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USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES
6 Months Ended
Jun. 30, 2024
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 and secured financings on our consolidated balance sheet as financing facilities. The issuing entities for our CLOs and secured financings 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 the 2021-FL1 CLO, 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, which expired in December 2023, that allowed 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 for a period of to 180 days from the 2021-FL1 CLO closing date, resulting in the issuer owning loan obligations with a face value of $1.0 billion, representing leverage at closing of 83%.

On July 12, 2023, the Company entered into and closed a matched-term non-recourse collateralized commercial real estate financing (the "LMF 2023-1 Financing"), secured by $386.4 million of first lien floating-rate multifamily mortgage assets and is not subject to margin calls or additional collateralization requirements. In connection with the LMF 2023-1 Financing, approximately $270.4 million of an investment-grade rated senior secured floating rate loan was provided by a private lender and approximately $47.3 million of investment-grade rated notes (collectively, the "Senior Debt") were issued and sold to an affiliate of LFT's external manager, Lument IM. A consolidated subsidiary of LFT retained the subordinate notes in the issuing vehicle of approximately $68.6 million. The Senior Debt has an initial weighted average spread of approximately 314 basis points over 30-day Term SOFR, excluding fees and transaction costs. The Senior Debt matures on the payment date in July 2032, unless it is sooner repaid or redeemed in accordance with its terms. The financing has an initial two-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.

The 2021-FL1 CLO and LMF 2023-1 Financing are subject to collateralization and coverage tests that are customary for these types of securitizations. As of June 30, 2024 and December 31, 2023 all such collateralization and coverage tests in the 2021-FL1 CLO and LMF 2023-1 Financing were met.

The carrying values of the Company's total assets and liabilities related to the 2021-FL1 CLO and LMF 2023-1 Financing at June 30, 2024 and December 31, 2023 included the following VIE assets and liabilities:

ASSETSJune 30, 2024December 31, 2023
Cash, cash equivalents and restricted cash$1,457,577 $270,217 
Accrued interest receivable7,427,539 8,588,805 
Investment related receivable33,360,000 — 
Loans held for investment, net of allowance for credit losses1,186,847,181 1,375,277,312 
Total Assets$1,229,092,297 $1,384,136,334 
LIABILITIES
Accrued interest payable$3,297,564 $3,996,538 
Collateralized loan obligations and secured financings(1)
995,895,094 1,146,210,752 
Total Liabilities$999,192,658 $1,150,207,290 
Equity229,899,639 233,929,044 
Total liabilities and equity$1,229,092,297 $1,384,136,334 

(1)     The stated maturity of the collateral loan obligations per the terms of the underlying collateralized loan obligation agreement is June 14, 2039 for the 2021-FL1 CLO and the stated maturity of the secured financing per the terms of the underlying indenture is July 20, 2032.

The following tables present certain loan and borrowing characteristics of the 2021-F1 CLO and LMF 2023-1 Financing as of June 30, 2024 and December 31, 2023:

As of June 30, 2024
Collateralized Loan Obligations/FinancingsCountPrincipal Value
Carrying Value(1)
Wtd. Avg. Coupon(2)
Collateral (loan investments)78$1,201,753,001 $1,186,847,181 
8.92%
Financing provided2$999,367,019 $995,895,094 
7.42%

As of December 31, 2023
Collateralized Loan Obligations/FinancingsCountPrincipal Value
Carrying Value(1)
Wtd. Avg. Coupon(2)
Collateral (loan investments)87$1,388,495,984 $1,375,277,312 
8.91%
Financing provided2$1,151,450,000 $1,146,210,752 
7.35%

(1)     The carrying value of the collateral is net of unaccreted purchase discounts of $5,712,646 and $7,159,664 as of June 30, 2024 and December 31, 2023, respectively. The carrying value for the 2021-FL1 CLO is net of debt issuance costs of $651,034 and $1,911,547 for June 30, 2024 and December 31, 2023, respectively and the carrying value for LMF 2023-1 Financing is net of debt issuance costs of $2,820,891 and 3,327,701 for June 30, 2024 and December 31, 2023, respectively.
(2)    Weighted average coupon for loan investments assumes applicable 30-day Term SOFR of 5.33% as of June 30, 2024 and December 31, 2023, respectively, inclusive of weighted average interest rate floors of 0.42% and 0.38%, and spreads of 3.59% and 3.54%, respectively. Weighted average coupon for the financings assumes applicable 30-day Term SOFR of 5.33% and 5.36% as of June 30, 2024 and December 31, 2023, respectively and spreads of 2.10% and 1.99% for June 30, 2024 and December 31, 2023, respectively.

The statement of operations related to the 2021-FL1 CLO and LMF 2023-1 Financing for the three and six months ended June 30, 2024 and June 30, 2023 include the following income and expense items:

Statements of OperationsThree Months Ended June 30, 2024Three Months Ended June 30, 2023
Interest income$28,931,987 $21,530,481 
Interest expense(20,178,657)(14,199,861)
     Net interest income$8,753,330 $7,330,620 
Less:
Provision for credit losses(1,376,712)(522,003)
General and administrative fees(266,102)(181,894)
     Net income$7,110,516 $6,626,723 
Statements of OperationsSix Months Ended June 30, 2024Six Months Ended June 30, 2023
Interest income$60,312,921 $42,328,890 
Interest expense(41,690,411)(27,232,907)
Net interest income$18,622,510 $15,095,983 
Less:
Provision for credit losses(3,134,168)(507,787)
General and administrative fees(512,848)(325,243)
Net income$14,975,494 $14,262,953