Loans Receivable and Other Lending Investments, net

12 Months Ended

Dec. 31, 2020

Loans Receivable and Other Lending Investments, net

The following is a summary of the Company's loans receivable and other lending investments by class ($ in thousands):


	As of December 31,
Construction loans	2020		2019
Senior mortgages	$	449,733	$	518,992
Corporate/Partnership loans	65,100		95,394
Subtotal - gross carrying value of construction loans(1)	514,833		614,386
Loans
Senior mortgages	35,922		53,592
Corporate/Partnership loans	20,567		24,424
Subordinate mortgages	11,640		10,877
Subtotal - gross carrying value of loans	68,129		88,893
Other lending investments
Financing receivables (refer to Note 5)	46,549		44,339
Held-to-maturity debt securities	90,715		84,981
Available-for-sale debt securities	25,274		23,896
Subtotal - other lending investments	162,538		153,216
Total gross carrying value of loans receivable and other lending investments	745,500		856,495
Allowance for loan losses	(13,170)		(28,634)
Total loans receivable and other lending investments, net	$	732,330	$	827,861

_______________________________________________________________________________

(1)As of December 31, 2020, 47%, or $241.8 million, gross carrying value of construction loans had completed construction and 5%, or $24.6 million, gross carrying value of construction loans had substantially completed construction.

Allowance for Loan Losses—Changes in the Company's allowance for loan losses were as follows for the year ended December 31, 2020 ($ in thousands):


	General Allowance
		Construction Loans		Loans		Held to Maturity Debt Securities		Financing Receivables		Specific Allowance		Total
Allowance for loan losses at beginning of period		$	6,668	$	265	$	—	$	—	$	21,701	$	28,634
Adoption of new accounting standard(1)		(353)		98		20		964		—		729
Provision for loan losses(2)		226		1,280		3,073		186		4,931		9,696
Charge-offs(3)		—		—		—		—		(25,889)		(25,889)
Allowance for loan losses at end of period		$	6,541	$	1,643	$	3,093	$	1,150	$	743	$	13,170

____________________________________________________________

(1)On January 1, 2020, the Company recorded an increase to its allowance for loan losses of $3.3 million upon the adoption of ASU 2016-13 (refer to Note 3), of which $2.5 million related to expected credit losses for unfunded loan commitments and was recorded in "Accounts payable, accrued expenses and other liabilities."

(2)During the year ended December 31, 2020, the Company recorded a provision for loan losses of $9.1 million in its consolidated statement of operations resulting from the macroeconomic impact of the COVID-19 pandemic on commercial real estate markets, of which $1.5 million related to a recovery of credit losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities" and $0.9 million related to a provision on a non-performing loan that was recorded as a reduction to "Accrued interest and operating lease income receivable, net."

(3)During the year ended December 31,2020, the Company charged-off $25.9 million from the specific allowance due to the sale of a non-performing loan. During the year ended December 31, 2019, the Company charged-off $19.2 million from the specific allowance due to the resolution of a non-performing loan and $12.0 million due to the deterioration of the collateral on a separate non-performing loan.

The Company's investment in loans and other lending investments and the associated allowance for loan losses were as follows ($ in thousands):


	Individually Evaluated for Impairment(1)		Collectively Evaluated for Impairment		Total
As of December 31, 2020
Construction loans(2)	$	53,305	$	461,528	$	514,833
Loans(2)	—		68,129		68,129
Financing receivables	—		46,549		46,549
Held-to-maturity debt securities	—		90,715		90,715
Available-for-sale debt securities(3)	—		25,274		25,274
Less: Allowance for loan losses	(743)		(12,427)		(13,170)
Total	$	52,562	$	679,768	$	732,330
As of December 31, 2019
Construction loans(2)	$	—	$	614,386	$	614,386
Loans(2)	37,820		51,073		88,893
Financing receivables	—		44,339		44,339
Held-to-maturity debt securities	—		84,981		84,981
Available-for-sale debt securities	—		23,896		23,896
Less: Allowance for loan losses	(21,701)		(6,933)		(28,634)
Total	$	16,119	$	811,742	$	827,861

_______________________________________________________________________________

(1)The carrying value of these loans includes an unamortized net discount of $0.8 million and $0.1 million as of December 31, 2020 and 2019, respectively. The Company's loans individually evaluated for impairment represents loans on non-accrual status; therefore, the unamortized amounts associated with these loans are not currently being amortized into income.

(2)The carrying value of these loans includes an unamortized net discount of $2.3 million and $0.7 million as of December 31, 2020 and 2019, respectively.

(3)Available-for-sale debt securities are evaluated for impairment under ASC 326-30.

Credit Characteristics—As part of the Company's process for monitoring the credit quality of its loans, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its performing loans. Risk ratings, which range from 1 (lower risk) to 5 (higher risk), are based on judgments which are inherently uncertain and there can be no assurance that actual performance will be similar to current expectation.

The Company's amortized cost basis in performing senior mortgages, corporate/partnership loans, subordinate mortgages and financing receivables, presented by year of origination and by credit quality, as indicated by risk rating, was as follows as of December 31, 2020 ($ in thousands):


	Year of Origination
	2020		2019		2018		2017		2016		Prior to 2016		Total
Senior mortgages
Risk rating
1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5	—		—		—		—		—		—		—
2.0	—		—		—		—		—		—		—
2.5	—		—		58,070		—		—		—		58,070
3.0	20,115		—		109,121		145,585		42,502		3,925		321,248
3.5	—		—		—		—		—		—		—
4.0	—		—		53,033		—		—		—		53,033
4.5	—		—		—		—		—		—		—
5.0	—		—		—		—		—		—		—
Subtotal(1)	$	20,115	$	—	$	220,224	$	145,585	$	42,502	$	3,925	$	432,351

Corporate/partnership loans
Risk rating
1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5	—		—		—		—		—		—		—
2.0	—		—		—		—		—		—		—
2.5	—		—		—		—		—		—		—
3.0	—		—		22,155		—		—		—		22,155
3.5	—		—		—		—		—		—		—
4.0	—		—		20,567		—		42,945		—		63,512
4.5	—		—		—		—		—		—		—
5.0	—		—		—		—		—		—		—
Subtotal	$	—	$	—	$	42,722	$	—	$	42,945	$	—	$	85,667

Subordinate mortgages
Risk rating
1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5	—		—		—		—		—		—		—
2.0	—		—		—		—		—		—		—
2.5	—		—		—		—		—		—		—
3.0	—		—		—		—		—		11,640		11,640
3.5	—		—		—		—		—		—		—
4.0	—		—		—		—		—		—		—
4.5	—		—		—		—		—		—		—
5.0	—		—		—		—		—		—		—
Subtotal	$	—	$	—	$	—	$	—	$	—	$	11,640	$	11,640



Financing receivables
Risk rating
1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5	—		—		—		—		—		—		—
2.0	—		46,549		—		—		—		—		46,549
2.5	—		—		—		—		—		—		—
3.0	—		—		—		—		—		—		—
3.5	—		—		—		—		—		—		—
4.0	—		—		—		—		—		—		—
4.5	—		—		—		—		—		—		—
5.0	—		—		—		—		—		—		—
Subtotal	$	—	$	46,549	$	—	$	—	$	—	$	—	$	46,549
Total	$	20,115	$	46,549	$	262,946	$	145,585	$	85,447	$	15,565	$	576,207

____________________________________________________________

(1)As of December 31, 2020, excludes $53.3 million for one loan on non-accrual status.

The Company's amortized cost basis in loans, aged by payment status and presented by class, was as follows ($ in thousands):


As of December 31, 2020	Current		Less Than and Equal to 90 Days		Greater Than 90 Days		Total Past Due		Total
Senior mortgages	$	443,154	$	42,501	$	—	$	42,501	$	485,655
Corporate/Partnership loans	42,721		42,946		—		42,946		85,667
Subordinate mortgages	11,640		—		—		—		11,640
Total	$	497,515	$	85,447	$	—	$	85,447	$	582,962
As of December 31, 2019
Senior mortgages	$	534,765	$	—	$	37,820	$	37,820	$	572,585
Corporate/Partnership loans	119,818		—		—		—		119,818
Subordinate mortgages	10,877		—		—		—		10,877
Total	$	665,460	$	—	$	37,820	$	37,820	$	703,280

Impaired Loans—In the fourth quarter 2020, the Company sold a non-performing loan with a carrying value of $15.2 million and received proceeds of $11.0 million. In addition, the Company recorded a $4.2 million loan loss provision and simultaneously charged-off of the remaining unpaid balance.

In the second quarter 2018, the Company resolved a non-performing loan with a carrying value of $145.8 million. The Company received a $45.8 million cash payment and a preferred equity investment with a face value of $100.0 million that is mandatorily redeemable in five years. The Company recorded the preferred equity at its fair value of $77.0 million and are accruing interest over the expected duration of the investment. In addition, the Company recorded a $21.4 million loan loss provision and simultaneously charged-off of the remaining unpaid balance.

The Company's impaired loans, presented by class, were as follows ($ in thousands):


	As of December 31, 2020						As of December 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance



With an allowance recorded:
Senior mortgages(1)	$	53,305	$	52,552	$	(743)	$	37,820	$	37,923	$	(21,701)






Total	$	53,305	$	52,552	$	(743)	$	37,820	$	37,923	$	(21,701)

_______________________________________________________________________________

(1)The Company has one non-accrual loan as of December 31, 2020 and one non-accrual loan as of December 31, 2019 that are considered impaired and included in the table above. The Company did not record any interest income on impaired loans for the years ended December 31, 2020, 2019 and 2018.

The Company's average recorded investment in impaired loans and interest income recognized, presented by class, was as follows ($ in thousands):


	Years Ended December 31,
	2020				2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:

Subordinate mortgages	$	—	$	—	$	—	$	—	$	—	$	301

Subtotal	—		—		—		—		—		301
With an allowance recorded:
Senior mortgages	50,205		2,145		38,556		—		67,041		—
Corporate/Partnership loans	—		—		—		—		39,169		—

Subtotal	50,205		2,145		38,556		—		106,210		—
Total:
Senior mortgages	50,205		2,145		38,556		—		67,041		—
Corporate/Partnership loans	—		—		—		—		39,169		—
Subordinate mortgages	—		—		—		—		—		301
Total	$	50,205	$	2,145	$	38,556	$	—	$	106,210	$	301

Other lending investments—Other lending investments includes the following securities ($ in thousands):


	Face Value		Amortized Cost Basis		Net Unrealized Gain		Estimated Fair Value		Net Carrying Value
As of December 31, 2020
Available-for-Sale Securities
Municipal debt securities	$	20,680	$	20,680	$	4,594	$	25,274	$	25,274
Held-to-Maturity Securities
Debt securities	100,000		90,715		—		90,715		90,715
Total	$	120,680	$	111,395	$	4,594	$	115,989	$	115,989
As of December 31, 2019
Available-for-Sale Securities
Municipal debt securities	$	21,140	$	21,140	$	2,756	$	23,896	$	23,896
Held-to-Maturity Securities
Debt securities	100,000		84,981		—		84,981		84,981
Total	$	121,140	$	106,121	$	2,756	$	108,877	$	108,877

As of December 31, 2020, the contractual maturities of the Company's securities were as follows ($ in thousands):


	Held-to-Maturity Securities				Available-for-Sale Securities
	Amortized Cost Basis		Estimated Fair Value		Amortized Cost Basis		Estimated Fair Value
Maturities
Within one year	$	—	$	—	$	—	$	—
After one year through 5 years	90,715		90,715		—		—
After 5 years through 10 years	—		—		—		—
After 10 years	—		—		20,680		25,274
Total	$	90,715	$	90,715	$	20,680	$	25,274