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Commercial Mortgage and Subordinate Loans, Net | 3 Months Ended
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Mar. 31, 2018
Mortgage Loans on Real Estate [Abstract] |
Loans | Commercial Mortgage and Subordinate Loans, Net The Company’s loan portfolio was comprised of the following at March 31, 2018 and December 31, 2017 ($ in thousands):
Loan Type |  | March 31, 2018 |  | December 31, 2017
Commercial mortgage loans, net |  | $ | 3,029,240 |  |  | $ | 2,653,826 |
Subordinate loans, net |  | 1,038,254 |  |  | 1,025,932 |
Total loans, net |  | $ | 4,067,494 |  |  | $ | 3,679,758 |
The Company's loan portfolio consisted of 89% and 88% floating rate loans, based on amortized cost, as of March 31, 2018 and December 31, 2017, respectively. Activity relating to our loan investment portfolio was as follows ($ in thousands):
|  | Principal Balance |  | Deferred Fees/Other Items (1) |  | Provision for Loan Loss (2) |  | Carrying Value
December 31, 2017 |  | $ | 3,706,169 |  |  | $ | (9,430 | ) |  | $ | (16,981 | ) |  | $ | 3,679,758 |
New loan fundings |  | 488,638 |  |  | — |  |  | — |  |  | 488,638 |
Add-on loan fundings |  | 18,393 |  |  | — |  |  | — |  |  | 18,393 |
Loan repayments |  | (137,947 | ) |  | — |  |  | — |  |  | (137,947 | )
Unrealized gain (loss) on foreign currency translation |  | 13,555 |  |  | (113 | ) |  | — |  |  | 13,442 |
Deferred fees and other items (1) |  | — |  |  | (11,561 | ) |  | — |  |  | (11,561 | )
PIK interest, amortization of fees and other items (1) |  | 10,564 |  |  | 6,207 |  |  | — |  |  | 16,771 |
March 31, 2018 |  | $ | 4,099,372 |  |  | $ | (14,897 | ) |  | $ | (16,981 | ) |  | $ | 4,067,494 |
——————— (1) Other items primarily consist of purchase discounts or premiums, exit fees and deferred origination expenses. (2) In addition to the $17.0 million provision for loan loss, the Company recorded an impairment of $3.0 million against an investment previously recorded under other assets on the Company's consolidated balance sheet. The following table details overall statistics for our loan portfolio ($ in thousands):
|  | March 31, 2018 |  | December 31, 2017
Number of loans |  | 63 |  |  | 59 |
Principal balance |  | $ | 4,099,372 |  |  | $ | 3,706,169 |
Carrying value |  | $ | 4,067,494 |  |  | $ | 3,679,758 |
Unfunded loan commitments (1) |  | $ | 852,508 |  |  | $ | 435,627 |
Weighted-average cash coupon (2) |  | 8.6 | % |  | 8.4 | %
———————
(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, based on applicable benchmark rates as of the specified dates.
The table below details the property type of the properties securing the loans in our portfolio ($ in thousands):
|  | March 31, 2018 |  | December 31, 2017
Property Type |  | Carrying Value |  | % of Portfolio |  | Carrying Value |  | % of Portfolio
Predevelopment |  | $710,992 |  | 17.5% |  | $654,736 |  | 17.8%
Residential - for sale |  | 704,020 |  | 17.3% |  | 442,177 |  | 12.0%
Hotel |  | 654,631 |  | 16.1% |  | 645,056 |  | 17.6%
Office |  | 584,990 |  | 14.4% |  | 513,830 |  | 14.0%
Residential Rental |  | 467,605 |  | 11.5% |  | 465,057 |  | 12.6%
Mixed Use |  | 356,079 |  | 8.7% |  | 354,640 |  | 9.6%
Retail Center |  | 199,463 |  | 4.9% |  | 198,913 |  | 5.4%
Healthcare |  | 158,292 |  | 3.9% |  | 173,870 |  | 4.7%
Other |  | 154,084 |  | 3.8% |  | 154,141 |  | 4.2%
Industrial |  | 77,338 |  | 1.9% |  | 77,338 |  | 2.1%
|  | $4,067,494 |  | 100.0% |  | $3,679,758 |  | 100.0%
The table below details the geographic distribution of the properties securing the loans in our portfolio ($ in thousands):
|  | March 31, 2018 |  | December 31, 2017
Geographic Location |  | Carrying Value |  | % of Portfolio |  | Carrying Value |  | % of Portfolio
Manhattan, NY |  | $1,209,678 |  | 29.7% |  | $1,173,833 |  | 31.9%
Brooklyn, NY |  | 358,425 |  | 8.8% |  | 357,611 |  | 9.7%
Northeast |  | 107,671 |  | 2.7% |  | 100,536 |  | 2.7%
Midwest |  | 737,780 |  | 18.1% |  | 683,380 |  | 18.6%
Southeast |  | 447,450 |  | 11.0% |  | 531,582 |  | 14.4%
West |  | 270,170 |  | 6.6% |  | 227,024 |  | 6.2%
Mid Atlantic |  | 182,320 |  | 4.5% |  | 191,976 |  | 5.2%
Southwest |  | 33,384 |  | 0.8% |  | 33,615 |  | 0.9%
United Kingdom |  | 645,338 |  | 15.9% |  | 303,488 |  | 8.3%
Other International |  | 75,278 |  | 1.9% |  | 76,713 |  | 2.1%
Total |  | $4,067,494 |  | 100.0% |  | $3,679,758 |  | 100.0%
The Company assesses the risk factors of each loan, and assigns a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio ("LTV"), debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. This review is performed quarterly. Based on a 5-point scale, our loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows: 1. Very low risk 2. Low risk 3. Moderate/average risk 4. High risk/potential for loss: a loan that has a risk of realizing a principal loss 5. Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or has been impaired The following table allocates the carrying value of our loan portfolio based on the Company's internal risk ratings ($ in thousands):
|  | March 31, 2018 |  | December 31, 2017
Risk Rating |  | Number of Loans |  | Carrying Value |  | % of Loan Portfolio |  | Number of Loans |  | Carrying Value |  | % of Loan Portfolio
1 |  | — |  | $ | — |  |  | — | % |  | — |  | $ | — |  |  | — | %
2 |  | 6 |  | 395,212 |  |  | 10 | % |  | 5 |  | 399,326 |  |  | 10 | %
3 |  | 54 |  | 3,431,086 |  |  | 84 | % |  | 51 |  | 3,034,358 |  |  | 83 | %
4 |  | 1 |  | 168,677 |  |  | 4 | % |  | 1 |  | 168,208 |  |  | 5 | %
5 |  | 2 |  | 72,519 |  |  | 2 | % |  | 2 |  | 77,866 |  |  | 2 | %
|  | 63 |  | $ | 4,067,494 |  |  | 100 | % |  | 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 is 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 2017, the Company recorded a loan loss provision of $2.0 million on a commercial mortgage loan secured by fully-built, for-sale residential condominium units located in Bethesda, MD. In addition to the $2.0 million provision for loan loss, the Company recorded an impairment of $3.0 million on a related investment previously recorded under other assets on the Company's condensed 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 March 31, 2018 and December 31, 2017, this was assigned a risk rating of 5. During 2016, the Company recorded a loan loss provision of $10.0 million on a commercial mortgage loan and $5.0 million on a contiguous 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 March 31, 2018 and December 31, 2017, this was assigned a risk rating of 5. As of March 31, 2018 and December 31, 2017, the aggregate loan loss provision was $12.0 million and $5.0 million for commercial mortgage loans and subordinate loans, respectively. For the three months ended March 31, 2018 and March 31, 2017, the Company recognized PIK interest of $10.6 million and $7.9 million, respectively. For the three months ended March 31, 2018 and March 31, 2017, the Company did not receive any pre-payment penalties or accelerated fees. 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. Loan proceeds held by servicer was $30.3 million and $302.8 million as of March 31, 2018 and December 31, 2017, respectively.

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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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