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Fair Value
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Fair Value
The following tables set forth the fair value of financial assets and liabilities by level within the fair value hierarchy as of March 31, 2020 and December 31, 2019 ($ in thousands):

Level 1Level 2Level 3
March 31, 2020Carrying valueQuoted prices in active marketsObservable inputs other than Level 1 pricesUnobservable inputs
Financial assets
Recurring financial assets
Investments in debt securities at fair value$247,372  $—  $247,372  $—  
Investments in beneficial interests$64,703  $—  $64,703  $—  
Non-recurring financial assets
Mortgage loans, net$1,098,629  $—  $—  $1,098,638  
Investment in Manager$734  $—  $—  $4,419  
Investment in AS Ajax E LLC$894  $—  $968  $—  
Investment in GAFS, including warrants$2,747  $—  $—  $3,320  
Investment in Gaea$19,998  $—  $—  $19,998  
Investment in legacy entities$651  $—  $—  $651  
Financial liabilities
Recurring financial liabilities
Borrowings under repurchase transactions$431,091  $—  $431,091  $—  
Non-recurring financial liabilities
Secured borrowings, net$630,938  $—  $—  $568,525  
Convertible senior notes, net $111,420  $87,073  $—  $—  

Level 1Level 2Level 3
December 31, 2019Carrying valueQuoted prices in active marketsObservable inputs other than Level 1 pricesUnobservable inputs
Financial assets
Recurring financial assets
Investments in debt securities at fair value$231,685  $—  $231,685  $—  
Investments in beneficial interests$57,954  $—  $57,954  $—  
Non-recurring financial assets
Mortgage loans, net$1,151,469  $—  $—  $1,260,385  
Investment in Manager$1,755  $—  $—  $7,721  
Investment in AS Ajax E LLC$931  $—  $1,012  $—  
Investment in GAFS, including warrants$3,023  $—  $—  $3,320  
Investment in Gaea$19,995  $—  $—  $19,995  
Investment in legacy entities$760  $—  $—  $760  
Financial liabilities
Recurring financial liabilities
Borrowings under repurchase transactions$414,114  $—  $414,114  $—  
Non-recurring financial liabilities
Secured borrowings, net$652,747  $—  $—  $657,918  
Convertible senior notes, net $118,784  $132,173  $—  $—  
The fair value of mortgage loans and beneficial interests is estimated using the Manager’s proprietary pricing model which estimates expected cash flows with the discount rate used in the present value calculation representing the estimated effective yield of the loan. The value of transfers of mortgage loans to REO is based upon the present value of future expected cash flows of the loans being transferred.

The Company values its Investments in debt securities using estimates provided by its financing counterparties. The Company also relies on its Manager's proprietary pricing model to estimate the underlying cash flows expected to be collected on these investments as a comparison to the estimates received from financing counterparties (See Note 5 Investments).

The Company's investment in the Manager is valued by applying an earnings multiple to net income.

The Company’s investment in AS Ajax E LLC is valued using estimates provided by financing counterparties.

The fair value of the Company's investment in GAFS is presented by applying an earnings multiple to expected earnings.

The Company's investment in Gaea and the legacy entities are presented as the carrying value due to the recent nature of the acquisition transactions.

The fair value of secured borrowings is estimated using estimates provided by the Company's financing counterparties which are compared for reasonableness to the Manager’s proprietary pricing model which estimates expected cash flows of the underlying mortgage loans collateralizing the debt, and which drive the cash flows used to make interest payments.

The Company’s borrowings under repurchase agreements are short-term in nature, and the Company’s management believes it can renew the current borrowing arrangements on similar terms in the future. Accordingly, the carrying value of these borrowings approximates fair value.

The Company’s convertible senior notes are traded on the NYSE; the debt’s fair value is determined from the NYSE closing price on the balance sheet date.

The carrying values of its Cash and cash equivalents, Cash held in trust, Receivable from Servicer, Prepaid expenses and other assets, Management fee payable and Accrued expenses and other liabilities are equal to or approximate fair value.

Non-financial assets

Property held-for-sale is carried at the lower of its acquisition basis plus improvements (cost) or net realizable value. Net realizable value is determined based on appraisals, broker price opinions, or other market indicators of fair value less expected liquidation costs. The lower of cost or net realizable value for the Company’s REO Property is stated as its carrying value. The following tables set forth the fair value of non-financial assets by level within the fair value hierarchy as of March 31, 2020 and December 31, 2019 ($ in thousands): 

Level 1Level 2Level 3
March 31, 2020Carrying valueThree months ended fair value adjustment recognized in the consolidated statements of incomeQuoted prices in active marketsObservable inputs other than Level 1 pricesUnobservable inputs
Non-financial assets   
Property held-for-sale$10,905  $897  $—  $—  $10,905  
 Level 1Level 2Level 3
December 31, 2019Carrying valueFair value adjustment recognized in the consolidated statements of income
Quoted prices in active marketsObservable inputs other than Level 1 pricesUnobservable inputs
Non-financial assets    
Property held-for-sale$13,537  $2,104  $—  $—  $13,537