Note 9 — Variable Interest Entities

The Company has evaluated its loans and investments, mortgage related securities, investments in equity affiliates, senior unsecured notes, junior subordinated notes, CDOs and CLOs, in order to determine if they qualify as VIEs or as variable interests in VIEs. This evaluation resulted in the Company determining that its bridge loans, junior participation loans, mezzanine loans, preferred equity investments, investments in equity affiliates, junior subordinated notes, CDOs, CLOs and investments in mortgage related securities are potential VIEs.

The Company’s involvement with VIEs primarily affects its financial performance and cash flows through amounts recorded in interest income, interest expense, provision for loan losses and through activity associated with its derivative instruments.

Consolidated VIEs

The Company consolidates its CDO and CLO subsidiaries, which qualify as VIEs, of which the Company is the primary beneficiary. These CDOs and CLOs invest in real estate and real estate-related securities and are financed by the issuance of CDO and CLO debt securities. The Company, or one of its affiliates, is named collateral manager, servicer, and special servicer for all CDO and CLO collateral assets which the Company believes gives it the power to direct the most significant economic activities of the entity. The Company also has exposure to CDO and CLO losses to the extent of its equity interests and also has rights to waterfall payments in excess of required payments to CDO and CLO bond investors. As a result of consolidation, equity interests in these CDOs and CLOs have been eliminated, and the Consolidated Balance Sheets reflect both the assets held and debt issued by the CDOs and CLOs to third parties. The Company’s operating results and cash flows include the gross amounts related to CDO and CLO assets and liabilities as opposed to the Company’s net economic interests in the CDO and CLO entities.

Assets held by the CDOs and CLOs are restricted and can be used only to settle obligations of the CDOs and CLOs. The liabilities of the CDOs and CLOs are non-recourse to the Company and can only be satisfied from each CDOs and CLOs respective asset pool. Assets and liabilities related to the CDOs and CLOs are disclosed parenthetically, in the aggregate, in the Company’s Consolidated Balance Sheets. See Note 7 — “Debt Obligations” for further details.

The Company is not obligated to provide, has not provided, and does not intend to provide financial support to any of the consolidated CDOs and CLOs.

Unconsolidated VIEs

The Company determined that it is not the primary beneficiary of 24 VIEs in which it has a variable interest as of September 30, 2014 because it does not have the ability to direct the activities of the VIEs that most significantly impact each entity’s economic performance. VIEs, of which the Company is not the primary beneficiary, have an aggregate carrying amount of $509.9 million and exposure to real estate debt of approximately $2.2 billion at September 30, 2014.

The following is a summary of the Company’s variable interests in identified VIEs, of which the Company is not the primary beneficiary, as of September 30, 2014:

Type	Carrying Amount (1)		Maximum Exposure to Loss (2)

Loans	$	420,378,972	$	420,378,972
Loans and equity investments	86,880,779		86,880,779
CMBS	2,100,000		2,100,000
Junior subordinated notes (3)	578,000		578,000
Total	$	509,937,751	$	509,937,751

(1) Represents the carrying amount of loans and investments before reserves. At September 30, 2014, $184.1 million of loans to VIEs had corresponding loan loss reserves of approximately $109.9 million and $40.3 million of loans to VIEs were related to loans classified as non-performing. See Note 3 — “Loans and Investments” for further details.

(2) The Company’s maximum exposure to loss as of September 30, 2014 would not exceed the carrying amount of its investment.

(3) These entities that issued the junior subordinated notes are VIEs. It is not appropriate to consolidate these entities as equity interests are variable interests only to the extent that the investment is considered to be at risk. Since the Company’s investments were funded by the entities that issued the junior subordinated notes, it is not considered to be at risk.