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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)
 6 Months Ended
Jun. 30, 2015
Carrying Amount and Fair Value of Financial Instruments

The following table summarizes the carrying amount and the fair value of our financial instruments as of June 30, 2015:

 

Financial Instrument

    Carrying
Amount		      Estimated
Fair Value		  

Assets

      

Commercial mortgages, mezzanine loans, other loans and preferred equity interests, net

    $ 1,493,746       $ 1,448,755   

Cash and cash equivalents

      104,772         104,772   

Restricted cash

      179,878         179,878   

Derivative assets

      278         278   

Liabilities

      

Recourse indebtedness:

      

7.0% convertible senior notes

      33,658         36,882   

4.0% convertible senior notes

      135,752         120,480   

7.625% senior notes

      60,000         55,440   

7.125% senior notes

      71,905         71,330   

Secured credit facilities

      14,848         14,848   

Junior subordinated notes, at fair value

      12,866         12,866   

Junior subordinated notes, at amortized cost

      25,100         14,107   

CMBS facilities

      77,742         77,742   

Senior secured notes

      65,559         75,777   

Non-recourse indebtedness:

      

CDO notes payable, at amortized cost

      986,891         807,995   

CMBS securitizations

      536,796         536,528   

Loans payable on real estate

      640,411         667,791   

Derivative liabilities

      12,154         12,154   

 

The following table summarizes the carrying amount and the fair value of our financial instruments as of December 31, 2014:

 

Financial Instrument

    Carrying
Amount		      Estimated Fair
Value		  

Assets

      

Commercial mortgages, mezzanine loans, other loans and preferred equity interests, net

    $ 1,392,436       $ 1,316,796   

Investments in securities and security-related receivables

      31,412         31,412   

Cash and cash equivalents

      121,726         121,726   

Restricted cash

      124,220         124,220   

Liabilities

      

Recourse indebtedness:

      

7.0% convertible senior notes

      33,417         41,901   

4.0% convertible senior notes

      134,418         123,677   

7.625% senior notes

      60,000         56,016   

7.125% senior notes

      71,905         70,064   

Secured credit facilities

      18,392         18,392   

Junior subordinated notes, at fair value

      13,102         13,102   

Junior subordinated notes, at amortized cost

      25,100         14,471   

CMBS facilities

      55,956         55,956   

Commercial mortgage facility

      29,097         29,097   

Senior secured notes

      68,314         79,594   

Non-recourse indebtedness:

      

CDO notes payable, at amortized cost

      1,073,145         913,050   

CMBS securitizations

      389,415         389,771   

Loans payable on real estate

      643,405         678,306   

Derivative liabilities

      20,695         20,695   

Warrants and investor SARs

      35,384         35,384   
Information of Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables summarize information about our assets and liabilities measured at fair value on a recurring basis as of June 30, 2015, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

 

Assets:

   Quoted Prices in
Active Markets for
Identical Assets
(Level 1) (a)		     Significant Other
Observable Inputs
(Level 2) (a)		     Significant
Unobservable Inputs
(Level 3) (a)		     Balance of
June 30,
2015		  

Available-for-sale securities

   $ —        $ —        $ —        $ —     

Security-related receivables

        

Unsecured REIT note receivables

     —          —          —          —     

CMBS receivables

     —          —          —          —     

Other securities

     —          —          —          —     

Derivative assets

     —          278        —          278   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

   $ —        $ 278      $ —        $ 278   
 

 

 

    

 

 

    

 

 

    

 

 

  

 

Liabilities:

   Quoted Prices in
Active Markets for
Identical Assets
(Level 1) (a)		     Significant Other
Observable Inputs
(Level 2) (a)		     Significant
Unobservable Inputs
(Level 3) (a)		     Balance of
June 30,
2015		  

Junior subordinated notes, at fair value

   $ —        $ —        $ 12,866      $ 12,866   

Derivative liabilities

     —          12,154        —          12,154   

Warrants and investor SARs

     —          —          22,181        22,181   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities

   $ —        $ 12,154      $ 35,047      $ 47,201   
 

 

 

    

 

 

    

 

 

    

 

 

  

 

(a) During the six-month period ended June 30, 2015, there were no transfers between Level 1 and Level 2, nor were there any transfers into and out of Level 3.

The following tables summarize information about our assets and liabilities measured at fair value on a recurring basis as of December 31, 2014, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

 

Assets:

   Quoted Prices in
Active Markets for
Identical Assets
(Level 1) (a)		     Significant Other
Observable Inputs
(Level 2) (a)		     Significant
Unobservable Inputs
(Level 3) (a)		     Balance of
December 31,
2014		  

Available-for-sale securities

   $ —       $ 19,167      $ —       $ 19,167   

Security-related receivables

        

Unsecured REIT note receivables

     —         10,995        —         10,995   

CMBS receivables

     —         1,250        —         1,250   

Other securities

     —         —         —         —    

Derivative assets

     —         —         —         —    
 

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

   $ —       $ 31,412      $ —       $ 31,412   
 

 

 

    

 

 

    

 

 

    

 

 

  

 

Liabilities:

   Quoted Prices in
Active Markets for
Identical Assets
(Level 1) (a)		     Significant Other
Observable Inputs
(Level 2) (a)		     Significant
Unobservable Inputs
(Level 3) (a)		     Balance of
December 31,
2014		  

Junior subordinated notes, at fair value

   $ —       $ —       $ 13,102      $ 13,102   

Derivative liabilities

     —         20,695        —         20,695   

Warrants and investor SARs

     —         —         35,384        35,384   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities

   $ —       $ 20,695      $ 48,486      $ 69,181   
 

 

 

    

 

 

    

 

 

    

 

 

  

 

(a) During the year ended December 31, 2014, there were no transfers between Level 1 and Level 2, nor were there any transfers into and out of Level 3.
Rollforward of Level 3 Liabilities

The following tables summarize additional information about liabilities that are measured at fair value on a recurring basis for which we have utilized level 3 inputs to determine fair value for the three-month period ended June 30, 2015:

 

Liabilities

    Warrants and investor
SARs		      Junior
Subordinated
Notes, at Fair
Value		      Total
Level 3
Liabilities		  

Balance, as of December 31, 2014

    $ 35,384       $ 13,102       $ 48,486   

Change in fair value of financial instruments

      (13,203 )       (236 )       (13,439 ) 

Purchases

      —           —           —     

Sales

      —           —           —     

Principal repayments

      —           —           —     
  

 

 

     

 

 

     

 

 

  

Balance, as of June 30, 2015

    $ 22,181       $ 12,866       $ 35,047   
  

 

 

     

 

 

     

 

 

  
Fair Value Hierarchy for Financial Instruments Not Fair Valued but For Which Fair Value Is Required To Be Disclosed

The following tables summarize the valuation technique and the level of the fair value hierarchy for financial instruments that are not fair valued in the accompanying consolidated balance sheets but for which fair value is required to be disclosed. The fair value of cash and cash equivalents, restricted cash, secured credit facilities, CMBS facilities and commercial mortgage facility approximates cost due to the nature of these instruments and are not included in the tables below.

 

                        Fair Value Measurement  
     Carrying Amount
as of
June 30,
2015		      Estimated Fair
Value as of
June 30,
2015		     

Valuation

Technique

    Quoted Prices in
Active
Markets for
Identical Assets
(Level 1)		      Significant Other
Observable Inputs
(Level 2)		      Significant Other
Unobservable
Inputs
(Level 3)		  

Commercial mortgages, mezzanine loans and other loans

    $ 1,493,746       $ 1,448,755       Discounted cash flows    $ —         $ —         $ 1,448,755   

7.0% convertible senior notes

      33,658         36,882       Trading price      36,882         —           —     

4.0% convertible senior notes

      135,752         120,480       Trading price      120,480         —           —     

7.625% senior notes

      60,000         55,440       Trading price      55,440         —           —     

7.125% senior notes

      71,905         71,330       Trading price      71,330         —           —     

Senior Secured Notes

      65,559         75,777       Discounted cash flows      —           —           75,777   

Junior subordinated notes, at amortized cost

      25,100         14,107       Discounted cash flows      —           —           14,107   

CDO notes payable, at amortized cost

      986,891         807,995       Trading price      807,995         —           —     

CMBS securitization

      536,796         536,528       Trading price      536,528         —           —     

Loans payable on real estate

      640,411         667,791       Discounted cash flows      —           —           667,791   

 

                        Fair Value Measurement  
     Carrying Amount
as of
December 31,
2014		      Estimated Fair
Value as of
December 31,
2014		     

Valuation

Technique

    Quoted Prices in
Active
Markets for
Identical Assets
(Level 1)		      Significant Other
Observable Inputs
(Level 2)		      Significant Other
Unobservable
Inputs
(Level 3)		  

Commercial mortgages, mezzanine loans and other loans

    $ 1,392,436       $ 1,316,796       Discounted cash flows    $ —        $ —        $ 1,316,796   

7.0% convertible senior notes

      33,417         41,901       Trading price      41,901         —          —    

4.0% convertible senior notes

      134,418         123,677       Trading price      123,677         —          —     

7.625% senior notes

      60,000         56,016       Trading price      56,016         —          —    

7.125% senior notes

      71,905         70,064       Trading price      70,064         —          —    

Senior Secured Notes

      68,314         79,594       Discounted cash flows      —          —          79,594   

Junior subordinated notes, at amortized cost

      25,100         14,471       Discounted cash flows      —          —          14,471   

CDO notes payable, at amortized cost

      1,073,145         913,050       Trading price      913,050         —          —    

CMBS securitization

      389,415         389,771       Trading price      389,771         —          —    

Loans payable on real estate

      643,405         678,306       Discounted cash flows      —          —          678,306   
Summary of Realized and Unrealized Gains and Losses on Assets and Liabilities

The following table summarizes realized and unrealized gains and losses on assets and liabilities for which we elected the fair value option of FASB ASC Topic 825, “Financial Instruments” and derivatives as reported in change in fair value of financial instruments in the accompanying consolidated statements of operations:

 

     For the Three-Month
Periods Ended June 30		      For the Six-Month
Periods Ended June 30		  

Description

    2015      2014      2015      2014  

Change in fair value of trading securities and security- related receivables

    $ —         $ 2,132       $ (173 )     $ 8,574   

Change in fair value of CDO notes payable and trust preferred obligations

      316         (18,937 )       236         (49,333 ) 

Change in fair value of derivatives

      1,627         (7,484 )       (420 )       (11,711 ) 

Change in fair value of warrants and investor SARs

      6,413         (782 )       13,203         3,260   
  

 

 

     

 

 

     

 

 

     

 

 

  

Change in fair value of financial instruments

    $ 8,356       $ (25,071 )     $ 12,846       $ (49,210 )