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Loan Proceeds Held by Servicer | 12 Months Ended
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Dec. 31, 2017
Receivables [Abstract] |
Loans | The Company’s loan portfolio was comprised of the following at December 31, 2017:
Loan Type |  | December 31, 2017 |  | December 31, 2016
Commercial mortgage loans, net |  | $ | 2,653,826 |  |  | $ | 1,641,856 |
Subordinate loans, net |  | 1,025,932 |  |  | 1,051,236 |
Total loans, net |  | $ | 3,679,758 |  |  | $ | 2,693,092 |
Activity relating to our loan investment portfolio was as follows:
|  | Principal Balance |  | Deferred Fees/Other Items (1) |  | Provision for Loan Loss (2) |  | Carrying Value
December 31, 2016 |  | $ | 2,720,344 |  |  | $ | (12,252 | ) |  | $ | (15,000 | ) |  | $ | 2,693,092 |
Loan fundings |  | 1,828,758 |  |  | — |  |  | — |  |  | 1,828,758 |
Loan repayments |  | (891,848 | ) |  | — |  |  | — |  |  | (891,848 | )
Unrealized gain on foreign currency translation |  | 23,766 |  |  | (154 | ) |  | — |  |  | 23,612 |
Provision for loan loss (2) |  | — |  |  | — |  |  | (1,981 | ) |  | (1,981 | )
Deferred fees and other items (1) |  | — |  |  | (27,424 | ) |  | — |  |  | (27,424 | )
PIK interest, amortization of fees and other items (1) |  | 25,149 |  |  | 30,400 |  |  | — |  |  | 55,549 |
December 31, 2017 |  | $ | 3,706,169 |  |  | $ | (9,430 | ) |  | $ | (16,981 | ) |  | $ | 3,679,758 |
——————— (1) Other items primarily consist of purchase discounts or premiums, exit fees and deferred origination expenses. (2) In addition to the $1,981 provision for loan loss, the Company recorded an impairment of $3,019 against a related investment previously recorded under other assets on the Company's consolidated balance sheet. The following table details overall statistics for our loan portfolio:
|  | December 31, 2017 |  | December 31, 2016
Number of loans |  | 59 |  |  | 45 |
Principal balance |  | $ | 3,706,169 |  |  | $ | 2,720,344 |
Carrying value |  | $ | 3,679,758 |  |  | $ | 2,693,092 |
Unfunded loan commitments (1) |  | $ | 435,627 |  |  | $ | 170,365 |
Weighted-average cash coupon (2) |  | 8.40 | % |  | 8.88 | %
———————
(1) | Unfunded loan commitments are primarily funded to finance property improvements or lease-related expenditures by the borrowers. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.
(2) | For floating rate loans, assumes one-month LIBOR of 1.56% and 0.77%, as of December 31, 2017 and December 31, 2016, respectively.
The table below details the property type of the properties securing the loans in our portfolio:
|  | December 31, 2017 |  | December 31, 2016
Property Type |  | Carrying Value |  | % of Portfolio |  | Carrying Value |  | % of Portfolio
Urban Retail Predevelopment |  | $654,736 |  | 17.8% |  | $491,187 |  | 18.2%
Hotel |  | 645,056 |  | 17.5% |  | 408,428 |  | 15.2%
Office |  | 513,830 |  | 14.0% |  | 255,031 |  | 9.5%
Residential Rental |  | 465,057 |  | 12.6% |  | 309,243 |  | 11.5%
Residential - for sale |  | 442,179 |  | 12.0% |  | 469,997 |  | 17.5%
Mixed Use |  | 354,640 |  | 9.6% |  | 134,797 |  | 5.0%
Retail Center |  | 198,913 |  | 5.4% |  | 209,401 |  | 7.8%
Healthcare |  | 173,870 |  | 4.7% |  | 170,549 |  | 6.3%
Other |  | 154,141 |  | 4.2% |  | 87,650 |  | 3.3%
Industrial |  | 77,338 |  | 2.1% |  | 156,809 |  | 5.8%
|  | 3,679,758 |  | 100.0% |  | 2,693,092 |  | 100.0%
The table below details the geographic distribution of the properties securing the loans in our portfolio:
|  | December 31, 2017 |  | December 31, 2016
Geographic Location |  | Carrying Value |  | % of Portfolio |  | Carrying Value |  | % of Portfolio
Manhattan, NY |  | $1,173,833 |  | 31.9% |  | $870,914 |  | 32.3%
Brooklyn, NY |  | 357,611 |  | 9.7% |  | 163,389 |  | 6.1%
Northeast |  | 100,536 |  | 2.7% |  | 137,770 |  | 5.1%
Midwest |  | 683,380 |  | 18.6% |  | 405,992 |  | 15.1%
Southeast |  | 531,582 |  | 14.4% |  | 332,276 |  | 12.3%
United Kingdom |  | 303,488 |  | 8.2% |  | 244,756 |  | 9.1%
West |  | 227,024 |  | 6.2% |  | 219,664 |  | 8.2%
Mid Atlantic |  | 191,976 |  | 5.2% |  | 263,717 |  | 9.8%
Other International |  | 76,713 |  | 2.1% |  | — |  | —%
Southwest |  | 33,615 |  | 0.9% |  | 54,614 |  | 2.0%
Total |  | 3,679,758 |  | 100.0% |  | $2,693,092 |  | 100.0%
The Company assesses the risk factors of each loan, and assigns a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio, or LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. This review is performed quarterly. Based on a 5-point scale, our loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows: 1. Very low risk 2. Low risk 3. Moderate/average risk 4. High risk/potential for loss: a loan that has a risk of realizing a principal loss 5. Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or has been impaired The following table allocates the carrying value of our loan portfolio based on the Company's internal risk ratings:
|  | December 31, 2017
Risk Rating |  | Number of Loans |  | Carrying Value |  | % of Loan Portfolio
1 |  | — |  | $ | — |  |  | — | %
2 |  | 5 |  | 399,326 |  |  | 10 | %
3 |  | 51 |  | 3,034,358 |  |  | 83 | %
4 |  | 1 |  | 168,208 |  |  | 5 | %
5 |  | 2 |  | 77,866 |  |  | 2 | %
|  | 59 |  | $ | 3,679,758 |  |  | 100 | %
The Company evaluates its loans for possible impairment on a quarterly basis. The Company regularly evaluates the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan by loan basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash from operations are sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the property’s liquidation value. The Company also evaluates the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the properties. In addition, the Company considers the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. Such loan loss analysis is completed and reviewed by asset management and finance personnel who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants. An allowance for loan loss is established when it is deemed probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan. During the year ended December 31, 2017, the Company recorded a loan loss provision of $1,981 on a commercial mortgage loan secured by fully-built, for-sale residential condominium units located in Bethesda, MD. In addition to the $1,981 provision for loan loss, the Company recorded an impairment of $3,019 on a related investment previously recorded under other assets on the Company's consolidated balance sheet. The loan loss provision and impairment were based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision and related impairment). Fair value of the collateral was determined using a discounted cash flow analysis. The significant unobservable inputs used in determining the collateral value were sales price per square foot and discount rate which were an average of $678 dollars per square foot across properties and 15%, respectively. Effective April 1, 2017, the Company ceased accruing all interest associated with the loan and accounts for the loan on a cost-recovery basis (all proceeds are applied towards the loan balance). As of December 31, 2017, this was assigned a risk rating of 5. During 2016, the Company recorded a loan loss provision of $10,000 on a multifamily commercial mortgage loan and $5,000 on a multifamily subordinate loan secured by a multifamily property located in Williston, ND. The loan loss provision was based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision). Fair value of the collateral was determined using a discounted cash flow analysis. The significant unobservable inputs used in determining the collateral value were terminal capitalization rate and discount rate which were 11% and 10% respectively. The Company ceased accruing payment in kind ("PIK") interest associated with the loan and recognizing interest income upon receipt of cash. As of December 31, 2017, this was assigned a risk rating of 5. As of December 31, 2017, the aggregate loan loss provision was $11,981 and $5,000 for commercial mortgage loans and subordinate loans, respectively. As of December 31, 2016, the aggregate loan loss provision was $10,000 and $5,000 for commercial mortgage loans and subordinate loans, respectively. During the years ended December 31, 2017, 2016, and 2015, the Company received pre-payment penalties of $5,416, $5,225, and $1,765, respectively. The Company records pre-payment penalty income under interest income. During the years ended December 31, 2017, 2016, and 2015, the Company recognized PIK interest of $25,227, $24,379, and $21,997, respectively. Loan Proceeds Held by Servicer Loan proceeds held by servicer represents principal payments held by the Company's third-party loan servicer as of the balance sheet date which were remitted to us subsequent to the balance sheet date. Schedule IV — Mortgage Loans on Real Estate December 31, 2017
Description | Number of Loans | Property Type | Contractual Interest Rate (1) | Maturity Date(2) | Periodic Payment | Principal Balance |  | Carrying Value |  | Principal Amount of Mortgages Subject to Delinquent Principal or Interest
Commercial mortgage loans individually >3% |  |  |  |  |  |  |  |
Loan A |  | Urban Retail Predevelopment | 7.80% | 7/1/2019 | Interest Only | $220,000 |  | $221,710 |  | —
Loan B |  | Office | 6.30% | 1/5/2023 | Principal and Interest | 182,616 |  | 180,851 |  | —
Loan C |  | Retail Center | 7.10% | 5/31/2020 | Interest Only | 167,340 |  | 168,208 |  | —
Loan D |  | Hotel | 6.80% | 9/30/2020 | Interest Only | 138,406 |  | 139,159 |  | —
Loan E |  | Mixed Use | 7.10% | 10/1/2020 | Interest Only | 132,184 |  | 131,672 |  | —
Loan F |  | Urban Retail Predevelopment | 8.60% | 9/1/2018 | Interest Only | 127,180 |  | 128,133 |  | —
Loan G |  | Mixed Use | 6.00% | 6/30/2019 | Principal and Interest | 125,000 |  | 124,256 |  | —
Loan H |  | Office | 6.90% | 12/1/2022 | Principal and Interest | 122,651 |  | 120,199 |  | —
Commercial mortgage loans individually <3% |  |  |  |  |  |  |
First Mortgage | 27 | Hotel, Mixed Use, Office, Other, Residential-for rent, Residential-for sale, Retail Center, Urban Retail Predevelopment | 6.06% - 8.31% | 2018 - 2022 | Principal and Interest / Interest Only | 1,456,494 |  | 1,439,637 |  | —
Total Commercial mortgage loans |  |  |  | $2,671,871 |  | $2,653,826 |  | —
Subordinate loans individually >3%(3) |  |  |  |  |  |  |  |
Loan I |  | Residential-for sale | 15.80% | 7/1/2020 | Interest Only | 115,490 |  | 115,776 |  | —
Loan J |  | Healthcare | 11.60% | 10/11/2021 | Interest Only | 129,305 |  | 128,785 |  | —
Subordinate loans individually <3%(3) |  |  |  |  |  |  |  |
Subordinate Mortgage | 22 | Healthcare, Hotel, Industrial, Mixed Use, Office, Other, Residential-for rent, Residential-for sale | 6.81% - 19.06% | 2018 - 2027 | Principal and Interest / Interest Only | 789,503 |  | 781,372 |  | —
Total Subordinate loans |  |  |  | $1,034,298 |  | $1,025,932 |  | —
Total loans (4) |  |  |  |  |  | $3,706,169 |  | $3,679,758 |  | —
———————
(1) | Assumes 1.56% 1 month Libor rate for all floating rate loans
(2) | Assumes all extension options are exercised.
(3) | Subject to prior liens.
(4) | The aggregate cost for federal income tax purposes is $3,696,739.
The following table summarizes the changes in the carrying amounts of mortgage loans during 2017 and 2016.
|  |  |  | Year Ended |  | Year Ended
Reconciliation of Carrying Amount of Loans |  |  |  | December 31, 2017 |  | December 31, 2016
Balance at beginning of year |  | $ | 2,693,092 |  |  | $ | 1,925,652 |
Loan fundings(1) |  | 1,828,758 |  |  | 1,127,039 |
Loan repayments |  | (891,848 | ) |  | (331,189 | )
Participation sold |  | — |  |  | (24,051 | )
Unrealized gain (loss) on foreign currency translation |  | 23,612 |  |  | (33,383 | )
Discount accretion |  | — |  |  | 13,656 |
Provision for loan losses(2) |  | (1,981 | ) |  | (15,000 | )
Deferred Fees |  | (27,424 | ) |  | — |
PIK interest, amortization of fees and other items |  | 55,549 |  |  | 30,368 |
Balance at the close of year |  | $ | 3,679,758 |  |  | $ | 2,693,092 |
——————— (1) During the year ended December 31, 2017, $50,000 was purchased from a fund managed by an affiliate of the Manager. (2) During the year ended December 31, 2017, the Company recorded a loan loss provision of $1,981 on a commercial mortgage loan secured by fully-built, for-sale residential condominium units located in Bethesda, MD. In addition to the $1,981 provision for loan loss, the Company recorded an impairment of $3,019 on a related investment previously recorded under other assets on the Company's consolidated balance sheet. During 2016, the Company recorded a loan loss provision of $10,000 on a multifamily commercial mortgage loan and $5,000 on a multifamily subordinate loan secured by a multifamily property located in Williston, ND.

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- Definition The entire disclosure for mortgage loans on real estate, this includes the supplemental information pertaining to each mortgage loan receivable that equals or exceeds three percent of the carrying amount of mortgages. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 948 -SubTopic 310 -URI http://asc.fasb.org/subtopic&trid=2176522 + Details
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