
	September 30, 2020							December 31, 2019
	Unpaid Principal Balance		Carrying Value		Weighted Average Coupon(1)		Weighted Average Maturity in Years	Unpaid Principal Balance		Carrying Value		Weighted Average Coupon(1)		Weighted Average Maturity in Years
Fixed rate
Mezzanine loans	$	150,335	$	149,678	12.8	%	4.2	$	223,395	$	222,503	12.8	%	4.2
Preferred equity interests	18,350		18,350		15.0	%	2.9	115,384		115,313		12.5	%	6.9
Other loans(2)	13,692		13,607		15.0	%	3.7	12,572		12,448		15.0	%	4.4
	182,377		181,635					351,351		350,264
Variable rate
Senior loans	974,207		971,963		5.5	%	3.4	1,462,467		1,457,738		6.0	%	3.8
Securitized loans(3)	972,687		970,473		5.1	%	3.6	1,006,495		1,002,696		5.2	%	4.2
Mezzanine loans	18,178		18,298		9.4	%	2.2	38,110		38,258		11.4	%	2.0
Preferred equity interests	1,569		1,569		5.3	%	0.3	—		—		—		—
	1,966,641		1,962,303					2,507,072		2,498,692
Loans and preferred equity held for investment	2,149,018		2,143,938					2,858,423		2,848,956

Allowance for loan losses	NA		(40,524)					NA		(272,624)
Loans and preferred equity held for investment, net	$	2,149,018	$	2,103,414				$	2,858,423	$	2,576,332

The Company had $7.6 million and $9.8 million of interest receivable related to its loans and preferred equity held for investment, net as of September 30, 2020 and December 31, 2019, respectively. This is included in receivables, net on the Company’s consolidated balance sheets.


	Carrying Value
Balance at January 1, 2020	$	2,576,332
Acquisitions/originations/additional funding	121,309
Loan maturities/principal repayments	(373,285)

Transfer to loans held for sale	(154,370)
Discount accretion/premium amortization	6,047
Capitalized interest	(3,856)
Provision for loan losses(1)	(86,329)
Effect of CECL adoption(2)	(21,093)


Charge-off	38,659
Balance at September 30, 2020	$	2,103,414

(1)Provision for loan losses includes $5.2 million for a loan that was subsequently transferred to held for sale during the second quarter of 2020 and the net provision recorded upon loan repayment totaling $1.8 million during the nine months ended September 30, 2020. Additionally, provision for loan losses excludes $1.0 million determined by the Company’s PD/LGD model for unfunded commitments reported on the consolidated statement of operations, with a corresponding offset to other liabilities recorded on the Company’s consolidated balance sheets.

Loans and preferred equity that are 90 days or more past due as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming and placed on nonaccrual status. At September 30, 2020, all loans and preferred equity held for investment remained current on interest payments.

In March 2018, the borrower on the Company’s four NY hospitality loans in its Legacy, Non-Strategic Portfolio failed to make all required interest payments and the loans were placed on nonaccrual status. These four loans are secured by the same collateral. During 2018, the Company recorded $53.8 million of provision for loan losses to reflect the estimated value to be recovered from the borrower following a sale. During 2019, the Company recorded an additional provision for loan loss of $154.3 million based on significant deterioration in the NY hospitality market, feedback from the sales process and the estimated value to be recovered from the borrower following a potential sale. During the three months ended March 31, 2020, the significant detrimental impact of COVID-19 on the U.S. hospitality industry further contributed to the deterioration of the Company’s four NY hospitality loans and as such the Company recorded an additional provision for loan losses of $36.8 million. During the three months ended June 30, 2020, the Company completed a discounted payoff of the NY hospitality loans and related investment interests.

•The Company placed one loan secured by a regional mall (“Midwest Regional Mall”) on nonaccrual status during 2019 as collectability of the principal was uncertain; as such, interest collected is recognized using the cost recovery method by applying interest collected as a reduction to loan carrying value. The Company recorded $10.6 million of impairment related to Midwest Regional Mall and transferred the loan to held for sale during 2019. During the three months ended June 30, 2020 the Midwest Regional Mall was sold. The Company received $8.3 million in gross proceeds and recognized a gain of $3.7 million.

•During 2018, the Company recorded $8.8 million of provision for loan losses on one loan secured by a regional mall (“Northeast Regional Mall B”) to reflect the estimated fair value of the collateral. During 2019, the Company recognized additional provision for loan losses of $10.5 million on Northeast Regional Mall B. The additional provisions were based on then-current and prospective leasing activity to reflect the estimated fair value of the collateral. During the three months ended March 31, 2020, the Northeast Regional Mall was sold. The Company received $9.2 million in gross proceeds and recognized a gain of $1.8 million.

•Also, during 2019, the Company separately recognized provision for loan losses of $18.5 million on two loans secured by one regional mall (“West Regional Mall”) to reflect the estimated fair value of the collateral. During the three months ended June 30, 2020 the West Regional Mall loan was sold. The Company received $23.5 million in gross proceeds and recognized a gain of $6.5 million.

•Furthermore, during 2019, the Company recognized a $26.7 million provision for loan losses on three loans to two separate borrowers (“South Regional Mall A” and “South Regional Mall B”) to reflect the estimated fair value of the collateral. During the three months ended March 31, 2020, the Company accepted a discounted payoff of South Regional Mall A. The Company received $22.0 million in gross proceeds and recognized a loss of $1.6 million. Additionally, during the three months ended March 31, 2020, South Regional Mall B was sold. The Company received $13.5 million in gross proceeds and recognized a gain of $8.7 million.

•The Company placed one loan secured by a hotel in Bloomington, Minnesota (“Midwest Hospitality”) on nonaccrual status due to a borrower default during the fourth quarter of 2019. During the three months ended March 31, 2020 the Company recognized a $2.3 million provision for loan loss on the Midwest Hospitality loan to reflect the estimated fair value of the collateral, which was based on feedback from the sales process and the estimated value to be recovered from the borrower following a potential sale. The Company had been sweeping cash from the hotel to amortize the unpaid principal balance of the loan. During the three months ended September 30, 2020 the hotel property securing this loan was sold and the Company received $24.5 million in gross proceeds and concurrently provided a bridge loan in the amount of $19.5 million to a new borrower, secured by Midwest Hospitality.

•Additionally, the Company had a total $20.9 million allowance for loan losses recorded as of March 31, 2020, which included an $8.8 million allowance for loan losses resulting from CECL adoption and an additional $12.1 million provision for loan losses recognition during the three months ended March 31, 2020, on one loan secured by six

suburban office buildings (“Northeast Office Portfolio”). During the three months ended September 30, 2020 the Company received gross proceeds of $80.7 million in a discounted payoff of the Northeast Office Portfolio which was equal to the carrying value of the loan, net of current provision for loan losses. As such, no additional provision for loan losses were required at September 30, 2020.

•Also, during the three months ended June 30, 2020 the Company classified one loan secured by a hospitality asset in San Diego, California (“West Hospitality”) as held for sale and recognized a net loss of $32.8 million to reflect the expected proceeds to be collected in a sale of the loan. The Company had recorded a $5.2 million allowance for loan losses as of March 31, 2020, which included a $2.6 million allowance for loan losses resulting from CECL adoption and an additional $2.6 million provision for loan losses recognized for West Hospitality during the three months ended March 31, 2020. In connection with transferring the loan to held for sale during the current quarter, the Company reversed out the $5.2 million from provision for loan losses line item and recorded a $38.0 million in other loss, net. During the three months ended September 30, 2020 the West Hospitality loan was sold. The Company received $105.2 million in gross proceeds and will recognize an additional loss of $1.5 million.

•Furthermore, the Company had a total $1.6 million allowance for loan losses recorded as of September 30, 2020, which included a $0.1 million allowance for loan losses resulting from CECL adoption and an additional $1.5 million provision for loan losses recognition recorded during the first and second quarters of 2020, on one loan secured by the borrowers limited partner interests in a fund (“Corporate Term loan”). Subsequent to September 30, 2020 the Company received gross proceeds of $12.1 million in a discounted payoff of the Corporate Term loan which was equal to the carrying value of the loan, net of current provision for loan losses. As such, no additional provision for loan losses were required at September 30, 2020.


	Current or Less Than 30 Days Past Due		30-59 Days Past Due(1)		60-89 Days Past Due		90 Days or More Past Due(2)		Total Loans
September 30, 2020	$	2,143,938	$	—	$	—	$	—	$	2,143,938
December 31, 2019	2,558,505		32,322		—		258,129		2,848,956

(1)At December 31, 2019, 30-59 days past due includes one loan (Midwest Hospitality) that was placed on nonaccrual status during the fourth quarter of 2019 following a borrower default. During the three months ended September 30, 2020, Midwest Hospitality was repaid in a discounted payoff at which time the Company provided a bridge loan totaling $19.5 million to a new borrower.

(2)At December 31, 2019, 90 days or more past due loans includes four NY hospitality loans to the same borrower and secured by the same collateral with combined carrying value before allowance for loan losses of $258.1 million on nonaccrual status. All other loans in this table remain current on interest payments. The Company completed a discounted payoff of the four NY hospitality loans in April 2020.

Loans are identified as impaired when it is no longer probable that interest or principal will be collected according to the contractual terms of the original loan agreement. Impaired loans include predominantly loans under nonaccrual, performing and nonperforming TDRs, as well as loans in maturity default. The following table presents impaired loans at December 31, 2019 (dollars in thousands):

(1)Includes four NY hospitality loans to the same borrower and secured by the same collateral with combined unpaid principal balance of $257.2 million and gross carrying value of $258.1 million on nonaccrual status. All other loans included in this table remain current on interest payments. The Company completed a discounted payoff of the four NY hospitality loans in April 2020.

Upon adoption of ASU 2016-13 the incurred loss model has been replaced with a lifetime current expected credit loss model for the Company’s loans carried at amortized cost, and as such all loans in the Company’s portfolio maintain an allowance for loan losses at September 30, 2020. See Note 2 “Summary of Significant Accounting Policies—Accounting Standards Adopted in 2020—Credit Losses” for further details.


	Nine Months Ended September 30,
	2020		2019
Allowance for loan losses at beginning of period	$	272,624	$	109,328
Effect of CECL adoption(1)	21,093		—

Provision for loan losses(2)	86,329		220,572
Charge-off	(38,659)		(46,692)

Transfer to loans held for sale	(300,863)		—
Allowance for loan losses at end of period(3)	$	40,524	$	283,208

(2)Provision for loan losses includes $5.2 million for a loan that was subsequently transferred to held for sale during the second quarter of 2020 and net provision recorded upon loan repayment totaling $1.8 million during the nine months ended September 30, 2020. Additionally, provision for loan losses excludes $1.0 million determined by the Company’s PD/LGD model for unfunded commitments reported on the consolidated statement of operations, with a corresponding offset to other liabilities recorded on the Company’s consolidated balance sheets.

(3)At September 30, 2020, includes $38.9 million related to the Company’s PD/LGD model and $1.6 million related to the corporate term loan, which was evaluated individually. See further discussion in “Nonaccrual and Past Due Loans and Preferred Equity.”

Loan and preferred equity investments are typically loans secured by direct senior priority liens on real estate properties or by interests in entities that directly own real estate properties, which serve as the primary source of cash for the payment of principal and interest. The Company evaluates its loan and preferred equity investments at least quarterly and differentiates the relative credit quality principally based on: (i) whether the borrower is currently paying contractual debt service in accordance with its contractual terms; and (ii) whether the Company believes the borrower will be able to perform under its contractual terms in the future, as well as the Company’s expectations as to the ultimate recovery of principal at maturity.

As of September 30, 2020, there were no loans and preferred equity investments past due and all loans were performing in accordance with the contractual terms of their governing documents and were categorized as performing loans. There were five loans held for investment with contractual payments past due as of December 31, 2019. For the nine months ended September 30, 2020, no debt investment contributed more than 10.0% of interest income.

The following table provides a summary by carrying values before any allowance for loan losses of the Company’s loans and preferred equity held for investment by year of origination and credit quality risk ranking (dollars in thousands). Refer to Note 2, “Summary of Significant Accounting Policies—Accounting Standards Adopted in 2020—Credit Losses” for loans risk ranking definitions.


	2020		2019		2018		2017		2016		Prior		Total
Senior loans
Risk Rankings:


3	$	19,500	$	371,654	$	279,223	$	33,660	$	—	$	—	$	704,037
4	—		835,205		403,194		—		—		—		1,238,399

Total Senior loans	19,500		1,206,859		682,417		33,660		—		—		1,942,436

Mezzanine loans
Risk Rankings:



4	—		95,848		55,484		12,120		—		4,524		167,976

Total Mezzanine loans	—		95,848		55,484		12,120		—		4,524		167,976

Preferred equity interests and other
Risk Rankings:



4	1,569		—		18,350		—		—		—		19,919
5	—		13,607		—		—		—		—		13,607

Total Preferred equity interests and other	1,569		13,607		18,350		—		—		—		33,526

Total Loans and preferred equity held for investment	$	21,069	$	1,316,314	$	756,251	$	45,780	$	—	$	4,524	$	2,143,938

The Company considers several risk factors when assigning risk ratings each quarter. Beginning with the quarter ended March 31, 2020, average risk ranking was impacted by the current and potential future effects of the COVID-19 pandemic, resulting in a number of assets moving from average risk (3) to high risk (4).

For the three months ended September 30, 2020, the Company believes the extended impact of the COVID-19 pandemic remains uncertain, and therefore continues to represent a significant risk to our portfolio. As such, the current period average rating is 3.7, which is consistent with the first half of 2020.

The Company has lending commitments to borrowers pursuant to certain loan agreements in which the borrower may submit a request for funding contingent on achieving certain criteria, which must be approved by the Company as lender, such as leasing, performance of capital expenditures and construction in progress with an approved budget. At September 30, 2020, assuming the terms to qualify for future fundings, if any, had been met, total gross unfunded lending commitments were $173.2 million. Refer to Note 16, “Commitments and Contingencies” for further details. At September 30, 2020, the Company recorded a $1.2 million allowance for lending commitments in accrued and other liabilities on its consolidated balance sheets in accordance with the credit losses accounting standard No. 2016-13. See Note 2, “Summary of Significant Accounting Policies” for further details.