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Use of Special Purpose Entities (SPE) and Variable Interest Entities (VIE) (Tables)

9 Months Ended

Sep. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Assets and Liabilities of Consolidated VIE's

The following table summarizes the aggregate estimated fair value of the assets, liabilities and non-controlling interests associated with the initial consolidation of the joint venture entities and real estate acquisitions by a Consolidated VIE during the nine months ended September 30, 2022 (dollar amounts in thousands):


	Nine Months Ended September 30, 2022
Cash (1)	$	8,576
Operating real estate (1) (2)	730,988
Lease intangibles (1) (3)	41,892
Other assets (1)	8,258
Total assets	789,714

Mortgages payable on real estate, net (1)	570,682
Other liabilities (1)	4,662
Total liabilities	575,344


Non-controlling interests (4)	16,293
Net assets consolidated	$	198,077

(1)In September 2022, the Company announced a repositioning of its business through the opportunistic disposition over time of the Company's joint venture equity investments in multi-family properties and reallocation of its capital away from such assets to its targeted assets. Accordingly, the Company determined that certain joint venture equity investments met the criteria to be classified as held for sale and transferred the assets and liabilities of the respective Consolidated VIEs to assets and liabilities of disposal group held for sale in the accompanying condensed consolidated balance sheets. See Note 9 for additional information.

(2)For joint venture equity investments that are not held for sale, operating real estate is included in real estate, net in the accompanying condensed consolidated balance sheets.

(3)For joint venture equity investments that are not held for sale, lease intangibles are included in other assets in the accompanying condensed consolidated balance sheets.

(4)Represents third-party ownership of membership interests in Consolidated Real Estate VIEs.

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 as of September 30, 2023 (dollar amounts in thousands). Intercompany balances have been eliminated for purposes of this presentation.


	Financing VIEs		Other VIEs
	Residential Loan Securitizations			Consolidated SLST		Consolidated Real Estate		Total
Cash and cash equivalents	$	—		$	—	$	7,120	$	7,120
Residential loans, at fair value	1,514,352			742,604		—		2,256,956
Real estate, net held in Consolidated VIEs (1)	—			—		542,797		542,797
Assets of disposal group held for sale (2)	—			—		904,658		904,658
Other assets	90,223			3,018		17,456		110,697
Total assets	$	1,604,575		$	745,622	$	1,472,031	$	3,822,228

Collateralized debt obligations ($1,318,131 at amortized cost, net and $584,741 at fair value)	$	1,318,131		$	584,741	$	—	$	1,902,872
Mortgages payable on real estate, net in Consolidated VIEs (3)	—			—		396,810		396,810
Liabilities of disposal group held for sale (2)	—			—		767,329		767,329
Other liabilities	7,575			5,138		12,373		25,086
Total liabilities	$	1,325,706		$	589,879	$	1,176,512	$	3,092,097
Redeemable non-controlling interest in Consolidated VIEs (4)	$	—		$	—	$	21,026	$	21,026
Non-controlling interest in Consolidated VIEs (5)	$	—		$	—	$	20,202	$	20,202
Net investment (6)	$	278,869		$	155,743	$	254,291	$	688,903

(1)Included in real estate, net in the accompanying condensed consolidated balance sheets.

(2)Represents assets and liabilities, respectively, of certain Consolidated Real Estate VIEs included in disposal group held for sale (see Note 9).

(3)Included in mortgages payable on real estate, net in the accompanying condensed consolidated balance sheets.

(4)Represents redeemable third-party ownership of membership interests in Consolidated Real Estate VIEs. See Redeemable Non-Controlling Interest in Consolidated VIEs below.

(5)Represents third-party ownership of membership interests in Consolidated Real Estate VIEs.

(6)The net investment amount is the maximum amount of the Company's investment that is at risk to loss and represents the difference between the carrying value of total assets and total liabilities held by VIEs, less non-controlling interests, if any.

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 as of December 31, 2022 (dollar amounts in thousands). Intercompany balances have been eliminated for purposes of this presentation.


	Financing VIEs		Other VIEs
	Residential Loan Securitizations		Consolidated SLST		Consolidated Real Estate		Total
Cash and cash equivalents	$	—	$	—	$	21,129	$	21,129
Residential loans, at fair value	1,616,114		827,582		—		2,443,696
Real estate, net held in Consolidated VIEs (1)	—		—		543,739		543,739
Assets of disposal group held for sale (2)	—		—		1,142,773		1,142,773
Other assets	92,906		3,168		13,686		109,760
Total assets	$	1,709,020	$	830,750	$	1,721,327	$	4,261,097

Collateralized debt obligations ($1,468,222 at amortized cost, net and $634,495 at fair value)	$	1,468,222	$	634,495	$	—	$	2,102,717
Mortgages payable on real estate, net in Consolidated VIEs (3)	—		—		394,707		394,707
Liabilities of disposal group held for sale (2)	—		—		883,812		883,812
Other liabilities	8,168		3,342		10,511		22,021
Total liabilities	$	1,476,390	$	637,837	$	1,289,030	$	3,403,257
Redeemable non-controlling interest in Consolidated VIEs (4)	$	—	$	—	$	63,803	$	63,803
Non-controlling interest in Consolidated VIEs (5)	$	—	$	—	$	32,967	$	32,967
Net investment (6)	$	232,630	$	192,913	$	335,527	$	761,070

(1)Included in real estate, net in the accompanying condensed consolidated balance sheets.

(2)Represents assets and liabilities, respectively, of certain Consolidated Real Estate VIEs included in disposal group held for sale (see Note 9).

(3)Included in mortgages payable on real estate, net in the accompanying condensed consolidated balance sheets.

(4)Represents redeemable third-party ownership of membership interests in Consolidated Real Estate VIEs. See Redeemable Non-Controlling Interest in Consolidated VIEs below.

(5)Represents third-party ownership of membership interests in Consolidated Real Estate VIEs.

The following table presents the carrying value and estimated fair value of the Company’s financial instruments at September 30, 2023 and December 31, 2022, respectively (dollar amounts in thousands):


		September 30, 2023				December 31, 2022
	Fair Value Hierarchy Level	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets:
Cash and cash equivalents	Level 1	$	228,333	$	228,333	$	244,718	$	244,718
Residential loans	Level 3	2,993,895		2,993,895		3,525,080		3,525,080
Multi-family loans	Level 3	98,435		98,435		87,534		87,534
Investment securities available for sale	Level 2	1,602,215		1,602,215		99,559		99,559
Equity investments	Level 3	155,583		155,583		179,746		179,746
Equity investments in disposal group held for sale	Level 3	5,073		5,073		9,010		9,010
Derivative assets	Level 2	2,031		2,031		2,473		2,473
Derivative assets in disposal group held for sale	Level 2	14,624		14,624		29,418		29,418
Financial Liabilities:
Repurchase agreements	Level 2	1,994,728		1,994,728		737,023		737,023
Collateralized debt obligations:
Residential loan securitizations at amortized cost, net	Level 3	1,318,131		1,242,804		1,468,222		1,383,715
Consolidated SLST	Level 3	584,741		584,741		634,495		634,495

Subordinated debentures	Level 3	45,000		35,803		45,000		32,721

Senior unsecured notes	Level 2	97,924		91,520		97,384		91,104
Mortgages payable on real estate	Level 3	396,810		361,520		394,707		377,327
Mortgages payable on real estate in disposal group held for sale	Level 3	740,187		738,639		865,414		864,758

Schedule of Statement of Operations of Variable Interest Entities

Multi-family loans consist of the following as of September 30, 2023 and December 31, 2022, respectively (dollar amounts in thousands):


	September 30, 2023		December 31, 2022
Investment amount	$	98,246	$	88,249
Deferred loan fees, net	(473)		(428)
Unrealized gains (losses), net	662		(287)
Total, at Fair Value	$	98,435	$	87,534

The following table presents condensed statements of operations for non-Company-sponsored VIEs for the three months ended September 30, 2023 and 2022, respectively (dollar amounts in thousands). The following table includes net (loss) income from assets and liabilities of disposal group held for sale and intercompany balances have been eliminated for purposes of this presentation.


	Three Months Ended September 30,
	2023						2022
	Consolidated SLST		Consolidated Real Estate		Total		Consolidated SLST		Consolidated Real Estate		Total
Interest income	$	8,370	$	—	$	8,370	$	9,013	$	—	$	9,013
Interest expense	5,957		—		5,957		6,611		—		6,611
Total net interest income	2,413		—		2,413		2,402		—		2,402

Income from real estate	—		39,287		39,287		—		39,261		39,261
Expenses related to real estate	—		47,367		47,367		—		67,319		67,319
Total net loss from real estate	—		(8,080)		(8,080)		—		(28,058)		(28,058)


Unrealized losses, net	(9,325)		—		(9,325)		(7,925)		—		(7,925)
Gains on derivative instruments, net	—		315		315		—		24,943		24,943
Impairment of real estate	—		(44,157)		(44,157)		—		—		—
Other (losses) income	—		(103)		(103)		—		16,287		16,287
Total other (loss) income	(9,325)		(43,945)		(53,270)		(7,925)		41,230		33,305



Net (loss) income	(6,912)		(52,025)		(58,937)		(5,523)		13,172		7,649
Net loss attributable to non-controlling interest in Consolidated VIEs	—		9,364		9,364		—		2,617		2,617
Net (loss) income attributable to Company	$	(6,912)	$	(42,661)	$	(49,573)	$	(5,523)	$	15,789	$	10,266

The following table presents condensed statements of operations for non-Company-sponsored VIEs for the nine months ended September 30, 2023 and 2022, respectively (dollar amounts in thousands). The following table includes net (loss) income from assets and liabilities of disposal group held for sale and intercompany balances have been eliminated for purposes of this presentation.


	Nine Months Ended September 30,
	2023						2022
	Consolidated SLST		Consolidated Real Estate		Total		Consolidated SLST		Consolidated Real Estate		Total
Interest income	$	25,543	$	—	$	25,543	$	27,648	$	—	$	27,648
Interest expense	18,238		—		18,238		18,796		—		18,796
Total net interest income	7,305		—		7,305		8,852		—		8,852

Income from real estate	—		120,247		120,247		—		97,308		97,308
Expenses related to real estate	—		145,310		145,310		—		202,084		202,084
Total net loss from real estate	—		(25,063)		(25,063)		—		(104,776)		(104,776)


Unrealized losses, net	(19,354)		—		(19,354)		(27,480)		—		(27,480)
Gains on derivative instruments, net	—		5,572		5,572		—		24,943		24,943
Impairment of real estate	—		(71,296)		(71,296)		—		—		—
Other (losses) income	—		(61)		(61)		—		16,287		16,287
Total other (loss) income	(19,354)		(65,785)		(85,139)		(27,480)		41,230		13,750



Net loss	(12,049)		(90,848)		(102,897)		(18,628)		(63,546)		(82,174)
Net loss attributable to non-controlling interest in Consolidated VIEs	—		19,957		19,957		—		36,409		36,409
Net loss attributable to Company	$	(12,049)	$	(70,891)	$	(82,940)	$	(18,628)	$	(27,137)	$	(45,765)

Schedule of Redeemable Noncontrolling Interest in Consolidated VIEs

The following table presents activity in redeemable non-controlling interest in Consolidated VIEs for the three and nine months ended September 30, 2023 and 2022, respectively (dollar amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Beginning balance	$	34,571	$	37,101	$	63,803	$	66,392
Contributions	—		—		—		315
Distributions	(41)		(4,115)		(3,991)		(5,925)
Net loss attributable to redeemable non-controlling interest in Consolidated VIEs	(2,907)		(5,200)		(11,592)		(32,996)
Adjustment of redeemable non-controlling interest to estimated redemption value (1)	(10,597)		—		(27,194)		—
Ending balance	$	21,026	$	27,786	$	21,026	$	27,786

(1)The Company determines the fair value of the redeemable non-controlling interest utilizing market assumptions and discounted cash flows. The Company applies a discount rate to the estimated future cash flows from the multi-family apartment properties held by the applicable Consolidated VIEs that are allocatable to the redeemable non-controlling interest. This fair value measurement is generally based on unobservable inputs and, as such, is classified as Level 3 in the fair value hierarchy. Significant unobservable inputs utilized in the estimation of fair value of redeemable non-controlling interest include a weighted average capitalization rate of 5.7% (ranges from 5.3% to 6.5%) and a weighted average discount rate of 14.8% (ranges from 13.9% to 15.6%).

Schedule of Classification and Carrying Value of Unconsolidated VIEs

The following tables present the classification and carrying value of unconsolidated VIEs as of September 30, 2023 and December 31, 2022, respectively (dollar amounts in thousands):


	September 30, 2023
	Multi-family loans		Investment securities available for sale, at fair value		Equity investments		Assets of disposal group held for sale		Total

Non-Agency RMBS	$	—	$	25,796	$	—	$	—	$	25,796
Preferred equity investments in multi-family properties	98,435		—		130,583		—		229,018
Joint venture equity investments in multi-family properties	—		—		—		5,073		5,073
Maximum exposure	$	98,435	$	25,796	$	130,583	$	5,073	$	259,887


	December 31, 2022
	Multi-family loans		Investment securities available for sale, at fair value		Equity investments		Assets of disposal group held for sale		Total
ABS	$	—	$	856	$	—	$	—	$	856
Non-Agency RMBS	—		29,290		—		—		29,290
Preferred equity investments in multi-family properties	87,534		—		152,246		—		239,780
Joint venture equity investments in multi-family properties	—		—		—		9,010		9,010
Maximum exposure	$	87,534	$	30,146	$	152,246	$	9,010	$	278,936

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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