XML 27 R11.htm IDEA: XBRL DOCUMENT v3.23.1
USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES
 12 Months Ended
Dec. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES
 
We account for CLO transactions on our consolidated balance sheet as financing facilities. Our CLOs are VIEs for which we are the primary beneficiary and are consolidated in our financial statements. The investment grade tranches are treated as secured financings, and are non-recourse to us. See Note 2 ("Summary of Significant Accounting Policies - Principles Consolidation - VIE") for further discussion.

On June 14, 2021, the Company completed a CRE CLO (LFT CRE 2021-FL1, Ltd."), issuing eight tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $903.8 million. Of the total CLO notes issued $833.8 million were investment grade notes issued to third party investors and $70 million were below investment-grade notes retained by us. In addition, a $96.25 million equity interest in the portfolio was retained by us. The financing has an initial two-and-a-half year reinvestment period that allows principal proceeds 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 $330.3 million for the purpose of acquiring additional loan obligations for a period up to 180 days from the CLO closing date, resulting in the issuer owning loan obligations with a face value of $1.0 billion, representing leverage of 83%.

On June 14, 2021, the Company unwound Hunt CRE 2017-FL1, Ltd. and Hunt CRE 2018-FL2, Ltd. redeeming $388.2 million of outstanding notes which were repaid primarily from the refinancing of the remaining assets primarily within LFT 2021-FL1, Ltd., as well as cash held within Hunt CRE 2018-FL2, Ltd. and expensed $1.7 million of deferred financing costs into loss on extinguishment of debt on the consolidated statements of operations. As of this date, the Company no longer consolidates the asset and liabilities of Hunt CRE 2017-FL1, Ltd. and Hunt CRE 2018-FL2, Ltd.

The CLO we consolidate is subject to collateralization and coverage tests that are customary for this type of securitization. As of December 31, 2022, and December 31, 2021 all such collateralization and coverage tests in the CLOs we consolidate were met. If the duration of the COVID-19 pandemic continues to prolong, its impact on our borrowers and their tenants could result in a sustained deterioration in a material amount of assets and may impact these tests.

The carrying values of the Company's total assets and liabilities related to LFT CRE 2021-FL1, Ltd. at December 31, 2022 and Hunt CRE 2017-FL1, Ltd. and Hunt CRE 2018-FL2, Ltd. at December 31, 2021 included the following VIE assets and liabilities:

ASSETSDecember 31, 2022December 31, 2021
Cash, cash equivalents and restricted cash$3,507,850 $3,530,006 
Accrued interest receivable5,488,118 3,941,695 
Investment related receivable— 22,400,000 
Loans held for investment996,511,403 974,025,294 
Total Assets$1,005,507,371 $1,003,896,995 
LIABILITIES
Accrued interest payable$2,264,646 $607,892 
Collateralized loan obligations(1)
829,310,498 826,782,543 
Total Liabilities$831,575,144 $827,390,435 
Equity173,932,227 176,506,560 
Total liabilities and equity$1,005,507,371 $1,003,896,995 

(1)     The stated maturity of the collateral loan obligations per the terms of the underlying collateralized loan obligation agreement is June 14, 2039 for LFT CRE 2021-FL1, Ltd.

The following tables present certain loan and borrowing characteristics of LFT CRE 2021-FL1, Ltd. as of December 31, 2022 and Hunt CRE 2017-FL1, Ltd. and Hunt CRE 2018-FL2, Ltd.as of December 31, 2021:
As of December 31, 2022
Collateralized Loan ObligationsCountPrincipal Value
Carrying Value(1)
Wtd. Avg. Coupon(2)
Collateral (loan investments)64996,492,150 996,511,403 7.60 %
Financings provided1833,750,000 829,310,498 5.75 %
 
As of December 31, 2021
Collateralized Loan ObligationsCountPrincipal Value
Carrying Value(1)
Wtd. Avg. Coupon(2)
Collateral (loan investments)64974,069,994 974,025,294 3.91 %
Financings provided1833,750,000 826,782,543 1.54 %

(1)     The carrying value for LFT CRE 2021-FL1, Ltd. is net of debt issuance costs of $4,439,502 and $6,967,457 or December 31, 2022, and December 31, 2021, respectively.
(2)    Weighted average coupon assumes applicable one-month LIBOR of 4.18% and 0.10% and 30-day Term SOFR of 4.19% and 0.00% as of December 31, 2022 and December 31, 2021, respectively, inclusive of weighted average interest rate floors of 0.25% and 0.49%, respectively. As of December 31, 2022, 80.4% of the investments by total exposure earned a floating rate indexed to one-month LIBOR and 19.6% of the investments by total investment exposure earned a floating rate indexed to 30-day Term SOFR. As of December 31, 2021, 100% of the investments by total investment exposure earned a floating rate indexed to one-month LIBOR. Weighted average coupon for the financing assumes applicable one-month LIBOR of 4.32% and 0.11% as of December 31, 2022 and December 31, 2021, respectively and spreads of 1.43% for December 31, 2022 and December 31, 2021.

The statement of operations related to LFT 2021-FL1, Ltd., Hunt CRE 2017-FL1, Ltd. and Hunt CRE 2018-FL2, Ltd. at December 31, 2022 and December 31, 2021 include the following income and expense items:


Statements of OperationsDecember 31, 2022December 31, 2021
Interest income$53,264,413 $35,506,459 
Interest expense29,055,324 12,178,545 
Net interest income$24,209,089 $23,327,914 
Less:
Loss on extinguishment of debt$— $1,663,926 
General and administrative fees614,149 308,718 
Net income$23,594,940 $21,355,270