The Company uses SPEs to facilitate transactions that involve securitizing financial assets or re-securitizing previously securitized financial assets. The objective of such transactions may include obtaining non-recourse financing, obtaining liquidity or refinancing the underlying securitized financial assets on improved terms. Securitization involves transferring assets to an SPE to convert all or a portion of those assets into cash before they would have been realized in the normal course of business through the SPE’s issuance of debt or equity instruments. Investors in an SPE usually have recourse only to the assets in the SPE and depending on the overall structure of the transaction, may benefit from various forms of credit enhancement, such as over-collateralization in the form of excess assets in the SPE, priority with respect to receipt of cash flows relative to holders of other debt or equity instruments issued by the SPE, or a line of credit or other form of liquidity agreement that is designed with the objective of ensuring that investors receive principal and/or interest cash flow on the investment in accordance with the terms of their investment agreement.

As of December 31, 2020, the Company evaluated its residential loan securitizations and re-securitization of non-Agency RMBS and concluded that the entities created to facilitate each of the financing transactions are VIEs and that the Company is the primary beneficiary of these VIEs (each a “Financing VIE” and collectively, the “Financing VIEs”). As of June 30, 2021, the Company evaluated its residential loan securitizations and concluded that the entities created to facilitate each of the financing transactions are VIEs and that the Company is the primary beneficiary of these VIEs. Accordingly, the Company consolidated the then-outstanding Financing VIEs as of June 30, 2021 and December 31, 2020. During the six months ended June 30, 2021, the Company exercised its right to an optional redemption of its non-Agency RMBS re-securitization with an outstanding principal balance of $14.7 million, returning the non-Agency RMBS held by the re-securitization trust to the Company.

The Company invests in subordinated securities that represent the first loss position of the Freddie Mac-sponsored residential loan securitization from which they were issued, and certain IOs and senior securities issued from the securitization. The Company has evaluated its investments in this securitization trust to determine whether it is a VIE and if so, whether the Company is the primary beneficiary requiring consolidation. The Company has determined that the Freddie Mac-sponsored residential loan securitization trust, which we refer to as Consolidated SLST, is a VIE as of June 30, 2021 and December 31, 2020, and that the Company is the primary beneficiary of the VIE within Consolidated SLST. Accordingly, the Company has consolidated the assets, liabilities, income and expenses of such VIE in the accompanying condensed consolidated financial statements (see Notes 2, 3 and 11). The Company has elected the fair value option on the assets and liabilities held within Consolidated SLST, which requires that changes in valuations in the assets and liabilities of Consolidated SLST be reflected in the Company’s condensed consolidated statements of operations.

The Company does not have any claims to the assets or obligations for the liabilities of Consolidated SLST, other than those securities owned by the Company as of June 30, 2021 and December 31, 2020 with a fair value of $228.3 million and $212.1 million, respectively (see Note 14). The Company’s investments that are included in Consolidated SLST were not included as collateral to any Financing VIE as of June 30, 2021 and December 31, 2020.

During the six months ended June 30, 2020, the Company purchased approximately $40.0 million in additional senior securities issued by Consolidated SLST and subsequently sold its entire investment in the senior securities issued by Consolidated SLST for sales proceeds of approximately $62.6 million at a realized loss of approximately $2.4 million, which is included in realized gains (losses), net on the Company's condensed consolidated statements of operations.

As of December 31, 2019, the Company invested in multi-family CMBS consisting of POs that represented the first loss position of the Freddie Mac-sponsored multi-family K-series securitizations from which they were issued, and certain IOs and certain senior and mezzanine CMBS securities issued from those securitizations. The Company evaluated these CMBS investments in Freddie Mac-sponsored K-Series securitization trusts to determine whether they were VIEs and if so, whether the Company was the primary beneficiary requiring consolidation. The Company determined that the Freddie Mac-sponsored multi-family K-Series securitization trusts were VIEs, which we refer to as the Consolidated K-Series. The Company also determined that it was the primary beneficiary of each VIE within the Consolidated K-Series and, accordingly, consolidated its assets, liabilities, income and expenses in the accompanying condensed consolidated financial statements (see Note 2). The Company elected the fair value option on the assets and liabilities held within the Consolidated K-Series, which required that changes in valuations in the assets and liabilities of the Consolidated K-Series be reflected in the Company's condensed consolidated statements of operations. Our investment in the Consolidated K-Series was limited to the multi-family CMBS that we owned.

In March 2020, the Company sold its first loss POs and certain mezzanine securities issued by the Consolidated K-Series which resulted in the de-consolidation of each Consolidated K-Series as of the sale date of each first loss PO. These sales, for total proceeds of approximately $555.2 million, resulted in a realized net loss of $54.1 million and reversal of previously recognized net unrealized gains of $168.5 million. The sales also resulted in the de-consolidation of $17.4 billion in multi-family loans held in the Consolidated K-Series and $16.6 billion in Consolidated K-Series CDOs. Also in March 2020, the Company transferred its remaining IOs and mezzanine and senior securities owned in the Consolidated K-Series with a fair value of approximately $237.3 million to investment securities available for sale.

During the six months ended June 30, 2021, the Company invested in two joint venture investments that own multi-family apartment communities, which the Company determined to be VIEs and for which the Company is the primary beneficiary. Accordingly, the Company consolidated the assets, liabilities, income and expenses of these VIEs in the accompanying condensed consolidated financial statements with non-controlling interests for the third-party ownership of the joint ventures' membership interests. The Company accounted for the initial consolidation of the joint venture investments in accordance with asset acquisition provisions of ASC 805, Business Combinations, ("ASC 805"), as substantially all of the fair value of the assets within the entities are concentrated in either a single identifiable asset or group of similar identifiable assets. The initial consolidation of the joint venture entities included operating real estate and lease intangibles in the amounts of $73.5 million and $5.0 million, respectively (included in other assets in the accompanying condensed consolidated balance sheets), mortgages payable, net in the amount of $61.8 million (included in other liabilities in the accompanying condensed consolidated balance sheets) and non-controlling interests in the amount of $1.9 million.

In addition, on November 12, 2020 (the "Changeover Date"), the Company reconsidered its evaluation of its variable interest in a VIE that owns a multi-family apartment community and in which the Company holds a preferred equity investment. The Company determined that it gained the power to direct the activities, and became primary beneficiary, of the VIE on the Changeover Date. Prior to the Changeover Date, the Company accounted for its investment as a preferred equity investment included in multi-family loans. The Company does not have any claims to the assets or obligations for the liabilities of this VIE other than the Company's net investment in the VIE. On the Changeover Date, the Company consolidated this VIE into its consolidated financial statements. The Company accounted for the initial consolidation of the VIE in accordance with asset acquisition provisions of ASC 805 as substantially all of the fair value of the assets within the entity are concentrated in either a single identifiable asset or group of similar identifiable assets. The estimated Changeover Date fair value of the consideration transferred totaled $8.7 million, which consisted of the estimated fair value of the Company's preferred equity investment in the VIE that was determined using assumptions for the underlying contractual cash flows and a discount rate. The initial consolidation of this VIE included operating real estate and lease intangibles in the amounts of $50.5 million and $1.6 million, respectively (included in other assets in the accompanying condensed consolidated balance sheets), a mortgage payable, net in the amount of $36.8 million (included in other liabilities in the accompanying condensed consolidated balance sheets) and a non-controlling interest (representing third-party ownership of the VIE's membership interests) in the amount of $6.8 million.

In analyzing whether the Company is the primary beneficiary of the Financing VIEs, Consolidated SLST, the Consolidated K-Series and other Consolidated VIEs, the Company considered its involvement in each of the VIEs, including the design and purpose of each VIE, and whether its involvement reflected a controlling financial interest that resulted in the Company being deemed the primary beneficiary of the VIEs. In determining whether the Company would be considered the primary beneficiary, the following factors were assessed:


	Financing VIEs		Other VIEs
	Residential Loan Securitizations			Consolidated SLST		Other		Total
Cash and cash equivalents	$	—		$	—	$	2,799	$	2,799
Residential loans, at fair value	799,363			1,176,539		—		1,975,902

Operating real estate, net held in Consolidated VIEs (1)	—			—		125,253		125,253
Other assets	94,036			3,849		10,162		108,047
Total assets	$	893,399		$	1,180,388	$	138,214	$	2,212,001

Collateralized debt obligations ($683,724 at amortized cost, net and $948,090 at fair value)	$	683,724		$	948,090	$	—	$	1,631,814



Mortgages payable, net in Consolidated VIEs (2)	—			—		98,611		98,611
Other liabilities	9,618			2,467		2,179		14,264
Total liabilities	$	693,342		$	950,557	$	100,790	$	1,744,689
Non-controlling interest in Consolidated VIEs (3)	$	—		$	—	$	5,198	$	5,198
Net investment (4)	$	200,057		$	229,831	$	32,226	$	462,114


	Financing VIEs				Other VIEs
	Residential Loan Securitizations		Non-Agency RMBS Re-Securitization		Consolidated SLST		Other		Total
Cash and cash equivalents	$	—	$	—	$	—	$	462	$	462
Residential loans, at fair value	691,451		—		1,266,785		—		1,958,236


Investment securities available for sale, at fair value	—		109,140		—		—		109,140
Operating real estate, net held in Consolidated VIEs (1)	—		—		—		50,532		50,532
Other assets	24,959		535		4,075		3,045		32,614
Total assets	$	716,410	$	109,675	$	1,270,860	$	54,039	$	2,150,984

Collateralized debt obligations ($569,323 at amortized cost, net and $1,054,335 at fair value)	$	554,067	$	15,256	$	1,054,335	$	—	$	1,623,658
Mortgages payable, net in Consolidated VIEs (2)	—		—		—		36,752		36,752
Other liabilities	2,610		70		2,781		1,435		6,896
Total liabilities	$	556,677	$	15,326	$	1,057,116	$	38,187	$	1,667,306
Non-controlling interest in Consolidated VIEs (3)	$	—	$	—	$	—	$	6,371	$	6,371
Net investment (4)	$	159,733	$	94,349	$	213,744	$	9,481	$	477,307



	Consolidated SLST		Other		Total
Interest income	$	10,479	$	—	$	10,479
Interest expense	7,151		430		7,581
Total net interest income (expense)	3,328		(430)		2,898

Unrealized gains, net	9,793		—		9,793
Other income	—		2,150		2,150
Total non-interest income	9,793		2,150		11,943



Total general, administrative and operating expenses	—		3,913		3,913

Net income (loss)	13,121		(2,193)		10,928
Net loss attributable to non-controlling interest in Consolidated VIEs	—		1,625		1,625
Net income (loss) attributable to Company	$	13,121	$	(568)	$	12,553



	Consolidated SLST		Other		Total
Interest income	$	11,522	$	—	$	11,522
Interest expense	8,158		—		8,158
Total net interest income	3,364		—		3,364


Unrealized gains, net	4,096		—		4,096
Other income (loss)	—		(1,780)		(1,780)
Total non-interest income (loss)	4,096		(1,780)		2,316



Total general, administrative and operating expenses	—		(26)		(26)

Net income (loss)	7,460		(1,754)		5,706
Net loss attributable to non-controlling interest in Consolidated VIEs	—		876		876
Net income (loss) attributable to Company	$	7,460	$	(878)	$	6,582



	Consolidated SLST		Other		Total
Interest income	$	20,797	$	—	$	20,797
Interest expense	14,254		740		14,994
Total net interest income (expense)	6,543		(740)		5,803

Unrealized gains, net	19,018		—		19,018
Other income	—		3,645		3,645
Total non-interest income	19,018		3,645		22,663



Total general, administrative and operating expenses	—		6,837		6,837

Net income (loss)	25,561		(3,932)		21,629
Net loss attributable to non-controlling interest in Consolidated VIEs	—		3,034		3,034
Net income (loss) attributable to Company	$	25,561	$	(898)	$	24,663

The following table presents condensed statements of operations for the non-Company-sponsored VIEs, including Consolidated K-Series (prior to the sale of first loss POs and de-consolidation of the Consolidated K-Series), Consolidated SLST and other Consolidated VIEs, for the six months ended June 30, 2020 (dollar amounts in thousands). Intercompany balances have been eliminated for purposes of this presentation.



	Consolidated K-Series		Consolidated SLST		Other		Total
Interest income	$	151,841	$	23,646	$	—	$	175,487
Interest expense	129,762		16,693		—		146,455
Total net interest income	22,079		6,953		—		29,032


Unrealized losses, net	(10,951)		(62,038)		—		(72,989)
Other income (loss)	—		—		(2,121)		(2,121)
Total non-interest income (loss)	(10,951)		(62,038)		(2,121)		(75,110)



Total general, administrative and operating expenses	—		—		—		—

Net income (loss)	11,128		(55,085)		(2,121)		(46,078)
Net loss attributable to non-controlling interest in Consolidated VIEs	—		—		1,060		1,060
Net income (loss) attributable to Company	$	11,128	$	(55,085)	$	(1,061)	$	(45,018)

As of June 30, 2021 and December 31, 2020, the Company evaluated its investment securities available for sale, preferred equity, mezzanine loan and other equity investments to determine whether they are VIEs and should be consolidated by the Company. Based on a number of factors, the Company determined that, as of June 30, 2021 and December 31, 2020, it does not have a controlling financial interest and is not the primary beneficiary of these VIEs. The following tables present the classification and carrying value of unconsolidated VIEs as of June 30, 2021 and December 31, 2020, respectively (dollar amounts in thousands):


	June 30, 2021
	Multi-family loans		Investment securities available for sale, at fair value		Equity investments		Total
ABS	$	—	$	42,620	$	—	$	42,620
Non-Agency RMBS	—		3,029		—		3,029
Preferred equity investments in multi-family properties	126,719		—		189,746		316,465
Equity investments in entities that invest in residential properties	—		—		14,951		14,951
Maximum exposure	$	126,719	$	45,649	$	204,697	$	377,065


	December 31, 2020
	Multi-family loans		Investment securities available for sale, at fair value		Equity investments		Total
ABS	$	—	$	43,225	$	—	$	43,225
Preferred equity investments in multi-family properties	158,501		—		182,765		341,266
Mezzanine loans on multi-family properties	5,092		—		—		5,092
Equity investments in entities that invest in residential properties and loans	—		—		76,330		76,330
Maximum exposure	$	163,593	$	43,225	$	259,095	$	465,913