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Senior Secured Term Loan, Net

12 Months Ended

Dec. 31, 2020

Senior Secured Term Loan, Net And Secured Debt Arrangements

Participations Sold

Participations sold represents the subordinate interests in loans we originated and subsequently partially sold. We account for participations sold as secured borrowings on our consolidated balance sheet with both assets and non-recourse liabilities because the participations do not qualify as a sale under ASC 860 - "Transfers and Servicing." The income earned on the participations sold is recorded as interest income and an identical amount is recorded as interest expense on our consolidated statements of operations.

In October 2020, we sold a $25.0 million interest, at par, in a mezzanine loan collateralized by a ground-up condominium development in New York City that we originated in December 2017. The participation interest sold is subordinate to our remaining $85.7 million mezzanine loan and is accounted for as a secured borrowing on our consolidated balance sheet. The participation sold accrues payment-in-kind interest.

In December 2020, we sold a £6.7 million ($8.9 million assuming conversion into USD) interest, at par, in a first mortgage loan collateralized by an office building located in London, UK that was originated by us in December 2017. In connection with this sale, we transferred our remaining unfunded commitment of £19.1 million ($25.3 million assuming conversion into USD). The participation interest sold is subordinate to our remaining £70.3 million ($96.1 million assuming conversion into USD) first mortgage loan and is accounted for as a secured borrowing on our consolidated balance sheet.

The table below details participations sold included in our consolidated balance sheet ($ in thousands):

			December 31, 2020						December 31, 2019
Participation sold on Commercial mortgage loans			$	9,217					$	—
Participation sold on Subordinate loans and other lending assets (1)			25,757						—
Total Participations sold			$	34,974					$	—

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(1)Includes $0.8 million of PIK interest in 2020.

Senior Debt

Senior Secured Term Loan, Net And Secured Debt Arrangements

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 years ended December 31, 2020 and 2019, we repaid $5.0 million and $2.5 million of principal related to the senior secured term loan, respectively. The outstanding principal balance as of December 31, 2020 and December 31, 2019 was $492.5 million and $497.5 million, respectively. As of December 31, 2020, the senior secured term loan had a carrying value of $483.5 million net of deferred financing costs of $7.1 million and an unamortized discount of $1.9 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 $2.3 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 December 31, 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 our consolidated balance sheet and interest expense will be recognized over the duration of the interest rate cap in our consolidated statement of operations

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- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI http://asc.fasb.org/topic&trid=2208564

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