Beneficial Interests

6 Months Ended

Jun. 30, 2024

The Company’s beneficial interests are associated with committed capital and other co-investment arrangements with a number of third-party institutional investors and lending partners, in which the Company puts certain amounts of assets at risk. The risk is subject to a dollar cap which represents the Company’s maximum exposure to losses in each particular arrangement. The Company is obligated to make payments to these third-parties or is entitled to receive payments from them if credit performance of the loans sold under the arrangements deviates from initial expectations set at the time of loan sale or origination. The maximum exposure to losses is determined by contractual terms and includes restricted cash held on the Company’s condensed consolidated balance sheets for certain arrangements. As of December 31, 2023 and June 30, 2024, the Company’s aggregate maximum exposure to losses under the committed capital and other co-investment arrangements was approximately $99 million and $260 million, of which $12.1 million and $66.6 million was in a form of restricted cash, respectively. Beneficial interests represent the value of the future cash flows as part of these arrangements, discounted to the present value based on expected performance.

The Company’s beneficial interests are associated with entities that meet the definition of a VIE or are evaluated under the voting interest model. The Company has variable interests in certain entities established in relation to its committed capital and co-investment arrangements, including purchaser trusts, which are unconsolidated VIEs. While the Company holds variable interests in these unconsolidated VIEs through committed capital and co-investment arrangements and as the servicer of the loans sold, the Company does not have the power to direct the activities that most significantly impact the VIE’s economic performance and has determined that it is not the primary beneficiary.

The Company’s beneficial interests either meet the definition of a derivative or meet the criteria of a debt security. The following table presents the aggregate outstanding principal balance of the underlying loan portfolios as well as the fair value of beneficial interest assets, which are presented as a separate asset line item on the condensed consolidated balance sheets and beneficial interest liabilities which are presented in other liabilities on the condensed consolidated balance sheets.


	December 31, 2023				June 30, 2024
	Outstanding Principal Balance		Fair Value		Outstanding Principal Balance		Fair Value

Beneficial interest assets	$	958,870	$	41,012	$	2,117,435	$	97,804
Beneficial interest liabilities	$	769,102	$	4,221	$	1,010,089	$	11,198

The Company recognizes beneficial interests at fair value with changes reported as part of the fair value and other adjustments on the condensed consolidated statements of operations and comprehensive loss. The table below presents losses recognized on beneficial interests during the following periods:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2024		2023		2024
Fair value adjustments and realized losses on beneficial interests, net	$	(1,956)	$	(8,176)	$	(1,956)	$	(22,210)

Refer to “Note 6. Fair Value Measurement” for additional information.