XML 23 R11.htm IDEA: XBRL DOCUMENT v3.24.2.u1
Loans Portfolio
 6 Months Ended
Jun. 30, 2024
Receivables [Abstract]  
Loans Portfolio

Note 3. Loan Portfolio

Loans Receivable

Our loan portfolio as of June 30, 2024 was comprised of the following loans ($ in thousands, except for number of loans):

 

 

 

Number of
Loans

 

Loan Commitment(1)

 

 

Unpaid Principal Balance

 

 

Carrying
Value (2)

 

 

Weighted Average Spread(3)

 

 

Weighted Average Interest Rate(4)

 

Loans receivable held-for-investment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior loans(5)

 

57

 

$

7,513,581

 

 

$

6,764,591

 

 

$

6,671,989

 

 

 

+ 3.76%

 

 

 

8.49

%

Subordinate loans

 

1

 

 

30,200

 

 

 

30,200

 

 

 

30,351

 

 

 

+ 12.86%

 

 

 

18.20

%

 

58

 

 

7,543,781

 

 

 

6,794,791

 

 

 

6,702,340

 

 

 

+ 3.80%

 

 

 

8.53

%

Fixed:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior loans(5)

 

2

 

$

7,597

 

 

$

7,597

 

 

$

7,809

 

 

N/A

 

 

 

8.25

%

Subordinate loans

 

2

 

 

125,886

 

 

 

125,886

 

 

 

124,847

 

 

N/A

 

 

 

8.44

%

 

4

 

 

133,483

 

 

 

133,483

 

 

 

132,656

 

 

 

 

 

 

8.43

%

Total/Weighted Average

 

62

 

$

7,677,264

 

 

$

6,928,274

 

 

$

6,834,996

 

 

N/A

 

 

 

8.53

%

General CECL reserve

 

 

 

 

 

 

 

 

 

 

(125,479

)

 

 

 

 

 

 

Loans receivable held-for-investment, net

 

 

 

 

 

 

 

 

$

6,709,517

 

 

 

 

 

 

 

 

(1)
Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
(2)
Net of specific CECL reserves of $78.3 million.
(3)
The weighted average spread is expressed as a spread over the relevant floating benchmark rates. One-month term Secured Overnight Financing Rate (“SOFR”) as of June 30, 2024 was 5.34%. Weighted average is based on outstanding principal as of June 30, 2024. For loans placed on non-accrual, the spread used in calculating the weighted average spread is 0%.
(4)
Reflects the weighted average interest rate based on the applicable floating benchmark rate (if applicable), including SOFR floors (if applicable). Weighted average is based on outstanding principal as of June 30, 2024 and includes loans on non-accrual status. For loans placed on non-accrual, the spread used in calculating the weighted average interest rate is 0%.
(5)
Senior loans include senior mortgages and similar credit quality loans, including related contiguous subordinate loans (if any), and pari passu participations in senior mortgage loans.

Our loans receivable portfolio as of December 31, 2023 was comprised of the following loans ($ in thousands, except for number of loans):

 

 

Number of
Loans

 

Loan Commitment(1)

 

 

Unpaid Principal Balance

 

 

Carrying
Value (2)

 

 

Weighted Average Spread(3)

 

 

Weighted Average Interest Rate(4)

 

Loans receivable held-for-investment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior loans(5)

 

60

 

$

7,952,806

 

 

$

6,875,894

 

 

$

6,779,899

 

 

 

+ 3.87%

 

 

 

8.67

%

Subordinate loans

 

1

 

 

30,200

 

 

 

30,200

 

 

 

30,313

 

 

 

+ 12.86%

 

 

 

18.21

%

 

61

 

 

7,983,006

 

 

 

6,906,094

 

 

 

6,810,212

 

 

 

+ 3.91%

 

 

 

8.71

%

Fixed:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior loans(5)

 

2

 

$

12,544

 

 

$

12,544

 

 

$

12,767

 

 

N/A

 

 

 

8.49

%

Subordinate loans

 

2

 

 

125,886

 

 

 

125,886

 

 

 

124,817

 

 

N/A

 

 

 

8.44

%

 

4

 

 

138,430

 

 

 

138,430

 

 

 

137,584

 

 

 

 

 

 

8.44

%

Total/Weighted Average

 

65

 

$

8,121,436

 

 

$

7,044,524

 

 

$

6,947,796

 

 

N/A

 

 

 

8.70

%

General CECL reserve

 

 

 

 

 

 

 

 

 

 

(70,371

)

 

 

 

 

 

 

Loans receivable held-for-investment, net

 

 

 

 

 

 

 

 

 

$

6,877,425

 

 

 

 

 

 

 

 

(1)
Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
(2)
Net of specific CECL reserves of $72.6 million.
(3)
The weighted average is expressed as a spread over the relevant floating benchmark rates. SOFR as of December 31, 2023 was 5.35%. Weighted average is based on unpaid principal balance as of December 31, 2023. For loans placed on non-accrual, the spread used in calculating the weighted average spread is 0%.
(4)
Reflects the weighted average interest rate based on the applicable floating benchmark rate (if applicable), including SOFR floors (if applicable). Weighted average is based on unpaid principal balance as of December 31, 2023 and includes loans on non-accrual status. For loans placed on non-accrual, the interest rate used in calculating the weighted average interest rate is 0%.
(5)
Senior loans include senior mortgages and similar credit quality loans, including related contiguous subordinate loans (if any), and pari passu participations in senior mortgage loans.

Activity relating to the loans receivable portfolio for the six months ended June 30, 2024 ($ in thousands):

 

 

 

 

Unpaid Principal Balance

 

 

Deferred Fees

 

 

Specific CECL Reserve

 

 

Carrying Value (1)

 

Balance at December 31, 2023

 

$

7,044,524

 

 

$

(24,141

)

 

$

(72,587

)

 

$

6,947,796

 

Advances on existing loans

 

 

263,427

 

 

 

-

 

 

 

-

 

 

 

263,427

 

Non-cash advances in lieu of interest

 

 

23,205

 

 

 

-

 

 

 

-

 

 

 

23,205

 

Origination fees, extension fees and exit fees

 

 

-

 

 

 

(1,423

)

 

 

-

 

 

 

(1,423

)

Repayments of loans receivable

 

 

(184,971

)

 

 

-

 

 

 

-

 

 

 

(184,971

)

Repayments of non-cash advances in lieu of interest

 

 

(1,865

)

 

 

-

 

 

 

-

 

 

 

(1,865

)

Accretion of fees

 

 

-

 

 

 

8,960

 

 

 

-

 

 

 

8,960

 

Provision for specific CECL reserve

 

 

-

 

 

 

-

 

 

 

(48,517

)

 

 

(48,517

)

Transfer to loans held-for-sale

 

 

(216,046

)

 

 

1,603

 

 

 

42,266

 

 

 

(172,177

)

Principal charge-offs

 

 

-

 

 

 

-

 

 

 

561

 

 

 

561

 

Balance at June 30, 2024

 

$

6,928,274

 

 

$

(15,001

)

 

$

(78,277

)

 

$

6,834,996

 

General CECL reserve

 

 

 

 

 

 

 

 

 

 

 

(125,479

)

Carrying Value

 

 

 

 

 

 

 

 

 

 

$

6,709,517

 

 

(1)
Balance at December 31, 2023 does not include general CECL reserve.

In April 2024, we sold a senior loan, which was collateralized by two multifamily properties under development located in Irvine, CA and a pledge of equity interests in the borrower, to an unaffiliated purchaser with a then carrying value and unpaid principal balance of $216.8 million and $218.4 million, respectively. During the three months ended March 31, 2024, in anticipation of this loan sale, we classified the loan as held-for-sale and recognized a $42.3 million principal charge-off, representing the difference between the carrying value before principal charge-off and the sales price of the loan. Such principal charge-off was attributable to the construction status of the loan’s collateral asset and its $44.9 million of remaining unfunded commitments. During the three months ended June 30, 2024, we recorded an additional principal charge-off of $0.6 million relating to transaction costs incurred. The loan was on non-accrual status effective October 1, 2023 and was risk rated 4.

In January 2024, we sold three senior loans to an unaffiliated purchaser. As of December 31, 2023, we determined that these loans met the held-for-sale criteria and were not considered in determining our general CECL reserve. The loans receivable held-for-sale were presented net of a $7.5 million principal charge-off, representing the difference between the carrying values before principal charge-off and the sales price of the loans. Two of the three loans were sold at their respective carrying values, while the principal charge-off was allocated and attributable to the construction status of the third loan’s collateral asset and its $105.0 million of remaining unfunded commitments.

As of June 30, 2024, we have no loans receivable classified as held-for-sale. As of December 31, 2023, our loans receivable held-for-sale were comprised of the following loans ($ in thousands):

 

Property Type

 

Location

 

Loan Commitment

 

 

Unpaid Principal Balance

 

 

Carrying Value Before Principal Charge-Off

 

 

Principal
Charge-Off

 

 

Held-For-Sale Carrying Value

 

For Sale Condo

 

FL

 

$

160,000

 

 

$

158,180

 

 

$

157,346

 

 

$

-

 

 

$

157,346

 

Multifamily

 

FL

 

 

77,115

 

 

 

76,580

 

 

 

76,275

 

 

 

-

 

 

 

76,275

 

Mixed-Use

 

FL

 

 

141,791

 

 

 

36,773

 

 

 

35,556

 

 

 

(7,468

)

 

 

28,088

 

Total

 

 

 

$

378,906

 

 

$

271,533

 

 

$

269,177

 

 

$

(7,468

)

 

$

261,709

 

During the three months ended September 30, 2023, we sold a senior loan collateralized by a portfolio of multifamily properties located in San Francisco, CA. We obtained a true-sale-at-law opinion and determined the transaction constituted a sale. Concurrent with the sale, we entered into an agreement with the transferee which provides for a share of cash flows from the senior loan upon the transferee meeting certain financial metrics. As of June 30, 2024, we have not recognized any value to this interest on our consolidated financial statements.

During the three months ended December 31, 2023, we modified a loan with a borrower that was experiencing financial difficulties, resulting in a maturity extension to June 10, 2024. As of June 30, 2024, the loan had total commitments and an amortized cost basis of $78.6 million, represents approximately 1.1% of total loans receivable held-for-investment, based on carrying value net of any specific CECL reserves, is current on interest payments, is in maturity default, and is risk rated 4. The loan is considered in determining our general CECL reserve.

During the three months ended June 30, 2022, we modified a loan with a borrower that was experiencing financial difficulties, resulting in a decrease in the index rate floor from 1.57% to 1.00% and modified extension requirements. During the year ended December 31, 2023, we further modified this loan to provide for an initial maturity extension to September 18, 2023. As of June 30, 2024, the loan had total commitments and an amortized cost basis of $87.8 million, represents approximately 1.3% of total loans receivable held-for-investment, based on carrying value net of any specific CECL reserves, is current on interest payments, is in maturity default, and is risk rated 4. The loan is considered in determining our general CECL reserve.

Concentration of Risk

The following table presents our loans receivable held-for-investment by loan type, as well as property type and geographic location of the properties collateralizing these loans as of June 30, 2024 and December 31, 2023 ($ in thousands):

 

 

 

June 30, 2024

 

 

December 31, 2023

 

Loan Type

 

Carrying Value (1)

 

 

Percentage

 

 

Carrying Value (2)

 

 

Percentage

 

Senior loans (3)

 

$

6,679,798

 

 

 

98

%

 

$

6,792,666

 

 

 

98

%

Subordinate loans

 

 

155,198

 

 

 

2

%

 

 

155,130

 

 

 

2

%

 

$

6,834,996

 

 

 

100

%

 

$

6,947,796

 

 

 

100

%

General CECL reserve

 

 

(125,479

)

 

 

 

 

 

(70,371

)

 

 

 

 

$

6,709,517

 

 

 

 

 

$

6,877,425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property Type

 

Carrying Value (1)

 

 

Percentage

 

 

Carrying Value (2)

 

 

Percentage

 

Multifamily

 

$

2,721,317

 

 

 

40

%

 

$

2,829,436

 

 

 

41

%

Hospitality

 

 

1,233,207

 

 

 

18

%

 

 

1,339,067

 

 

 

19

%

Office

 

 

974,943

 

 

 

14

%

 

 

961,744

 

 

 

14

%

Mixed-Use (4)

 

 

604,985

 

 

 

9

%

 

 

596,919

 

 

 

9

%

Other

 

 

567,061

 

 

 

8

%

 

 

482,582

 

 

 

7

%

Land

 

 

518,645

 

 

 

8

%

 

 

518,252

 

 

 

7

%

For Sale Condo

 

 

214,838

 

 

 

3

%

 

 

219,796

 

 

 

3

%

 

$

6,834,996

 

 

 

100

%

 

$

6,947,796

 

 

 

100

%

General CECL reserve

 

 

(125,479

)

 

 

 

 

 

(70,371

)

 

 

 

 

$

6,709,517

 

 

 

 

 

$

6,877,425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Geographic Location

 

Carrying Value (1)

 

 

Percentage

 

 

Carrying Value (2)

 

 

Percentage

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

2,445,836

 

 

 

36

%

 

$

2,518,716

 

 

 

35

%

Northeast

 

 

1,763,775

 

 

 

26

%

 

 

1,861,239

 

 

 

27

%

Mid Atlantic

 

 

776,594

 

 

 

11

%

 

 

761,588

 

 

 

11

%

Southeast

 

 

763,529

 

 

 

11

%

 

 

735,011

 

 

 

11

%

Southwest

 

 

600,746

 

 

 

9

%

 

 

592,324

 

 

 

9

%

Midwest

 

 

482,617

 

 

 

7

%

 

 

477,019

 

 

 

7

%

Other

 

 

1,899

 

 

 

0

%

 

 

1,899

 

 

 

0

%

 

$

6,834,996

 

 

 

100

%

 

$

6,947,796

 

 

 

100

%

General CECL reserve

 

 

(125,479

)

 

 

 

 

 

(70,371

)

 

 

 

 

$

6,709,517

 

 

 

 

 

$

6,877,425

 

 

 

 

 

(1)
Net of specific CECL reserves of $78.3 million at June 30, 2024.
(2)
Net of specific CECL reserves of $72.6 million at December 31, 2023.
(3)
Senior loans include senior mortgages and similar credit quality loans, including related contiguous subordinate loans and pari passu participations in senior mortgage loans.
(4)
At June 30, 2024, mixed-use comprises of 4% office, 2% retail, 2% multifamily, 1% hospitality, and immaterial amounts of for sale condo. At December 31, 2023, mixed-use comprises of 3% office, 2% retail, 2% multifamily, 1% hospitality, and immaterial amounts of for sale condo.

Interest Income and Accretion

The following table summarizes our interest and accretion income from our loan portfolio and interest on cash balances for the three and six months ended June 30, 2024 and 2023, respectively ($ in thousands):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2024

 

 

June 30, 2023

 

 

June 30, 2024

 

 

June 30, 2023

 

Coupon interest

 

$

148,319

 

 

$

171,018

 

 

$

301,326

 

 

$

327,634

 

Interest on cash, cash equivalents, and other income

 

 

2,485

 

 

 

4,378

 

 

 

5,690

 

 

 

6,681

 

Accretion of fees

 

 

4,327

 

 

 

5,339

 

 

 

8,960

 

 

 

10,586

 

Total interest and related income(1)

 

$

155,131

 

 

$

180,735

 

 

$

315,976

 

 

$

344,901

 

 

 

(1)
For the three months ended June 30, 2024 and 2023, we did not recognize any default interest, late fees, pre-payment penalties, and/or accelerated fees. For the six months ended June 30, 2024 and 2023, we recognized $1.3 million and $0.3 million, respectively, in default interest, late fees, pre-payment penalties, and/or accelerated fees.

Loan Risk Ratings

As further described in Note 2 – Summary of Significant Accounting Policies, we evaluate the credit quality of our loan portfolio on a quarterly basis. In conjunction with our quarterly loan portfolio review, we assess the risk factors of each loan and assign a risk rating based on several factors, including current loan-to-value, debt yield, structure, cash flow volatility, exit plan, current market conditions and sponsorship level. While evaluating the credit quality of each loan within our portfolio, we assess these quantitative and qualitative factors as a whole and with no pre-prescribed weight on their impact to our determination of a loan’s risk rating. However, based upon the facts and circumstances for each loan and the current market conditions, we may consider certain previously mentioned factors more or less relevant than others. Loans are rated “1” (less risk) through “5” (greater risk), which ratings are defined in Note 2 – Summary of Significant Accounting Policies.

The following tables allocate the principal balance and carrying value of our loans receivable held-for-investment based on our internal risk ratings as of June 30, 2024 and December 31, 2023 ($ in thousands):

 

June 30, 2024

Risk Rating

 

Number of Loans

 

Unpaid Principal Balance

 

 

Carrying Value (1)

 

 

% of Total of Carrying Value

1

 

-

 

$

-

 

 

$

-

 

 

0%

2

 

-

 

 

-

 

 

 

-

 

 

0%

3

 

39

 

 

4,483,181

 

 

 

4,472,171

 

 

65%

4

 

18

 

 

2,106,138

 

 

 

2,102,826

 

 

31%

5

 

5

 

 

338,955

 

 

 

259,999

 

 

4%

 

62

 

$

6,928,274

 

 

$

6,834,996

 

 

100%

General CECL reserve

 

 

 

 

 

(125,479

)

 

 

 

 

 

 

 

 

$

6,709,517

 

 

 

 

(1)
Net of specific CECL reserves of $78.3 million.

 

December 31, 2023

Risk Rating

 

Number of Loans

 

Unpaid Principal Balance

 

 

Carrying Value (1)

 

 

% of Total of Carrying Value

1

 

-

 

$

-

 

 

$

-

 

 

0%

2

 

-

 

 

-

 

 

 

-

 

 

0%

3

 

45

 

 

5,169,731

 

 

 

5,148,188

 

 

74%

4

 

15

 

 

1,536,748

 

 

 

1,534,829

 

 

22%

5

 

5

 

 

338,045

 

 

 

264,779

 

 

4%

 

65

 

$

7,044,524

 

 

$

6,947,796

 

 

100%

General CECL reserve

 

 

 

 

(70,371

)

 

 

 

 

 

 

 

 

$

6,877,425

 

 

 

 

(1)
Net of specific CECL reserves of $72.6 million.

As of June 30, 2024 and December 31, 2023, the average risk rating of our portfolio was 3.4 and 3.3, respectively, weighted by unpaid principal balance.

 

The following table presents the carrying value and significant characteristics of our loans receivable held-for-investment on non-accrual status as of June 30, 2024 ($ in thousands):

 

Property Type

 

Location

 

Risk Rating

 

Unpaid Principal Balance

 

 

Carrying Value Before Specific CECL Reserve

 

 

Specific
CECL Reserve

 

 

Net Carrying Value

 

 

Interest Recognition Method /
as of Date

Land

 

VA

 

5

 

$

152,236

 

 

$

152,236

 

 

$

(32,136

)

 

$

120,100

 

 

Cost Recovery/ 1/1/2023

Office

 

CA

 

5

 

 

112,442

 

 

 

112,163

 

 

 

(20,863

)

 

 

91,300

 

 

Cash Basis/ 4/1/2023

Office

 

CA

 

4

 

 

98,214

 

 

 

97,827

 

 

 

-

 

 

 

97,827

 

 

Cost Recovery/ 9/1/2023

Multifamily

 

NV

 

4

 

 

96,529

 

 

 

96,082

 

 

 

-

 

 

 

96,082

 

 

Cash Basis/ 1/1/2024

Land

 

NY

 

4

 

 

87,741

 

 

 

88,166

 

 

 

-

 

 

 

88,166

 

 

Cash Basis/ 4/1/2024

Office

 

GA

 

5

 

 

71,492

 

 

 

71,094

 

 

 

(24,394

)

 

 

46,700

 

 

Cost Recovery/ 9/1/2023

Land

 

NY

 

4

 

 

67,000

 

 

 

67,000

 

 

 

-

 

 

 

67,000

 

 

Cash Basis/ 11/1/2021

Multifamily

 

AZ

 

4

 

 

50,164

 

 

 

49,957

 

 

 

-

 

 

 

49,957

 

 

Cash Basis/ 1/1/2024

Multifamily

 

TX

 

4

 

 

39,279

 

 

 

39,085

 

 

 

-

 

 

 

39,085

 

 

Cash Basis/ 1/1/2024

Other

 

Other

 

5

 

 

1,899

 

 

 

1,899

 

 

 

-

 

 

 

1,899

 

 

Cost Recovery/ 7/1/2020

Other

 

NY

 

5

 

 

886

 

 

 

884

 

 

 

(884

)

 

 

-

 

 

Cost Recovery/ 6/30/2023

Total non-accrual (1)

 

$

777,882

 

 

$

776,393

 

 

$

(78,277

)

 

$

698,116

 

 

 

 

 

(1)
Loans classified as non-accrual represented 10.2% of the total loans receivable held-for-investment at June 30, 2024, based on carrying value net of any specific CECL reserves. Excludes five loans with an aggregate carrying value of $600.7 million that are in maturity default but remain on accrual status as the borrower is either current on interest payments or interest is deemed collectible based on the underlying collateral value. Additionally, as of June 30, 2024, we have two loans with an aggregate carrying value of $479.4 million that are delinquent on interest payments but remains on accrual status as the interest is deemed collectible based on the underlying collateral value.

The following table presents the carrying value and significant characteristics of our loans receivable held-for-investment on non-accrual status as of December 31, 2023 ($ in thousands):

 

Property Type

 

Location

 

Risk Rating

 

Unpaid Principal Balance

 

 

Carrying Value Before Specific CECL Reserve

 

 

Specific
CECL Reserve

 

 

Net Carrying Value

 

 

Interest Recognition Method /
 as of Date

Multifamily(1)

 

CA

 

4

 

$

214,479

 

 

$

212,877

 

 

$

-

 

 

$

212,877

 

 

Cost recovery/ 10/1/2023

Land

 

VA

 

5

 

 

151,326

 

 

 

151,326

 

 

 

(31,226

)

 

 

120,100

 

 

Cost recovery/ 1/1/2023

Office(2)

 

CA

 

5

 

 

112,442

 

 

 

112,163

 

 

 

(20,523

)

 

 

91,640

 

 

Cash basis/ 4/1/2023

Office

 

CA

 

4

 

 

98,214

 

 

 

97,827

 

 

 

-

 

 

 

97,827

 

 

Cost recovery/ 9/1/2023

Office

 

GA

 

5

 

 

71,492

 

 

 

71,094

 

 

 

(19,954

)

 

 

51,140

 

 

Cost recovery/ 9/1/2023

Land

 

NY

 

4

 

 

67,000

 

 

 

67,000

 

 

 

-

 

 

 

67,000

 

 

Cash basis/ 11/1/2021

Other

 

Other

 

5

 

 

1,899

 

 

 

1,899

 

 

 

-

 

 

 

1,899

 

 

Cost recovery/ 7/1/2020

Other

 

NY

 

5

 

 

886

 

 

 

884

 

 

 

(884

)

 

 

-

 

 

Cost recovery/ 6/30/2023

Total non-accrual (3)

 

 

 

$

717,738

 

 

$

715,070

 

 

$

(72,587

)

 

$

642,483

 

 

 

 

 

(1)
This loan was sold in April 2024.
(2)
During the year ended December 31, 2023, interest income of $0.3 million was recognized on a cash basis for this loan while on non-accrual status.
(3)
Loans classified as non-accrual represented 9.2% of the total loans receivable held-for-investment at December 31, 2023, based on carrying value net of any specific CECL reserves. Excludes four loans with an aggregate carrying value of $490.2 million that are in maturity default but remain on accrual status as the borrower is either current on interest payments or interest is deemed collectible based on the underlying collateral value. Additionally, as of December 31, 2023, we have one loan with an aggregate carrying value of $78.4 million that is delinquent on interest payments but remains on accrual status as the interest is deemed collectible based on the underlying collateral value.

 

Current Expected Credit Losses

The current expected credit loss reserve required under GAAP reflects our current estimate of potential credit losses related to our loan commitments. See Note 2 for further detail of our current expected credit loss reserve methodology.

The following table illustrates the changes in the current expected credit loss reserve for our loans receivable held-for-investment for the three and six months ended June 30, 2024 and 2023, respectively ($ in thousands):

 

 

 

 

 

General CECL Reserve

 

 

 

 

 

 

Specific CECL Reserve

 

 

Loans Receivable Held-for-Investment

 

 

Unfunded Loan Commitments (1)

 

 

Total General CECL Reserve

 

 

Total CECL Reserve

 

Total reserve, December 31, 2022

 

$

60,300

 

 

$

68,347

 

 

$

17,715

 

 

$

86,062

 

 

$

146,362

 

Reversal

 

 

-

 

 

 

(1,021

)

 

 

(2,218

)

 

 

(3,239

)

 

 

(3,239

)

Total reserve, March 31, 2023

 

$

60,300

 

 

$

67,326

 

 

$

15,497

 

 

$

82,823

 

 

$

143,123

 

Provision (reversal)

 

 

44,588

 

 

 

(1,628

)

 

 

(1,485

)

 

 

(3,113

)

 

 

41,475

 

Principal charge-offs

 

 

(66,935

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(66,935

)

Total reserve, June 30, 2023

 

$

37,953

 

 

$

65,698

 

 

$

14,012

 

 

$

79,710

 

 

$

117,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total reserve, December 31, 2023

 

$

72,587

 

 

$

70,371

 

 

$

9,726

 

 

$

80,097

 

 

$

152,684

 

Provision (reversal)

 

 

47,285

 

 

 

23,358

 

 

 

(683

)

 

 

22,675

 

 

 

69,960

 

Principal charge-offs

 

 

(42,266

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(42,266

)

Total reserve, March 31, 2024

 

$

77,606

 

 

$

93,729

 

 

$

9,043

 

 

$

102,772

 

 

$

180,378

 

Provision

 

 

1,232

 

 

 

31,750

 

 

 

946

 

 

 

32,696

 

 

 

33,928

 

Principal charge-offs

 

 

(561

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(561

)

Total reserve, June 30, 2024

 

$

78,277

 

 

$

125,479

 

 

$

9,989

 

 

$

135,468

 

 

$

213,745

 

Reserve at June 30, 2024 (2)

 

1.1

%

 

 

 

 

 

 

 

 

2.0

%

 

 

3.1

%
(1)
The CECL reserve for unfunded commitments is included in other liabilities on the consolidated balance sheets.
(2)
Represents CECL reserve as a percent of total unpaid principal balance of loans receivable held-for-investment as of June 30, 2024.

During the six months ended June 30, 2024, we recorded a provision for current expected credit losses of $103.9 million, which consisted of a $55.4 million increase in our general CECL reserve and a $48.5 million increase in our specific CECL reserve prior to principal charge-offs. The increase in general CECL reserves was primarily attributable to changes in the historical loss rate of the analogous dataset and changes in risk ratings, non-accrual status, and expected remaining duration within our loan portfolio, offset by the reduction in the size of our loan portfolio subject to determination of the general CECL reserve. As of June 30, 2024, our total current expected credit loss reserve was $213.7 million.

During the six months ended June 30, 2023, we recorded a provision for current expected credit losses of $38.2 million, which included a $44.6 million increase in our specific CECL reserve prior to a principal charge-off and a reversal of $6.4 million of general CECL reserves. This reversal of general CECL reserves was primarily attributable to the seasoning of our loan portfolio and a reduction in the size of our loan portfolio. As of June 30, 2023, our total current expected credit loss reserve was $117.7 million.

Specific CECL Reserves

The following table presents a summary of our loans receivable held-for-investment with specific CECL reserves as of June 30, 2024 ($ in thousands):

 

Property Type

 

Location

 

Unpaid Principal Balance

 

 

Carrying Value Before Specific CECL Reserve

 

 

Specific CECL Reserve

 

 

Net Carrying Value

 

Land

 

VA

 

$

152,236

 

 

$

152,236

 

 

$

32,136

 

 

$

120,100

 

Office

 

CA

 

 

112,442

 

 

 

112,163

 

 

 

20,863

 

 

 

91,300

 

Office

 

GA

 

 

71,492

 

 

 

71,094

 

 

 

24,394

 

 

 

46,700

 

Other

 

NY

 

 

886

 

 

 

884

 

 

 

884

 

 

 

-

 

Total

 

 

 

$

337,056

 

 

$

336,377

 

 

$

78,277

 

 

$

258,100

 

As of December 31, 2023, we had a specific CECL reserve of $31.2 million in connection with a senior loan with a borrower that is experiencing financial difficulty and which is secured by land in Arlington, VA. During the six months ended June 30, 2024, we recorded additional specific CECL reserves totaling $0.9 million as a result of protective advances made, resulting in a total specific CECL reserve of $32.1 million. As of June 30, 2024, the loan had an unpaid principal balance and carrying value prior to any specific CECL reserve of $152.2 million and is in maturity default. Effective January 1, 2023, this loan was placed on non-accrual status.

As of December 31, 2023, we had a specific CECL reserve of $20.5 million in connection with a senior loan with a borrower that is experiencing financial difficulty and which is secured by an office building in San Francisco, CA and a pledge of equity interests in the borrower. During the six months ended June 30, 2024, we recorded additional specific CECL reserves totaling $0.4 million based on changes to the collateral value, resulting in a total specific CECL reserve of $20.9 million. As of June 30, 2024, the loan had an unpaid principal balance and carrying value prior to any specific CECL reserve of $112.4 million and $112.2 million, respectively, and is in maturity default. Effective September 1, 2023, this loan was placed on non-accrual status.

As of December 31, 2023, we had a specific CECL reserve of $20.0 million in connection with a senior loan with a borrower that is experiencing financial difficulty and which is secured by an office building in Atlanta, GA and a pledge of equity interests in the borrower. During the six months ended June 30, 2024, we recorded additional specific CECL reserves totaling $4.4 million based on changes to the collateral value, resulting in a total specific CECL reserve of $24.4 million. As of June 30, 2024, the loan had an unpaid principal balance and carrying value prior to any specific CECL reserve of $71.5 million and $71.1 million, respectively, and an initial maturity date of August 27, 2024. Effective September 1, 2023, this loan was placed on non-accrual status.

As of June 30, 2023 and December 31, 2023, we had a specific CECL reserve of $0.9 million in connection with a subordinate loan with a borrower that is experiencing financial difficulty and which is secured by the equity interests in a retail condo in Brooklyn, NY. As of June 30, 2024, the loan had an unpaid principal balance and carrying value prior to any specific CECL reserve of $0.9 million and is in maturity default. Effective June 30, 2023, the loan was placed on non-accrual status.

Fair market values used to determine specific CECL reserves are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach. Estimates of fair market values used to determine specific CECL reserves as of June 30, 2024 include assumptions of property specific cash flows over estimated holding periods, assumptions of property redevelopment costs, assumptions of leasing activities, discount rates ranging from 6.0% to 9.5%, and market and terminal capitalization rates ranging from 6.0% to 8.3%. These assumptions are based upon the nature of the properties, recent sales and lease comparables, and anticipated real estate and capital market conditions.

Our primary credit quality indicator is our internal risk rating, which is further discussed above. The following table presents the carrying value of our loans receivable held-for-investment as of June 30, 2024 by year of origination and risk rating, and the principal charge-offs recognized during the six months ended June 30, 2024 ($ in thousands):

 

 

 

 

Carrying Value by Origination Year as of June 30, 2024

 

Risk Rating

 

Number of Loans

 

Carrying Value (1)

 

 

2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

1

 

-

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

2

 

-

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

3

 

39

 

 

4,472,171

 

 

 

-

 

 

 

101,093

 

 

 

2,018,589

 

 

 

1,104,317

 

 

 

-

 

 

 

808,669

 

 

 

439,503

 

4

 

18

 

 

2,102,826

 

 

 

-

 

 

 

-

 

 

 

542,904

 

 

 

570,590

 

 

 

87,750

 

 

 

734,864

 

 

 

166,718

 

5

 

5

 

 

259,999

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

46,700

 

 

 

91,300

 

 

 

1,899

 

 

 

120,100

 

 

62

 

$

6,834,996

 

 

$

-

 

 

$

101,093

 

 

$

2,561,493

 

 

$

1,721,607

 

 

$

179,050

 

 

$

1,545,432

 

 

$

726,321

 

Principal Charge-offs (2)

 

$

-

 

 

$

-

 

 

$

-

 

 

$

42,827

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

(1)
Net of specific CECL reserves of $78.3 million.
(2)
Principal charge-off recognized in connection with the sale of a senior loan in April 2024.

The following table details overall statistics for our loans receivable held-for-investment:

 

 

 

June 30, 2024

 

 

December 31, 2023

 

Weighted average yield to maturity(1)

 

 

9.0

%

 

 

9.1

%

Weighted average term to initial maturity

 

0.8 years

 

 

1.2 years

 

Weighted average term to fully extended maturity(2)

 

2.2 years

 

 

2.6 years

 

(1)
Represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon, and fees received, based on the applicable floating benchmark rate/floors (if applicable), in place as of June 30, 2024 and December 31, 2023. For loans placed on non-accrual, the annualized yield to initial maturity used in calculating the weighted average annualized yield to initial maturity is 0%.
(2)
Term to fully extended maturity is determined based on the maximum maturity of each of the corresponding loans, assuming all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date.