Investments in Unconsolidated Entities

9 Months Ended

Sep. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated EntitiesThe Company has various equity investments in entities where it has the ability to exert significant influence over such entity, but does not control such entity. In these cases the criteria for consolidation have not been met and the Company is required to account for such investments under ASC 323-10; the Company has elected the FVO for its investments in unconsolidated entities. As of September 30, 2020 and December 31, 2019, the Company's investments in unconsolidated entities had an aggregate fair value of $95.8 million and $71.9 million, respectively, which is included on the Condensed Consolidated Balance Sheet in Investments in unconsolidated entities, at fair value. For the three-month periods ended September 30, 2020 and 2019, the Company recognized $11.4 million and $2.8 million, respectively, in Earnings (losses) from investments in unconsolidated entities, on its Condensed Consolidated Statement of Operations. For the nine-month periods ended September 30, 2020 and 2019, the Company recognized $10.6 million and $6.9 million, respectively, in Earnings (losses) from investments in unconsolidated entities, on its Condensed Consolidated Statement of Operations. Certain of the entities that the Company accounts for under ASC 323-10 are deemed to be VIEs, and the maximum amount at risk is generally limited to the Company's investment in the VIE. As of September 30, 2020 and December 31, 2019, the fair value of the Company's investments in unconsolidated entities that have been deemed to be VIEs was $37.1 million and $28.5 million.

The following table provides details about the Company's investments in unconsolidated entities as of September 30, 2020 and December 31, 2019:

Percentage Ownership
of Unconsolidated Entity

Investment in Unconsolidated Entity

Form of Investment

September 30, 2020

December 31, 2019

Longbridge Financial, LLC(1)

Preferred shares

49.7%

LendSure Mortgage Corp.(1)(2)

Common shares

49.9%

Jepson Holdings Limited(1)

Membership Interest

30.1%

Elizon AFG 2018-1 LLC(1)(3)(4)

Membership Interest

22.1%

13.4%

Elizon DB 2015-1 LLC(1)(3)(5)

Membership Interest

8.5%

3.5%

Other

Various

7.4%–51.0%

7.7%–51.0%

(1)See Note 13 for additional details on the Company's related party transactions.

(2)Excludes investment in warrants convertible into non-voting common shares; including such warrants the Company's additional non-voting stake in the entity was 15.0% as of September 30, 2020. See Note 13 Related Party Transactions—Transactions Involving Certain Loan Originators for additional information.

(3)The Company has evaluated this entity and determined that it meets the definition of a VIE. The Company evaluated its interest in the VIE and determined that the Company does not have the power to direct the activities of the VIE and does not have control of the underlying assets, where applicable. As a result, the Company determined that it is not the primary beneficiary of this VIE and therefore has not consolidated the VIE.

(4)As discussed in Note 13 Related Party Transactions—Participation in Multi-Borrower Financing Facilities, the Company and the Affiliated Entities (as defined in Note 13) each consolidate their segregated portions of the Joint Entity (as defined in Note 13). The Company's effective percentage ownership before the effects of consolidation of both its and the Affiliated Entities' respective segregated portions of the Joint Entity, was 61.7% and 70.4% as of September 30, 2020 and December 31, 2019, respectively.

(5)As discussed in Note 13 Related Party Transactions—Participation in Multi-Borrower Financing Facilities, the Company and the Affiliated Entities each consolidate their segregated portions of the Joint Entity . The Company's effective percentage ownership before the effects of consolidation of both its and the Affiliated Entities' respective segregated portions of the Joint Entity, was 53.1% and 48.7% as of September 30, 2020 and December 31, 2019, respectively.

For the nine-month period ended September 30, 2020, the Company recognized unrealized gains that may be deemed to be significant in relation to the Company's net income related to one of the Company's investments in an unconsolidated entity, a mortgage originator. For the three-month periods ended September 30, 2020 and 2019, the Company recognized $8.9 million and $2.1 million, respectively of unrealized gains included in Earnings (losses) from investments in unconsolidated entities on the Condensed Consolidated Statement of Operations. For the nine-month periods ended September 30, 2020 and 2019, the Company recognized $13.2 million and $0.6 million, respectively of unrealized gains included in Earnings (losses) from investments in unconsolidated entities on the Condensed Consolidated Statement of Operations. The following table provides a summary of the results of operations of this entity for the three- and nine-month periods ended September 30, 2020 and 2019.


	Three-Month Period Ended				Nine-Month Period Ended
(In thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Revenue	$	4,827	$	6,957	$	10,030	$	14,486
Net income (loss)	$	15,962	$	4,739	$	28,901	$	3,074