XML 21 R10.htm IDEA: XBRL DOCUMENT v3.23.1
USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES
 3 Months Ended
Mar. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES
We account for CLO transactions on our consolidated balance sheet as financing facilities. Our CLOs are VIEs for which we are the primary beneficiary and are consolidated in our financial statements. The investment grade tranches are treated as secured financings, and are non-recourse to us. See Note 2 ("Summary of Significant Accounting Policies - Principles Consolidation - VIE") for further discussion.

On June 14, 2021, the Company completed a CRE CLO ("LFT CRE 2021-FL1, Ltd."), issuing eight tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $903.8 million. Of the total CLO notes issued $833.8 million were investment grade notes issued to third party investors and $70 million were below investment-grade notes retained by us. In addition, a $96.25 million equity interest in the portfolio was retained by us. The financing has an initial two-and-a-half year reinvestment period that allows principal proceeds of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance will be reduced as loans are repaid. Initially, the proceeds of the issuance of the securities also included $330.3 million for the purpose of acquiring additional loan obligations or a period of up to 180 days from the CLO closing date, resulting in the issuer owning loan obligations with a face value of $1.0 billion, representing leverage of 83%.

The CLO we consolidate is subject to collateralization and coverage tests that are customary for these types of securitizations. As of March 31, 2023 and December 31, 2022 all such collateralization and coverage tests in the CLO we consolidate were met.

The carrying values of the Company's total assets and liabilities related to LFT CRE 2021-FL1, Ltd. at March 31, 2023 and December 31, 2022 included the following VIE assets and liabilities:

ASSETSMarch 31, 2023December 31, 2022
Cash, cash equivalents and restricted cash$1,946,370 $3,507,850 
Accrued interest receivable5,848,895 5,488,118 
Investment related receivable488,578 — 
Loans held for investment, net of allowance for credit losses994,280,018 996,511,403 
Total Assets$1,002,563,861 $1,005,507,371 
LIABILITIES
Accrued interest payable$2,408,745 $2,264,646 
Collateralized loan obligations(1)
829,933,826 829,310,498 
Total Liabilities$832,342,571 $831,575,144 
Equity170,221,290 173,932,227 
Total liabilities and equity$1,002,563,861 $1,005,507,371 

(1)     The stated maturity of the collateral loan obligations per the terms of the underlying collateralized loan obligation agreement is June 14, 2039 for LFT CRE 2021-FL1, Ltd.

The following tables present certain loan and borrowing characteristics of LFT CRE 2021-FL1, Ltd. as of March 31, 2023 and December 31, 2022:
As of March 31, 2023
Collateralized Loan ObligationsCountPrincipal Value
Carrying Value(1)
Wtd. Avg. Coupon(2)
Collateral (loan investments)65$997,565,052 $994,280,018 
8.12%
Financing provided1833,750,000 829,933,826 
6.12%

As of December 31, 2022
Collateralized Loan ObligationsCountPrincipal Value
Carrying Value(1)
Wtd. Avg. Coupon(2)
Collateral (loan investments)64$996,492,150 $996,511,403 
7.60%
Financing provided1833,750,000 829,310,498 
5.75%
(1)     The carrying value for LFT CRE 2021-FL1, Ltd. is net of debt issuance costs of $3,816,174 and $4,439,502 for March 31, 2023 and December 31, 2022, respectively.
(2)    Weighted average coupon for loan investments assumes applicable one-month LIBOR of 4.70% and 4.18% and 30-day SOFR of 4.70% and 4.19% as of March 31, 2023 and December 31, 2022, respectively, inclusive of weighted average interest rate floors of 0.27% and 0.25%, and spreads of 3.42% and 3.41%, respectively. As of March 31, 2023, 75.8% of the investments by total investment exposure earned a floating rate indexed to one-month LIBOR and 24.2% of the investments by total investment exposure earned a floating rate indexed to 30-day Term SOFR. As of December 31, 2022, 80.5% of the investments by total investment exposure earned a floating rate indexed to one-month LIBOR and 19.5% of the investments by total investment exposure earned a floating rate indexed to 30-day Term SOFR. Weighted coupon for the financing assumes applicable one-month LIBOR of 4.68% and 4.32% as of March 31, 2023 and December 31, 2022 and spreads of 1.43% for March 31, 2023 and December 31, 2022.

The statement of operations related to LFT CRE 2021-FL1, Ltd., Hunt CRE 2017-FL1, Ltd. and Hunt CRE 2018-FL2, Ltd. for the three months ended March 31, 2023 and March 31, 2022 include the following income and expense items:

Statements of OperationsThree Months Ended March 31, 2023Three Months Ended March 31, 2022
Interest income$20,798,409 $9,812,443 
Interest expense(13,033,046)(4,004,238)
Net interest income$7,765,363 $5,808,205 
Provision for credit losses14,216 — 
General and administrative fees(143,349)(146,522)
Net income$7,636,230 $5,661,683