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Variable Interest Entities and Collateralized Loan Obligations (Tables)

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Variable Interest Entities Assets and Liabilities

The following table outlines the total assets and liabilities within the Sub-REIT structure (dollars in thousands):


	June 30, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	25,967	$	28,167
Collateralized loan obligation proceeds held at trustee(1)	130,908		204
Accounts receivable from servicer/trustee(2)	259,796		150
Accrued interest receivable	5,806		6,765
Loans held for investment, net(3)	2,808,158		3,138,603
Total assets	$	3,230,635	$	3,173,889
Liabilities
Accrued interest payable	$	2,687	$	1,823
Accrued expenses	310		1,490
Collateralized loan obligations, net(4)	2,639,314		2,545,691
Payable to affiliates	6,731		3,830
Total liabilities	$	2,649,042	$	2,552,834

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(1)Includes $59.2 million and $71.7 million of cash available to acquire eligible assets related to TRTX 2022-FL5 and TRTX 2021-FL4, respectively, as of June 30, 2022. Includes $0.2 million of cash available for acquire eligible assets related to TRTX 2021-FL4 as of December 31, 2021.

(2)Includes $83.6 million, $150.5 million, and $25.5 million of cash proceeds related to loan repayments held by the Company's loan servicer as of June 30, 2022, which are remitted to the Company during the subsequent remittance cycle related to TRTX 2022-FL5, TRTX 2021-FL4 and TRTX 2019-FL3, respectively.

(3)Includes one loan held for investment with an unpaid principal balance of $1.6 million and $0.1 million as of June 30, 2022 and December 31, 2021, respectively.

(4)Net of $12.6 million and $10.3 million of unamortized deferred financing costs as of June 30, 2022 and December 31, 2021, respectively.

Schedule of Borrowings and Corresponding Collateral

The following tables detail the loan collateral and borrowings under the Company's CRE CLOs (dollars in thousands):


	June 30, 2022
CRE CLOs	Count	Benchmark interest rate	Outstanding principal balance		Carrying value(1)		Wtd. avg. spread(2)		Wtd. avg. maturity(3)
TRTX 2019-FL3
Collateral loan investment assets	15	LIBOR	$	898,090	$	861,596	3.15	%	1.7
Financing provided	1	Term SOFR(4)	707,389		705,884		1.57	%	12.3
TRTX 2021-FL4
Collateral loan investment assets	21	LIBOR(5)	1,250,000		1,021,079		3.06	%	2.9
Financing provided	1	LIBOR	1,037,500		1,032,109		1.60	%	15.7
TRTX 2022-FL5
Collateral loan investment assets	17	LIBOR(6)	1,075,000		923,842		3.28	%	3.3
Financing provided	1	Compounded SOFR	907,031		901,321		2.02	%	16.6
Total
Collateral loan investment assets(7)	53	LIBOR	$	3,223,090	$	2,806,517	3.16	%	2.7 years
Financing provided(8)	3	Term SOFR/LIBOR/Compounded SOFR	$	2,651,920	$	2,639,314	1.74	%	15.1 years

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(1)Includes loan amounts held in the Company's CRE CLO investment structures and does not include other loans held for investment, net of $1.6 million held within the Sub-REIT structure.

(2)Weighted average spread excludes the amortization of loan fees and deferred financing costs.

(3)Loan term represents weighted-average final maturity, assuming extension options are exercised by the borrower. Repayments of CRE CLO notes are dependent on timing of related loan repayments post-reinvestment period. The term of the CRE CLO notes represents the rated final distribution date.

(4)On October 1, 2021, the benchmark index interest rate for borrowings under TRTX 2019-FL3 was converted from Compounded SOFR to Term SOFR by the designated transaction representative under the FL3 indenture. The Company has the right to convert the mortgage assets benchmark interest rate from LIBOR to Term SOFR to eliminate the difference between benchmark rates used for the assets and liabilities of the CRE CLO.

(5)As of June 30, 2022, the TRTX 2022-FL4 mortgage assets are indexed to LIBOR, with the exception of one $27.7 million participation interest which is indexed to Term SOFR.

(6)As of June 30, 2022, the TRTX 2022-FL5 mortgage assets are indexed to LIBOR, with the exception of one $16.8 million participation interest which is indexed to Term SOFR. The Company has the right to convert the mortgage assets benchmark interest rate from LIBOR to Compounded SOFR to eliminate the difference between benchmark rates used for the assets and liabilities of the CRE CLO.

(7)Collateral loan investment assets of FL3, FL4 and FL5 represent 19.1%, 26.5% and 22.8% of the aggregate unpaid principal balance of the Company's loans held for investment portfolio as of June 30, 2022.

(8)During the three months ended June 30, 2022, the Company recognized interest expense of $18.2 million, which includes $1.9 million of deferred financing cost amortization and is reflected within the Company's consolidated statements of income and comprehensive income. During the six months ended June 30, 2022, the Company recognized interest expense of $32.5 million, which includes $4.1 million of deferred financing cost amortization and is reflected within the Company's consolidated statements of income and comprehensive income.


	December 31, 2021
CRE CLOs	Count	Benchmark interest rate	Outstanding principal balance		Carrying value		Wtd. avg. spread(1)		Wtd. avg. maturity(2)
TRTX 2018-FL2
Collateral loan investment assets	17	LIBOR	$	805,685	$	795,815	3.39	%	2.0
Financing provided	1	LIBOR	600,001		599,394		1.56	%	15.9
TRTX 2019-FL3
Collateral loan investment assets	19	LIBOR	1,109,229		1,100,497		3.19	%	2.2
Financing provided	1	Term SOFR(3)	918,487		915,451		1.48	%	12.8
TRTX 2021-FL4
Collateral loan investment assets	24	LIBOR	1,249,796		1,242,291		3.19	%	3.1
Financing provided	1	LIBOR	1,037,500		1,030,846		1.60	%	16.2
Total
Collateral loan investment assets(4)	60	LIBOR	$	3,164,710	$	3,138,603	3.24	%	2.7 years
Financing provided(5)	3	Term SOFR/LIBOR	$	2,555,988	$	2,545,691	1.55	%	15.2 years

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(1)Weighted average spread excludes the amortization of loan fees and deferred financing costs.

(2)Loan term represents weighted-average final maturity, assuming extension options are exercised by the borrower. Repayments of CRE CLO notes are dependent on timing of related loan repayments post-reinvestment period. The term of the CRE CLO notes represents the rated final distribution date.

(3)On October 1, 2021, the benchmark index interest rate for borrowings under TRTX 2019-FL3 was converted from Compounded SOFR to Term SOFR by the designated transaction representative under the FL3 indenture. The Company has the right to convert the mortgage assets benchmark interest rate from LIBOR to Term SOFR to eliminate the difference between benchmark rates used for the assets and liabilities of the CRE CLO.

(4)Collateral loan investment assets of FL2, FL3, and FL4 represent 16.4%, 22.5%, and 25.4% of the aggregate unpaid principal balance of the Company's loans held for investment portfolio as of December 31, 2021.

(5)During the three months ended June 30, 2021, the Company recognized interest expense of $13.5 million, which includes $1.7 million of deferred financing cost amortization and is reflected within the Company's consolidated statements of income and comprehensive income. During the six months ended June 30, 2021, the Company recognized interest expense of $22.0 million, which includes $2.9 million of deferred financing cost amortization and is reflected within the Company's consolidated statements of income and comprehensive income.

The following table summarizes the Company's investment portfolio financing (dollars in thousands):


	Outstanding principal balance
	June 30, 2022		December 31, 2021
Collateralized loan obligations(1)	$	2,651,920	$	2,555,988
Secured credit agreements	1,089,655		1,166,211
Secured revolving credit facility	52,065		—
Asset-specific financing arrangements	124,202		—

Total	$	3,917,842	$	3,722,199

________________________________

(1)See Note 5 for additional information regarding the Company's collateralized loan obligations.

The following table details the Company's asset-specific financing arrangements (dollars in thousands):


	June 30, 2022
	Financing									Collateral
Asset-specific financing	Commitment amount		Outstanding principal balance		Carrying value(1)		Wtd. avg. spread(2)		Wtd. avg. term(3)	Outstanding principal balance		Amortized Cost		Wtd. avg. term
Axos Bank	$	89,802	$	89,802	$	89,351	4.4	%	1.8	$	208,603	$	204,519	0.2
BMO Facility	200,000		34,400		34,228		1.5	%	4.7	43,000		42,588		4.7
Total / weighted average	$	289,802	$	124,202	$	123,579	3.6	%	2.6 years	$	251,603	$	247,107	1.4 years

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(1)Net of $0.6 million unamortized deferred financing costs.

(2)Collateral loan assets and the financing provided are indexed to Term SOFR.

(3)Term under Axos Bank is based on the extended maturity date for the specific arrangement. Borrowings under the BMO Facility are term-matched to the corresponding collateral loan asset. The weighted-average term assumes all extension options of the collateral loan asset are exercised by the borrower.

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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