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Senior Secured Term Loan, Net

3 Months Ended

Mar. 31, 2021

Debt Instrument [Line Items]

Secured Debt Arrangement, Net and Senior Secured Term Loans, Net

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 condensed 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 condensed 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 $88.5 million mezzanine loan and is accounted for as a secured borrowing on our condensed 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, United Kingdom 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 £70.5 million ($97.1 million assuming conversion into USD) first mortgage loan and is accounted for as a secured borrowing on our condensed consolidated balance sheet.

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

			March 31, 2021						December 31, 2020
Participation sold on Commercial mortgage loans			$	23,974					$	9,217
Participation sold on Subordinate loans and other lending assets (1)			26,735						25,757
Total Participations sold			$	50,709					$	34,974

———————

(1)Includes $1.0 million and $0.8 million of PIK interest in 2021 and 2020, respectively.

Senior Debt

Debt Instrument [Line Items]

Secured Debt Arrangement, Net and Senior Secured Term Loans, Net

Senior Secured Term Loans, Net

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

In March 2021, we entered into an additional $300.0 million in senior secured term loan with substantially the same terms as the 2026 Term Loan (the "2028 Term Loan" and, together with the 2026 Term Loan, the "Term Loans"), which matures in March 2028 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities. The 2028 Term Loan bears interest at LIBOR (with a floor of 0.50%) plus 3.50% and was issued at a price of 99.0%.

During each of the three months ended March 31, 2021 and 2020, we repaid $1.3 million of principal related to the 2026 Term Loan.

The following table summarizes the terms of our Term Loans as of March 31, 2021 ($ in thousands):

			Principal Amount			Unamortized Issuance Discount			Deferred Financing Costs			Carrying Value			Spread			Maturity Date
2026 Term Loan			$	491,250		$	(1,816)		$	(6,703)		$	482,731		2.75		%	5/15/2026
2028 Term Loan			300,000			(2,964)			(3,793)			293,243			3.50		%	3/11/2028
Total			$	791,250		$	(4,780)		$	(10,496)		$	775,974

The following table summarizes the terms of our Term Loans as of December 31, 2020 ($ in thousands):

			Principal Amount			Unamortized Issuance Discount			Deferred Financing Costs			Carrying Value			Spread			Maturity Date
2026 Term Loan			$	492,500		$	(1,905)		$	(7,130)		$	483,465		2.75		%	5/15/2026

Covenants

The Term Loans include 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 Term Loans at March 31, 2021 and December 31, 2020.

Interest Rate Swap

In connection with the 2026 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 year ended December 31, 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 2026 Term Loan to 3.50%. In connection with the interest rate cap, we incurred up-front fees of $1.1 million for the year ended December 31, 2020, which we recorded as a deferred financing cost on our condensed consolidated balance sheet and interest expense will be recognized over the duration of the interest rate cap in our condensed 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.

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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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