SALE OF MIDDLE MARKET LENDING PORTFOLIO

6 Months Ended

Jun. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]


9. SALE OF COMMERCIAL REAL ESTATE BUSINESS

On March 25, 2021, the Company entered into a definitive agreement to sell substantially all of the assets that comprise its CRE business to Slate Asset Management L.P. and Slate Grocery REIT (together, “Slate”) for $2.33 billion. The transaction included equity interests, loan assets and associated liabilities, and CMBS (other than commercial CRTs). The Company also sold nearly all of the remaining CRE business assets that are not included in the transaction with Slate. Certain employees who primarily supported the CRE business joined Slate in connection with the sale. In connection with the execution of the definitive agreement to sell the CRE business, during the three months ended March 31, 2021, the Company performed an assessment of goodwill, which was related to the Company’s 2013 acquisition of CreXus Investment Corp., and recognized an impairment of $71.8 million. During the six months ended June 30, 2021, the Company reported Business divestiture-related gains (losses) of ($248.0) million, in its Consolidated Statements of Comprehensive Income (Loss) which includes the aforementioned goodwill impairment as well as valuation adjustments resulting from classifying the CRE assets as held for sale and estimated transaction costs. As of June 30, 2022, the assets held for sale and the associated liabilities were transferred to Slate.


10. SALE OF MIDDLE MARKET LENDING PORTFOLIO

In April 2022, the Company entered into a definitive agreement to sell substantially all of the corporate loan interests held by the MML business operated by the Company, as well as assets managed for third parties (collectively, the "MML Portfolio"), to Ares Capital Management LLC (“Ares”) for $2.4 billion. The Company’s loans, having an unpaid principal balance of $1.8 billion, were transferred to Ares for cash proceeds of $1.8 billion and a realized gain of $40.1 million was recorded during the three months ended June 30, 2022. As of June 30, 2022, loans with an unpaid principal balance of $121.2 million were classified as held for sale pending receipt of required consents to assign the loans to Ares. The loans classified as held for sale are carried at lower of cost or fair value measured using a discounted cash flow methodology. This methodology is considered to be Level 3 in the fair value measurement hierarchy because the valuation requires inputs (i.e., the discount rate) that are both significant to the measurement and unobservable. The nature of the Company’s continuing involvement with the transferred loans is primarily administrative, including providing customary representations and warranties regarding the transferred loans.