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Use of Special Purpose Entities (SPE) and Variable Interest Entities (VIE)
 12 Months Ended
Dec. 31, 2021
Variable Interest Entity, Measure of Activity [Abstract]  
Use of Special Purpose Entities (SPE) and Variable Interest Entities (VIE) Use of Special Purpose Entities (SPE) and Variable Interest Entities (VIE)
Financing VIEs

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.    

The Company has entered into financing transactions, including residential loan securitizations and re-securitizations, which required the Company to analyze and determine whether the SPEs that were created to facilitate the transactions are VIEs in accordance with ASC 810 and if so, whether the Company is the primary beneficiary requiring consolidation.

As of December 31, 2021 and 2020, the Company evaluated its residential loan securitizations and re-securitization of non-agency RMBS and concluded that the entities created to facilitate 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"). Accordingly, the Company consolidated the then-outstanding Financing VIEs as of December 31, 2021 and 2020. During the year ended December 31, 2021, the Company exercised its right to an optional redemption of its non-Agency RMBS re-securitization and one of its residential loan securitizations with outstanding principal balances of $14.7 million and $203.5 million at the time of redemption, respectively, returned the assets held by the trusts to the Company and recognized $1.6 million of loss on the extinguishment of collateralized debt obligations.

Consolidated SLST

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 December 31, 2021 and 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 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 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 December 31, 2021 and 2020 with a fair value of $230.3 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 December 31, 2021 and 2020.

During the year ended December 31, 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 consolidated statements of operations.
Consolidated K-Series

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 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 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. The Company subsequently sold such securities in the years ended December 31, 2021 and 2020.

Consolidated Real Estate VIEs

During the year ended December 31, 2021, the Company invested in 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 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, 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 in the amount of $926.8 million and lease intangibles in the amount of $52.0 million (included in other assets in the accompanying consolidated balance sheets), mortgages payable on real estate, net in the amount of $669.6 million, other liabilities in the amount of $15.9 million, redeemable non-controlling interests in the amount of $67.1 million and non-controlling interests in the amount of $25.5 million. The non-controlling interests represent third-party ownership of the VIEs' membership interests.

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. 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 estimated cash flows and discount rate. The initial consolidation of this VIE included operating real estate in the amount of $50.5 million and a lease intangible in the amount of $1.6 million (included in other assets in the accompanying consolidated balance sheets), other liabilities in the amount of $1.5 million, a mortgage payable on real estate, net in the amount of $36.8 million and a non-controlling interest (representing third-party ownership of the VIE's membership interests) in the amount of $6.8 million. Subsequently, in July 2021, the VIE redeemed its non-controlling interest which resulted in an equity transaction accounted for by the Company in accordance with ASC 810. In addition, the Company reconsidered its evaluation of its investment in the entity and determined that the entity no longer met the criteria for being characterized as a VIE and is a wholly-owned subsidiary of the Company.
In analyzing whether the Company is the primary beneficiary of the Financing VIEs, Consolidated SLST, the Consolidated K-Series and Consolidated Real Estate 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:

•whether the Company has both the power to direct the activities that most significantly impact the economic performance of the VIE; and
•whether the Company has a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE.

The following table presents a summary of the assets, liabilities and non-controlling interests of the Company’s residential loan securitizations, Consolidated SLST and Consolidated Real Estate VIEs of as of December 31, 2021 (dollar amounts in thousands). Intercompany balances have been eliminated for purposes of this presentation:

Financing VIEsOther VIEs
Residential Loan SecuritizationsConsolidated SLSTConsolidated Real EstateTotal
Cash and cash equivalents
$— $— $29,606 $29,606 
Residential loans, at fair value801,429 1,070,882 — 1,872,311 
Real estate, net held in Consolidated VIEs (1)
— — 927,725 927,725 
Other assets20,932 3,547 70,557 95,036 
Total assets$822,361 $1,074,429 $1,027,888 $2,924,678 
Collateralized debt obligations ($682,802 at amortized cost, net and $839,419 at fair value)
$682,802 $839,419 $— $1,522,221 
Mortgages payable on real estate, net in Consolidated VIEs (2)
— — 672,568 672,568 
Other liabilities4,321 3,193 17,527 25,041 
Total liabilities$687,123 $842,612 $690,095 $2,219,830 
Redeemable non-controlling interest in Consolidated VIEs (3)
$— $— $66,392 $66,392 
Non-controlling interest in Consolidated VIEs (4)
$— $— $24,359 $24,359 
Net investment (5)
$135,238 $231,817 $247,042 $614,097 

(1)Included in real estate, net in the accompanying consolidated balance sheets.
(2)Included in mortgages payable on real estate, net in the accompanying consolidated balance sheets.
(3)Represents redeemable third-party ownership of membership interests in Consolidated Real Estate VIEs. See Redeemable Non-Controlling Interest in Consolidated VIEs below.
(4)Represents third-party ownership of membership interests in Consolidated Real Estate VIEs.
(5)The net investment amount is the maximum amount of the Company's investment that is at risk to loss and represents the difference between total assets and total liabilities held by VIEs, less non-controlling interest, if any.
The following table presents a summary of the assets, liabilities and non-controlling interests of the Company's residential loan securitizations, non-Agency RMBS re-securitization, Consolidated SLST and Consolidated Real Estate VIEs as of December 31, 2020 (dollar amounts in thousands). Intercompany balances have been eliminated for purposes of this presentation:
Financing VIEsOther VIEs
Residential Loan SecuritizationsNon-Agency RMBS Re-SecuritizationConsolidated SLSTConsolidated Real EstateTotal
Cash and cash equivalents
$— $— $— $462 $462 
Residential loans, at fair value691,451 — 1,266,785 — 1,958,236 
Investment securities available for sale, at fair value— 109,140 — — 109,140 
Real estate, net held in Consolidated VIEs (1)
— — — 50,532 50,532 
Other assets24,959 535 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 on real estate, net in Consolidated VIEs (2)
— — — 36,752 36,752 
Other liabilities2,610 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 

(1)Included in real estate, net in the accompanying consolidated balance sheets.
(2)Included in mortgages payable on real estate, net in the accompanying consolidated balance sheets.
(3)Represents third-party ownership of membership interests in Consolidated Real Estate VIEs.
(4)The net investment amount is the maximum amount of the Company's investment that is at risk to loss and represents the difference between total assets and total liabilities held by VIEs, less non-controlling interest, if any.
The following tables present statements of operations for non-Company-sponsored VIEs for the years ended December 31, 2021, 2020 and 2019, respectively (dollar amounts in thousands). Intercompany balances have been eliminated for purposes of this presentation.

Year Ended December 31,
2021
Consolidated SLSTConsolidated Real EstateTotal
Interest income$40,944 $— $40,944 
Interest expense28,135 3,477 31,612 
Total net interest income (expense)12,809 (3,477)9,332 
Unrealized gains, net23,832 — 23,832 
Income from real estate— 12,339 12,339 
Other loss— — — 
Total non-interest income 23,832 12,339 36,171 
Expenses related to real estate (1)
— 25,687 25,687 
Net income (loss)36,641 (16,825)19,816 
Net loss attributable to non-controlling interest in Consolidated VIEs— 4,724 4,724 
Net income (loss) attributable to Company$36,641 $(12,101)$24,540 

(1)Includes depreciation expense of $4.8 million and amortization expense related to lease intangibles of $13.6 million.

Year Ended December 31,
2020
Consolidated K-Series (1)
Consolidated SLSTConsolidated Real EstateTotal
Interest income$151,841 $45,194 $— $197,035 
Interest expense129,762 31,663 — 161,425 
Total net interest income22,079 13,531 — 35,610 
Unrealized losses, net(10,951)(32,073)— (43,024)
Income from real estate— — 419 419 
Other loss— — (2,667)(2,667)
Total non-interest income (loss)(10,951)(32,073)(2,248)(45,272)
Expenses related to real estate (2)
— — 763 763 
Net income (loss)11,128 (18,542)(3,011)(10,425)
Net income attributable to non-controlling interest in Consolidated VIEs— — (267)(267)
Net income (loss) attributable to Company$11,128 $(18,542)$(3,278)$(10,692)

(1)Reflects statement of operations for the Consolidated K-Series prior to the sale of first loss POs and de-consolidation of the Consolidated K-Series.
(2)Includes depreciation expense of $0.2 million and amortization expense related to lease intangibles of $0.2 million.
Year Ended December 31,
2019
Consolidated K-SeriesConsolidated SLSTConsolidated Real EstateTotal
Interest income$535,226 $4,764 $— $539,990 
Interest expense457,130 2,945 — 460,075 
Total net interest income 78,096 1,819 — 79,915 
Unrealized gains (losses), net23,962 (83)— 23,879 
Income from real estate— — 215 215 
Other loss— — (2,424)(2,424)
Total non-interest income (loss)23,962 (83)(2,209)21,670 
General and administrative expenses— — 219 219 
Expenses related to real estate— — 482 482 
Total general, administrative and operating expenses— — 701 701 
Net income (loss)102,058 1,736 (2,910)100,884 
Net loss attributable to non-controlling interest in Consolidated VIEs— — 840 840 
Net income (loss) attributable to Company$102,058 $1,736 $(2,070)$101,724 
Redeemable Non-Controlling Interest in Consolidated VIEs

The third-party owners of certain of the non-controlling interests in Consolidated VIEs have the ability to sell their ownership interests to the Company, at their election. The Company has classified these third-party ownership interests as redeemable non-controlling interests in Consolidated VIEs in mezzanine equity on the accompanying consolidated balance sheets. The holders of the redeemable non-controlling interests may elect to sell their ownership interests to the Company at fair value once a year and the sales are subject to minimum and maximum amount limitations.

The following table presents activity in redeemable non-controlling interest in Consolidated VIEs for the year ended December 31, 2021 (dollar amounts in thousands):


Beginning balance$— 
Initial consolidation of Consolidated VIEs67,096 
Net loss attributable to redeemable non-controlling interest in Consolidated VIEs(704)
Ending balance$66,392 

Unconsolidated VIEs

As of December 31, 2021 and 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 December 31, 2021 and 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 December 31, 2021 and 2020, respectively (dollar amounts in thousands):

December 31, 2021
Multi-family loansInvestment securities available for sale, at fair valueEquity investmentsTotal
ABS$— $39,679 $— $39,679 
Non-Agency RMBS— 30,924 — 30,924 
Preferred equity investments in multi-family properties120,021 — 180,798 300,819 
Joint venture equity investments in multi-family properties— — 10,440 10,440 
Equity investments in entities that invest in residential properties— — 19,143 19,143 
Maximum exposure$120,021 $70,603 $210,381 $401,005 

December 31, 2020
Multi-family loansInvestment securities available for sale, at fair valueEquity investmentsTotal
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