Investments in Unconsolidated Entities

9 Months Ended

Sep. 30, 2023

Equity Method Investments and Joint Ventures [Abstract]

The 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, 2023 and December 31, 2022, the Company's investments in unconsolidated entities had an aggregate fair value of $113.5 million and $127.0 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, 2023 and 2022, the Company recognized $(1.0) million and $(25.5) million, respectively, and for the nine-month periods ended September 30, 2023 and 2022, the Company recognized $(3.4) million and $(54.3) 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, 2023 and December 31, 2022, the fair value of the Company's investments in unconsolidated entities that have been deemed to be VIEs was $82.9 million and $82.4 million, respectively.

The following table provides details about the Company's investments in unconsolidated entities as of September 30, 2023 and December 31, 2022:

Percentage Ownership
of Unconsolidated Entity

Investment in Unconsolidated Entity

Form of Investment

September 30, 2023

December 31, 2022

Loan Originators:

LendSure Mortgage Corp.(1)(2)

Common shares

49.9%

Other(1)

Various

45.0%–50.0%

24.7%–80.0%

Co-investments with Ellington affiliate(s)(1):

Elizon DB 2015-1 LLC(3)(4)

Membership Interest

25.8%

14.6%

Elizon NM CRE 2020-1 LLC(3)(5)

Membership Interest

8.7%

20.2%

Elizon CH CRE 2021-1 LLC(3)(6)

Membership Interest

29.2%

34.2%

Elizon NAT CRE 2021-1 LLC(3)(7)

Membership Interest

—%

15.5%

Equity investments in securitization-related vehicles, including risk retention vehicles(8)

Membership Interest

24.6%–84.5%

Other:

Jepson Holdings Limited(1)(3)

Membership Interest

7.0%

1.9%

Other(1)(3)(9)

Various

6.1%–79.0%

9.9%–79.0%

(1)See Note 15 for additional details on the Company's related party transactions.

(2)Excludes investment in equity interests convertible into non-voting common shares; including such interests the Company's additional non-voting stake in the entity was 13.8% as of both September 30, 2023 and December 31, 2022. See Note 15 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 15 Related Party Transactions—Participation in Multi-Borrower Financing Facilities, the Company and the Affiliated Entities (as defined in Note 15) each consolidate their segregated silos of the Joint Entity (as defined in Note 15). The Company's effective percentage ownership before the effects of consolidation of both its and the Affiliated Entities' respective segregated silos of the Joint Entity, was 58.6% and 62.4% as of September 30, 2023 and December 31, 2022, respectively.

(5)As discussed in Note 15 Related Party Transactions—Participation in Multi-Borrower Financing Facilities, the Company and the Affiliated Entities (as defined in Note 15) each consolidate their segregated silos of the Joint Entity (as defined in Note 15). The Company's effective percentage ownership before the effects of consolidation of both its and the Affiliated Entities' respective segregated silos of the Joint Entity, was 57.3% and 54.2% as of September 30, 2023 and December 31, 2022, respectively.

(6)As discussed in Note 15 Related Party Transactions—Participation in Multi-Borrower Financing Facilities, the Company and the Affiliated Entities (as defined in Note 15) each consolidate their segregated silos of the Joint Entity (as defined in Note 15). The Company's effective percentage ownership before the effects of consolidation of both its and the Affiliated Entities' respective segregated silos of the Joint Entity, was 50.2% and 57.4% as of September 30, 2023 and December 31, 2022, respectively.

(7)As discussed in Note 15 Related Party Transactions—Participation in Multi-Borrower Financing Facilities, the Company and the Affiliated Entities (as defined in Note 15) each consolidate their segregated silos of the Joint Entity (as defined in Note 15). The Company's effective percentage ownership before the effects of consolidation of both its and the Affiliated Entities' respective segregated silos of the Joint Entity, was 66.6% as of December 31, 2022.

(8)Includes interests in Consumer Risk Retention Vehicles, as defined in Note 12—Participation in Multi-Seller Consumer Loan Securitizations, and Participated Risk Retention Vehicle and Residential Loan JV, as defined in Note 12—Residential Mortgage Loan Securitizations. The Company has evaluated these entities and determined that they do not meet the definition of a VIE. The Company evaluated its interest in the entity under the voting interest model outlined in ASC 810, and has determined that the Company does not control these entities. As a result, the Company has not consolidated the entity. See Note 12 for additional details on the Company's securitization transactions.

(9)Includes interest in warehouse facilities; see Note 15—Participation in CLO Transactions, for additional details.

As of September 30, 2023 and December 31, 2022, the Company had non-controlling equity interests in various loan originators, including LendSure Mortgage Corp., or "LendSure," a mortgage loan originator. The Company's investment in LendSure was considered significant pursuant to Regulation S-X for the nine-month period ended September 30, 2022. For the three-month periods ended September 30, 2023 and 2022, the Company recognized $(0.4) million and $(6.9) million, respectively, and for the nine-month periods ended September 30, 2023 and 2022, the Company recognized $(3.5) million and $(18.9) million, respectively, of unrealized gains (losses) from its investment in LendSure, which is included in Earnings (losses) from investments in unconsolidated entities on the Condensed Consolidated Statement of Operations. As of September 30, 2023 and December 31, 2022, the fair value of the Company's investment in LendSure was $23.2 million and $26.7 million, respectively, which is included on the Condensed Consolidated Balance Sheet in Investments in unconsolidated entities, at fair value. The following table provides a summary of the results of operations of LendSure for the three- and nine- month periods ended September 30, 2023 and 2022.


	Three-Month Period Ended				Nine-Month Period Ended
(In thousands)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Revenue	$	12,968	$	15,715	$	29,615	$	45,734
Net income (loss)	$	1,660	$	1,299	$	510	$	2,453