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Fair Value (Tables)

9 Months Ended

Sep. 30, 2020

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The table below presents a summary of financial assets and financial liabilities carried at fair value on a recurring basis, including financial instruments for which the fair value option was elected, but excluding financial assets under the NAV practical expedient, categorized into the three tier fair value hierarchy that is prioritized based upon the level of transparency in inputs used in the valuation techniques, as follows:

Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in non-active markets, or valuation techniques utilizing inputs that are derived principally from or corroborated by observable data directly or indirectly for substantially the full term of the financial instrument.

Level 3—At least one assumption or input is unobservable and it is significant to the fair value measurement, requiring significant management judgment or estimate.


	Fair Value Measurements
(In thousands)	Level 1		Level 2		Level 3		Total
September 30, 2020
Assets
Marketable equity securities	$	147,051	$	—	$	—	$	147,051
AFS debt securities	—		—		27,898		27,898
Other assets—derivative assets	—		6,007		—		6,007
Fair Value Option:
Loans held for investment	—		—		1,325,144		1,325,144
Loans held for disposition	—		—		42,985		42,985
Equity method investments	—		—		165,770		165,770
Liabilities
Other liabilities—derivative liabilities	—		96,944		—		96,944

Other liabilities—settlement liability	—		—		10,754		10,754
December 31, 2019
Assets
Marketable equity securities	$	138,586	$	—	$	—	$	138,586
AFS debt securities	—		—		54,859		54,859
CMBS of consolidated fund	—		2,732		—		2,732
Other assets—derivative assets	—		21,386		—		21,386
Fair Value Option:
Equity method investments	—		—		222,875		222,875
Liabilities
Other liabilities—derivative liabilities	—		127,531		—		127,531
Other liabilities—contingent consideration for THL Hotel Portfolio	—		—		9,330		9,330

Schedule of Fair Value Assumptions Related to Contingent Consideration

Quantitative information about recurring Level 3 fair value assets are as follows.

Valuation Technique

Key Unobservable Inputs

Input Value

Effect on Fair Value from Increase in Input Value (2)

Financial Instrument

Fair Value

(In thousands)

Weighted Average(1)

(Range)

September 30, 2020

AFS debt securities

27,898

Discounted cash flows

Discount rate

28.4%
(18.3% - 57.8%)

Decrease

Fair Value Option:

Loans held for investment

1,295,444

Discounted cash flows

Discount rate

14.3%
(8.1% - 26.7%)

Decrease

Loans held for investment

29,700

Transaction price(5)

N/A

Loans held for disposition

42,985

Transaction price(5)

N/A

Equity method investments—third party private equity funds

2,575

NAV(3)

N/A

Equity method investments—other

8,417

Discounted cash flows

Discount rate

18.3%
(18.1% - 20.0%)

Decrease

Equity method investments—other

14,710

Multiple

Revenue multiple

4.1x

(4)

Equity method investments—other

140,068

Transaction price(5)

N/A

December 31, 2019

AFS debt securities

54,859

Discounted cash flows

Discount rate

22.3%

(16.8% - 65.0%)

Decrease

Fair Value Option:

Equity method investments—third party private equity funds

5,391

NAV(3)

N/A

Equity method investments—other

18,574

Discounted cash flows

Discount rate

10.1%

(5.1% - 15.8%)

Decrease

Equity method investments—other

25,000

Multiple

Revenue multiple

3.7x

(4)

Equity method investments—other

173,910

Transaction price(5)

N/A

__________

(1) Weighted average discount rates are calculated based upon undiscounted cash flows.

(2) Represents the directional change in fair value that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the reverse effect. Significant increases or decreases in these inputs in isolation could result in significantly higher or lower fair value measures.

(3) Fair value was estimated based on underlying NAV of the respective funds on a quarter lag, adjusted as deemed appropriate by management.

(4) Fair value is affected by change in revenue multiple relative to change in rate of revenue growth.

(5) Valued based upon transaction price of investments recently acquired, settlement amounts under contract, or offer prices on loans, investments or underlying assets of investee pending sales. Transaction price approximates fair value for investee engaged in real estate development during the development stage.

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following table presents changes in recurring Level 3 fair value assets, including realized and unrealized gains (losses) included in other gain (loss) on the consolidated statement of operations and in AOCI.



			Fair Value Option
(In thousands)	AFS Debt Securities		Loans Held for Investment		Equity Method Investments












Fair value at December 31, 2018	$	64,127			$	81,085
Purchases, contributions and accretion	5,272		—		101,203
Paydowns, distributions and sales	(8,727)		—		(8,082)



Realized and unrealized gains (losses) in earnings, net	(7,083)		—		(1,811)
Other comprehensive income	6,364		—		—
Fair value at September 30, 2019	$	59,953	$	—	$	172,395

Net unrealized gains (losses) in earnings on instruments held at September 30, 2019	$	(7,083)	$	—	$	(2,589)

Fair value at December 31, 2019	$	54,859	$	—	$	222,875
Election of fair value option on January 1, 2020	—		1,556,131		—
Reclassification of accrued interest on January 1, 2020	—		13,504		—
Purchases, drawdowns, contributions and accretion	2,979		156,179		4,614
Paydowns, distributions and sales	(4,542)		(131,365)		(900)
Interest accrual, including capitalization of paid-in-kind interest	—		32,544		—

Transfer to held for disposition	—		(42,985)		—
Allowance for credit losses	(23,973)		—		—
Realized and unrealized gains (losses) in earnings, net (1)	—		(289,283)		(66,418)
Other comprehensive income (loss) (2)	(1,425)		30,419		5,599
Fair value at September 30, 2020	$	27,898	$	1,325,144	$	165,770

Net unrealized gains (losses) on instruments held at September 30, 2020:
In earnings	$	—	$	(280,822)	$	(66,418)
In other comprehensive income (loss)	$	(1,425)	N/A		N/A

__________

(1) Includes $4.8 million of unrealized losses on loans held for disposition with aggregate fair value of $43.0 million at September 30, 2020.

(2) Amounts recorded in OCI for loans receivable and equity method investments represent foreign currency translation differences on the Company's foreign subsidiaries that hold the respective foreign currency denominated investments.

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation



			Fair Value Option
(In thousands)	AFS Debt Securities		Loans Held for Investment		Equity Method Investments












Fair value at December 31, 2018	$	64,127			$	81,085
Purchases, contributions and accretion	5,272		—		101,203
Paydowns, distributions and sales	(8,727)		—		(8,082)



Realized and unrealized gains (losses) in earnings, net	(7,083)		—		(1,811)
Other comprehensive income	6,364		—		—
Fair value at September 30, 2019	$	59,953	$	—	$	172,395

Net unrealized gains (losses) in earnings on instruments held at September 30, 2019	$	(7,083)	$	—	$	(2,589)

Fair value at December 31, 2019	$	54,859	$	—	$	222,875
Election of fair value option on January 1, 2020	—		1,556,131		—
Reclassification of accrued interest on January 1, 2020	—		13,504		—
Purchases, drawdowns, contributions and accretion	2,979		156,179		4,614
Paydowns, distributions and sales	(4,542)		(131,365)		(900)
Interest accrual, including capitalization of paid-in-kind interest	—		32,544		—

Transfer to held for disposition	—		(42,985)		—
Allowance for credit losses	(23,973)		—		—
Realized and unrealized gains (losses) in earnings, net (1)	—		(289,283)		(66,418)
Other comprehensive income (loss) (2)	(1,425)		30,419		5,599
Fair value at September 30, 2020	$	27,898	$	1,325,144	$	165,770

Net unrealized gains (losses) on instruments held at September 30, 2020:
In earnings	$	—	$	(280,822)	$	(66,418)
In other comprehensive income (loss)	$	(1,425)	N/A		N/A

__________

(1) Includes $4.8 million of unrealized losses on loans held for disposition with aggregate fair value of $43.0 million at September 30, 2020.

Fair Value, Assets Measured on Recurring and Nonrecurring Basis

Investments in a Company-sponsored private fund and a non-traded REIT, and limited partnership interest in a third party private fund are valued using NAV of the respective vehicles.


	September 30, 2020				December 31, 2019
(In thousands)	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Private fund—real estate	$	15,668	$	9,137	$	16,271	$	11,058
Non-traded REIT—real estate	18,263		—		19,358		—
Private fund—emerging market private equity	2,628		—		3,012		—

Fair and Carrying Values of Assets and Liabilities by the Level in the Fair Value Hierarchy by Balance Sheet Grouping

Carrying amounts and estimated fair values of financial instruments reported at amortized cost are presented below. The carrying values of cash, accounts receivable, due from and to affiliates, interest payable and accounts payable approximate fair value due to their short term nature and credit risk, if any, are negligible. There are no loans receivable carried at amortized cost in 2020 as the Company elected the fair value option for all loans receivable effective January 1, 2020.


	Fair Value Measurements								Carrying Value
(In thousands)	Level 1		Level 2		Level 3		Total
September 30, 2020
Liabilities
Debt at amortized cost

Convertible and exchangeable senior notes	$	671,421	$	13,095	$	—	$	684,516	$	535,596
Secured debt	—		—		6,113,253		6,113,253		6,347,480
Secured debt related to assets held for disposition	—		—		3,660,152		3,660,152		3,712,982
Junior subordinated debt	—		—		197,460		197,460		202,918
December 31, 2019
Assets
Loans at amortized cost	$	—	$	—	$	1,557,850	$	1,557,850	$	1,552,824
Liabilities
Debt at amortized cost

Convertible and exchangeable senior notes	602,000		13,095		—		615,095		614,052
Secured debt	—		—		4,747,560		4,747,560		4,702,676
Secured debt related to assets held for disposition	—		—		3,700,990		3,700,990		3,698,934
Junior subordinated debt	—		—		225,835		225,835		201,190