Note 7—Debt Obligations

We utilize various forms of short-term and long-term financing agreements to finance certain of our loans and investments. Borrowings underlying these arrangements are primarily secured by a significant amount of our loans and investments.

Credit Facilities and Repurchase Agreements

The following table outlines borrowings under our credit facilities and repurchase agreements:

	December 31, 2015									December 31, 2014
	Debt Principal Balance		Debt Carrying Value		Collateral Carrying Value		Weighted Average Note Rate			Debt Principal Balance		Debt Carrying Value		Collateral Carrying Value		Weighted Average Note Rate
$150 million warehouse repurchase facility	$	58,270,774	$	57,610,463	$	99,641,504		2.70	%	$	—	$	—	$	—		—
$100 million warehousing credit facility		24,582,200		24,328,863		38,000,000		2.62	%		92,520,637		92,324,890		128,593,000		2.45	%
$75 million warehousing credit facility		13,852,500		13,766,445		18,470,000		2.59	%		42,975,000		42,859,751		58,000,000		2.45	%
$75 million warehousing credit facility		—		—		—		—			29,890,563		29,866,116		45,422,236		2.20	%
$25 million warehousing credit facility		24,120,000		24,114,494		30,200,000		2.46	%		—		—		—		—
$16.5 million term credit facility		16,500,000		16,431,870		29,750,000		3.22	%		—		—		—		—
$15 million term credit facility		—		—		—		—			15,000,000		14,996,242		—		7.50	%

Total credit facilities and repurchase agreements	$	137,325,474	$	136,252,135	$	216,061,504		2.69	%	$	180,386,200	$	180,046,999	$	232,015,236		2.84	%

At December 31, 2015 and 2014, the weighted average interest rate for our credit facilities and repurchase agreements was 2.69% and 2.84%, respectively, and was calculated on the outstanding principal balance of the facility. Including certain fees and costs, such as structuring, commitment, non-use and warehousing fees, the weighted average interest rate was 3.42% and 3.06% at December 31, 2015 and 2014, respectively. There were no interest rate swaps on these facilities at December 31, 2015 and 2014.

In January 2015, we entered into a $150.0 million warehouse repurchase facility with a financial institution to finance a significant portion of the unwind of our CDO I and CDO II vehicles. See "Collateralized Debt Obligations" below. The facility bears interest at a rate of 212.5 basis points over LIBOR on senior mortgage loans, 350.0 basis points over LIBOR on junior mortgage loans, and matures in January 2017 with a one-year extension option. If the estimated market value of the loans financed in this facility decrease, we may be required to pay down borrowings under this repurchase agreement. Debt carrying value is net of $0.7 million of deferred financing fees at December 31, 2015. In July 2015, we amended the facility to temporarily increase the committed amount to $175.0 million until December 31, 2015.

We have a $100.0 million warehouse facility with a financial institution to finance first mortgage loans on multifamily properties that bore interest at a rate of 225 basis points over LIBOR and was to mature in April 2015. In April 2015, we extended the maturity to May 2015. In May 2015, we amended the facility decreasing the rate of interest to 215 basis points over LIBOR and extended the maturity to May 2017 with a one-year extension option, subject to certain conditions. The facility has a maximum advance rate of 75% and also has a compensating balance requirement of $50.0 million to be maintained by us and our affiliates. Debt carrying value is net of $0.3 million and $0.2 million of deferred financing fees at December 31, 2015 and 2014, respectively.

We have a $75.0 million warehouse facility with a financial institution to finance first mortgage loans on multifamily properties that bore interest at a rate of 225 basis points over LIBOR and was to mature in June 2015. In June 2015, we amended the facility, extending the maturity to June 2016, decreasing the rate of interest to 212.5 basis points over LIBOR, and added a new $25.0 million sublimit to finance healthcare related loans. The healthcare related loans will have an interest rate ranging from 225 basis points to 250 basis points over LIBOR depending on the type of healthcare facility financed. The facility has a maximum advance rate of 75%. Debt carrying value is net of $0.1 million of deferred financing fees at both December 31, 2015 and 2014.

We have another $75.0 million warehouse facility with a financial institution to finance first mortgage loans on multifamily and commercial properties that bears interest at a rate of 200 basis points over LIBOR and was to mature in April 2015. In April 2015, the facility was increased from $60.0 million to $75.0 million and the maturity was extended to April 2016. The facility has a maximum advance rate of 70% or 75%, depending on the property type. Debt carrying value is net of less than $0.1 million of deferred financing fees at both December 31, 2015 and 2014.

In February 2015, we entered into a $25.0 million warehouse facility with a financial institution to finance first mortgage loans on multifamily properties. The facility bears interest at a rate of 200 basis points over LIBOR and was to mature in February 2016. Debt carrying value is net of less than $0.1 million of deferred financing fees at December 31, 2015. In February 2016, we amended the facility, increasing the committed amount to $50.0 million and extending the maturity to February 2017 with two one-year extension options, subject to certain conditions.

In September 2015, we entered into a $16.5 million term facility with a financial institution to finance a first mortgage loan. The facility bears interest at a rate of 275 basis points over LIBOR, matures in December 2016 and has a compensating balance requirement of $3.0 million to be maintained by us and our affiliates. Debt carrying value is net of $0.1 million of deferred financing fees at December 31, 2015.

We had a $15.0 million term facility that bore interest at a fixed rate of 7.5%, had a maturity in August 2015 and was secured by a portion of the bonds originally issued by our CDO III entity that we repurchased. We repaid this facility in full in July 2015. Debt carrying value is net of less than $0.1 million of deferred financing fees at December 31, 2014.

In March 2015, we entered into an $87.0 million warehouse repurchase facility with a financial institution to finance the acquisition of a first mortgage note. The facility bore interest at a rate of 250 basis points over a LIBOR floor of 0.25% and was to mature in March 2016. The facility was fully repaid in April 2015.

Our warehouse credit facilities generally allow for an original warehousing period of up to 24 months from the initial advance on an asset. In addition, our credit facilities and repurchase agreements contain several restrictions including full repayment of an advance if a loan becomes 60 days past due, is in default or is written down by us. Our credit facilities and repurchase agreements also contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of these types. See "Debt Covenants" below for details.

Collateralized Loan Obligations (CLOs)

The following table outlines borrowings and the corresponding collateral under our CLOs as of December 31, 2015:

					Collateral
	Debt				Loans				Cash
	Face Value		Carrying Value		Unpaid Principal		Carrying Value		Restricted Cash(1)		Collateral At-Risk(2)
CLO III	$	281,250,000	$	279,129,518	$	339,019,221	$	338,034,689	$	25,135,492	$	—
CLO IV		219,000,000		215,985,420		288,581,773		287,946,641		11,418,227		—
CLO V		267,750,000		263,784,723		343,561,696		342,988,734		6,438,304		—

Total CLOs	$	768,000,000	$	758,899,661	$	971,162,690	$	968,970,064	$	42,992,023	$	—

The following table outlines borrowings and the corresponding collateral under our CLOs as of December 31, 2014:

					Collateral
	Debt				Loans				Cash
	Face Value		Carrying Value		Unpaid Principal		Carrying Value		Restricted Cash(1)		Collateral At-Risk(2)
CLO II	$	177,000,000	$	175,351,084	$	252,353,210	$	251,658,406	$	7,284,919	$	—
CLO III		281,250,000		277,750,577		315,390,280		313,932,084		59,245,183		—

Total CLOs	$	458,250,000	$	453,101,661	$	567,743,490	$	565,590,490	$	66,530,102	$	—

CLO II—Issued two investment grade tranches in January 2013 with a stated maturity date in February 2023. Interest was variable based on three-month LIBOR; the weighted average note rate was 2.56%. Debt carrying value is net of $1.6 million of deferred financing fees at December 31, 2014.

CLO III—Issued three investment grade tranches in April 2014 with a replacement period through October 2016 and a stated maturity date in May 2024. Interest is variable based on three-month LIBOR; the weighted average note rate was 2.86% and 2.60% at December 31, 2015 and 2014, respectively. Debt carrying value is net of $2.1 million and $3.5 million of deferred financing fees at December 31, 2015 and 2014, respectively.

CLO IV—Issued three investment grade tranches in February 2015 with a replacement period through September 2017 and a stated maturity date in March 2025. Interest is variable based on three-month LIBOR; the weighted average note rate was 2.71% at December 31, 2015. Debt carrying value is net of $3.0 million of deferred financing fees at December 31, 2015.

CLO V—Issued three investment grade tranches in August 2015 with a replacement period through September 2018 and a stated maturity date in September 2025. Interest is variable based on one-month LIBOR; the weighted average note rate was 2.91% at December 31, 2015. Debt carrying value is net of $3.8 million of deferred financing fees at December 31, 2015.


(1)	Represents restricted cash held for principal repayments as well as for reinvestment in the CLOs. Does not include restricted cash related to interest payments, delayed fundings and expenses.
(2)	Amounts represent the face value of collateral in default, as defined by the CLO indenture, as well as assets deemed to be "credit risk." Credit risk assets are reported by each of the CLOs and are generally defined as one that, in the CLO collateral manager's reasonable business judgment, has a significant risk of declining in credit quality or, with a passage of time, becoming a defaulted asset.

In August 2015, we completed a collateralized securitization vehicle ("CLO V"), issuing to third party investors three tranches of investment grade CLOs through two newly-formed wholly-owned subsidiaries totaling $267.8 million, of which we purchased $12.5 million of Class C notes that we subsequently sold at par for $12.5 million. As of the CLO closing date, the notes are secured by a portfolio of loan obligations with a face value of approximately $302.6 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio. The financing has an approximate three year replacement period that allows the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance will be reduced as loans are repaid. Initially, the proceeds of the issuance of the securities also included $47.4 million for the purpose of acquiring additional loan obligations for a period of up to 120 days from the closing date of the CLO. In September 2015, the additional proceeds were fully utilized resulting in the issuer owning loan obligations with a face value of approximately $350.0 million. The aggregate principal amounts of the three classes of notes are $197.8 million of Class A senior secured floating rate notes, $24.5 million of Class B secured floating rate notes and $45.5 million of Class C secured floating rate notes. We retained a residual interest in the portfolio with a notional amount of approximately $82.3 million. The notes have an initial weighted average interest rate of approximately 2.44% plus one-month LIBOR and interest payments on the notes are payable monthly. Including certain fees and costs, the initial weighted average note rate was 3.07%.

In March 2015, we completed the unwinding of CLO II, redeeming $177.0 million of our outstanding notes which were repaid primarily from the refinancing of the remaining assets within our new and existing financing facilities as well as with cash held by the CLO and expensed approximately $1.5 million of deferred fees in the first quarter of 2015 into interest expense on the consolidated statements of income.

In February 2015, we completed a collateralized securitization vehicle ("CLO IV"), issuing to third party investors three tranches of investment grade CLOs through two newly-formed wholly-owned subsidiaries totaling $219.0 million. At closing, the notes were secured by a portfolio of loan obligations with a face value of approximately $250.0 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio. The financing has an approximate 2.5 year replacement period from closing that allows the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance will be reduced as loans are repaid. Initially, the proceeds of the issuance of the securities also included $50.0 million for the purpose of acquiring additional loan obligations for a period of up to 120 days from the closing date of the CLO. In April 2015, the $50.0 million of additional proceeds was fully utilized. The aggregate principal amounts of the three classes of notes are $165.8 million of Class A senior secured floating rate notes, $24.8 million of Class B secured floating rate notes and $28.5 million of Class C secured floating rate notes. We retained a residual interest in the portfolio with a notional amount of approximately $81.0 million. The notes have an initial weighted average interest rate of approximately 2.24% plus one-month LIBOR and interest payments on the notes are payable monthly. Including certain fees and costs, the initial weighted average note rate was 2.96%.

At December 31, 2015 and 2014, the aggregate weighted average note rate for our CLOs was 2.84% and 2.59%, respectively. Including certain fees and costs, the weighted average note rate was 3.24% and 3.14% at December 31, 2015 and 2014, respectively.

Collateralized Debt Obligations (CDOs)

In July 2015, we completed the unwind of CDO III, redeeming $71.1 million of our outstanding notes. The notes were repaid primarily from proceeds received from the refinancing of CDO III's remaining assets within our existing financing facilities, as well as with cash held by the CDO. We also terminated a related interest rate swap and incurred a loss of $0.3 million in the third quarter of 2015. See Note 8—"Derivative Financial Instruments" for additional details. CDO III had a $100.0 million revolving note class that provided a revolving note facility, which was paid off in the first quarter of 2015.

In January 2015, we completed the unwind of CDO I and CDO II, redeeming $167.9 million of our outstanding notes. The notes were repaid primarily from proceeds received from the refinancing of CDO I and II's remaining assets within a new $150.0 million warehouse repurchase facility and our existing financing facilities, as well as with cash held by each CDO. As a result of this transaction, we generated approximately $30.0 million in cash equity and expensed $0.5 million of deferred fees in the first quarter of 2015. We also terminated the related basis and interest rate swaps and incurred a loss of $4.3 million in the first quarter of 2015. See Note 8—"Derivative Financial Instruments" for additional details.

In 2010, we re-issued our own CDO bonds we had acquired throughout 2009 with an aggregate face amount of approximately $42.8 million as part of an exchange for the retirement of $114.1 million of our junior subordinated notes. This transaction resulted in the recording of $65.2 million of additional CDO debt, of which $42.3 million represented the portion of our CDO bonds that were exchanged and $22.9 million represented the estimated interest due on the reissued bonds through their maturity. In January 2015, we unwound our CDO I and CDO II vehicles and reduced the balance of estimated interest by $11.0 million and in July 2015, we unwound our CDO III vehicle and reduced the remaining balance of estimated interest by $8.2 million, recording a gain on acceleration of deferred income in the consolidated statements of income.

The following table outlines borrowings and the corresponding collateral under our CDOs as of December 31, 2014:

					Collateral
	Debt				Loans				Cash
	Face Value		Carrying Value		Unpaid Principal(1)		Carrying Value(1)		Restricted Cash(2)		Collateral At-Risk(3)
CDO I	$	69,972,159	$	75,299,282	$	222,903,486	$	174,460,160	$	5,232,226	$	180,691,292
CDO II		97,906,092		103,449,741		192,522,685		143,824,571		69,412,808		106,139,494
CDO III		144,192,804		152,470,455		202,758,120		171,457,394		64,771,797		147,049,346

Total CDOs	$	312,071,055	$	331,219,478	$	618,184,291	$	489,742,125	$	139,416,831	$	433,880,132

CDO I—Issued four investment grade tranches in January 2005 with a stated maturity date in February 2040. Interest was variable based on three-month LIBOR; the weighted average note rate was 3.23% at December 31, 2014. Debt carrying value is net of $0.1 million of deferred financing fees at December 31, 2014.

CDO II—Issued nine investment grade tranches in January 2006 with a stated maturity date in April 2038. Interest was variable based on three-month LIBOR; the weighted average note rate was 6.22% at December 31, 2014. Debt carrying value is net of less than $0.1 million of deferred financing fees at December 31, 2014.

CDO III—Issued ten investment grade tranches in December 2006 with a stated maturity date in January 2042. Interest was variable based on three-month LIBOR; the weighted average note rate was 0.98% at December 31, 2014. Debt carrying value is net of less than $0.1 million of deferred financing fees at December 31, 2014.


(1)	Amounts include loans to real estate assets consolidated by us that were reclassified to real estate owned and held-for-sale, net on the consolidated financial statements.
(2)	Represents restricted cash held for principal repayments in the CDOs. Does not include restricted cash related to interest payments, delayed fundings and expenses.
(3)	Amounts represent the face value of collateral in default, as defined by the CDO indenture, as well as assets deemed to be "credit risk." Credit risk assets are reported by each of the CDOs and are generally defined as one that, in the CDO collateral manager's reasonable business judgment, has a significant risk of declining in credit quality or, with a passage of time, becoming a defaulted asset.

At December 31, 2014, the aggregate weighted average note rate for our CDOs, including the cost of interest rate swaps on assets financed in these facilities, was 3.13%. Excluding the effect of swaps, the weighted average note rate at December 31, 2014 was 1.07%. Including certain fees and costs, the weighted average note rate was 3.55% at December 31, 2014.

We account for our CLO and CDO transactions on our consolidated balance sheet as financing facilities. Our CLOs and CDOs are VIEs for which we are the primary beneficiary and are consolidated in our financial statements accordingly. The investment grade tranches are treated as secured financings, and are non-recourse to us.

Senior Unsecured Notes

During 2014, we issued $90.0 million aggregate principal amount of 7.375% senior unsecured notes due in 2021 in an underwritten public offering for net proceeds of $85.4 million after deducting the issuance and underwriting discounts and offering expenses. In connection with this offering, the underwriters exercised a portion of their overallotment option for a $7.8 million aggregate principal amount providing additional net proceeds of $7.4 million. Debt carrying value is net of $4.1 million and $4.8 million of deferred financing fees at December 31, 2015 and 2014, respectively. The notes can be redeemed by us after May 15, 2017. The interest is paid quarterly in February, May, August, and November starting in August 2014. Including certain fees and costs, the weighted average note rate was 8.12% and 8.06% at December 31, 2015 and 2014, respectively. We used the net proceeds to make investments, to repurchase or pay liabilities and for general corporate purposes.

Junior Subordinated Notes

The carrying value of borrowings under our junior subordinated notes was $157.1 million and $156.4 million at December 31, 2015 and 2014, respectively, which is net of a deferred amount of $15.5 million and $16.0 million, respectively, that is being amortized into interest expense over the life of the notes, and $3.3 million and $3.4 million, respectively, of deferred financing fees. These notes have maturities ranging from March 2034 through April 2037, pay interest quarterly at a fixed or floating rate of interest based on three-month LIBOR and were not redeemable for the first two years. The current weighted average note rate was 3.12% and 3.01% at December 31, 2015 and 2014, respectively. Including certain fees and costs, the weighted average note rate was 3.55% and 3.18% at December 31, 2015 and 2014, respectively. The entities that issued the junior subordinated notes have been deemed VIEs. See Note 9—"Variable Interest Entities" for further details.

Note Payable

The following table outlines borrowings under our note payable:

	December 31, 2015				December 31, 2014
	Debt Carrying Value		Collateral Carrying Value		Debt Carrying Value		Collateral Carrying Value
Junior loan participation, secured by our interest in a first mortgage loan with a principal balance of $1.3 million, participation interest was based on a portion of the interest received from the loan which had a fixed rate of 9.57%	$	—	$	—	$	1,300,000	$	1,300,000

Total note payable	$	—	$	—	$	1,300,000	$	1,300,000

At December 31, 2014, the note rate for our note payable was 0%. There were no interest rate swaps on the note payable at December 31, 2014.

We had a $1.3 million junior loan participation on a $1.3 million bridge loan that was written-off in the third quarter of 2015.

Our obligation to pay interest on the junior loan participations is based on the performance of the related loan. Interest expense is based on the portion of the interest received from the loan that is paid to the junior participant.

Mortgage Note Payable—Real Estate Owned and Held-For-Sale

In the first quarter of 2015, we made required paydowns of $10.3 million and repaid the Multifamily Portfolio mortgage of $20.7 million, replacing it with two new notes payable totaling $27.2 million. At December 31, 2015, the new notes payable consist of a $24.7 million secured loan that bears interest at a fixed rate of 3.00% and matures in December 2017, as well as a $2.5 million, unsecured loan that bears interest at a variable rate of one-month LIBOR plus 2.75% and matures in December 2016. At December 31, 2014, the prior mortgage had an outstanding balance of $31.0 million, bore interest at a variable rate of one-month LIBOR plus 1.23% and was to mature in June 2015.

Debt Covenants

Our debt facilities contain various financial covenants and restrictions, including a minimum liquidity requirement of $20.0 million, minimum net worth requirement of $100.0 million to $300.0 million depending on the debt facility and a maximum total liabilities less subordinated debt requirement of $2.0 billion, as well as certain other debt service coverage ratios and debt to equity ratios. We were in compliance with all financial covenants and restrictions at December 31, 2015.

Our CLO vehicles contain interest coverage and asset overcollateralization covenants that must be met as of the waterfall distribution date in order for us to receive such payments. If we fail these covenants in any of our CLOs, all cash flows from the applicable CLO would be diverted to repay principal and interest on the outstanding CLO bonds and we would not receive any residual payments until that CLO regained compliance with such tests. Our CLOs were in compliance with all such covenants as of December 31, 2015, as well as on the most recent determination dates in January and February 2016. In the event of a breach of the CLO covenants that could not be cured in the near-term, we would be required to fund our non-CLO expenses, including management fees and employee costs, distributions required to maintain REIT status, debt costs, and other expenses with (i) cash on hand, (ii) income from any CLO not in breach of a covenant test, (iii) income from real property and loan assets, (iv) sale of assets, or (v) accessing the equity or debt capital markets, if available. We have the right to cure covenant breaches which would resume normal residual payments to us by purchasing non-performing loans out of the CLOs. However, we may not have sufficient liquidity available to do so at such time.

The chart below is a summary of our CLO compliance tests as of the most recent determination dates in February 2016:

Cash Flow Triggers	CLO III			CLO IV			CLO V
Overcollateralization(1)
Current		133.33	%		136.99	%		130.72	%
Limit		132.33	%		135.99	%		129.72	%
Pass / Fail		Pass			Pass			Pass
Interest Coverage(2)
Current		247.10	%		303.11	%		267.62	%
Limit		120.00	%		120.00	%		120.00	%
Pass / Fail		Pass			Pass			Pass


(1)	The overcollateralization ratio divides the total principal balance of all collateral in the CLO by the total principal balance of the bonds associated with the applicable ratio. To the extent an asset is considered a defaulted security, the asset's principal balance for purposes of the overcollateralization test is the lesser of the asset's market value or the principal balance of the defaulted asset multiplied by the asset's recovery rate which is determined by the rating agencies. Rating downgrades of CLO collateral will generally not have a direct impact on the principal balance of a CLO asset for purposes of calculating the CLO overcollateralization test unless the rating downgrade is below a significantly low threshold (e.g. CCC–) as defined in each CLO vehicle.
(2)	The interest coverage ratio divides interest income by interest expense for the classes senior to those retained by us.

The chart below is a summary of our CLO overcollateralization ratios as of the determination dates subsequent to each quarter end:

Determination Date(1)	CLO III			CLO IV			CLO V
January 2016		133.33	%		136.99	%		130.72	%
October 2015		133.33	%		136.99	%		130.72	%
July 2015		133.33	%		136.99	%		—
April 2015		133.33	%		136.99	%		—
January 2015		133.33	%		—			—


(1)	The table above represents the quarterly trend of our overcollateralization ratio, however, the CLO determination dates are monthly and we were in compliance with this test for all periods in 2015.

The ratio will fluctuate based on the performance of the underlying assets, transfers of assets into the CLOs prior to the expiration of their respective replenishment dates, purchase or disposal of other investments, and loan payoffs. No payment due under the junior subordinated indentures may be paid if there is a default under any senior debt and the senior lender has sent notice to the trustee. The junior subordinated indentures are also cross-defaulted with each other.