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Senior Secured Term Loan, Net

6 Months Ended

Jun. 30, 2020

Secured Debt Arrangements, Net

At June 30, 2020 and December 31, 2019, our borrowings included the following secured debt arrangements, maturities and weighted-average interest rates ($ in thousands):



	June 30, 2020						December 31, 2019
	Maximum Amount of Borrowings⁽¹⁾		Borrowings Outstanding⁽¹⁾			Maturity ⁽²⁾	Maximum Amount of Borrowings⁽¹⁾		Borrowings Outstanding⁽¹⁾			Maturity ⁽²⁾
JPMorgan (USD)	$	1,138,858	$	993,495		June 2024	$	1,154,109	$	1,090,160		June 2024
JPMorgan (GBP)	93,738		93,738			June 2024	51,702		50,410			June 2024
JPMorgan (EUR)	67,404		67,404			June 2024	94,189		94,189			June 2024
DB (USD)	1,000,000		509,800			March 2023	1,250,000		513,876			March 2021
Goldman (USD)	500,000		354,562			November 2021	500,000		322,170			November 2021
CS - USD	332,444		321,518			January 2023⁽³⁾	226,068		218,644			June 2020
CS - GBP	84,618		84,618			March 2021⁽³⁾	93,915		93,915			June 2020
HSBC - USD	47,223		47,223			January 2021	50,625		50,625			October 2020
HSBC - GBP	—		—			N/A	34,634		34,634			June 2020
HSBC - EUR	150,621		150,621			July 2021	154,037		154,037			January 2021
Barclays (USD)	200,000		35,192			March 2024	N/A		N/A			N/A
Barclays (GBP)	—		—			N/A⁽⁴⁾	538,916		290,347			February 2024⁽⁵⁾
Barclays (EUR)	—		—			N/A⁽⁴⁾	182,549		182,549			November 2020
Total Secured Credit Facilities	3,614,906		2,658,171				4,330,744		3,095,556
Barclays Private Securitization	782,006		782,006			July 2023⁽⁵⁾	N/A		N/A			N/A
Total Secured Debt Arrangements	4,396,912		3,440,177				4,330,744		3,095,556
less: deferred financing costs	N/A		(15,079		)		N/A		(17,190		)
Total Secured Debt Arrangements, net^(6)(7)(8)	$	4,396,912	$	3,425,098			$	4,330,744	$	3,078,366
Total Secured Debt Arrangements, net^(6)(7)(8)	$	4,396,912	$	3,425,098			$	4,330,744	$	3,078,366

———————


(1)	As of June 30, 2020, British Pound Sterling ("GBP") and Euros ("EUR") borrowings were converted to U.S. Dollars ("USD") at a rate of 1.24 and 1.12, respectively. As of December 31, 2019, GBP and EUR borrowings were converted at a rate of 1.33 and 1.12, respectively.

(2) Maturity date assumes extensions at our option are exercised with consent of financing providers, where applicable.

(3) Assumes financings are extended in line with the underlying loans.

(4) As of June 30, 2020, there are no loans pledged to this facility.

(5) Represents weighted average maturity across various financings with the counterparty. See below for additional details.

(6) Weighted-average borrowing costs as of June 30, 2020 and December 31, 2019 were USD L + 2.13% / GBP L + 1.87% / EUR L + 1.46% and USD L + 2.07% / GBP L + 1.75% / EUR L + 1.36%, respectively.

(7) Weighted average advance rates based on cost as of June 30, 2020 and December 31, 2019 were 64.5% (63.6% (USD) / 68.8% (GBP) / 61.6% (EUR)) and 63.8% (66.7% (USD) / 47.1% (GBP) / 76.1% (EUR)).

(8) As of June 30, 2020 and December 31, 2019, approximately 56% and 54% of the outstanding balance under these secured borrowings were recourse to us.

Each of our existing secured debt arrangements include "credit based and other mark-to-market" features. "Credit mark-to-market" provisions in repurchase facilities are designed to keep the lenders' credit exposure generally constant as a percentage of the underlying collateral value of the assets pledged as security to them. If the credit of the underlying collateral value decreases, the amount of leverage available to us will be reduced as our assets are marked-to-market, which would reduce our liquidity. Generally, the lender under the applicable secured debt arrangement calls for and/or sets the valuation and any revaluation of the collateral assets in its sole, good faith discretion. If it is determined (subject to certain conditions) that the market value of the underlying collateral has decreased by more than a defined minimum amount, the lender may require us to provide additional collateral or may make margin calls, which may require us to repay all or a portion of the funds advanced. We closely monitor our liquidity and intend to maintain sufficient liquidity on our balance sheet in order to meet any margin calls in the event of any significant decreases in asset values. As of June 30, 2020 and December 31, 2019, the weighted average haircut under our secured debt arrangements was approximately 35% and 36%, respectively. In addition, our existing secured debt arrangements are not entirely term-matched financings and may mature before our commercial real estate debt investments that represent underlying collateral to those financings. We are in frequent dialogue with the lenders under our secured debt arrangements regarding our management of their collateral assets and as we negotiate renewals and extensions of these liabilities, we may experience lower advance rates and higher pricing under the renewed or extended agreements.

JPMorgan Facility

In November 2019, through three indirect wholly-owned subsidiaries, we entered into a Sixth Amended and Restated Master Repurchase Agreement with JPMorgan Chase Bank, National Association (as amended, the "JPMorgan Facility"). The JPMorgan Facility allows for $1.3 billion of maximum borrowings (with amounts borrowed in British pounds and Euros converted to U.S. dollars for purposes of calculating availability based on the greater of the spot rate as of the initial financing under the corresponding mortgage loan and the then-current spot rate) and matures in June 2022 and has two one-year extensions available at our option, which are subject to certain conditions. The JPMorgan Facility enables us to elect to receive advances in U.S. dollars, GBP, or EUR. Margin calls may occur any time at specified aggregate margin deficit thresholds.

As of June 30, 2020, we had $1.2 billion (including £75.6 million and €60.0 million assuming conversion into USD) of borrowings outstanding under the JPMorgan Facility secured by certain of our commercial mortgage loans.

DB Facility

In March 2020, through an indirect wholly-owned subsidiary, we entered into a Third Amended and Restated Master Repurchase Agreement with Deutsche Bank AG, Cayman Islands Branch, London Branch (as amended, the "DB Facility"), which provides for advances of up to $1.0 billion for the sale and repurchase of eligible first mortgage loans secured by commercial or multifamily properties located in the United States, United Kingdom and the European Union, and enables us to elect to receive advances in USD, GBP, or EUR. The repurchase facility matures in March 2021, and has two one-year extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds.

As of June 30, 2020, we had $509.8 million of borrowings outstanding under the DB Facility secured by certain of our commercial mortgage loans.

Goldman Facility

In November 2017, through an indirect wholly-owned subsidiary, we entered into a master repurchase and securities contract agreement with Goldman Sachs Bank USA (the "Goldman Facility"), which provides advances up to $500.0 million and matures in November 2020, and has one one-year extension available at our option, subject to certain conditions. Margin calls may occur any time at specified margin deficit thresholds.

As of June 30, 2020, we had $354.6 million of borrowings outstanding under the Goldman Facility secured by certain of our commercial mortgage loans.

CS Facility - USD

In July 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS Facility - USD"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - USD has an "evergreen" feature such that the facility continues unless terminated at any time by Credit Suisse with six months' notice. Margin calls may occur any time at specified aggregate margin deficit thresholds.

As of June 30, 2020, we had $321.5 million of borrowings outstanding under the CS Facility - USD secured by certain of our commercial mortgage loans.

CS Facility - GBP

In June 2018, through an indirect wholly-owned subsidiary, we entered into a Global Master Repurchase Agreement with Credit Suisse Securities (Europe) Limited (the "CS Facility - GBP"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - GBP has an "evergreen" feature such that the facility continues unless terminated at any time by Credit Suisse with six months' notice. Margin calls may occur any time at specified aggregate margin deficit thresholds.

As of June 30, 2020, we had $84.6 million (£68.2 million assuming conversion into USD) of borrowings outstanding under the CS Facility - GBP secured by one commercial mortgage loan.

HSBC Facility - USD

In October 2019, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - USD"), which provides for a single asset financing. The facility is scheduled to mature in January 2021. Margin calls may occur any time at specified aggregate margin thresholds.

As of June 30, 2020, we had $47.2 million of borrowings under the HSBC Facility - USD secured by one commercial mortgage loan.

HSBC Facility - GBP

In September 2018, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - GBP"), which provided for a single asset financing. The facility matured and was repaid in June 2020 in connection with the repayment of the underlying loan.

HSBC Facility - EUR

In July 2019, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - EUR"), which provides for a single asset financing. The facility matures in July 2021. Margin calls may occur any time at specified aggregate margin deficit thresholds.

As of June 30, 2020, we had $150.6 million (€134.1 million assuming conversion into USD) of borrowings outstanding under the HSBC Facility - EUR secured by one commercial mortgage loan.

Barclays Facility - USD

In March 2020, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement pursuant to a Master Repurchase Agreement with Barclays Bank plc ("Barclays Facility - USD"). The Barclays Facility - USD allows for $200.0 million of maximum borrowings and initially matures in March 2023 with extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds.

As of June 30, 2020, we had $35.2 million of borrowings outstanding under the Barclays Facility - USD secured by one commercial mortgage loan.

Barclays Facility - GBP/EUR

Beginning in October 2019, through an indirect wholly-owned subsidiary, we entered into five secured debt arrangements pursuant to a Global Master Repurchase Agreement with Barclays Bank plc (the "Barclays Facility - GBP/EUR"). In June 2020, all assets previously financed pursuant to this facility were refinanced under the Barclays Private Securitization.

Barclays Private Securitization

In June 2020, through a newly formed entity, we entered into a private securitization with Barclays Bank plc. Barclays Bank plc retained $782.0 million senior notes from the securitization. This Barclays Private Securitization finances the loans that were previously financed under the Barclays Facility - GBP/EUR. In addition, we pledged an additional commercial mortgage loan with an outstanding principal balance of £26.0 million and pledged additional collateral of a financed loan of €5.3 million ($38.2 million in USD).

The securitization eliminates daily margining provisions and grants us significant discretion to modify certain terms of the underlying collateral including waiving certain loan-level covenant breaches and deferring or waiving of debt service payments for up to 18 months. The securitization includes LTV based covenants with significant headroom to existing levels that are also subject to a six-month holiday through December 2020. These deleveraging requirements are based on significant declines in the value of the collateral as determined by an annual third-party (engaged by us) appraisal process tied to the provisions of the underlying loan agreements. We believe this provides us with both cushion and predictability to avoid sudden unexpected outcomes and material repayment requirements. In addition to the pledge of the additional collateral noted above, we paid down the previous financing by €16.5 million (totaling $18.5 million in USD) and agreed to increase the financing spreads by 0.25%.

The table below provides the borrowings outstanding and weighted-average fully-extended maturities by currency for the assets financed under the Barclays Private Securitization ($ in thousands):



	Borrowings outstanding	Fully-Extended Maturity⁽¹⁾
Total/Weighted-Average GBP	$644,397	December 2023
Total/Weighted-Average EUR	137,609	May 2021⁽²⁾
Total/Weighted-Average Securitization	$782,006	July 2023

———————

(1) Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.

(2) The EUR portion of the Barclays Private Securitization has an "evergreen" feature such that the facility continues for one year and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve months' notice.

The table below provides the assets and liabilities of the Barclays Private Securitization VIE included in our condensed consolidated balance sheet ($ in thousands):



	June 30, 2020
Assets:
Commercial mortgage loans, net⁽¹⁾	$	1,169,978
Liabilities:
Secured debt arrangements, net	$	782,006
Accounts payable, accrued expenses and other liabilities⁽²⁾	317
Total Liabilities	782,323

———————

(1) Net of the General CECL Allowance of $6.9 million.

(2) Represents General CECL Allowance related to unfunded commitments.

As of June 30, 2020, we had $782.0 million (£519.6 million and €122.5 million assuming conversion into USD) of borrowings outstanding under the Barclays Private Securitization secured by certain of our commercial mortgage loans.

At June 30, 2020, our borrowings had the following remaining maturities ($ in thousands):



	Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total
JPMorgan	$	61,836	$	415,766	$	677,035	$	—	$	1,154,637
DB	15,594		494,206		—		—		509,800
Goldman	—		354,562		—		—		354,562
CS - USD	—		198,154		123,364		—		321,518
CS - GBP⁽¹⁾	84,618		—		—		—		84,618



HSBC - USD	47,223		—		—		—		47,223
HSBC - EUR	—		150,621		—		—		150,621
Barclays (USD)	—		—		35,192		—		35,192
Barclays Private Securitization	137,610		156,718		487,678		—		782,006
Total	$	346,881	$	1,770,027	$	1,323,269	$	—	$	3,440,177

———————

(1) Subsequent to quarter end, the outstanding balance was repaid in connection with the sale of the underlying loan. For more information, see "Note 18 - Subsequent Events."

The table above reflects the fully extended maturity date of the facility and assumes facilities with an "evergreen" feature continue to extend through the fully-extended maturity of the underlying asset and assumes underlying loans are extended with consent of financing providers.

The table below summarizes the outstanding balances at June 30, 2020, as well as the maximum and average month-end balances for the six months ended June 30, 2020 for our borrowings under secured debt arrangements ($ in thousands).



	As of June 30, 2020				For the six months ended June 30, 2020
	Balance		Amortized Cost of Collateral		Maximum Month-End Balance		Average Month-End Balance
JPMorgan	$	1,154,637	$	1,934,291	$	1,192,288	$	1,080,012
DB	509,800		786,913		514,301		491,215
Goldman	354,562		546,776		359,541		337,854
CS - USD	321,518		451,872		336,448		324,101
CS - GBP	84,618		121,288		90,111		86,189
HSBC - USD	47,223		67,122		50,625		48,924
HSBC - GBP	—		—		34,501		27,417
HSBC - EUR	150,621		195,326		152,389		150,289
Barclays (USD)	35,192		49,865		35,193		23,462
Barclays (GBP)	—		—		666,810		521,385
Barclays (EUR)	—		—		180,595		141,042
Barclays Private Securitization	782,006		1,176,927		782,006		130,334
Total	$	3,440,177	$	5,330,380

The table below summarizes the outstanding balances at December 31, 2019, as well as the maximum and average month-end balances for the year ended December 31, 2019 for our borrowings under secured debt arrangements ($ in thousands).



	As of December 31, 2019				For the year ended December 31, 2019
	Balance		Amortized Cost of Collateral		Maximum Month-End Balance		Average Month-End Balance
JPMorgan	$	1,234,759	$	1,845,400	$	1,234,759	$	947,400
DB	513,876		766,676		757,117		604,067
Goldman	322,170		513,559		324,821		246,318
CS - USD	218,644		308,884		218,644		182,646
CS - GBP	93,915		129,723		150,811		134,694
HSBC - USD	50,625		66,960		50,625		50,625
HSBC - GBP	34,634		49,976		50,784		42,296
HSBC - EUR	154,037		190,780		154,037		151,889
Barclays (GBP)	290,347		738,455		290,347		139,004



Barclays (EUR)	182,549		241,674		182,549	181,159
Total	$	3,095,556	$	4,852,087

We were in compliance with the covenants under each of our secured debt arrangements at June 30, 2020 and December 31, 2019.

Senior Secured Term Loan, Net

In May 2019, we entered into a $500.0 million senior secured term loan. The senior secured term loan bears interest at LIBOR plus 2.75% and was issued at a price of 99.5%. The senior secured term loan matures in May 2026 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities.

During the three and six months ended June 30, 2020, we repaid $1.3 million and $2.5 million of principal related to the senior secured term loan, respectively. The outstanding principal balance as of June 30, 2020 and December 31, 2019 was $495.0 million and $497.5 million, respectively. As of June 30, 2020, the senior secured term loan had a carrying value of $485.2 million net of deferred financing costs of $7.7 million and an unamortized discount of $2.1 million. As of December 31, 2019, the senior secured term loan had a carrying value of $488.0 million net of deferred financing costs of $7.3 million and an unamortized discount of $2.2 million.

Covenants

The senior secured term loan includes the following financial covenants: (i) our ratio of total recourse debt to tangible net worth cannot be greater than 3:1; and (ii) our ratio of total unencumbered assets to total pari-passu indebtedness must be at least 1.25:1.

We were in compliance with the covenants under the senior secured term loan at June 30, 2020 and December 31, 2019.

Interest Rate Swap

In connection with the senior secured term loan, we previously entered into an interest rate swap to fix LIBOR at 2.12% effectively fixing our all-in coupon on the senior secured term loan at 4.87%. During the second quarter of 2020 we terminated the interest rate swap and recognized a realized loss of $53.9 million.

Interest Rate Cap

During the second quarter of 2020, we entered into a three-year interest rate cap to cap LIBOR at 0.75%. This effectively limits the maximum all-in coupon on our senior secured term loan to 3.50%. In connection with the interest rate cap, we incurred up-front fees of $1.1 million, which we recorded as a deferred financing cost on the condensed consolidated balance sheet and interest expense will be recognized over the duration of the interest rate cap in the condensed consolidated statement of operations.