FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2017

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

Fair Value of Financial Instruments

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, commercial mortgage facilities and other indebtedness approximates cost due to the nature of these instruments and are not included in the tables below.

Carrying Amount

as of June 30, 2017

Estimated Fair

Value as of June 30, 2017

Valuation

Technique

Level in Fair Value Hierarchy

Total investment in mortgages and loans, net

1,244,191

1,192,723

Discounted cash flows

Three

7.0% convertible senior notes

832

590

Trading price

Two

4.0% convertible senior notes

121,065

119,680

Trading price

Two

7.625% senior notes

55,687

55,018

Trading price

Two

7.125% senior notes

69,477

70,420

Trading price

Two

Senior secured notes

14,355

15,783

Discounted cash flows

Three

Junior subordinated notes, at amortized cost

25,100

13,995

Discounted cash flows

Three

CDO notes payable, at amortized cost

370,379

329,004

Discounted cash flows

Three

CMBS securitizations

713,263

721,456

Discounted cash flows

Three

Loans payable on real estate

134,687

137,583

Discounted cash flows

Three

Other indebtedness

40,880

40,830

Discounted cash flows

Three

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, 2017:

Financial Instrument	Carrying Amount		Estimated Fair Value
Assets
Total investment in mortgages and loans, net	$	1,244,191	$	1,192,723
Cash and cash equivalents		89,317		89,317
Restricted cash		193,580		193,580
Derivative assets		85		85

Liabilities
Recourse indebtedness:
7.0% convertible senior notes		832		590
4.0% convertible senior notes		121,065		119,680
7.625% senior notes		55,687		55,018
7.125% senior notes		69,477		70,420
Senior secured notes		14,355		15,783
Junior subordinated notes, at fair value		12,524		12,524
Junior subordinated notes, at amortized cost		25,100		13,995
CMBS facilities		29,818		30,708
Non-recourse indebtedness:
CDO notes payable, at amortized cost		370,379		329,004
CMBS securitizations		713,263		721,456
Loans payable on real estate		134,687		137,583
Other indebtedness		40,880		40,830
Derivative liabilities		17		17
Warrants and investor SARs		27,500		27,500

The following table summarizes the carrying amount and the fair value of our financial instruments as of December 31, 2016:

Financial Instrument	Carrying Amount		Estimated Fair Value
Assets
Total investment in mortgages and loans, net	$	1,280,285	$	1,256,342
Cash and cash equivalents		110,531		110,531
Restricted cash		190,179		190,179
Derivative assets		206		206
Liabilities
Recourse indebtedness:
7.0% convertible senior notes		831		890
4.0% convertible senior notes		120,271		116,861
7.625% senior notes		55,568		53,231
7.125% senior notes		69,188		69,118
Senior secured notes		58,233		62,620
Junior subordinated notes, at fair value		11,822		11,822
Junior subordinated notes, at amortized cost		25,100		13,099
CMBS facilities		24,908		26,421
Non-recourse indebtedness:
CDO notes payable, at amortized cost		534,501		477,032
CMBS securitizations		641,077		646,642
Loans payable on real estate		185,668		188,525
Other indebtedness		23,915		24,321
Derivative liabilities		-		-
Warrants and investor SARs		30,400		30,400

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, 2017, 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) (1)

Significant Other

Observable Inputs

(Level 2) (1)

Significant

Unobservable Inputs

(Level 3) (1)

Balance as of June 30, 2017

Derivative assets

—

Total assets

—

Liabilities:	Quoted Prices in Active Markets for Identical Assets (Level 1) (1)		Significant Other Observable Inputs (Level 2) (1)		Significant Unobservable Inputs (Level 3) (1)		Balance as of June 30, 2017
Junior subordinated notes, at fair value	$	—	$	—	$	12,524	$	12,524
Derivative liabilities				17				17
Warrants and investor SARs		—		—		27,500		27,500
Total liabilities	$	—	$	17	$	40,024	$	40,041

(1)	During the six months ended June 30, 2017, there were no transfers between Level 1 and Level 2, and there were no transfers into and/or 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, 2016, 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) (1)

Significant Other

Observable Inputs

(Level 2) (1)

Significant

Unobservable Inputs

(Level 3) (1)

Balance as of December 31, 2016

Derivative assets

—

206

—

206

Total assets

—

206

—

206

Liabilities:	Quoted Prices in Active Markets for Identical Assets (Level 1) (1)		Significant Other Observable Inputs (Level 2) (1)		Significant Unobservable Inputs (Level 3) (1)		Balance as of December 31, 2016
Junior subordinated notes, at fair value	$	—	$	—	$	11,822	$	11,822
Warrants and investor SARs		—		—		30,400		30,400
Total liabilities	$	—	$	—	$	42,222	$	42,222

(1)	During the year ended December 31, 2016, there were no transfers between Level 1 and Level 2, and there were no transfers into and/or out of Level 3.

Rollforward of Level 3 Liabilities

Liabilities	Warrants and investor SARS			Junior Subordinated Notes, at Fair Value		Total Level 3 Liabilities
Balance, as of December 31, 2016	$	30,400		$	11,822	$	42,222
Change in fair value of financial instruments		(2,900	)		702		(2,198	)
Purchases		—			—		—
Principal Repayments		—			—		—
Balance, as of June 30, 2017	$	27,500		$	12,524	$	40,024

Liabilities	Warrants and investor SARS			Junior Subordinated Notes, at Fair Value		Total Level 3 Liabilities
Balance, as of March 31, 2017	$	30,900		$	12,482	$	43,382
Change in fair value of financial instruments		(3,400	)		42		(3,358	)
Purchases		—			—		—
Principal Repayments		—			—		—
Balance, as of June 30, 2017	$	27,500		$	12,524	$	40,024

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 Months Ended June 30,						For the Six Months Ended June 30,
Description	2017			2016			2017			2016
Change in fair value of junior subordinated notes	$	(42	)	$	(1,004	)	$	(702	)	$	(285	)
Change in fair value of derivatives		(265	)		(388	)		(258	)		(2,295	)
Change in fair value of warrants and investors SARs		3,400			(200	)		2,900			(3,100	)
Change in fair value of financial instruments	$	3,093		$	(1,592	)	$	1,940		$	(5,680	)