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Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net (Tables)

6 Months Ended

Jun. 30, 2023

Our loan portfolio was comprised of the following at June 30, 2023 and December 31, 2022 ($ in thousands):


Loan Type	June 30, 2023		December 31, 2022
Commercial mortgage loans, net(1)	$	7,831,859	$	8,121,109
Subordinate loans and other lending assets, net	463,569		560,881
Carrying value, net	$	8,295,428	$	8,681,990

———————

(1)Includes $124.7 million and $138.3 million in 2023 and 2022, respectively, of contiguous financing structured as subordinate loans.

Schedule of Activity Related to Loan Investment Portfolio

Activity relating to our loan portfolio for the six months ended June 30, 2023 was as follows ($ in thousands):


	Principal Balance		Deferred Fees/Other Items (1)		Specific CECL Allowance		Carrying Value, Net
December 31, 2022	$	8,892,767	$	(51,053)	$	(133,500)	$	8,708,214
New funding of loans	181,017		—		—		181,017
Add-on loan fundings(2)	244,881		—		—		244,881
Loan repayments and sales	(734,647)		—		—		(734,647)
Gain (loss) on foreign currency translation	137,421		(737)		—		136,684
Increase in Specific CECL Allowance, net	—		—		(59,500)		(59,500)
Net realized loss on investment	(87,367)		763		—		(86,604)
Transfer to real estate owned	(75,000)		—		—		(75,000)
Deferred fees and other items	—		(4,940)		—		(4,940)
Payment-in-kind interest and amortization of fees	—		17,599		—		17,599
June 30, 2023	$	8,559,072	$	(38,368)	$	(193,000)	$	8,327,704
General CECL Allowance(3)							(32,276)
Carrying value, net							$	8,295,428

———————

(1)Other items primarily consist of purchase discounts or premiums, cost recovery interest, exit fees, deferred origination expenses, and the activity of unconsolidated joint ventures.

(2)Represents fundings committed prior to 2023.

(3)$4.8 million of the General CECL Allowance, as defined in this Form 10-Q, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheet.

Schedule of Overall Statistics for the Loan Portfolio

The following table details overall statistics for our loan portfolio at the dates indicated ($ in thousands):


	June 30, 2023			December 31, 2022
Number of loans	53			61
Principal balance	$	8,559,072		$	8,892,767
Carrying value, net	$	8,295,428		$	8,681,990
Unfunded loan commitments(1)	$	779,958		$	1,041,654
Weighted-average cash coupon(2)	8.1		%	7.2		%
Weighted-average remaining fully-extended term(3)	2.6 years			2.8 years
Weighted-average expected term(4)	1.9 years			1.7 years

———————

(1)Unfunded loan commitments are funded to finance construction costs, tenant improvements, leasing commissions, or carrying costs. 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. For loans placed on non-accrual the interest rate used in calculating weighted-average cash coupon is 0%.

(3)Assumes all extension options are exercised.

(4)Expected term represents our estimated timing of repayments as of the specified dates. Excludes risk-rated 5 loans.

Schedule of Mortgage Loans on Real Estate

The table below details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):


	June 30, 2023				December 31, 2022
Property Type	Carrying Value		% of Portfolio(1)		Carrying Value		% of Portfolio(1)
Hotel	$	1,938,822	23.3	%	$	2,117,079	24.3	%
Office	1,524,162		18.3		1,671,006		19.2
Retail	1,414,041		17.0		1,364,752		15.7
Residential	1,405,857		16.9		1,537,541		17.7
Mixed Use	638,577		7.7		559,809		6.4
Healthcare	569,557		6.8		575,144		6.6
Industrial	288,093		3.4		296,860		3.4
Other(2)	548,595		6.6		586,023		6.7
Total	$	8,327,704	100.0	%	$	8,708,214	100.0	%
General CECL Allowance(3)	(32,276)				(26,224)
Carrying value, net	$	8,295,428			$	8,681,990

———————

(1)Percentage of portfolio calculations are made prior to consideration of General CECL Allowance.

(2)Other property types include parking garages (2.6%), caravan parks (2.5%) and urban predevelopment (1.5%) in 2023, and parking garages (3.1%), caravan parks (2.3%) and urban predevelopment (1.3%) in 2022.

(3)$4.8 million and $4.3 million of the General CECL Allowance for 2023 and 2022, respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheets.

Geography

The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):


	June 30, 2023				December 31, 2022
Geographic Location	Carrying Value		% of Portfolio(1)		Carrying Value		% of Portfolio(1)
United Kingdom	$	2,560,347	30.7	%	$	2,470,532	28.4	%
New York City	1,846,163		22.2		2,049,493		23.5
Other Europe(2)	1,438,559		17.3		1,542,462		17.7


West	599,460		7.2		584,247		6.7
Southeast	556,861		6.7		642,542		7.4
Midwest	549,837		6.6		592,756		6.8
Other(3)	776,477		9.3		826,182		9.5
Total	$	8,327,704	100.0	%	$	8,708,214	100.0	%
General CECL Allowance(4)	(32,276)				(26,224)
Carrying value, net	$	8,295,428			$	8,681,990

———————

(1)Percentage of portfolio calculations are made prior to consideration of General CECL Allowance.

(2)Other Europe includes Germany (5.1%), Italy (4.7%), Spain (4.1%), Sweden (2.9%) and Ireland (0.5%) in 2023 and Italy (5.4%), Germany (4.9%), Spain (3.8%), Sweden (2.8%) and Ireland (0.7%) in 2022.

(3)Other includes Northeast (5.5%), Southwest (1.8%), Mid-Atlantic (1.2%) and Other (0.8%) in 2023 and Northeast (5.5%), Southwest (2.3%), Mid-Atlantic (1.4%) and Other (0.3%) in 2022.

(4)$4.8 million and $4.3 million of the General CECL Allowance for 2023 and 2022, respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheets.

Schedule of Carrying Value of Loan Portfolio Based on Internal Risk Ratings

The following tables present the carrying value of our loan portfolio by year of origination and internal risk rating and gross write-offs by year of origination as of June 30, 2023 and December 31, 2022, respectively ($ in thousands):


June 30, 2023
						Amortized Cost by Year Originated
Risk Rating	Number of Loans	Total		% of Portfolio		2023		2022		2021		2020		2019		Prior
1	—	$	—	—	%	$	—	$	—	$	—	$	—	$	—	$	—
2	3	196,423		2.4	%	—		—		—		—		130,615		65,808
3	46	7,772,551		93.3	%	171,275		2,658,288		2,341,120		404,609		1,483,574		713,685
4	2	90,612		1.1	%	—		—		—		—		—		90,612
5	2	268,118		3.2	%	—		—		—		169,881		—		98,237
Total	53	$	8,327,704	100.0	%	$	171,275	$	2,658,288	$	2,341,120	$	574,490	$	1,614,189	$	968,342
General CECL Allowance(1)		(32,276)
Total carrying value, net		$	8,295,428

Weighted Average Risk Rating		3.1
Gross write-offs		$	81,890			$	—	$	—	$	—	$	—	$	—	$	81,890


December 31, 2022
						Amortized Cost by Year Originated
Risk Rating	Number of Loans	Total		% of Portfolio		2022		2021		2020		2019		2017		Prior
1	—	$	—	—	%	$	—	$	—	$	—	$	—	$	—	$	—
2	2	65,943		0.8	%	—		—		—		—		—		65,943
3	54	8,401,925		96.5	%	2,575,455		2,462,499		687,329		1,637,050		479,769		559,823
4	2	27,451		0.3	%	—		—		—		—		19,951		7,500
5	3	212,895		2.4	%	—		—		—		—		—		212,895
Total	61	$	8,708,214	100.0	%	$	2,575,455	$	2,462,499	$	687,329	$	1,637,050	$	499,720	$	846,161
General CECL Allowance(1)		(26,224)
Total carrying value, net		$	8,681,990

Weighted Average Risk Rating		3.0
Gross write-offs		$	7,000			$	—	$	—	$	—	$	—	$	—	$	7,000

———————

(1)$4.8 million and $4.3 million of the General CECL Allowance for 2023 and 2022, respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheets.

Schedule of CECL Reserves

The following schedule illustrates changes in CECL Allowances for the six months ended June 30, 2023 ($ in thousands):


		Specific CECL Allowance(1)		General CECL Allowance						Total CECL Allowance		CECL Allowance as % of Amortized Cost(1)
				Funded		Unfunded		Total				General		Total
December 31, 2022		$	133,500	$	26,224	$	4,347	$	30,571	$	164,071	0.36	%	1.86	%
Changes:
	Q1 Allowances(2)	—		4,043		348		4,391		$	4,391
March 31, 2023		$	133,500	$	30,267	$	4,695	$	34,962	$	168,462	0.42	%	1.95	%
Changes:
	Q2 Allowances(3)	141,480		2,009		139		2,148		143,628
	Q2 Write-offs(4)	(81,980)		—		—		—		(81,980)
June 30, 2023		$	193,000	$	32,276	$	4,834	$	37,110	$	230,110	0.46	%	2.70	%

———————

(1)Loans evaluated for Specific CECL Allowance are excluded from General CECL Allowance pool.

(2)During the three months ended March 31, 2023, our General CECL Allowance increased by $4.4 million primarily due to an increase in our view of the remaining expected term of our loan portfolio. This increase was partially offset by the impact of portfolio seasoning and loan repayments and sales.

(3)During the three months ended June 30, 2023, our General CECL Allowance increased by $2.1 million primarily due to a more adverse macroeconomic outlook and an increase in our view of the remaining expected term of certain of our loans. This increase was partially offset by the impact of portfolio seasoning. Additionally, during the three months ended June 30, 2023, we recorded an increase of $141.5 million to our Specific CECL Allowance. The increase was related to two mezzanine loans secured by the same ultra-luxury property. Refer to discussion below.

(4)As of June 30, 2023, $82.0 million related to the most junior mezzanine loan secured by the ultra-luxury residential property was deemed unrecoverable. Accordingly, $82.0 million of previously recorded Specific CECL was written-off and recorded as a realized loss within net realized loss on investments in our June 30, 2023 condensed consolidated statement of operations. Refer to "Specific CECL Allowance" section below for further detail.


		Specific CECL Allowance(1)		General CECL Allowance						Total CECL Allowance		CECL Allowance as % of Amortized Cost(1)
				Funded		Unfunded		Total				General		Total
December 31, 2021		$	145,000	$	33,588	$	3,106	$	36,694	$	181,694	0.49	%	2.26	%
Changes:
	Q1 Allowances (Reversals)(2)	30,000		(12,211)		822		(11,389)		18,611
March 31, 2022		$	175,000	$	21,377	$	3,928	$	25,305	$	200,305	0.32	%	2.34	%
Changes:
	Q2 Allowances (Reversals)(3)	(3,000)		1,985		71		2,056		(944)
June 30, 2022		$	172,000	$	23,362	$	3,999	$	27,361	$	199,361	0.33	%	2.18	%

———————

(1)Loans evaluated for Specific CECL Allowance are excluded from General CECL Allowance pool.

(2)During the three months ended March 31, 2022, a $30.0 million Specific CECL Allowance was recorded on a subordinate loan secured by an ultra luxury residential property in Manhattan, NY. During the three months ended March 31, 2022, the General CECL Allowance decreased by $11.4 million primarily due to changes in expected loan repayment dates, as well as portfolio seasoning, which was partially offset by new loan originations.

(3)During the three months ended June 30, 2022, the $3.0 million net reversal of Specific CECL Allowance was comprised of (i) the reversal of $10.0 million of previously recorded allowance on a loan related to a multifamily development in Brooklyn, NY as a result of market rent growth and value created from development activities and (ii) a $7.0 million allowance recorded on a loan secured by a hotel in Atlanta, GA due to slower than expected recovery from COVID-19. General CECL Allowance increased by $2.1 million due to new loan originations and more adverse macroeconomic outlook, which was partially offset by portfolio seasoning.

The following schedule sets forth our General CECL Allowance as of June 30, 2023 and December 31, 2022 ($ in thousands):


	June 30, 2023		December 31, 2022
Commercial mortgage loans, net	$	30,793	$	22,848
Subordinate loans and other lending assets, net	1,483		3,376
Unfunded commitments(1)	4,834		4,347
Total General CECL Allowance	$	37,110	$	30,571

———————

(1)The General CECL Allowance on unfunded commitments is recorded as a liability on our condensed consolidated balance sheets within accounts payable, accrued expenses and other liabilities.

Financing Receivable Cost Recovery

The following table summarizes our risk rated 5 loans as of June 30, 2023, which were analyzed for Specific CECL Allowances ($ in thousands):


Type	Property type	Location	Amortized cost prior to Specific CECL Allowance	Specific CECL Allowance	Amortized cost	Interest recognition status/ as of date	Risk rating
Mortgage
	Retail(1)(2)	Cincinnati, OH	$165,237	$67,000	$98,237	Non-Accrual/ 10/1/2019	5
Mortgage total:			$165,237	$67,000	$98,237

Mezzanine
	Residential(3)	Manhattan, NY	$295,881	$126,000	$169,881	Non-Accrual/ 7/1/2021	5
Mezzanine total:			$295,881	$126,000	$169,881

Total:			$461,118	$193,000	$268,118

———————

(1)The fair value of retail collateral was determined by applying a capitalization rate of 8.5%.

(2)In September 2018, we entered a joint venture with Turner Consulting II, LLC ("Turner Consulting"), through an entity which owns the underlying property that secures our loan. Turner Consulting contributed 10% of the venture’s equity and we contributed 90%. The entity was deemed to be a Variable Interest Entity (a "VIE") and we determined that we are not the primary beneficiary of that VIE as we do not have the power to direct the entity's activities. During the three and six months ended June 30, 2023 and 2022, $0.7 million and $1.3 million, respectively and $0.3 million and $0.6 million, respectively, of interest paid was applied towards reducing the carrying value of the loan. The related profit and loss from the joint venture was immaterial for the three and six months ended June 30, 2023 and 2022. During the three months ended June 30, 2023, the loan's maturity was extended from September 2023 to September 2024.

(3)The fair value of the residential collateral was determined by making certain projections and assumptions with respect to future performance and a discount rate of 10%.