Debt

9 Months Ended

Sep. 30, 2020

The following table presents debt as of September 30, 2020 and December 31, 2019 (dollars in thousands):


							September 30, 2020				December 31, 2019
	Capacity ($)		Recourse vs. Non-Recourse(1)	Final Maturity	Contractual Interest Rate		Principal Amount(2)		Carrying Value(2)		Principal Amount(2)		Carrying Value(2)

Securitization bonds payable, net
CLNC 2019-FL1(3)			Non-recourse	Aug-35	LIBOR + 1.59%		$	840,423	$	834,621	$	840,423	$	833,153
Subtotal securitization bonds payable, net							840,423		834,621		840,423		833,153

Mortgage and other notes payable, net
Net lease 6(4)			Non-recourse	Oct-27	4.45%		23,780		23,780		24,117		24,117
Net lease 5(5)			Non-recourse	Nov-26	4.45%		3,373		3,290		3,422		3,329
Net lease 4(5)			Non-recourse	Nov-26	4.45%		7,272		7,094		7,384		7,184
Net lease 3(5)			Non-recourse	Jun-21	4.00%		12,308		12,268		12,450		12,368
Net lease 6(5)			Non-recourse	Jul-23	LIBOR + 2.15%		1,439		1,405		1,658		1,615
Net lease 5(4)			Non-recourse	Aug-26	4.08%		31,439		31,189		31,821		31,539
Net lease 1(5)(6)			Non-recourse	Nov-26	4.45%		18,315		17,866		18,579		18,076
Net lease 1(7)			Non-recourse	Mar-28	4.38%		12,077		11,639		12,221		11,758
Net lease 4(4)(8)			Non-recourse	Apr-21	LIBOR + 2.50%		—		—		74,916		74,845
Net lease 1(4)			Non-recourse	Jul-25	4.31%		250,000		247,270		250,000		246,961
Net lease 2(4)(9)			Non-recourse	Jun-25	3.91%		170,112		172,524		181,952		184,532
Net lease 3(4)			Non-recourse	Sep-33	4.77%		200,000		198,583		200,000		198,521
Other real estate 4(5)			Non-recourse	Dec-23	4.84%		42,383		42,853		42,925		43,407
Other real estate 2(5)(10)			Non-recourse	Dec-23	4.94%		—		—		42,443		42,851
Other real estate 8(5)			Non-recourse	Jun-30	3.53%		22,880		22,648		15,819		16,324
Other real estate 10(5)(11)			Non-recourse	Jun-30	3.53%		12,480		12,306		11,744		11,939
Other real estate 9(5)			Non-recourse	Nov-26	3.98%		23,543		22,791		23,885		23,133
Other real estate 1(5)			Non-recourse	Oct-24	4.47%		107,317		107,915		108,719		109,475
Other real estate 3(5)			Non-recourse	Jan-25	4.30%		74,134		73,548		75,256		74,554
Other real estate 5(5)(10)			Non-recourse	Apr-23	LIBOR + 4.00%		—		—		33,498		32,801
Other real estate 6(5)(12)			Non-recourse	Apr-24	LIBOR + 2.95%		22,788		22,282		21,500		20,825
Loan 9(13)			Non-recourse	Jun-24	LIBOR + 3.00%		71,748		71,748		65,958		65,958
Subtotal mortgage and other notes payable, net							1,107,388		1,102,999		1,260,267		1,256,112

Bank credit facility
Bank credit facility	$	450,000	Recourse	Feb-23 (14)	LIBOR + 2.25%		—		—		113,500		113,500
Subtotal bank credit facility							—		—		113,500		113,500

Master repurchase facilities
Bank 1 facility 3	$	400,000	Limited Recourse(15)	Apr-23(16)	LIBOR + 1.91%	(17)	103,622		103,622		106,309		106,309
Bank 2 facility 3(18)	200,000		Limited Recourse(15)	Oct-22	LIBOR + 2.50%	(17)	21,353		21,353		22,750		22,750
Bank 3 facility 3	600,000		Limited Recourse(15)	Apr-22	LIBOR + 2.14%	(17)	202,952		202,952		265,633		265,633
Bank 7 facility 1	500,000		Limited Recourse(15)	Apr-22(19)	LIBOR + 2.01%	(17)	124,704		124,704		221,421		221,421
Bank 8 facility 1	250,000		Limited Recourse(15)	Jun-21(20)	LIBOR + 1.98%	(17)	130,769		130,769		164,098		164,098
Bank 9 facility 1	300,000		(21)	Nov-23(22)	(23)	(17)	—		—		—		—
Subtotal master repurchase facilities	$	2,250,000					583,400		583,400		780,211		780,211


						September 30, 2020				December 31, 2019
	Capacity ($)	Recourse vs. Non-Recourse(1)	Final Maturity	Contractual Interest Rate		Principal Amount(2)		Carrying Value(2)		Principal Amount(2)		Carrying Value(2)

CMBS credit facilities
Bank 1 facility 1		Recourse	(24)	NA	(25)	—		—		20,375		20,375
Bank 1 facility 2		Recourse	(24)	NA	(25)	—		—		18,834		18,834
Bank 3 facility		Recourse	(24)	NA	(25)	—		—		—		—
Bank 4 facility		Recourse	(24)	NA	(25)	—		—		—		—
Bank 5 facility 1		Recourse	(24)	NA	(25)	—		—		—		—
Bank 5 facility 2		Recourse	(24)	NA	(25)	—		—		—		—
Bank 6 facility 1		Recourse	(24)	4.25%		13,165		13,165		83,584		83,584
Bank 6 facility 2		Recourse	(24)	4.25%		12,067		12,067		82,729		82,729
Subtotal CMBS credit facilities						25,232		25,232		205,522		205,522
Subtotal credit facilities						608,632		608,632		1,099,233		1,099,233

Total						$	2,556,443	$	2,546,252	$	3,199,923	$	3,188,498

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(1)Subject to customary non-recourse carveouts.

(2)Difference between principal amount and carrying value of securitization bonds payable, net and mortgage and other notes payable, net is attributable to deferred financing costs, net and premium/discount on mortgage notes payable.

(3)The Company, through indirect Cayman subsidiaries, securitized commercial mortgage loans originated by the Company. Senior notes issued by the securitization trusts were generally sold to third parties and subordinated notes retained by the Company. These securitizations are accounted for as secured financing with the underlying mortgage loans pledged as collateral. Principal payments from underlying collateral loans must be applied to repay the notes until fully paid off, irrespective of the contractual maturities on the notes. Underlying collateral loans have initial terms of two to three years.

(4)Represents a mortgage note collateralized by an investment in the Company’s Core Portfolio.

(5)Represents a mortgage note collateralized by an investment in the Company’s Legacy, Non-Strategic Portfolio.

(6)Payment terms are periodic payment of principal and interest for debt on two properties and periodic payment of interest only with principal at maturity (except for principal repayments to release collateral properties disposed) for debt on one property.

(7)Represents a mortgage note collateralized by three properties in the Company’s Legacy, Non-Strategic Portfolio.

(8)Represents a mortgage note that was repaid during the third quarter of 2020 in connection with the sale of the collateralized property.

(9)As of September 30, 2020, the outstanding principal of the mortgage payable was NOK 1.6 billion, which translated to $170.1 million.

(10)Represents a mortgage note that was repaid during the first quarter of 2020 in connection with the sale of the collateralized properties.

(11)Represents two separate senior mortgage notes with a weighted average maturity of December 2020 and weighted average interest rate of 3.53%.

(12)The current maturity of the mortgage payable is April 2022, with two one-year extensions available at the Company’s option, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.

(13)The current maturity of the note payable is June 2021, with three one-year extensions available at the Company’s option, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents. The loan is included in the Company’s Core Portfolio.

(14)The ability to borrow additional amounts terminates on February 1, 2022 at which time the Company may, at its election, extend the termination date for two additional six-month terms.

(15)Recourse solely with respect to 25.0% of the financed amount.

(16)The next maturity date is April 2021, with two one-year extensions available at the option of the Company, which may be exercised upon the satisfaction of certain customary conditions set forth in the governing documents.

(17)Represents the weighted average spread as of September 30, 2020. The contractual interest rate depends upon asset type and characteristics and ranges from one-month London Interbank Offered Rates (“LIBOR”) plus 1.50% to 2.60%.

(18)The next maturity date is October 2020, with two one-year extension options available, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents. Subsequent to September 30, 2020, the Company exercised a one-year extension option to October 2021 and reduced the capacity of Bank 2 Facility 3 to $21.4 million.

(19)The next maturity date is April 2021, with a one-year extension available, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.

(20)The next maturity date is June 2021, with a one-year extension available, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.

(21)Recourse is either 25.0% or 50.0% depending on loan metrics.

(22)The next maturity date is November 2021, with two one-year extension options available, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.

(23)The interest rate will be determined by the lender in its sole discretion.

(24)The maturity dates on the CMBS Credit Facilities are dependent upon asset type and will typically range from one to six months.

(25)CMBS Credit Facilities are undrawn and fully available.

Future Minimum Principal Payments

The following table summarizes future scheduled minimum principal payments at September 30, 2020 based on initial maturity dates or extended maturity dates to the extent criteria are met and the extension option is at the borrower’s discretion (dollars in thousands):


	Total		Securitization Bonds Payable, Net		Mortgage Notes Payable, Net(1)		Credit Facilities(1)
Remainder of 2020	$	25,904	$	—	$	672	$	25,232
2021	145,401		—		14,632		130,769
2022	351,529		—		2,520		349,009
2023	148,532		—		44,910		103,622
2024	204,072		—		204,072		—
2025 and thereafter	1,681,005		840,423		840,582		—
Total	$	2,556,443	$	840,423	$	1,107,388	$	608,632

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(1)Includes $101.3 million of future minimum principal payments related to assets held for sale.

Bank Credit Facility

On February 1, 2018, the Company, through subsidiaries, including the OP, entered into a credit agreement with several lenders to provide a revolving credit facility in the aggregate principal amount of up to $400.0 million (the “Bank Credit Facility”). On December 17, 2018, the aggregate amount of revolving commitments was increased to $525.0 million and on February 4, 2019, the aggregate amount of revolving commitments was increased to $560.0 million. On May 6, 2020 these commitments were reduced to $450.0 million. The Bank Credit Facility will mature on February 1, 2022, unless the OP elects to extend the maturity date for up to two additional six-month terms.

The maximum amount available for borrowing at any time under the Bank Credit Facility is limited to a borrowing base valuation of certain investment assets, with the valuation of such investment assets generally determined according to a percentage of adjusted net book value. At September 30, 2020, the borrowing base valuation was sufficient to support the borrowing of up to $195.0 million.

Advances under the Bank Credit Facility accrue interest at a per annum rate equal to, at the applicable borrower’s election, either a LIBOR rate plus a margin of 2.25%, or a base rate determined according to a prime rate or federal funds rate plus a margin of 1.25%. The Company pays a commitment fee of 0.25% or 0.35% per annum of the unused amount (0.35%) at September 30, 2020, depending upon the amount of facility utilization.

Substantially all material wholly owned subsidiaries of the Company guarantee the obligations of the Company and any other borrowers under the Bank Credit Facility. As security for the advances under the Bank Credit Facility, the Company pledged substantially all equity interests it owns and granted a security interest in deposit accounts in which the proceeds of investment asset distributions are maintained.

The Bank Credit Facility contains various affirmative and negative covenants including financial covenants that require the Company to maintain minimum tangible net worth, liquidity levels and financial ratios, as specified in the Bank Credit Facility. On May 6, 2020, the Company amended the Bank Credit Facility to, among other things, (i) reduce the minimum tangible net worth covenant to $1.5 billion, providing portfolio management flexibilities as a result of any disruptions in investments caused by COVID-19 or other factors; (ii) reduce the facility size to $450.0 million, (iii) limit dividends in line with taxable income and restrict stock repurchases, each for liquidity preservation purposes, and (iv) focus new investments on senior mortgages. At September 30, 2020, the Company was in compliance with all of the financial covenants.

Securitization Financing Transactions

Securitization bonds payable, net represent debt issued by securitization vehicles consolidated by the Company. Senior notes issued by these securitization trusts were generally sold to third parties and subordinated notes retained by the Company. Payments from underlying collateral loans must be applied to repay the notes until fully paid off, irrespective of the contractual maturities of the loans.

In October 2019, the Company executed a securitization transaction, through wholly-owned subsidiaries, CLNC 2019-FL1, Ltd. and CLNC 2019-FL1, LLC (collectively, “CLNC 2019-FL1”), which resulted in the sale of $840.4 million of investment grade notes. The securitization reflects an advance rate of 83.5% at a weighted average cost of funds of LIBOR plus 1.59%, and is collateralized by a pool of 21 senior loans originated by the Company.

CLNC 2019-FL1 includes a two-year reinvestment feature that allows us to contribute existing or newly originated loan investments in exchange for proceeds from repayments or repurchases of loans held in CLNC 2019-FL1, subject to the satisfaction of certain conditions set forth in the indenture. In addition to existing eligible loans available for reinvestment, the continued origination of securitization eligible loans is required to ensure that we reinvest the available proceeds within CLNC 2019-FL1.

Additionally, CLNC 2019-FL1 contains note protection tests that can be triggered as a result of contributed loan defaults, losses, and certain other events outlined in the indenture, beyond established thresholds. A note protection test failure that is not remedied can result in the redirection of interest proceeds from the below investment grade tranches to amortize the most senior outstanding tranche. While we continue to closely monitor all loan investments contributed to CLNC 2019-FL1, a deterioration in the performance of an underlying loan could negatively impact our liquidity position.

As of September 30, 2020, the Company had $1.0 billion carrying value of CRE debt investments financed with $840.4 million of securitization bonds payable, net.

Master Repurchase Facilities

As of September 30, 2020, the Company, through subsidiaries, had entered into repurchase agreements with multiple global financial institutions to provide an aggregate principal amount of up to $2.3 billion to finance the origination of first mortgage loans and senior loan participations secured by CRE debt investments (“Master Repurchase Facilities”). The Company agreed to guarantee certain obligations under the Master Repurchase Facilities, which contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of this type. The Master Repurchase Facilities act as revolving loan facilities that can be paid down as assets are repaid or sold and re-drawn upon for new investments. As of September 30, 2020, the Company was in compliance with all of its financial covenants under the Master Repurchase Facilities.

As of September 30, 2020, the Company had $869.0 million carrying value of CRE debt investments financed with $583.4 million under the master repurchase facilities.

On May 7, 2020, the Company amended all six of its Master Repurchase Facilities to reduce the minimum tangible net worth covenant consistent with the Bank Credit Facility. During the first quarter of 2020, the Company received and timely paid a margin call on a hospitality loan and made voluntarily paydowns on two other hospitality and one retail loan. The lender granted the Company a holiday from future margin calls for four months, and it obtained broader discretion to enter into permitted modifications with the borrowers on these three specific loans, if necessary.

In May, the Company entered into agreements to modify two of its Master Repurchase Facilities pursuant to which the Company reduced facility advances corresponding to ten senior mortgage loans financed under such facilities. The Company and its lender counterparties agreed to temporary modifications providing for margin holidays from future margin calls or buffers before further margin calls are possible, as well as providing additional protections before certain repurchase obligations may be triggered. The Company was also provided broader discretion to negotiate with its borrowers to implement certain modifications to the underlying loans during such period. These holiday periods are scheduled to expire in the fourth quarter of 2020. Additionally, during the third quarter and fourth quarter of 2020, the Company made voluntarily paydowns on a hospitality loan and a self-storage loan, respectively. In exchange for the paydown on the self-storage loan, the lender granted the Company a holiday from future margin calls for four months, and the Company obtained broader approval to enter into a permitted modification with the borrower.

Subsequent to September 30, 2020, the Company exercised a one-year extension option on Bank 2 Facility 3, extending the maturity to October 2021. The Company additionally reduced the capacity from $200.0 million to $21.4 million.

CMBS Credit Facilities

As of September 30, 2020, the Company had entered into eight master repurchase agreements (collectively the “CMBS Credit Facilities”) to finance CMBS investments. The CMBS Credit Facilities are on a recourse basis and contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of this type. As of September 30, 2020, the Company had $36.3 million carrying value of CRE securities financed with $18.4

million under its CMBS Credit Facilities. As of September 30, 2020, the Company had $21.6 million carrying value of underlying investments in the subordinate tranches of the securitization trusts financed with $6.8 million under its CMBS Credit Facilities.During the first quarter, the Company received and paid margin calls on its CMBS Credit Facilities of $48.9 million. During the second quarter, the Company consolidated its CMBS Credit Facilities borrowings with one existing counterparty bank. In connection with the consolidation, the Company paid down the CMBS Credit Facilities borrowing advance rate to a blended borrowing advance rate of 62% and extended the repurchase date on all such borrowings first to June 30, 2020 and then to December 31, 2020. This $73.9 million paydown allowed for a 15% additional loss on a bond specific basis before further margin calls. As of November 5, 2020, the Company had $18.6 million outstanding under its CMBS Credit Facilities. The consolidated facility bears a fixed interest rate of 4.25%. Refer to Note 19 “Subsequent Events” for further details on CMBS sales and repayment of the CMBS Credit Facility.