LOANS HELD FOR INVESTMENT (Tables)

12 Months Ended

Dec. 31, 2019

The Company’s investments in loans held for investment are accounted for at amortized cost. The following tables summarize the Company’s loans held for investment as of December 31, 2019 and 2018 ($ in thousands):



	As of December 31, 2019
	Carrying Amount (1)		Outstanding Principal (1)		Weighted Average Unleveraged Effective Yield (2)		Weighted Average Remaining Life (Years)
Senior mortgage loans	$	1,622,666	$	1,632,164	6.5	%	1.5
Subordinated debt and preferred equity investments	59,832		60,730		15.1	%	2.6
Total loans held for investment portfolio	$	1,682,498	$	1,692,894	6.8	%	1.6



	As of December 31, 2018
	Carrying Amount (1)		Outstanding Principal (1)		Weighted Average Unleveraged Effective Yield (2)		Weighted Average Remaining Life (Years)
Senior mortgage loans	$	1,489,708	$	1,498,530	7.0	%	1.7
Subordinated debt and preferred equity investments	35,165		36,213		14.9	%	4.3
Total loans held for investment portfolio	$	1,524,873	$	1,534,743	7.1	%	1.8

_______________________________________________________________________________


(1)	The difference between the Carrying Amount and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs.

(2)

Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by the Company as of December 31, 2019 and 2018 as weighted by the outstanding principal balance of each loan.

Schedule of current investment portfolio and Outstanding Principal

A more detailed listing of the Company’s loans held for investment portfolio based on information available as of December 31, 2019 is as follows ($ in millions, except percentages):

Loan Type

Location

Outstanding Principal (1)

Carrying Amount (1)

Interest Rate

Unleveraged Effective Yield (2)

Maturity Date (3)

Payment Terms (4)

Senior Mortgage Loans:

Mixed-use

$100.6

$99.9

L+4.25%

7.8%

Feb 2021

I/O

Multifamily

89.7

89.6

L+4.75%

6.8%

Feb 2020

(5)

I/O

Multifamily

75.0

74.7

L+2.85%

5.0%

Oct 2022

I/O

Office

69.2

69.0

L+3.75%

6.1%

Dec 2020

I/O

Hotel

OR/WA

68.1

67.7

L+3.45%

5.9%

May 2021

I/O

Hotel

Diversified

58.9

58.6

L+3.60%

6.2%

Sep 2021

I/O

Office

57.0

56.8

L+3.95%

6.3%

Jun 2021

I/O

Industrial

52.5

52.0

L+6.10%

8.8%

Oct 2022

I/O

Office

49.6

49.0

L+4.25%

8.6%

Mar 2021

I/O

Mixed-use

49.0

48.8

L+4.00%

6.3%

Apr 2021

I/O

Multifamily

45.4

45.3

L+4.75%

6.8%

Feb 2020

(5)

I/O

Multifamily

42.7

42.6

L+3.30%

5.4%

Dec 2020

I/O

Multifamily

42.4

42.1

L+2.60%

5.5%

Jan 2022

I/O

Student Housing

41.7

L+3.95%

6.3%

Jul 2020

I/O

Student Housing

41.0

40.8

L+4.75%

7.1%

Jan 2021

I/O

Hotel

40.0

39.9

L+4.12%

6.2%

Jan 2021

I/O

Multifamily

39.2

39.0

L+3.50%

6.5%

Nov 2020

I/O

Office

36.9

36.3

L+3.05%

5.8%

Dec 2022

I/O

Multifamily

35.8

35.5

L+3.25%

5.5%

Nov 2022

I/O

Hotel

35.2

L+4.40%

6.2%

Jul 2020

(6)

I/O

Industrial

34.8

34.6

L+4.05%

6.1%

Mar 2024

I/O

Mixed-use

33.8

33.4

L+3.75%

6.7%

Sep 2022

I/O

Hotel

32.9

32.7

L+4.40%

6.8%

May 2021

I/O

Hotel

31.5

31.3

L+3.55%

6.0%

Aug 2021

I/O

Office

30.9

30.6

L+3.35%

6.0%

Nov 2022

I/O

Multifamily

30.2

30.1

L+3.20%

5.3%

Dec 2020

I/O

Student Housing

30.0

29.8

L+3.15%

5.9%

Feb 2022

I/O

Multifamily

29.3

29.2

L+3.00%

5.9%

Dec 2021

I/O

Multifamily

27.5

27.4

L+3.20%

5.5%

Oct 2020

I/O

Office

27.5

27.2

L+3.80%

6.2%

Jan 2023

I/O

Multifamily

26.8

26.7

L+3.85%

6.1%

Jul 2020

I/O

Student Housing

24.1

L+4.45%

6.8%

Feb 2020

I/O

Student Housing

24.0

23.9

L+4.10%

6.4%

Jan 2021

I/O

Student Housing

22.0

21.8

L+3.25%

5.9%

Aug 2022

I/O

Industrial

21.0

20.8

L+4.50%

7.4%

Dec 2021

I/O

Self Storage

19.5

19.4

L+3.50%

6.0%

Mar 2022

I/O

Multifamily

19.2

19.1

L+4.00%

6.1%

Nov 2020

I/O

Office

18.4

L+4.30%

6.6%

Apr 2020

I/O

Office

17.7

17.6

L+3.40%

6.3%

Nov 2021

I/O

Office

13.2

13.0

L+3.51%

6.7%

May 2023

I/O

Office

13.1

12.8

L+4.05%

7.5%

Nov 2021

I/O

Industrial

12.7

12.6

L+3.75%

6.3%

Mar 2023

I/O

Residential

11.6

11.5

13.00%

(7)

22.5%

Feb 2020

I/O

Office

8.6

8.5

L+4.00%

6.7%

Nov 2022

I/O

Multifamily

2.0

1.7

L+6.50%

10.1%

Sep 2022

I/O

Subordinated Debt and Preferred Equity Investments:

Office

17.0

16.4

12.00%

12.8%

Jan 2026

I/O

(8)

Residential Condominium

14.9

14.8

L+14.00%

(9)

19.1%

May 2021

(9)

I/O

Mixed-use

14.5

14.3

L+12.25%

14.9%

Nov 2021

I/O

Residential Condominium

11.5

14.00%

14.5%

Mar 2020

(10)

I/O

Office

2.8

L+8.25%

10.2%

Nov 2021

I/O

Total/Weighted Average

$1,692.9

$1,682.5

6.8%

_______________________________________________________________________________

(1)

The difference between the Carrying Amount and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs. For the loans held for investment that represent co-investments with other investment vehicles managed by Ares Management (see Note 11 included in these consolidated financial statements for additional information on co-investments), only the portion of Carrying Amount and Outstanding Principal held by the Company is reflected.

(2)

Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premiums or discounts) and assumes no dispositions, early prepayments or defaults. Unleveraged Effective Yield for each loan is calculated based on LIBOR as of December 31, 2019 or the LIBOR floor, as applicable. The total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by the Company as of December 31, 2019 as weighted by the outstanding principal balance of each loan.

(3)

Certain loans are subject to contractual extension options that generally vary between one and two 12-month extensions and may be subject to performance based or other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications.


(4)	I/O = interest only, P/I = principal and interest.


(5)	In September 2019, the Company and the borrower entered into an extension agreement, which extended the maturity date on the senior Florida loan to February 2020.


(6)	In May 2019, the borrower exercised a one-year extension option in accordance with the loan agreement, which extended the maturity date on the senior Michigan loan to July 2020.


(7)	In November 2019, the Company and the borrowers entered into a modification agreement to, among other things, waive certain performance hurdles associated with the borrowers’ business plan and increase the interest rate from a per annum rate of 12.00% to 13.00% on the senior California loan.


(8)	In February 2021, amortization will begin on the subordinated New Jersey loan, which had an outstanding principal balance of $17.0 million as of December 31, 2019. The remainder of the loans in the Company’s portfolio are non-amortizing through their primary terms.

(9)

In September 2019, the Company and the borrower entered into a modification agreement to, among other things, loan an additional $2.1 million to the borrower on the subordinated New York loan, for which such amount accrues interest at a per annum rate of 20.00% and has an initial maturity date of April 2020. The remaining outstanding principal balance of the subordinated New York loan continues to accrue interest at L + 14.00% and has an initial maturity date of May 2021.


(10)	In September 2019, the Company and the borrower entered into a modification and extension agreement to, among other things, extend the maturity date on the subordinated Hawaii loan to March 2020.

Schedule of activity in loan portfolio

For the years ended December 31, 2019 and 2018, the activity in the Company’s loan portfolio was as follows ($ in thousands):



Balance at December 31, 2017	$	1,726,283
Initial funding	510,529
Origination fees and discounts, net of costs	(5,816		)
Additional funding	33,693
Amortizing payments	(645		)
Loan payoffs	(746,120		)
Origination fee accretion	6,949
Balance at December 31, 2018	$	1,524,873
Initial funding	493,913
Origination fees and discounts, net of costs	(7,539		)
Additional funding	185,281
Amortizing payments	—
Loan payoffs	(482,407		)
Loan converted to real estate owned (see Note 4)	(38,636		)
Origination fee accretion	7,013
Balance at December 31, 2019	$	1,682,498