Concentration of Credit Risk

6 Months Ended

Jun. 30, 2022

Impact of COVID-19 on Concentration of Credit Risk

The potential negative impacts on the Company’s business caused by COVID-19 may be heightened because the Company is not required to observe specific diversification criteria, which means that the Company’s investments may be concentrated in certain property types, geographical areas or loan categories that are more adversely affected by COVID-19 than other property types, geographical areas or loan categories. For example, certain of the loans in the Company’s loan portfolio are secured by office buildings, hotels and retail properties. At the onset of the COVID-19 pandemic, hotels were disproportionately affected. As the pandemic has evolved, and the ways people use real estate has changed, much of the Company's focus has shifted to its office exposure. For example, office buildings may be adversely impacted by a slowdown in return-to-office or a reversal in the pre-COVID trend toward increased densification of office space, or a preference by office users for suburban properties less reliant on public transportation to safely deliver their employees to and from the workplace. Additionally, entrenched work-from-home behavior by employees may cause a slow return to office, or permanent reduction in demand for office space.

Property Type

A summary of the Company’s loans held for investment portfolio by property type based on total loan commitment and current unpaid principal balance (“UPB”) is as follows (dollars in thousands):


	June 30, 2022
Property type	Loan commitment		Unfunded commitment		% of loan commitment		Loan UPB		% of loan UPB
Office	$	1,928,630	$	142,168	37.2	%	$	1,786,462	37.8	%
Multifamily	1,865,326		133,194		36.0		1,732,132		36.8
Hotel	493,944		4,000		9.5		492,359		10.5
Life Science	404,600		146,367		7.8		258,233		5.5
Mixed-Use	285,340		15,230		5.5		270,110		5.7
Industrial	113,000		6,167		2.2		106,833		2.3
Other	50,600		21,600		1.0		29,000		0.6
Retail(1)	33,000		2,143		0.6		23,000		0.5
Condominium(2)	12,032		—		0.2		12,032		0.3
Total	$	5,186,472	$	470,869	100.0	%	$	4,710,161	100.0	%


	December 31, 2021
Property type	Loan commitment		Unfunded commitment		% of loan commitment		Loan UPB		% of loan UPB
Office	$	2,265,187	$	178,878	41.9	%	$	2,086,309	42.4	%
Multifamily	1,595,643		121,211		29.5		1,474,731		30.0
Hotel	658,943		4,000		12.2		657,672		13.4
Life Science	494,600		163,860		9.1		330,740		6.7
Mixed-Use	347,408		17,681		6.4		329,728		6.7
Retail(1)	33,000		2,143		0.6		23,000		0.5
Condominium(2)	17,163		—		0.3		17,163		0.3
Total	$	5,411,944	$	487,773	100.0	%	$	4,919,343	100.0	%

_______________________

(1)For the period ended June 30, 2022 and December 31, 2021, the Company's non-performing retail loan held for investment was in default of its loan agreement and as a result the $2.1 million of outstanding unfunded loan commitments could not be drawn upon by the borrower.

(2)Condominium property type includes a 24% pari passu participation interest in each of four whole mortgage loans related to one project to the same borrower.

Loan commitments exclude (1) capitalized interest resulting from previously modified loans of $2.4 million and $3.0 million as of June 30, 2022 and December 31, 2021, respectively and include (2) a $7.8 million commitment related to a non-performing retail loan held for investment. The commitment cannot be drawn by the borrower.

Geography

All of the Company’s loans held for investment are secured by properties within the United States. The geographic composition of loans held for investment based on total loan commitment and current UPB is as follows (dollars in thousands):


	June 30, 2022
Geographic region	Loan commitment		Unfunded commitment		% of loan commitment		Loan UPB		% of loan UPB
East	$	1,942,462	$	71,429	37.5	%	$	1,872,204	39.7	%
West(1)	1,510,326		249,692		29.1		1,253,479		26.6
South	1,290,922		106,851		24.9		1,184,613		25.2
Midwest	372,762		36,730		7.2		336,032		7.1
Various	70,000		6,167		1.3		63,833		1.4
Total	$	5,186,472	$	470,869	100.0	%	$	4,710,161	100.0	%

	December 31, 2021
Geographic region	Loan commitment		Unfunded commitment		% of loan commitment		Loan UPB		% of loan UPB
East	$	1,925,457	$	63,459	35.6	%	$	1,863,172	37.8	%
West(1)	1,484,883		244,100		27.4		1,233,628		25.1
South	1,323,800		115,714		24.5		1,208,940		24.6
Midwest	677,804		64,500		12.5		613,603		12.5
Total	$	5,411,944	$	487,773	100.0	%	$	4,919,343	100.0	%

_______________________

(1)For the period ended June 30, 2022 and December 31, 2021, the Company's unfunded loan commitments included $2.1 million of outstanding unfunded loan commitments that could not be drawn upon by the borrower related to a non-performing retail loan held for investment that was in default.