QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
☒ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ||
Emerging growth company |
Page | ||
PART I - FINANCIAL INFORMATION | ||
PART II - OTHER INFORMATION | ||
March 31, 2020 | December 31, 2019 | ||||||
ASSETS | |||||||
Loans held-for-investment | $ | $ | |||||
Allowance for credit losses | ( | ) | |||||
Loans held-for-investment, net | |||||||
Available-for-sale securities, at fair value | |||||||
Held-to-maturity securities | |||||||
Cash and cash equivalents | |||||||
Restricted cash | |||||||
Accrued interest receivable | |||||||
Other assets | |||||||
Total Assets (1) | $ | $ | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Liabilities | |||||||
Repurchase agreements | $ | $ | |||||
Securitized debt obligations | |||||||
Asset-specific financings | |||||||
Revolving credit facilities | |||||||
Convertible senior notes | |||||||
Dividends payable | |||||||
Other liabilities | |||||||
Total Liabilities (1) | |||||||
10% cumulative redeemable preferred stock, par value $0.01 per share; 50,000,000 shares authorized and 1,000 and 1,000 shares issued and outstanding, respectively | |||||||
Stockholders’ Equity | |||||||
Common stock, par value $0.01 per share; 450,000,000 shares authorized and 55,136,885 and 54,853,205 shares issued and outstanding, respectively | |||||||
Additional paid-in capital | |||||||
Accumulated other comprehensive (loss) income | ( | ) | |||||
Cumulative earnings | |||||||
Cumulative distributions to stockholders | ( | ) | ( | ) | |||
Total Stockholders’ Equity | |||||||
Total Liabilities and Stockholders’ Equity | $ | $ |
(1) | The condensed consolidated balance sheets include assets of consolidated variable interest entities, or VIEs, that can only be used to settle obligations of these VIEs, and liabilities of the consolidated VIEs for which creditors do not have recourse to Granite Point Mortgage Trust Inc. At March 31, 2020 and December 31, 2019, assets of the VIEs totaled $ |
Three Months Ended | |||||||
March 31, | |||||||
2020 | 2019 | ||||||
Interest income: | |||||||
Loans held-for-investment | $ | $ | |||||
Available-for-sale securities | |||||||
Held-to-maturity securities | |||||||
Cash and cash equivalents | |||||||
Total interest income | |||||||
Interest expense: | |||||||
Repurchase agreements | |||||||
Securitized debt obligations | |||||||
Convertible senior notes | |||||||
Asset-specific financings | |||||||
Revolving credit facilities | |||||||
Total interest expense | |||||||
Net interest income | |||||||
Other (loss) income: | |||||||
Provision for credit losses | ( | ) | |||||
Fee income | |||||||
Total other (loss) income | ( | ) | |||||
Expenses: | |||||||
Management fees | |||||||
Incentive fees | |||||||
Servicing expenses | |||||||
Other operating expenses | |||||||
Total expenses | |||||||
(Loss) income before income taxes | ( | ) | |||||
Benefit from income taxes | ( | ) | ( | ) | |||
Net (loss) income | ( | ) | |||||
Dividends on preferred stock | |||||||
Net (loss) income attributable to common stockholders | $ | ( | ) | $ | |||
Basic (loss) earnings per weighted average common share | $ | ( | ) | $ | |||
Diluted (loss) earnings per weighted average common share | $ | ( | ) | $ | |||
Dividends declared per common share | $ | $ | |||||
Weighted average number of shares of common stock outstanding: | |||||||
Basic | |||||||
Diluted | |||||||
Comprehensive (loss) income: | |||||||
Net (loss) income attributable to common stockholders | $ | ( | ) | $ | |||
Other comprehensive (loss) income, net of tax: | |||||||
Unrealized (loss) gain on available-for-sale securities | ( | ) | |||||
Other comprehensive (loss) income | ( | ) | |||||
Comprehensive (loss) income attributable to common stockholders | $ | ( | ) | $ |
Common Stock | ||||||||||||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Accumulated Other Comprehensive (Loss) Income | Cumulative Earnings | Cumulative Distributions to Stockholders | Total Stockholders’ Equity | ||||||||||||||||||||
Balance, December 31, 2018 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||
Cumulative effect of adoption of new accounting principle | — | — | — | ( | ) | — | ||||||||||||||||||||
Adjusted balance, January 1, 2019 | ( | ) | ( | ) | ||||||||||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||
Other comprehensive income before reclassifications | — | — | — | — | — | |||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | — | — | — | — | — | |||||||||||||||||||||
Net other comprehensive income | — | — | — | — | — | |||||||||||||||||||||
Issuance of common stock, net of offering costs | — | — | — | |||||||||||||||||||||||
Common dividends declared | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||
Preferred dividends declared | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||
Non-cash equity award compensation | — | — | — | |||||||||||||||||||||||
Balance, March 31, 2019 | ( | ) | ||||||||||||||||||||||||
Balance, December 31, 2019 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
Cumulative effect of adoption of new accounting principle | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||
Adjusted balance, January 1, 2020 | ( | ) | ||||||||||||||||||||||||
Net loss | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||
Other comprehensive loss before reclassifications | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | — | — | — | — | — | |||||||||||||||||||||
Net other comprehensive loss | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Preferred dividends declared | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||
Non-cash equity award compensation | — | — | — | |||||||||||||||||||||||
Balance, March 31, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ |
Three Months Ended | |||||||
March 31, | |||||||
2020 | 2019 | ||||||
Cash Flows From Operating Activities: | |||||||
Net (loss) income | $ | ( | ) | $ | |||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | |||||||
Accretion of discounts and net deferred fees on loans held-for-investment | ( | ) | ( | ) | |||
Amortization of deferred debt issuance costs on convertible senior notes and securitized debt obligations | |||||||
Provision for credit losses | |||||||
Equity based compensation | |||||||
Net change in assets and liabilities: | |||||||
Decrease (increase) in accrued interest receivable | ( | ) | |||||
Increase in other assets | ( | ) | ( | ) | |||
Increase in other liabilities | |||||||
Net cash (used in) provided by operating activities | ( | ) | |||||
Cash Flows From Investing Activities: | |||||||
Originations, acquisitions and additional fundings of loans held-for-investment, net of deferred fees | ( | ) | ( | ) | |||
Proceeds from repayment of loans held-for-investment | |||||||
Principal payments on held-to-maturity securities | |||||||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash Flows From Financing Activities: | |||||||
Proceeds from repurchase agreements | |||||||
Principal payments on repurchase agreements | ( | ) | ( | ) | |||
Proceeds from issuance of securitized debt obligations | |||||||
Principal payments on securitized debt obligations | ( | ) | ( | ) | |||
Proceeds from asset-specific financings | |||||||
Proceeds from revolving credit facilities | |||||||
Repayment of revolving credit facilities | ( | ) | ( | ) | |||
Proceeds from issuance of common stock, net of offering costs | |||||||
Dividends paid on preferred stock | ( | ) | ( | ) | |||
Dividends paid on common stock | ( | ) | ( | ) | |||
Net cash provided by financing activities | |||||||
Net decrease in cash, cash equivalents and restricted cash | ( | ) | ( | ) | |||
Cash, cash equivalents, and restricted cash at beginning of period | |||||||
Cash, cash equivalents, and restricted cash at end of period | $ | $ | |||||
Supplemental Disclosure of Cash Flow Information: | |||||||
Cash paid for interest | $ | $ | |||||
Cash paid for taxes | $ | $ | |||||
Noncash Activities: | |||||||
Dividends declared but not paid at end of period | $ | $ |
(in thousands) | |||||||||||
ASSETS | Pre-ASU 2016-13 Adoption | Cumulative Effect of Adoption | As Reported Under ASU 2016-13 | ||||||||
Loans and securities | $ | $ | $ | ||||||||
Allowance for credit losses | ( | ) | ( | ) | |||||||
Loans and securities, net | $ | $ | ( | ) | $ | ||||||
LIABILITIES | |||||||||||
Liability for off-balance sheet credit losses (1) | $ | $ | $ | ||||||||
STOCKHOLDERS’ EQUITY | |||||||||||
Cumulative earnings | $ | $ | ( | ) | $ |
(1) | Represents expected loss on unfunded commitments. |
(in thousands) | March 31, 2020 | December 31, 2019 | |||||
Loans held-for-investment | $ | $ | |||||
Allowance for credit losses | ( | ) | |||||
Loans held-for-investment, net | |||||||
Restricted cash | |||||||
Other assets | |||||||
Total Assets | $ | $ | |||||
Securitized debt obligations | $ | $ | |||||
Other liabilities | |||||||
Total Liabilities | $ | $ |
March 31, 2020 | |||||||||||||||
(dollars in thousands) | Senior Loans (1) | Mezzanine Loans | B-Notes | Total | |||||||||||
Unpaid principal balance | $ | $ | $ | $ | |||||||||||
Unamortized (discount) premium | ( | ) | ( | ) | |||||||||||
Unamortized net deferred origination fees | ( | ) | ( | ) | |||||||||||
Allowance for credit losses | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Carrying value | $ | $ | $ | $ | |||||||||||
Unfunded commitments | $ | $ | $ | $ | |||||||||||
Number of loans | |||||||||||||||
Weighted average coupon | % | % | % | % | |||||||||||
Weighted average years to maturity (2) |
December 31, 2019 | |||||||||||||||
(dollars in thousands) | Senior Loans (1) | Mezzanine Loans | B-Notes | Total | |||||||||||
Unpaid principal balance | $ | $ | $ | $ | |||||||||||
Unamortized (discount) premium | ( | ) | ( | ) | |||||||||||
Unamortized net deferred origination fees | ( | ) | ( | ) | ( | ) | |||||||||
Carrying value | $ | $ | $ | $ | |||||||||||
Unfunded commitments | $ | $ | $ | $ | |||||||||||
Number of loans | |||||||||||||||
Weighted average coupon | % | % | % | % | |||||||||||
Weighted average years to maturity (2) |
(1) | Loans primarily secured by a first priority lien on commercial real property and related personal property and also includes, when applicable, any companion subordinate loans. |
(2) | Based on contractual maturity date. Certain loans are subject to contractual extension options with such conditions stipulated in the applicable loan documents. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment fee. The Company may also extend contractual maturities in connection with loan modifications. |
(dollars in thousands) | March 31, 2020 | December 31, 2019 | ||||||||||||
Property Type | Carrying Value | % of Loan Portfolio | Carrying Value | % of Loan Portfolio | ||||||||||
Office | $ | % | $ | % | ||||||||||
Multifamily | % | % | ||||||||||||
Hotel | % | % | ||||||||||||
Retail | % | % | ||||||||||||
Industrial | % | % | ||||||||||||
Other | % | % | ||||||||||||
Total | $ | % | $ | % |
(dollars in thousands) | March 31, 2020 | December 31, 2019 | ||||||||||||
Geographic Location | Carrying Value | % of Loan Portfolio | Carrying Value | % of Loan Portfolio | ||||||||||
Northeast | $ | % | $ | % | ||||||||||
Southwest | % | % | ||||||||||||
West | % | % | ||||||||||||
Midwest | % | % | ||||||||||||
Southeast | % | % | ||||||||||||
Total | $ | % | $ | % |
Three Months Ended March 31, | |||||||
(in thousands) | 2020 | 2019 | |||||
Balance at beginning of period | $ | $ | |||||
Originations, acquisitions and additional fundings | |||||||
Repayments | ( | ) | ( | ) | |||
Net discount accretion (premium amortization) | |||||||
Increase in net deferred origination fees | ( | ) | ( | ) | |||
Amortization of net deferred origination fees | |||||||
Allowance for credit losses | ( | ) | |||||
Balance at end of period | $ | $ |
Three Months Ended March 31, | |||
(in thousands) | 2020 | ||
Balance at beginning of period | $ | ||
Provision for credit losses | |||
Writeoffs | |||
Recoveries of amounts previously written off | |||
Balance at end of period | $ |
1 – | Lower Risk |
2 – | Average Risk |
3 – | Acceptable Risk |
4 – | Higher Risk: A loan that has exhibited material deterioration in cash flows and/or other credit factors, which, if negative trends continue, could be indicative of probability of default or principal loss. |
5 – | Loss Likely: A loan that has a significantly increased probability of default or principal loss. |
(dollars in thousands) | March 31, 2020 | December 31, 2019 | ||||||||||||||||||||
Risk Rating | Number of Loans | Unpaid Principal Balance | Carrying Value | Number of Loans | Unpaid Principal Balance | Carrying Value | ||||||||||||||||
1 | $ | $ | $ | $ | ||||||||||||||||||
2 | ||||||||||||||||||||||
3 | ||||||||||||||||||||||
4 | ||||||||||||||||||||||
5 | ||||||||||||||||||||||
Total | $ | $ | $ | $ |
March 31, 2020 | ||||||||||||||||||||||||||||
(dollars in thousands) | Origination Year | |||||||||||||||||||||||||||
Risk Rating | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Total | |||||||||||||||||||||
1 (Low Risk) | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
2 (Average Risk) | ||||||||||||||||||||||||||||
3 (Acceptable Risk) | ||||||||||||||||||||||||||||
4 (High Risk) | ||||||||||||||||||||||||||||
5 (Loss Likely) | ||||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ |
(in thousands) | March 31, 2020 | December 31, 2019 | |||||
Face value | $ | $ | |||||
Unamortized premium (discount) | |||||||
Allowance for credit losses | ( | ) | |||||
Gross unrealized gains | |||||||
Gross unrealized losses | ( | ) | |||||
Carrying value | $ | $ |
(in thousands) | March 31, 2020 | December 31, 2019 | |||||
Face value | $ | $ | |||||
Unamortized premium (discount) | |||||||
Allowance for credit losses | ( | ) | |||||
Carrying value | $ | $ |
(in thousands) | March 31, 2020 | December 31, 2019 | |||||
Cash and cash equivalents | $ | $ | |||||
Restricted cash | |||||||
Total cash, cash equivalents and restricted cash | $ | $ |
Level 1 | Inputs are quoted prices in active markets for identical assets or liabilities as of the measurement date under current market conditions. Additionally, the entity must have the ability to access the active market and the quoted prices cannot be adjusted by the entity. |
Level 2 | Inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs that are observable or can be corroborated by observable market data by correlation or other means for substantially the full-term of the assets or liabilities. |
Level 3 | Unobservable inputs are supported by little or no market activity. The unobservable inputs represent the assumptions that market participants would use to price the assets and liabilities, including risk. Generally, Level 3 assets and liabilities are valued using pricing models, discounted cash flow methodologies or similar techniques that require significant judgment or estimation. |
Recurring Fair Value Measurements | |||||||||||||||
March 31, 2020 | |||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets | |||||||||||||||
Available-for-sale securities | $ | $ | $ | $ | |||||||||||
Total assets | $ | $ | $ | $ |
Recurring Fair Value Measurements | |||||||||||||||
December 31, 2019 | |||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets | |||||||||||||||
Available-for-sale securities | $ | $ | $ | $ | |||||||||||
Total assets | $ | $ | $ | $ |
• | Loans held-for-investment are carried at cost, net of any unamortized acquisition premiums or discounts, loan fees, origination costs and allowance for credit losses, as applicable. The Company estimates the fair value of its loans held-for-investment by assessing any changes in market interest rates, shifts in credit profiles and actual operating results for mezzanine loans and senior loans, taking into consideration such factors as underlying property type, property competitive position within its market, market and submarket fundamentals, tenant mix, nature of business plan, sponsorship, extent of leverage and other loan terms. The Company categorizes the fair value measurement of these assets as Level 3. |
• | AFS securities are recurring fair value measurements; carrying value equals fair value. See discussion of valuation methods and assumptions within the Fair Value Measurements section of this footnote. |
• | HTM securities, which are comprised of CMBS, are carried at cost, net of any unamortized acquisition premiums or discounts and allowance for credit losses. In determining the fair value of the Company’s CMBS HTM, management judgment may be used to arrive at fair value that considers prices obtained from third-party pricing providers or broker quotes received using the bid price, which are both deemed indicative of market activity, and other applicable market data. The third-party pricing providers and brokers use pricing models that generally incorporate such factors as coupons, primary and secondary mortgage rates, rate reset period, issuer, prepayment speeds, credit enhancements and expected life of the security. The Company categorizes the fair value measurement of these assets as Level 2. |
• | Cash and cash equivalents and restricted cash have a carrying value which approximates fair value because of the short maturities of these instruments. The Company categorizes the fair value measurement of these assets as Level 1. |
• | The carrying value of repurchase agreements, asset-specific financings and revolving credit facilities that mature in less than one year generally approximates fair value due to the short maturities. The Company’s long-term repurchase agreements and asset-specific financings have floating rates based on an index plus a credit spread and the credit spread is typically consistent with those demanded in the market. Accordingly, the interest rates on these borrowings are at market and, thus, carrying value approximates fair value. The Company categorizes the fair value measurement of these liabilities as Level 2. |
• | Securitized debt obligations are recorded at outstanding principal, net of any unamortized deferred debt issuance costs. In determining the fair value of its securitized debt obligations, management judgment may be used to arrive at fair value that considers prices obtained from third-party pricing providers, broker quotes received and other applicable market data. If observable market prices are not available or insufficient to determine fair value due principally to illiquidity in the marketplace, then fair value is based upon internally developed models that are primarily based on observable market-based inputs but also include unobservable market data inputs (including prepayment speeds, delinquency levels and credit losses). The Company categorizes the fair value measurement of these liabilities as Level 2. |
• | Convertible senior notes are carried at their unpaid principal balance, net of any unamortized deferred issuance costs. The Company estimates the fair value of its convertible senior notes using the market transaction price nearest to March 31, 2020. The Company categorizes the fair value measurement of these assets as Level 2. |
March 31, 2020 | December 31, 2019 | ||||||||||||||
(in thousands) | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||
Assets | |||||||||||||||
Loans held-for-investment, net of allowance for credit losses | $ | $ | $ | $ | |||||||||||
Available-for-sale securities | $ | $ | $ | $ | |||||||||||
Held-to-maturity securities | $ | $ | $ | $ | |||||||||||
Cash and cash equivalents | $ | $ | $ | $ | |||||||||||
Restricted cash | $ | $ | $ | $ | |||||||||||
Liabilities | |||||||||||||||
Repurchase agreements | $ | $ | $ | $ | |||||||||||
Securitized debt obligations | $ | $ | $ | $ | |||||||||||
Asset-specific financings | $ | $ | $ | $ | |||||||||||
Revolving credit facilities | $ | $ | $ | $ | |||||||||||
Convertible senior notes | $ | $ | $ | $ |
March 31, 2020 | ||||||||||||||||||||
(in thousands) | Maturity Date (1) | Amount Outstanding | Unused Capacity | Total Capacity | Carrying Value of Collateral | Weighted Average Borrowing Rate | ||||||||||||||
Repurchase agreements: | ||||||||||||||||||||
Morgan Stanley Bank | June 28, 2021 | $ | $ | $ | $ | % | ||||||||||||||
Goldman Sachs Bank | May 2, 2021 | % | ||||||||||||||||||
JPMorgan Chase Bank | June 28, 2022 | % | ||||||||||||||||||
Citibank | January 9, 2023 | % | ||||||||||||||||||
Wells Fargo Bank (2) | June 28, 2021 | % | ||||||||||||||||||
JPMorgan Chase Bank (3) | May 11, 2020 | NA | NA | % | ||||||||||||||||
Total/Weighted Average | $ | $ | $ | $ | ||||||||||||||||
Asset-specific financings: | ||||||||||||||||||||
Canadian Imperial Bank of Commerce | Various | $ | $ | $ | $ | % | ||||||||||||||
Revolving credit facilities: | ||||||||||||||||||||
Citibank (4) | July 26, 2021 | $ | $ | $ | $ | % |
December 31, 2019 | ||||||||||||||||||||
(in thousands) | Maturity Date (1) | Amount Outstanding | Unused Capacity | Total Capacity | Carrying Value of Collateral | Weighted Average Borrowing Rate | ||||||||||||||
Repurchase agreements: | ||||||||||||||||||||
Morgan Stanley Bank | June 28, 2021 | $ | $ | $ | $ | % | ||||||||||||||
Goldman Sachs Bank | May 2, 2020 | % | ||||||||||||||||||
JPMorgan Chase Bank | June 28, 2022 | % | ||||||||||||||||||
Citibank | July 15, 2022 | % | ||||||||||||||||||
Wells Fargo Bank (2) | June 28, 2021 | % | ||||||||||||||||||
JPMorgan Chase Bank (3) | February 10, 2020 | NA | NA | % | ||||||||||||||||
Total/Weighted Average | $ | $ | $ | $ | ||||||||||||||||
Asset-specific financings: | ||||||||||||||||||||
Canadian Imperial Bank of Commerce | Various | $ | $ | $ | $ | % | ||||||||||||||
Revolving credit facilities: | ||||||||||||||||||||
Citibank (4) | July 26, 2021 | $ | $ | $ | $ | % |
(1) | The facilities are set to mature on the stated maturity date, unless extended pursuant to their terms. |
(2) | As of March 31, 2020, the Company retained an option to increase the maximum facility capacity amount up to $ |
(3) | Includes repurchase agreement collateralized by the Company’s CMBS, including both AFS and HTM securities. As of March 31, 2020, carrying value of collateral includes $ |
(4) | As of March 31, 2020, the Company retained an option to increase the maximum facility capacity amount up to $ |
March 31, 2020 | |||||||||||||||
(dollars in thousands) | Repurchase Agreements | Asset-Specific Financings | Revolving Credit Facilities | Total Amount Outstanding | |||||||||||
Within one year | $ | $ | $ | $ | |||||||||||
One to three years | |||||||||||||||
Three to five years | |||||||||||||||
Five years and over | |||||||||||||||
Total | $ | $ | $ | $ |
March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||
(dollars in thousands) | Amount Outstanding | Net Counterparty Exposure (1) | Percent of Equity | Weighted Average Years to Maturity | Amount Outstanding | Net Counterparty Exposure (1) | Percent of Equity | Weighted Average Years to Maturity | |||||||||||||||||
Morgan Stanley Bank | $ | $ | % | $ | $ | % | |||||||||||||||||||
JPMorgan Chase Bank | % | % | |||||||||||||||||||||||
Goldman Sachs Bank | % | % | |||||||||||||||||||||||
Citibank | % | % | |||||||||||||||||||||||
Wells Fargo Bank | % | % | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
(1) | Represents the excess of the carrying amount or market value of the loans held-for-investment, AFS securities and HTM securities pledged as collateral for repurchase agreements, including accrued interest plus any cash on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest. |
Number of common shares | ||
Common shares outstanding, December 31, 2018 | ||
Issuance of common stock | ||
Issuance of restricted stock (1) | ||
Common shares outstanding, March 31, 2019 | ||
Common shares outstanding, December 31, 2019 | ||
Issuance of common stock | ||
Issuance of restricted stock (1) | ||
Common shares outstanding, March 31, 2020 |
(1) | Represents shares of restricted stock granted under the Company’s 2017 Equity Incentive Plan, net of forfeitures. See Note 15 - Equity Incentive Plan for additional information. |
Declaration Date | Record Date | Payment Date | Cash Dividend Per Share | |||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
$ |
(in thousands) | March 31, 2020 | December 31, 2019 | |||||
Available-for-sale securities | |||||||
Unrealized gains | $ | $ | |||||
Unrealized losses | ( | ) | |||||
Accumulated other comprehensive (loss) income | $ | ( | ) | $ |
Three Months Ended March 31, | |||||||||||||
2020 | 2019 | ||||||||||||
Shares | Weighted Average Grant Date Fair Market Value | Shares | Weighted Average Grant Date Fair Market Value | ||||||||||
Outstanding at Beginning of Period | $ | $ | |||||||||||
Granted | |||||||||||||
Vested | ( | ) | ( | ) | ( | ) | ( | ) | |||||
Forfeited | ( | ) | ( | ) | |||||||||
Outstanding at End of Period | $ | $ |
Three Months Ended | |||||||
March 31, | |||||||
(in thousands, except share data) | 2020 | 2019 | |||||
Numerator: | |||||||
Net income (loss) attributable to common stockholders - basic | $ | ( | ) | $ | |||
Interest expense attributable to convertible notes (1) | |||||||
Net income (loss) attributable to common stockholders - diluted | $ | ( | ) | $ | |||
Denominator: | |||||||
Weighted average common shares outstanding | |||||||
Weighted average restricted stock shares | |||||||
Basic weighted average shares outstanding | |||||||
Effect of dilutive shares issued in an assumed conversion of the convertible senior notes | |||||||
Diluted weighted average shares outstanding | |||||||
Earnings (Loss) per share | |||||||
Basic | $ | ( | ) | $ | |||
Diluted | $ | ( | ) | $ |
(1) | Includes a nondiscretionary adjustment for the assumed change in the management fee calculation. |
• | the severity and duration of the COVID-19 pandemic; |
• | potential risks and uncertainties relating to the ultimate geographic spread of COVID-19; |
• | actions that may be taken by governmental authorities to contain the COVID-19 outbreak or to mitigate its impact; |
• | the potential negative impacts of COVID-19 on the global economy, including the sudden severe rise in unemployment, and the impacts of COVID-19 on our financial condition, business operations and value of our assets, as well as the financial condition and operations of our borrowers; |
• | the general political, economic and competitive conditions in the markets in which we invest; |
• | defaults by borrowers in paying debt service on outstanding indebtedness and borrowers' abilities to manage and stabilize properties; |
• | our ability to obtain or maintain financing arrangements on terms favorable to us or at all, particularly in light of the current disruption in the financial markets; |
• | the level and volatility of prevailing interest rates and credit spreads; |
• | reductions in the yield on our investments and increases in the cost of our financing; |
• | general volatility of the securities markets in which we participate and the potential need to post additional collateral on our financing arrangements; |
• | the return or impact of current or future investments; |
• | changes in our business, investment strategies or target investments; |
• | allocation of investment opportunities to us by our Manager; |
• | increased competition from entities investing in our target investments; |
• | effects of hedging instruments on our target investments; |
• | changes in governmental regulations, tax law and rates and similar matters; |
• | our ability to maintain our qualification as a REIT for U.S. federal income tax purposes and our exclusion from registration under the Investment Company Act; |
• | availability of desirable investment opportunities; |
• | availability of qualified personnel and our relationship with our Manager; |
• | the time and cost of the process to internalize our management function; |
• | estimates relating to our ability to make distributions to our stockholders in the future; |
• | hurricanes, earthquakes and other natural disasters, acts of war and/or terrorism, pandemics such as COVID-19 and other events that may cause unanticipated and uninsured performance declines and/or losses to us or the owners and operators of the real estate securing our investments; |
• | deterioration in the performance of the properties securing our investments that may cause deterioration in the performance of our investments and, potentially, principal losses to us, including the risk of impairment charges and any impact on our ability to satisfy the covenants and conditions in our debt agreements; and |
• | difficulty or delays in redeploying the proceeds from repayments of our existing investments. |
(in thousands, except share data) | Three Months Ended | |||||||
Income Statement Data: | March 31, | |||||||
2020 | 2019 | |||||||
Interest income: | (unaudited) | |||||||
Loans held-for-investment | $ | 63,259 | $ | 56,665 | ||||
Available-for-sale securities | 280 | 308 | ||||||
Held-to-maturity securities | 310 | 661 | ||||||
Cash and cash equivalents | 326 | 511 | ||||||
Total interest income | 64,175 | 58,145 | ||||||
Interest expense: | ||||||||
Repurchase agreements | 19,675 | 16,989 | ||||||
Securitized debt obligations | 9,434 | 9,859 | ||||||
Convertible senior notes | 4,516 | 4,465 | ||||||
Asset-specific financings | 1,122 | — | ||||||
Revolving credit facilities | 242 | 695 | ||||||
Total interest expense | 34,989 | 32,008 | ||||||
Net interest income | 29,186 | 26,137 | ||||||
Other (loss) income: | ||||||||
Provision for credit losses | (53,336 | ) | — | |||||
Fee income | 522 | 913 | ||||||
Total other (loss) income | (52,814 | ) | 913 | |||||
Expenses: | ||||||||
Management fees | 3,907 | 3,449 | ||||||
Incentive fees | — | 244 | ||||||
Servicing expenses | 1,109 | 773 | ||||||
Other operating expenses | 8,553 | 5,616 | ||||||
Total expenses | 13,569 | 10,082 | ||||||
(Loss) income before income taxes | (37,197 | ) | 16,968 | |||||
Benefit from income taxes | (6 | ) | (1 | ) | ||||
Net (loss) income | (37,191 | ) | 16,969 | |||||
Dividends on preferred stock | 25 | 25 | ||||||
Net (loss) income attributable to common stockholders | $ | (37,216 | ) | $ | 16,944 | |||
Basic (loss) earnings per weighted average common share | $ | (0.68 | ) | $ | 0.35 | |||
Diluted (loss) earnings per weighted average common share | $ | (0.68 | ) | $ | 0.34 | |||
Dividends declared per common share | $ | — | $ | 0.42 | ||||
Weighted average number of shares of common stock outstanding: | ||||||||
Basic | 55,056,411 | 48,601,431 | ||||||
Diluted | 55,056,411 | 62,256,595 | ||||||
Comprehensive (loss) income: | ||||||||
Net (loss) income attributable to common stockholders | $ | (37,216 | ) | $ | 16,944 | |||
Other comprehensive (loss) income, net of tax: | ||||||||
Unrealized (loss) gain on available-for-sale securities | (3,744 | ) | 192 | |||||
Other comprehensive (loss) income | (3,744 | ) | 192 | |||||
Comprehensive (loss) income attributable to common stockholders | $ | (40,960 | ) | $ | 17,136 |
(in thousands) | March 31, 2020 | December 31, 2019 | ||||||
Balance Sheet Data: | ||||||||
Loans held-for-investment | $ | 4,251,251 | $ | 4,226,212 | ||||
Total assets | $ | 4,476,878 | $ | 4,460,862 | ||||
Repurchase agreements | $ | 2,072,099 | $ | 1,924,021 | ||||
Securitized debt obligations | $ | 982,312 | $ | 1,041,044 | ||||
Asset-specific financings | $ | 119,062 | $ | 116,465 | ||||
Revolving credit facilities | $ | 38,361 | $ | 42,008 | ||||
Convertible senior notes | $ | 270,031 | $ | 269,634 | ||||
Total stockholders’ equity | $ | 961,059 | $ | 1,019,136 |
Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | ||||||||||||||||||||
(dollars in thousands) | Average Balance | Interest Income/Expense (1) | Net Yield/Cost of Funds | Average Balance | Interest Income/Expense | Net Yield/Cost of Funds | |||||||||||||||
Interest-earning assets (2) | |||||||||||||||||||||
Loans held-for-investment | |||||||||||||||||||||
Senior loans (3) | $ | 4,267,974 | $ | 62,549 | 5.9 | % | $ | 3,163,419 | $ | 55,743 | 7.0 | % | |||||||||
Subordinated loans | 27,739 | 710 | 10.2 | % | 35,735 | 922 | 10.3 | % | |||||||||||||
Available-for-sale securities | 12,798 | 280 | 8.8 | % | 12,798 | 308 | 9.6 | % | |||||||||||||
Held-to-maturity securities | 13,672 | 310 | 9.1 | % | 26,530 | 661 | 10.0 | % | |||||||||||||
Other | 326 | 511 | |||||||||||||||||||
Total interest income/net asset yield | $ | 4,322,183 | $ | 64,175 | 5.9 | % | $ | 3,238,482 | $ | 58,145 | 7.2 | % | |||||||||
Interest-bearing liabilities | |||||||||||||||||||||
Borrowings collateralized by: | |||||||||||||||||||||
Loans held-for-investment | |||||||||||||||||||||
Senior loans (3) | $ | 3,125,388 | $ | 30,191 | 3.9 | % | $ | 2,141,379 | $ | 27,115 | 5.1 | % | |||||||||
Subordinated loans | 9,371 | 107 | 4.6 | % | 9,519 | 131 | 5.5 | % | |||||||||||||
Available-for-sale securities | 8,365 | 76 | 3.6 | % | 8,378 | 92 | 4.4 | % | |||||||||||||
Held-to-maturity securities | 9,557 | 99 | 4.1 | % | 16,631 | 205 | 4.9 | % | |||||||||||||
Other unsecured: | |||||||||||||||||||||
Convertible senior notes | 269,899 | 4,516 | 6.7 | % | 268,369 | 4,465 | 6.7 | % | |||||||||||||
Total interest expense/cost of funds | $ | 3,422,580 | 34,989 | 4.1 | % | $ | 2,444,276 | $ | 32,008 | 5.2 | % | ||||||||||
Net interest income/spread | $ | 29,186 | 1.8 | % | $ | 26,137 | 2.0 | % |
(1) | Includes amortization of deferred debt issuance costs. |
(2) | Average balance represents average amortized cost on loans held-for-investment, AFS securities and HTM securities. |
(3) | Loans primarily secured by a first priority lien on commercial real property and related personal property and also includes, when applicable, any companion subordinate loans. |
Three Months Ended March 31, | |||
(in thousands) | 2020 | ||
Provision for credit losses on: | |||
Loans held-for-investment | $ | (45,873 | ) |
Available-for-sale securities | (767 | ) | |
Held-to-maturity securities | (942 | ) | |
Other liabilities | (5,754 | ) | |
Total provision for credit losses | $ | (53,336 | ) |
Three Months Ended | |||||||
March 31, | |||||||
(in thousands, except share data) | 2020 | 2019 | |||||
Management fees | $ | 3,907 | $ | 3,449 | |||
Incentive fees | $ | — | $ | 244 | |||
Servicing expenses | $ | 1,109 | $ | 773 | |||
Other operating expenses: | |||||||
Compensation paid to certain officers by our Manager and reimbursed by us (1) | $ | 1,707 | $ | 1,364 | |||
Other direct and allocated costs paid by our Manager and reimbursed by us | 6,054 | 5,193 | |||||
Amortization of executive officers’ restricted stock (2) | 793 | 745 | |||||
All other operating expenses/changes in operating expense accruals | (1 | ) | (1,686 | ) | |||
Total other operating expenses | $ | 8,553 | $ | 5,616 | |||
Annualized other operating expense ratio | 3.4 | % | 2.5 | % |
(1) | Officers include our principal financial officer, chief operating officer and general counsel. We do not reimburse our Manager for any expenses related to the compensation of our chief executive officer or chief investment officer. |
(2) | Equity based compensation expense related to the amortization of restricted stock awarded to our executive officers in conjunction with the Plan (see discussion in Note 15 - Equity Incentive Plan of the notes to the consolidated financial statements included in this Quarterly Report on Form 10-Q), including our chief executive officer, chief investment officer, chief operating officer, principal financial officer, secretary and general counsel. |
(dollars in thousands) | |||||||||||||||||||||||||
Type | Maximum Loan Commitment | Principal Balance | Carrying Value | Cash Coupon (2) | All-in Yield at Origination(3) | Original Term (Years) | Initial LTV (4) | Stabilized LTV (5) | |||||||||||||||||
Senior loans (1) | $ | 5,077,592 | $ | 4,314,836 | $ | 4,224,962 | L+3.52% | L+4.20% | 3.1 | 66.3 | % | 63.8 | % | ||||||||||||
Subordinated loans | 27,592 | 27,592 | 26,289 | L+9.50% | L+9.84% | 8.2 | 56.1 | % | 49.9 | % | |||||||||||||||
CMBS | 24,576 | 24,576 | 19,155 | L+7.07% | L+7.61% | 2.8 | 71.5 | % | 71.4 | % | |||||||||||||||
Total/Wtd. Avg. | $ | 5,129,760 | $ | 4,367,004 | $ | 4,270,406 | L+3.55% | L+4.23% | 3.2 | 66.3 | % | 63.7 | % |
(dollars in millions) | ||||||||||||||||||||||
Type (1) | Origination/ Acquisition Date | Maximum Loan Commitment | Principal Balance | Carrying Value | Cash Coupon (2) | All-in Yield at Origination (3) | Original Term (Years) | State | Property Type | Initial LTV (4) | Stabilized LTV (5) | |||||||||||
Senior | 07/18 | $144.3 | $113.8 | $111.6 | L+3.34% | L+4.27% | 2.0 | CA | Retail | 50.7% | 55.9% | |||||||||||
Senior | 12/15 | 120.0 | 120.0 | 117.4 | L+3.65% | L+4.43% | 4.0 | LA | Mixed-Use | 65.5% | 60.0% | |||||||||||
Senior | 10/19 | 120.0 | 81.6 | 79.5 | L+3.24% | L+3.86% | 3.0 | CA | Office | 63.9% | 61.1% | |||||||||||
Senior | 12/19 | 101.7 | 81.5 | 80.1 | L+2.75% | L+3.23% | 3.0 | IL | Multifamily | 76.5% | 73.0% | |||||||||||
Senior | 08/19 | 100.3 | 74.9 | 73.7 | L+2.80% | L+3.26% | 3.0 | MN | Office | 73.1% | 71.2% | |||||||||||
Senior | 07/19 | 94.0 | 67.5 | 65.7 | L+3.69% | L+4.32% | 3.0 | IL | Office | 70.0% | 64.4% | |||||||||||
Senior | 06/19 | 92.4 | 68.4 | 66.4 | L+3.45% | L+3.88% | 3.0 | TX | Hotel | 56.1% | 48.1% | |||||||||||
Senior | 12/18 | 92.0 | 52.6 | 51.7 | L+3.75% | L+5.21% | 3.0 | NY | Mixed-Use | 26.2% | 47.6% | |||||||||||
Senior | 10/19 | 87.8 | 65.2 | 63.8 | L+2.55% | L+3.05% | 3.0 | TN | Office | 70.2% | 74.2% | |||||||||||
Senior | 05/17 | 86.8 | 82.5 | 81.9 | L+3.50% | L+4.82% | 4.0 | MA | Office | 71.3% | 71.5% | |||||||||||
Senior | 01/20 | 81.8 | 47.5 | 46.5 | L+3.25% | L+3.93% | 3.0 | CO | Industrial | 47.2% | 47.5% | |||||||||||
Senior | 06/19 | 80.0 | 79.4 | 78.4 | L+2.69% | L+3.05% | 3.0 | TX | Mixed-Use | 71.7% | 72.2% | |||||||||||
Senior | 09/19 | 75.6 | 66.5 | 65.6 | L+3.07% | L+3.58% | 3.0 | NY | Multifamily | 62.7% | 67.1% | |||||||||||
Senior | 10/19 | 75.1 | 75.1 | 72.4 | L+3.36% | L+3.73% | 3.0 | FL | Mixed-Use | 67.7% | 62.9% | |||||||||||
Senior | 10/17 | 74.8 | 50.3 | 49.4 | L+4.07% | L+4.47% | 4.0 | DC | Office | 67.0% | 66.0% | |||||||||||
Senior | 11/17 | 73.3 | 68.8 | 65.2 | L+4.45% | L+5.20% | 3.0 | TX | Hotel | 68.2% | 61.6% | |||||||||||
Senior | 12/16 | 71.8 | 68.0 | 66.7 | L+3.75% | L+4.87% | 4.0 | FL | Office | 73.3% | 63.2% | |||||||||||
Senior | 06/16 | 68.4 | 62.4 | 61.6 | L+3.87% | L+4.93% | 4.0 | HI | Retail | 76.2% | 57.4% | |||||||||||
Senior | 11/17 | 68.3 | 64.4 | 63.9 | L+4.10% | L+4.73% | 3.0 | CA | Office | 66.8% | 67.0% | |||||||||||
Senior | 12/19 | 65.2 | 50.2 | 49.4 | L+2.80% | L+3.28% | 3.0 | NY | Office | 68.8% | 59.3% | |||||||||||
Senior | 01/19 | 64.5 | 64.5 | 61.1 | L+3.85% | L+4.38% | 3.0 | MN | Hotel | 67.2% | 64.5% | |||||||||||
Senior | 04/18 | 64.0 | 64.0 | 60.9 | L+3.78% | L+4.23% | 3.0 | GA | Hotel | 68.8% | 59.8% |
(dollars in millions) | ||||||||||||||||||||||
Type (1) | Origination/ Acquisition Date | Maximum Loan Commitment | Principal Balance | Carrying Value | Cash Coupon (2) | All-in Yield at Origination (3) | Original Term (Years) | State | Property Type | Initial LTV (4) | Stabilized LTV (5) | |||||||||||
Senior | 09/19 | 60.2 | 53.7 | 53.1 | L+3.00% | L+3.63% | 2.0 | TX | Office | 64.7% | 59.0% | |||||||||||
Senior | 12/18 | 60.1 | 49.1 | 48.4 | L+2.90% | L+3.44% | 3.0 | TX | Office | 68.5% | 66.7% | |||||||||||
Senior | 01/17 | 58.6 | 47.3 | 47.0 | L+4.50% | L+5.16% | 3.0 | CA | Industrial | 51.0% | 60.4% | |||||||||||
Senior | 01/17 | 56.2 | 56.2 | 55.9 | L+4.75% | L+5.24% | 4.0 | SC | Office | 67.6% | 67.1% | |||||||||||
Senior | 06/19 | 55.0 | 50.0 | 48.9 | L+3.10% | L+3.67% | 3.0 | AL | Multifamily | 69.5% | 74.0% | |||||||||||
Senior | 12/15 | 54.5 | 54.5 | 54.2 | L+3.73% | L+4.87% | 4.0 | PA | Office | 74.5% | 67.5% | |||||||||||
Senior | 06/19 | 54.1 | 48.8 | 48.2 | L+3.30% | L+3.70% | 3.0 | VA | Office | 49.3% | 49.9% | |||||||||||
Senior | 12/19 | 52.3 | 42.2 | 41.5 | L+3.61% | L+4.20% | 3.0 | NY | Industrial | 76.8% | 72.4% | |||||||||||
Senior | 10/18 | 52.2 | 49.4 | 48.7 | L+2.70% | L+3.10% | 3.0 | NJ | Industrial | 73.9% | 68.8% | |||||||||||
Senior | 05/17 | 52.0 | 52.0 | 50.8 | L+4.70% | L+5.50% | 3.0 | HI | Hotel | 60.8% | 59.4% | |||||||||||
Senior | 12/18 | 51.0 | 51.0 | 50.4 | L+2.99% | L+3.40% | 3.0 | IL | Multifamily | 78.6% | 74.9% | |||||||||||
Senior | 02/20 | 50.2 | 42.0 | 40.5 | L+3.30% | L+3.75% | 3.0 | TN | Hotel | 69.1% | 54.2% | |||||||||||
Senior | 09/18 | 50.1 | 21.5 | 21.2 | L+3.25% | L+4.13% | 3.0 | IL | Office | 47.9% | 56.1% | |||||||||||
Senior | 08/17 | 50.0 | 49.7 | 49.3 | L+3.09% | L+4.88% | 3.0 | LA | Multifamily | 64.6% | 60.9% | |||||||||||
Senior | 05/18 | 50.0 | 50.0 | 49.3 | L+3.60% | L+3.85% | 3.0 | TX | Multifamily | 71.1% | 71.4% | |||||||||||
Senior | 10/18 | 49.1 | 36.1 | 35.3 | L+4.15% | L+5.24% | 3.0 | IL | Multifamily | 60.7% | 62.4% | |||||||||||
Senior | 12/18 | 49.0 | 42.9 | 42.5 | L+2.93% | L+3.39% | 3.0 | NY | Industrial | 56.5% | 56.3% | |||||||||||
Senior | 12/17 | 47.0 | 40.6 | 40.0 | L+4.38% | L+5.26% | 3.0 | MA | Mixed-Use | 72.9% | 62.0% | |||||||||||
Senior | 05/18 | 46.5 | 32.0 | 31.7 | L+4.07% | L+4.63% | 3.0 | NY | Mixed-Use | 57.0% | 51.1% | |||||||||||
Senior | 08/19 | 46.4 | 39.7 | 38.8 | L+2.84% | L+3.39% | 3.0 | GA | Office | 69.5% | 68.3% | |||||||||||
Senior | 07/16 | 46.0 | 34.9 | 34.7 | L+2.93% | L+4.99% | 4.0 | VA | Office | 62.8% | 61.5% | |||||||||||
Senior | 06/18 | 46.0 | 44.4 | 42.8 | L+3.60% | L+4.06% | 3.0 | WY | Hotel | 67.4% | 62.3% | |||||||||||
Senior | 08/18 | 44.8 | 41.7 | 41.3 | L+2.93% | L+3.32% | 3.0 | TX | Multifamily | 68.9% | 63.6% | |||||||||||
Senior | 05/19 | 44.1 | 40.6 | 40.1 | L+3.20% | L+3.60% | 3.0 | NY | Mixed-Use | 59.7% | 55.1% | |||||||||||
Senior | 10/19 | 42.9 | 31.0 | 30.5 | L+2.75% | L+3.28% | 3.0 | CA | Office | 70.6% | 67.8% | |||||||||||
Senior | 08/17 | 40.0 | 40.0 | 35.9 | L+4.24% | L+4.40% | 3.0 | KY | Multifamily | 79.8% | 73.1% | |||||||||||
Senior | 05/18 | 38.8 | 33.0 | 32.9 | L+3.18% | L+3.95% | 3.0 | MA | Office | 47.0% | 41.1% | |||||||||||
Senior | 07/19 | 37.5 | 34.6 | 33.3 | L+3.70% | L+4.43% | 3.0 | NJ | Hotel | 47.8% | 54.6% | |||||||||||
Senior | 12/17 | 37.2 | 35.3 | 34.9 | L+3.90% | L+4.55% | 3.0 | CA | Office | 69.8% | 66.4% | |||||||||||
Senior | 11/18 | 37.1 | 22.3 | 21.6 | L+3.60% | L+5.50% | 3.0 | CA | Mixed-Use | 69.9% | 67.9% | |||||||||||
Senior | 10/18 | 36.8 | 29.9 | 29.4 | L+2.85% | L+3.45% | 3.0 | NY | Industrial | 71.2% | 70.8% | |||||||||||
Senior | 05/17 | 35.2 | 31.2 | 29.8 | L+5.00% | L+5.97% | 3.0 | TX | Office | 68.7% | 65.1% | |||||||||||
Senior | 06/18 | 34.9 | 30.3 | 28.6 | L+4.07% | L+4.75% | 3.0 | OH | Hotel | 70.6% | 57.4% | |||||||||||
Senior | 03/20 | 34.9 | 11.7 | 11.3 | L+3.42% | L+4.66% | 3.0 | GA | Office | 63.2% | 64.6% | |||||||||||
Senior | 12/18 | 34.2 | 27.5 | 27.3 | L+2.92% | L+3.27% | 4.0 | IL | Multifamily | 70.8% | 62.1% | |||||||||||
Senior | 10/17 | 34.1 | 23.7 | 23.5 | L+4.05% | L+4.69% | 3.0 | AZ | Office | 62.6% | 59.5% | |||||||||||
Senior | 05/17 | 33.8 | 29.5 | 29.2 | L+4.40% | L+5.36% | 3.0 | AZ | Office | 69.5% | 59.0% | |||||||||||
Senior | 03/16 | 33.8 | 33.8 | 33.3 | 5.11% | 5.26% | 10.0 | NJ | Office | 74.9% | 74.9% | |||||||||||
Senior | 10/19 | 33.7 | 25.9 | 25.4 | L+3.15% | L+3.75% | 3.0 | CA | Office | 70.6% | 64.2% | |||||||||||
Senior | 03/20 | 33.5 | 24.8 | 24.5 | L+2.80% | L+3.27% | 3.0 | CA | Office | 63.6% | 66.7% | |||||||||||
Senior | 11/19 | 33.2 | 27.4 | 26.9 | L+2.70% | L+3.14% | 3.0 | NC | Multifamily | 80.0% | 72.8% | |||||||||||
Senior | 03/19 | 32.0 | 26.9 | 26.6 | L+2.97% | L+3.42% | 3.0 | NY | Office | 53.8% | 48.5% | |||||||||||
Senior | 08/19 | 32.0 | 10.1 | 9.8 | L+3.32% | L+5.27% | 3.0 | MA | Office | 76.5% | 54.1% | |||||||||||
Senior | 08/19 | 31.7 | 26.1 | 25.6 | L+2.80% | L+3.53% | 3.0 | LA | Multifamily | 74.1% | 72.4% | |||||||||||
Senior | 11/19 | 31.3 | 31.1 | 30.8 | L+2.75% | L+3.27% | 2.0 | IL | Multifamily | 72.7% | 72.7% | |||||||||||
Senior | 08/19 | 31.3 | 25.0 | 24.6 | L+2.90% | L+3.38% | 3.0 | TX | Multifamily | 79.3% | 72.5% | |||||||||||
Senior | 05/17 | 30.9 | 28.7 | 28.3 | L+3.50% | L+5.19% | 4.0 | FL | Office | 69.3% | 68.5% | |||||||||||
Senior | 07/17 | 30.0 | 30.0 | 29.8 | L+4.10% | L+4.58% | 3.0 | NY | Multifamily | 76.5% | 76.5% | |||||||||||
Senior | 06/18 | 29.3 | 24.9 | 24.6 | L+3.40% | L+4.18% | 3.0 | CA | Office | 69.1% | 64.3% | |||||||||||
Senior | 06/18 | 29.0 | 29.0 | 28.3 | L+3.55% | L+3.96% | 3.0 | TX | Multifamily | 74.3% | 68.2% | |||||||||||
Senior | 11/18 | 28.6 | 25.4 | 25.1 | L+3.50% | L+4.12% | 3.0 | TN | Office | 61.8% | 63.6% | |||||||||||
Senior | 11/15 | 28.5 | 28.5 | 28.2 | L+4.75% | L+4.67% | 3.0 | NY | Office | 66.4% | 68.7% | |||||||||||
Senior | 11/19 | 27.7 | 18.5 | 18.2 | L+3.18% | L+3.64% | 3.0 | CA | Office | 61.7% | 62.8% | |||||||||||
Senior | 01/19 | 27.5 | 25.9 | 25.7 | L+2.97% | L+3.38% | 3.0 | TX | Multifamily | 64.9% | 64.9% | |||||||||||
Senior | 12/18 | 27.5 | 24.7 | 23.6 | L+3.90% | L+4.42% | 3.0 | MN | Hotel | 64.7% | 57.7% |
(dollars in millions) | ||||||||||||||||||||||
Type (1) | Origination/ Acquisition Date | Maximum Loan Commitment | Principal Balance | Carrying Value | Cash Coupon (2) | All-in Yield at Origination (3) | Original Term (Years) | State | Property Type | Initial LTV (4) | Stabilized LTV (5) | |||||||||||
Senior | 06/17 | 27.0 | 24.0 | 23.3 | L+3.83% | L+5.24% | 3.0 | CA | Hotel | 54.7% | 48.6% | |||||||||||
Senior | 01/19 | 27.0 | 23.4 | 23.1 | L+2.90% | L+3.44% | 3.0 | MA | Office | 71.2% | 70.1% | |||||||||||
Senior | 09/17 | 26.9 | 23.9 | 23.1 | L+4.90% | L+5.52% | 3.0 | MA | Hotel | 67.3% | 63.9% | |||||||||||
Senior | 08/19 | 26.8 | 23.3 | 22.9 | L+3.15% | L+3.67% | 3.0 | SC | Multifamily | 67.0% | 58.7% | |||||||||||
Senior | 07/17 | 26.0 | 24.6 | 24.4 | L+3.15% | L+4.86% | 3.0 | CA | Office | 62.3% | 64.2% | |||||||||||
Senior | 01/18 | 26.0 | 26.0 | 25.0 | L+5.13% | L+5.58% | 3.0 | AZ | Hotel | 65.8% | 61.3% | |||||||||||
Senior | 12/18 | 26.0 | 21.1 | 20.9 | L+2.95% | L+3.43% | 3.0 | FL | Office | 61.9% | 65.5% | |||||||||||
Senior | 06/18 | 25.9 | 25.9 | 25.5 | L+3.50% | L+4.37% | 3.0 | PA | Industrial | 72.1% | 66.1% | |||||||||||
Senior | 09/18 | 25.5 | 22.0 | 21.6 | L+3.87% | L+4.42% | 3.0 | NY | Mixed-Use | 60.2% | 59.3% | |||||||||||
Senior | 06/19 | 25.5 | 25.5 | 23.5 | L+4.50% | L+5.05% | 3.0 | NY | Other | 39.6% | 39.6% | |||||||||||
Senior | 10/15 | 25.0 | 25.0 | 24.4 | L+4.07% | L+5.76% | 3.0 | MO | Hotel | 73.2% | 57.8% | |||||||||||
Senior | 08/19 | 25.0 | 23.9 | 23.6 | L+2.66% | L+3.07% | 2.0 | OK | Multifamily | 79.9% | 74.2% | |||||||||||
Senior | 07/19 | 24.0 | 16.1 | 15.9 | L+3.00% | L+3.60% | 3.0 | OH | Office | 63.1% | 66.1% | |||||||||||
Senior | 10/18 | 23.7 | 23.2 | 21.8 | L+4.21% | L+5.16% | 3.0 | CT | Hotel | 75.4% | 66.9% | |||||||||||
Senior | 01/18 | 23.4 | 21.1 | 20.9 | L+4.77% | L+5.50% | 3.0 | PA | Mixed-Use | 66.8% | 67.3% | |||||||||||
Senior | 03/19 | 23.3 | 23.3 | 22.9 | L+3.27% | L+3.79% | 3.0 | WI | Multifamily | 72.4% | 75.2% | |||||||||||
Senior | 07/19 | 23.3 | 20.0 | 19.7 | L+2.95% | L+3.51% | 3.0 | CA | Office | 62.3% | 62.6% | |||||||||||
Senior | 08/16 | 23.2 | 23.2 | 23.1 | L+5.15% | L+5.42% | 4.0 | NY | Industrial | 70.0% | 67.6% | |||||||||||
Senior | 03/18 | 23.0 | 23.0 | 21.1 | L+4.05% | L+4.65% | 2.0 | FL | Office | 60.8% | 60.8% | |||||||||||
Senior | 06/18 | 22.8 | 17.2 | 16.7 | L+4.21% | L+4.73% | 3.0 | FL | Retail | 74.0% | 69.4% | |||||||||||
Senior | 01/19 | 22.7 | 22.4 | 22.2 | L+2.99% | L+3.40% | 3.0 | WI | Multifamily | 69.3% | 73.5% | |||||||||||
Senior | 04/18 | 22.2 | 21.5 | 21.4 | L+4.05% | L+4.46% | 3.0 | KS | Multifamily | 72.1% | 67.4% | |||||||||||
Senior | 08/17 | 21.9 | 18.9 | 18.7 | L+4.77% | L+5.49% | 3.0 | PA | Office | 66.7% | 67.3% | |||||||||||
Senior | 12/18 | 21.8 | 10.2 | 10.1 | L+4.44% | L+5.56% | 3.0 | PA | Multifamily | 70.1% | 67.0% | |||||||||||
Senior | 07/17 | 21.5 | 21.3 | 21.3 | L+2.98% | L+4.42% | 3.0 | GA | Multifamily | 75.6% | 75.2% | |||||||||||
Senior | 10/18 | 21.5 | 18.4 | 18.2 | L+3.24% | L+3.69% | 3.0 | TX | Office | 73.0% | 69.9% | |||||||||||
Senior | 12/18 | 21.2 | 19.7 | 19.5 | L+3.42% | L+3.88% | 2.0 | MN | Multifamily | 73.6% | 73.7% | |||||||||||
Senior | 08/17 | 21.2 | 21.2 | 21.1 | L+4.20% | L+4.50% | 3.0 | NY | Office | 72.7% | 66.7% | |||||||||||
Senior | 03/19 | 21.1 | 19.3 | 19.0 | L+2.93% | L+3.40% | 3.0 | KY | Multifamily | 69.8% | 69.9% | |||||||||||
Senior | 06/19 | 21.0 | 19.4 | 19.2 | L+2.90% | L+4.24% | 3.0 | GA | Mixed-Use | 60.6% | 67.4% | |||||||||||
Senior | 06/19 | 20.9 | 13.8 | 13.3 | 10.00% | 14.17% | 1.0 | FL | Other | 39.7% | 57.2% | |||||||||||
Senior | 03/18 | 19.7 | 19.7 | 17.7 | L+5.15% | L+5.71% | 3.0 | CA | Hotel | 67.2% | 60.0% | |||||||||||
Senior | 11/18 | 19.0 | 15.2 | 14.9 | L+3.20% | L+3.83% | 3.0 | CA | Office | 73.1% | 64.5% | |||||||||||
Senior | 04/18 | 18.7 | 18.7 | 18.6 | L+4.29% | L+4.65% | 3.0 | NV | Multifamily | 78.7% | 66.1% | |||||||||||
Senior | 08/19 | 18.4 | 18.4 | 18.2 | L+2.97% | L+3.45% | 3.0 | TN | Multifamily | 63.6% | 62.1% | |||||||||||
Senior | 01/19 | 18.3 | 17.6 | 17.3 | L+3.40% | L+4.14% | 3.0 | TX | Multifamily | 72.2% | 68.2% | |||||||||||
Senior | 07/18 | 16.6 | 11.0 | 10.6 | L+3.75% | L+4.35% | 3.0 | CA | Office | 77.1% | 63.5% | |||||||||||
Senior | 09/18 | 16.5 | 16.5 | 16.4 | L+2.85% | L+3.06% | 3.0 | SC | Multifamily | 79.4% | 72.2% | |||||||||||
Senior | 11/18 | 16.2 | 16.2 | 16.0 | L+3.15% | L+3.65% | 3.0 | TX | Multifamily | 68.8% | 68.7% | |||||||||||
Senior | 06/19 | 15.2 | 10.3 | 10.1 | L+3.96% | L+4.69% | 3.0 | NY | Office | 40.7% | 60.0% | |||||||||||
Mezzanine | 01/17 | 14.4 | 14.4 | 14.1 | 8.00% | 8.11% | 10.0 | HI | Hotel | 41.4% | 36.2% | |||||||||||
Senior | 04/19 | 14.3 | 12.2 | 12.0 | L+3.75% | L+4.31% | 3.0 | OH | Multifamily | 62.6% | 65.4% | |||||||||||
CMBS | 12/15 | 12.8 | 12.8 | 8.3 | L+6.91% | L+7.20% | 2.8 | Various | Office | 65.8% | 65.8% | |||||||||||
Senior | 09/19 | 12.0 | 11.1 | 10.8 | L+2.99% | L+3.50% | 3.0 | WI | Multifamily | 51.4% | 75.0% | |||||||||||
CMBS | 11/15 | 11.8 | 11.8 | 10.8 | L+7.25% | L+8.06% | 2.8 | Various | Office | 77.6% | 77.5% | |||||||||||
Mezzanine | 08/15 | 9.9 | 9.9 | 9.2 | L+9.50% | L+9.84% | 5.0 | GA | Office | 73.3% | 67.1% | |||||||||||
Mezzanine | 11/15 | 3.3 | 3.3 | 3.0 | 13.00% | 12.50% | 10.0 | NY | Hotel | 68.3% | 58.0% | |||||||||||
Total/Weighted Average | $5,129.8 | $4,367.0 | $4,270.4 | L+3.55% | L+4.23% | 3.2 | 66.3% | 63.7% |
(1) | “Senior” means a loan primarily secured by a first priority lien on commercial real property and related personal property and also includes, when applicable, any companion subordinate loans. |
(2) | Cash coupon does not include origination or exit fees. Weighted average cash coupon excludes fixed rate loans. |
(3) | Yield includes net origination fees and exit fees, but does not include future fundings, and is expressed as a monthly equivalent. Weighted average yield excludes fixed rate loans. |
(4) | Initial loan-to-value ratio, or initial LTV, is calculated as the initial loan amount (plus any financing that is pari passu with or senior to such loan) divided by the as is appraised value (as determined in conformance with the Uniform Standards of Professional Appraisal Practice, or USPAP) as of the date of the loan was originated set forth in the original appraisal. |
(5) | Stabilized loan-to-value ratio, or stabilized LTV, is calculated as the fully funded loan amount (plus any financing that is pari passu with or senior to such loan), including all contractually provided for future fundings, divided by the as stabilized value (as determined in conformance with USPAP) set forth in the original appraisal. As stabilized value may be based on certain assumptions, such as future construction completion, projected re-tenanting, payment of tenant improvement or leasing commissions allowances or free or abated rent periods, or increased tenant occupancies. |
(in thousands) | Quarterly Average | End of Period Balance | Maximum Balance of Any Month-End | ||||||||
For the Three Months Ended March 31, 2020 | $ | 3,422,580 | $ | 3,481,865 | $ | 3,481,865 | |||||
For the Three Months Ended December 31, 2019 | $ | 3,299,023 | $ | 3,393,172 | $ | 3,393,172 | |||||
For the Three Months Ended September 30, 2019 | $ | 3,015,152 | $ | 3,233,053 | $ | 3,233,053 | |||||
For the Three Months Ended June 30, 2019 | $ | 2,549,873 | $ | 2,731,238 | $ | 2,731,238 | |||||
For the Three Months Ended March 31, 2019 | $ | 2,444,276 | $ | 2,459,932 | $ | 2,586,880 |
March 31, 2020 | |||||||||||||||
(in thousands) | Maturity Date (1) | Committed | Amount Outstanding | Unused Capacity | Total Capacity | ||||||||||
Repurchase facilities: | |||||||||||||||
Morgan Stanley Bank | June 28, 2021 | No | $ | 594,545 | $ | 5,455 | $ | 600,000 | |||||||
Goldman Sachs Bank | May 2, 2021 | No | $ | 461,860 | $ | 38,140 | $ | 500,000 | |||||||
JPMorgan Chase Bank | June 28, 2022 | No | $ | 405,505 | $ | 44,495 | $ | 450,000 | |||||||
Citibank | January 9, 2023 | No | $ | 412,812 | $ | 87,188 | $ | 500,000 | |||||||
Wells Fargo Bank (2) | June 28, 2021 | No | $ | 180,456 | $ | 94,544 | $ | 275,000 | |||||||
Asset-specific financings: | |||||||||||||||
Canadian Imperial Bank of Commerce | Various | No | $ | 119,062 | $ | 30,938 | $ | 150,000 | |||||||
Revolving credit facilities: | |||||||||||||||
Citibank (3) | July 26, 2021 | No | $ | 38,361 | $ | 36,639 | $ | 75,000 |
(1) | The facilities are set to mature on the stated maturity date, unless extended pursuant to their terms. |
(2) | We retain an option to increase the maximum facility capacity amount up to $350 million, subject to customary terms and conditions. |
(3) | We retain an option to increase the maximum facility capacity amount up to $150 million, subject to customary terms and conditions. |
• | Unrestricted cash cannot be less than the greater of $30.0 million and 5.0% of recourse indebtedness. As of March 31, 2020, our unrestricted cash, as defined, was $99.3 million, while 5.0% of our recourse indebtedness, as defined, was $45.9 million. |
• | Tangible net worth must be greater than the sum of 75.0% of tangible net worth as of March 31, 2020 and 75.0% of net cash proceeds of additional equity issuances, which calculates to $782.3 million. As of March 31, 2020, our tangible net worth, as defined, was $1.0 billion. |
• | Target asset leverage ratio cannot exceed 77.5% and our total leverage ratio cannot exceed 80.0%. As of March 31, 2020, our target asset leverage ratio, as defined, was 75.2% and our total leverage ratio, as defined, was 78.5%. |
• | Minimum interest coverage must be greater than 1.5:1.0. As of March 31, 2020, our minimum interest coverage, as defined, was 1.8:1.0. |
(in thousands) | March 31, 2020 | December 31, 2019 | |||||
Loans held-for-investment | $ | 4,168,312 | $ | 4,081,155 | |||
Available-for-sale securities, at fair value | 8,319 | 12,830 | |||||
Held-to-maturity securities | 10,836 | 18,076 | |||||
Restricted cash | 4,302 | — | |||||
Total | $ | 4,191,769 | $ | 4,112,061 |
(in thousands) | March 31, 2020 | December 31, 2019 | |||||
Within one year | $ | 360,113 | $ | 709,363 | |||
One to three years | 2,993,046 | 2,533,995 | |||||
Three to five years | 128,706 | 149,814 | |||||
Five years and over | — | — | |||||
Total | $ | 3,481,865 | $ | 3,393,172 |
• | Cash flows from operating activities. For the three months ended March 31, 2020, operating activities decreased our cash balances by approximately $39.3 million, primarily driven by our financial results for the year. |
• | Cash flows from investing activities. For the three months ended March 31, 2020, investing activities decreased our cash balances by approximately $76.5 million, primarily driven by originations of loans held-for-investment, offset by repayments of loans held-for-investment and held-to-maturity securities. |
• | Cash flows from financing activities. For the three months ended March 31, 2020, financing activities increased our cash balance by approximately $64.0 million, primarily driven by net proceeds from repurchase agreements and asset-specific financings, offset by net repayments of securitized debt obligations and revolving credit facilities and dividends paid. |
Changes in Interest Rates | |||||||||||||||
(in thousands) | -100 bps | -50 bps | +50 bps | +100 bps | |||||||||||
Change in value of financial position: | |||||||||||||||
Loans held-for-investment | $ | 62 | $ | 50 | $ | (872 | ) | $ | (1,745 | ) | |||||
Available-for-sale securities | 2 | 2 | (2 | ) | (3 | ) | |||||||||
Held-to-maturity securities | 3 | 2 | (2 | ) | (5 | ) | |||||||||
Repurchase agreements | (871 | ) | (439 | ) | 439 | 877 | |||||||||
Securitized debt obligations | (318 | ) | (206 | ) | 206 | 412 | |||||||||
Asset-specific financings | (49 | ) | (25 | ) | 25 | 50 | |||||||||
Revolving credit facilities | (16 | ) | (8 | ) | 8 | 16 | |||||||||
Convertible senior notes | (3,385 | ) | (1,678 | ) | 1,649 | 3,271 | |||||||||
Total net assets | $ | (4,572 | ) | $ | (2,302 | ) | $ | 1,451 | $ | 2,873 | |||||
-100 bps | -50 bps | +50 bps | +100 bps | ||||||||||||
Change in annualized net interest income: | $ | 26,908 | $ | 14,122 | $ | 5,203 | $ | 10,406 |
• | we manage our portfolio with focus on diligent, investment-specific market review, enforcement of loan and security rights and timely execution of disposition strategies; |
• | we actively employ portfolio-wide and investment-specific risk measurement and management processes in our daily operations, including utilizing our Manager’s risk management tools; and |
• | we seek to manage credit risk through our rigorous underwriting due diligence process prior to origination or acquisition of our target investments and through the use of non-recourse financing, when and where available and appropriate. |
• | The COVID-19 pandemic could have a significant long-term impact on the broader economy and the commercial real estate market generally, which would negatively impact the value of the assets collateralizing our loans. Our portfolio includes loans collateralized by hotel, retail and other asset classes which have been significantly negatively impacted by the pandemic, particularly due to government-mandated closures and travel restrictions. While we believe the principal amount of our loans are generally adequately protected by the value of the underlying collateral, there can be no assurance that we will realize the entire principal value of certain investments. |
• | We are actively engaged in discussions with our borrowers, some of whom have indicated that, due to the impact of the COVID-19 pandemic, they have been unable to timely execute their business plans, have had to temporarily close their businesses or have experienced other negative business consequences. As a result, some borrowers have requested or indicated that they will be requesting interest deferral or forbearance or other modifications of their loans. We therefore anticipate more frequent modifications of our loans and potentially instances of default or foreclosure on assets underlying our loans, which would adversely affect the credit profile of our assets and our results of operations and financial condition. |
• | We have repurchase agreements with numerous lenders and are actively engaged in discussions with them, particularly with respect to the effects of the COVID-19 pandemic, around the value of pledged assets as defined in such agreements, our ability to deleverage or finance our future loan funding commitments, the application of certain provisions of such agreements to these circumstances and other structural elements under the agreements. If we do not have sufficient liquidity to make required payments on a timely basis, we would likely experience defaults and potential loss of assets to the lenders unless we are able to raise the funds from alternative sources, including by selling or financing assets or raising capital, or liquidity sources, each of which we may be required to do under adverse market conditions or at an inopportune time or on unfavorable terms, or may be unable to do at all. A default under one agreement may trigger cross-defaults under other agreements. Continued market volatility may further limit our ability to access liquidity sources under favorable terms, or at all. Pledging additional collateral or otherwise paying down facilities to satisfy our lenders and avoid potential margin calls and loan defaults would reduce our cash available to meet subsequent margin calls and/or future funding requests, as well as to make other higher yielding investments, thereby decreasing our liquidity, return on equity, available cash, net income and ability to implement our investment strategy. We also have covenants in some of our debt agreements that require us to maintain a minimum amount of cash, which could impact our ability to satisfy |
• | Because of the impacts of the COVID-19 pandemic on global economies and U.S. commercial real estate, we likely will experience reduced availability of liquidity sources, but our requirements for liquidity, including future loan funding obligations and potential margin calls, likely will not be commensurately reduced. If we do not have funds available to meet our obligations, we would have to raise funds from alternative sources, which may be at unfavorable terms or may not be available to us. We expect that the financial impact of the COVID-19 pandemic will likely adversely affect our liquidity position and could limit our ability to grow our business and successfully execute our business strategy. In order to preserve and build our liquidity to weather near-term market uncertainty, satisfy our loan future funding and financing obligations and potentially make opportunistic new investments, we intend to take some or all of the following actions: raise capital from offerings of securities, borrow additional capital, sell assets and/or change our dividend practice (which we did for the quarter ended March 31, 2020 by temporarily suspending the payment of dividends on our common stock). One or more of these conditions could increase our secured debt or be dilutive to our existing stockholders. |
• | Interest rates and credit spreads have been significantly impacted since the outbreak of COVID-19. This can increase the volatility of the fair value of our floating rate loans and also the interest obligations on our floating-rate debt and fair value of our fixed-rate liabilities, which could increase our interest expense. |
• | An extended period of remote working by our personnel could strain our technology resources and introduce operational risks, including heightened cybersecurity risk. Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that seek to exploit the COVID-19 pandemic. |
• | lack of liquidity of our investments; |
• | the greater risk of loss to which we are exposed in connection with CMBS, CLOs, B-notes, mezzanine loans and other investments that are subordinated or otherwise junior in an issuer’s capital structure and that involve privately negotiated structures; |
• | risks associated with loans on properties in transition, renovation, restoration or construction; |
• | impairment of our investments and harm to our operations from a prolonged economic slowdown, a lengthy or severe recession or declining real estate values; |
• | the concentration of our loans and investments in terms of geography, asset types and sponsors; |
• | losses resulting from foreclosing on certain of the loans we originate or acquire; |
• | downgrades in credit ratings assigned to our investments; |
• | investments in non-investment grade rated commercial real estate loans or securities; |
• | the difficulty of estimating provisions for loan losses; |
• | our debt; |
• | risks associated with non-recourse securitizations which we use to finance our loans and investments; |
• | losses arising from current and future guarantees of debt and contingent obligations of our subsidiaries; |
• | borrower and counterparty risks; |
• | if the market value or income potential of our assets decline, we may need to increase our real estate assets and income or liquidate our non-qualifying assets in order to maintain our REIT qualification or exclusion from the Investment Company Act; |
• | operational impacts on ourselves and our third-party service providers, including loan servicers and other service providers, such as trustees, appraisers and other due diligence vendors and document custodians, related to our investments in commercial real estate debt investments, as well as for general operating purposes; |
• | the availability of key personnel of the Manager and our service providers as they face changed circumstances and potential illness during the pandemic; and |
• | other risks described in our Annual Report as they may be amended by our periodic filings with the SEC. |
Exhibit Number | Exhibit Index | |
3.1 | ||
3.2 | ||
3.3 | ||
4.1 | ||
4.2 | ||
4.3 | ||
4.4 | ||
10.1 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101 | Financial statements from the Quarterly Report on Form 10-Q of Granite Point Mortgage Trust Inc. for the three months ended March 31, 2020, filed with the SEC on May 11, 2020, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Statements of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to the Condensed Consolidated Financial Statements. (filed herewith) | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). (filed herewith) |
GRANITE POINT MORTGAGE TRUST INC. | |||
Dated: | May 11, 2020 | By: | /s/ John A. Taylor |
John A. Taylor President, Chief Executive Officer and Director (Principal Executive Officer) | |||
Dated: | May 11, 2020 | By: | /s/ Marcin Urbaszek |
Marcin Urbaszek Chief Financial Officer (Principal Accounting and Financial Officer) |
Date: | May 11, 2020 | /s/ John A. Taylor | ||
John A. Taylor | ||||
Chief Executive Officer and President |
Date: | May 11, 2020 | /s/ Marcin Urbaszek | ||
Marcin Urbaszek | ||||
Chief Financial Officer and Treasurer |
Date: | May 11, 2020 | /s/ John A. Taylor | ||
John A. Taylor | ||||
Chief Executive Officer and President |
Date: | May 11, 2020 | /s/ Marcin Urbaszek | ||
Marcin Urbaszek | ||||
Chief Financial Officer and Treasurer |
Convertible Senior Notes |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Convertible Debt [Abstract] | |
Convertible Senior Notes | Convertible Senior Notes In December 2017, the Company closed a private placement of $125.0 million aggregate principal amount of convertible senior notes due 2022. In January 2018, an additional $18.8 million in notes were issued by the Company in connection with the exercise of the initial purchaser’s option. The net proceeds from the offering were approximately $139.5 million after deducting underwriting discounts and expenses. The notes are unsecured, pay interest semiannually at a rate of 5.625% per annum and are convertible at the option of the holder into shares of the Company’s common stock. The notes will mature in December 2022, unless earlier converted or repurchased in accordance with their terms. The Company does not have the right to redeem the notes prior to maturity, but may be required to repurchase the notes from holders under certain circumstances. As of March 31, 2020, the notes had a conversion rate of 50.7073 shares of common stock per $1,000 principal amount of the notes. In October 2018, the Company closed an underwritten public offering of $131.6 million aggregate principal amount of convertible senior notes due 2023. The net proceeds from the offering were approximately $127.7 million after deducting underwriting discounts and expenses. The notes are unsecured, pay interest semiannually at a rate of 6.375% per annum and are convertible at the option of the holder into shares of the Company’s common stock. The notes will mature in October 2023, unless earlier converted or repurchased in accordance with their terms. The Company does not have the right to redeem the notes prior to maturity, but may be required to repurchase the notes from holders under certain circumstances. As of March 31, 2020, the notes had a conversion rate of 48.8496 shares of common stock per $1,000 principal amount of the notes. The consolidated amount outstanding due on convertible senior notes as of March 31, 2020 and December 31, 2019 was $270.0 million and $269.6 million, respectively, net of deferred issuance costs.
|
Cash, Cash Equivalents and Restricted Cash |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents include cash held in bank accounts and cash held in money market funds on an overnight basis. The Company is required to maintain certain cash balances in restricted accounts as collateral for the Company’s repurchase agreements and with counterparties to support investment activities. As of March 31, 2020 and December 31, 2019, the Company had $7.6 million and $3.4 million, respectively, as collateral for repurchase agreements and by counterparties to support investment activities. In addition, as of March 31, 2020 and December 31, 2019, the Company held $0.9 million and $76.1 million, respectively, in restricted cash representing proceeds from principal paydowns of loans held in the CLOs. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Company’s condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019 that sum to the total of the same such amounts shown in the statements of cash flows:
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Available-for-Sale Securities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Securities, Available-for-sale [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Available-for-sale Securities Reconciliation | The following table presents the components of the carrying value of AFS securities as of March 31, 2020 and December 31, 2019:
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Collateralized Borrowings (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Collateralized Borrowings [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Collateralized Borrowings | The following tables summarize details of the Company’s collateralized borrowings outstanding as of March 31, 2020 and December 31, 2019:
____________________
(4) As of March 31, 2020, the Company retained an option to increase the maximum facility capacity amount up to $150 million, subject to customary terms and conditions.
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Schedule of Collateralized Borrowings by Maturity | At March 31, 2020, the Company’s collateralized borrowings outstanding had the following remaining maturities:
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Schedule of Repurchase Agreement Counterparties with Whom Repurchase Agreements Exceed 10 Percent of Stockholders' Equity | The following table summarizes certain characteristics of the Company’s repurchase agreements and counterparty concentration at March 31, 2020 and December 31, 2019:
____________________ (1) Represents the excess of the carrying amount or market value of the loans held-for-investment, AFS securities and HTM securities pledged as collateral for repurchase agreements, including accrued interest plus any cash on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest.
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Subsequent Events |
3 Months Ended |
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Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Events subsequent to March 31, 2020, were evaluated through the date these financial statements were issued and no other additional events were identified requiring further disclosure in these condensed consolidated financial statements.
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Equity Incentive Plan |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Incentive Plan | Equity Incentive Plan The Company’s 2017 Equity Incentive Plan, or the Plan, provides incentive compensation to attract and retain qualified directors, officers, advisors, consultants and other personnel, including certain personnel of the Manager and its affiliates. The Plan is administered by the compensation committee of the Company’s board of directors. The compensation committee has the full authority to administer and interpret the Plan, to authorize the granting of awards, to determine the eligibility of directors, officers, advisors, consultants and other personnel, including personnel of the Manager and its affiliates, to receive an award, to determine the number of shares of common stock to be covered by each award (subject to the individual participant limitations provided in the Plan), to determine the terms, provisions and conditions of each award (which may not be inconsistent with the terms of the Plan), to prescribe the form of instruments evidencing awards and to take any other actions and make all other determinations that it deems necessary or appropriate in connection with the Plan or the administration or interpretation thereof. In connection with this authority, the compensation committee may, among other things, establish performance goals that must be met in order for awards to be granted or to vest, or for the restrictions on any such awards to lapse. The Plan provides for grants of restricted common stock, phantom shares, dividend equivalent rights and other equity-based awards, subject to a ceiling of 3,242,306 shares available for issuance under the Plan. The Plan allows for the Company’s board of directors to expand the types of awards available under the Plan to include long-term incentive plan units in the future. If an award granted under the Plan expires or terminates, the shares subject to any portion of the award that expires or terminates without having been exercised or paid, as the case may be, will again become available for the issuance of additional awards. Unless earlier terminated by the Company’s board of directors, no new award may be granted under the Plan after the tenth anniversary of the effective date of the Plan. No award may be granted under the Plan to any person who, assuming payment of all awards held by such person, would own or be deemed to own more than 9.8% of the outstanding shares of the Company’s common stock. During the three months ended March 31, 2020 and 2019, the Company granted 297,769 and 258,918 shares of restricted common stock, respectively, to key employees of the Manager and its affiliates pursuant to the terms of the Plan and the associated award agreements. The estimated fair value of these awards was $18.47 and $19.31 per share, respectively, on the grant date, based on the closing market price of the Company’s common stock on the NYSE on such date. The shares underlying the grants vest in three equal annual installments commencing on the first anniversary of the grant date, as long as the grantee complies with the terms and conditions of his or her applicable restricted stock award agreement. The following table summarizes the activity related to restricted common stock for the three months ended March 31, 2020 and 2019:
For the three months ended March 31, 2020 and 2019, the Company recognized compensation related to restricted common stock of $1.4 million and $1.1 million, respectively.
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Loans Held-for-Investment (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Loans Held-for-Investment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Loans Held-for-Investment | The following tables summarize the Company’s loans held-for-investment by asset type, property type and geographic location as of March 31, 2020 and December 31, 2019:
____________________
(2) Based on contractual maturity date. Certain loans are subject to contractual extension options with such conditions stipulated in the applicable loan documents. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment fee. The Company may also extend contractual maturities in connection with loan modifications.
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Schedule of Loans Held-for-Investment by Property Type |
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Schedule of Loans Held-for-Investment by Geographic Location |
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Rollforward of Loans Held-for-Investment | The following table summarizes activity related to loans held-for-investment, net of allowance for credit losses, for the three months ended March 31, 2020 and 2019:
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Rollforward of Allowance for Credit Losses | The following table presents the changes for the three months ended March 31, 2020 in the allowance for credit losses on loans held-for-investment:
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Schedule of Loans Held-for-Investment by Internal Risk Rating | The following table presents the number of loans, unpaid principal balance and carrying value by risk rating for loans held-for-investment as of March 31, 2020 and December 31, 2019:
As of December 31, 2019 (prior to the adoption of ASU 2016-13), the Company had not identified any impaired loans and it had not recorded any allowances for losses as it was not deemed probable that the Company would not be able to collect all amounts due pursuant to the contractual terms of the loans. The following table presents the carrying value of loans held-for-investment as of March 31, 2020 by risk rating and year of origination:
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Schedule of Total Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
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Variable Interest Entity [Line Items] | ||||
Cash collateral for repurchase agreements and securities activity | $ 7,600 | $ 3,400 | ||
Cash and cash equivalents | 99,332 | 80,281 | ||
Restricted cash | 8,533 | 79,483 | ||
Cash, cash equivalents and restricted cash | 107,865 | 159,764 | $ 120,435 | $ 123,423 |
Restricted Cash and Cash Equivalents [Member] | ||||
Variable Interest Entity [Line Items] | ||||
Cash collateral for repurchase agreements and securities activity | $ 900 | $ 76,100 |
Variable Interest Entities |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities | Variable Interest Entities The Company finances pools of its commercial real estate loans through collateralized loan obligations, or CLOs, which are considered VIEs for financial reporting purposes and, thus, are reviewed for consolidation under the applicable consolidation guidance. The Company has both the power to direct the activities of the CLOs that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant, therefore, the Company consolidates the CLOs. The following table presents a summary of the assets and liabilities of all VIEs consolidated on the Company’s condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019:
The Company is not required to consolidate VIEs for which it has concluded it does not have both the power to direct the activities of the VIEs that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant. The Company’s investments in these unconsolidated VIEs include commercial mortgage-backed securities, or CMBS, which are classified within AFS securities, at fair value, and held-to-maturity, or HTM, securities on the condensed consolidated balance sheets. As of March 31, 2020 and December 31, 2019, the carrying value, which also represents the maximum exposure to loss, of all CMBS in unconsolidated VIEs was $19.2 million and $30.9 million, respectively.
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Loans Held-for-Investment Rollforward of Allowance for Credit Losses (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
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Mar. 31, 2020 |
Jan. 01, 2020 |
Dec. 31, 2019 |
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Loans Held-for-Investment [Abstract] | |||
Liability for off balance sheet credit losses | $ 7,500 | $ 1,780 | $ 0 |
Financing Receivable, Allowance for Credit Loss [Roll Forward] | |||
Allowance for loan losses | 0 | ||
Provision for credit losses | 45,873 | ||
Writeoffs | 0 | ||
Recoveries of amounts previously written off | 0 | ||
Allowance for loan losses | $ 62,565 |
Stockholders' Equity Schedule of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
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Mar. 31, 2020 |
Mar. 31, 2019 |
Dec. 31, 2019 |
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Stockholders' Equity Attributable to Parent [Abstract] | |||
Unrealized gains | $ 0 | $ 32 | |
Unrealized losses | (3,712) | 0 | |
Accumulated other comprehensive income | (3,712) | $ 32 | |
Amounts reclassified from accumulated other comprehensive income | $ 767 | $ 0 |
Variable Interest Entities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Variable Interest Entities | The following table presents a summary of the assets and liabilities of all VIEs consolidated on the Company’s condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019:
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Related Party Transactions |
3 Months Ended |
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Mar. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions The Company does not have any employees and is currently externally managed by the Manager under the terms of a management agreement. Under the management agreement, the Manager and its affiliates provide the Company with the personnel and resources necessary to operate the Company’s business. In exchange, the Company pays the Manager a base management fee that is equal to 1.5% of the Company’s equity, as defined in the management agreement, on an annualized basis. The Company incurred $3.9 million and $3.4 million, respectively, as a management fee to the Manager for the three months ended March 31, 2020 and 2019. In addition, incentive fees, if earned, are payable to the Company’s Manager, as defined in the management agreement. The Company incurred $0.2 million as an incentive fee to the Manager for the three months ended March 31, 2019. No incentive fees were incurred for the three months ended March 31, 2020. See further discussion of the base management fee and incentive fee calculations in Note 12 - Commitments and Contingencies and further discussion of base management fee reimbursements for common stock sold under the Company’s equity distribution agreement in Note 14 - Stockholder’s Equity. On March 2, 2020, the Company announced that it has agreed to a process with the Manager to internalize the Company’s management function. If the internalization is completed, the management agreement will be terminated and therefore the Company will no longer pay a management fee or reimburse expenses. During the three months ended March 31, 2020 and 2019, the Company reimbursed the Manager for certain direct and allocated net costs incurred by the Manager on behalf of the Company. These direct and allocated net costs totaled approximately $7.8 million and $6.6 million, respectively. In addition, during the three months ended March 31, 2019, the Manager paid the underwriters an amount equal to $0.20 per share for each share issued in connection with the Company’s underwritten public offering of its common stock and the related option exercised by the underwriters to purchase additional shares of the Company’s common stock. The Company has contractual relationships with a majority of its third-party vendors and pays those vendors directly. The Company will continue to have certain costs allocated to it by the Manager under the management agreement for compensation, data services, technology and certain office lease payments. The Company recognized $1.4 million and $1.1 million of compensation during the three months ended March 31, 2020 and 2019 related to restricted common stock issued to employees of the Manager and the Company’s independent directors pursuant to the Plan. See Note 15 - Equity Incentive Plan for additional information. The terms of these transactions may have been different had they been transacted with an unrelated third-party.
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Stockholders' Equity |
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Stockholders' Equity Attributable to Parent [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Common Stock On February 5, 2019, the Company closed an underwritten public offering of 6,850,000 shares of its common stock. The Company received total proceeds from the offering of approximately $130.2 million. In addition, the Company granted the underwriters a thirty-day option to purchase up to an additional 1,027,500 shares of its common stock, which was exercised in full on March 6, 2019 resulting in proceeds of $19.5 million from exercise of the underwriters option. In connection with this offering, the Manager agreed to pay approximately $1.6 million of the underwriting fees and discounts. As of March 31, 2020, the Company had 55,136,885 shares of common stock outstanding. The following table presents a reconciliation of the common shares outstanding for the three months ended March 31, 2020 and 2019:
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Distributions to Stockholders On March 25, 2020, as a result of the unprecedented market conditions and uncertainty caused by the COVID-19 pandemic, the Company announced that it had suspended its first quarter 2020 common stock dividend in order to conserve available liquidity. The following table presents cash dividends declared by the Company on its common stock from December 31, 2018 through March 31, 2020:
Share Repurchase Program The Company’s Share Repurchase Program allows for the repurchase of up to an aggregate of 2,000,000 shares of the Company’s common stock. The shares are expected to be repurchased from time to time through privately negotiated transactions or open market transactions, including pursuant to a trading plan in accordance with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, or by any combination of such methods. The manner, price, number and timing of share repurchases will be subject to a variety of factors, including market conditions and applicable SEC rules. The Company has not repurchased any of its common stock since the program was authorized. At-the-Market Offering The Company is party to an equity distribution agreement under which the Company may sell up to an aggregate of 8,000,000 shares of its common stock from time to time in any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 under the Securities Act of 1933, as amended, or the Securities Act. As of March 31, 2020, 3,242,364 shares of common stock had been sold under the equity distribution agreement for total accumulated net proceeds of approximately $61.2 million, of which 414,329 shares were sold for total proceeds of $7.8 million during the three months ended March 31, 2019. No shares were sold during the three months ended March 31, 2020. Accumulated Other Comprehensive (Loss) Income Accumulated other comprehensive (loss) income at March 31, 2020 and December 31, 2019 was as follows:
Reclassifications out of Accumulated Other Comprehensive (Loss) Income The Company reclassifies unrealized gains and losses on AFS securities in accumulated other comprehensive (loss) income to net (loss) income upon the recognition of any provision for credit losses as the allowance for credit losses on individual AFS securities is increased or decreased. For the three months ended March 31, 2020, the Company reclassified $0.8 million of unrealized losses on AFS securities out of accumulated other comprehensive (loss) income to provision for credit losses on the condensed consolidated statement of comprehensive (loss) income. The Company did not record any reclassifications out of accumulated other comprehensive (loss) income during the three months ended March 31, 2019.
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Basis of Presentation and Significant Accounting Policies |
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Basis of Presentation and Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Significant Accounting Policies | Basis of Presentation and Significant Accounting Policies Consolidation and Basis of Presentation The interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles, or GAAP, have been condensed or omitted according to such SEC rules and regulations. However, management believes that the disclosures included in these interim condensed consolidated financial statements are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at March 31, 2020 and results of operations for all periods presented have been made. The results of operations for the three months ended March 31, 2020 should not be construed as indicative of the results to be expected for future periods or the full year. The unaudited condensed consolidated financial statements of the Company include the accounts of all subsidiaries; inter-company accounts and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current period presentation. All entities in which the Company holds investments that are considered VIEs for financial reporting purposes were reviewed for consolidation under the applicable consolidation guidance. Whenever the Company has both the power to direct the activities of an entity that most significantly impact the entity’s performance, and the obligation to absorb losses or the right to receive benefits of the entity that could be significant, the Company consolidates the entity. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make a number of significant estimates. These include estimates of amount and timing of allowances for credit losses, fair value of certain assets and liabilities, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of certain revenues and expenses during the reported period. It is likely that changes in these estimates (e.g., valuation changes to the underlying collateral of loans due to changes in market capitalization rates, leasing, credit worthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, overall economic and capital markets conditions, the broader commercial real estate market, local geographic sub-markets or other factors) will occur in the near term. Over the course of the first quarter of 2020, a global outbreak of a novel strain of coronavirus (COVID-19), took place. The outbreak has spread around the world, including to every state in the United States. As a result of the pandemic, numerous countries, including the United States, have declared national emergencies. As the global impact of the outbreak has been rapidly evolving and as new cases of COVID-19 have quickly spread around the world, many countries, including the U.S., have reacted by instituting quarantines, restrictions on travel, and temporarily closing non-essential businesses. Many states in the U.S. instituted varying degrees of “shelter-in-place” guidelines or orders and other measures designed to contain the spread of COVID-19. Such actions are creating significant macroeconomic disruptions and adversely impacting many industries. The outbreak could have a continued adverse impact on macroeconomic and market conditions, and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on macroeconomic and market conditions. The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2020. However, the significant degree of uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of March 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. The Company’s actual results could ultimately differ from its estimates and the differences may be material. Significant Accounting Policies Included in Note 2 to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 is a summary of the Company’s significant accounting policies. Provided below is a summary of additional accounting policies that are significant to the Company’s consolidated financial condition and results of operations for the three months ended March 31, 2020. Recently Issued and/or Adopted Accounting Standards Measurement of Credit Losses on Financial Instruments On January 1, 2020, the Company adopted Accounting Standard Update, or ASU, 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. ASU 2016-13 significantly changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the incurred loss model under existing guidance with a Current Expected Credit Loss, or CECL, model for instruments measured at amortized cost, and also require entities to record allowances for available-for-sale, or AFS, debt securities rather than reduce the amortized cost, as they did under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. In addition, the new model applies to off-balance sheet credit exposures, such as unfunded loan commitments. ASU 2016-13 was adopted by the Company through a cumulative-effect adjustment to cumulative earnings of $18.5 million as of January 1, 2020. The allowance for credit losses required under ASU 2016-13 is a valuation account that is deducted from the amortized cost basis of related loans and debt securities on the Company’s condensed consolidated balance sheets, and which reduces the Company’s total stockholders’ equity. The initial allowance for credit losses recorded on January 1, 2020 is reflected as a direct charge to cumulative earnings; however, going forward, changes to the allowance for credit losses are recognized through net income on the Company’s condensed consolidated statements of comprehensive (loss) income. While ASU 2016-13 does not require any particular method for determining the allowance for credit losses, it does specify the allowance should be based on relevant information about past events, including historical loss experience, current portfolio, market conditions, and reasonable and supportable forecasts for the duration of each respective loan. In addition, other than a few narrow exceptions, ASU 2016-13 requires that all financial instruments subject to the CECL model have some amount of expected loss to reflect the GAAP principal underlying the CECL model that all loans, debt securities, and similar assets have some inherent risk of loss, regardless of credit quality, subordinate capital or other mitigating factors. The Company’s loans typically include commitments to fund incremental proceeds to its borrowers over the life of the loan. Those future funding commitments are also subject to an allowance for credit losses. The allowance for credit losses related to future loan fundings is recorded as a component of other liabilities on the Company’s condensed consolidated balance sheets, and not as an offset to the related loan balance. This allowance for credit losses is estimated using the same process outlined below for the Company’s outstanding loan balances, and changes in this component of the allowance for credit losses similarly flow through the Company’s condensed consolidated statement of comprehensive (loss) income. The Company elected not to measure an allowance for credit losses on accrued interest receivable. The Company generally writes off accrued interest receivable balance when interest is 90 days or more past due unless the loan is both well secured and in the process of collection. Write-offs of accrued interest receivable are recognized within provision for credit losses in the condensed consolidated statements of comprehensive income. The Company did not write-off any accrued interest receivable during the three months ended March 31, 2020. The Company’s implementation process included a selection of a credit loss analytical model, completion and documentation of policies and procedures, changes to internal reporting processes and related internal controls and additional disclosures. A control framework for governance, data, forecast, and model controls was developed to support the CECL process. Estimating an allowance for credit losses requires significant judgment and a variety of subjective assumptions, including (i) determination of relevant historical loan loss data sets, (ii) the expected timing and amount of future loan fundings and repayments, (iii) the current credit quality of loans and operating performance of loan collateral and the Company’s expectations of performance and (iv) expectations for macroeconomic conditions over the relevant time period. Considering the lack of historical company data related to any realized loan losses since its inception, the Company elected to estimate its allowance for credit losses by using a probability-weighted analytical model that considers the likelihood of default and loss-given-default for each individual loan. The analytical model incorporates a third-party licensed database with historical loan losses from 1998 to 2019 for over 100,000 commercial real estate loans. At the time of adoption of ASU No. 2016-13, in determining its initial allowance for credit losses estimate, the Company employed a third-party licensed macroeconomic forecast that largely reflected management’s views at the time and projected a stable overall economic scenario over the reasonable projection period. Significant inputs to the Company’s estimate of the allowance for credit losses include the reasonable and supportable forecast period and loan specific factors such as DSCR, LTV, remaining loan term, property type, and others. In addition, the Company also considers relevant loan-specific qualitative factors to estimate its allowance for credit losses. In certain instances, for loans with unique risk characteristics, the Company may instead elect to employ different methods to estimate loan losses that also conform to ASU 2016-13 and related guidance. Upon adoption of ASU No. 2016-13 on January 1, 2020, based on the Company’s loan portfolio, pre-COVID-19 economic environment and management’s expectations for future economic and market conditions at the time, the Company recorded an initial allowance for credit losses, as a cumulative-effective adjustment to the cumulative earnings in its consolidated statement of equity, of approximately $18.5 million, or approximately $0.34 per share. The following table illustrates the day-one financial statement impact of the adoption of ASU 2016-13 on January 1, 2020:
____________________ (1) Represents expected loss on unfunded commitments.
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Income Taxes (Details) |
Mar. 31, 2020 |
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Income Tax Disclosure [Abstract] | |
Percent of REIT taxable income the company is required to distribute | 90.00% |
Percentage of REIT taxable income the company currently intends to distribute | 100.00% |
Stockholders' Equity At-the-Market Offering (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2020 |
Mar. 31, 2019 |
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Class of Stock [Line Items] | ||
Number of shares authorized to be sold under equity distribution agreement (in shares) | 8,000,000 | |
Number of common shares issued under equity distribution agreement and outstanding as of period-end (in shares) | 3,242,364 | |
Accumulated proceeds from issuance of common shares under equity distribution agreement | $ 61,200 | |
Common stock issued during period (in shares) | 0 | 8,291,829 |
Issuance of common stock, net of offering costs | $ 157,228 | |
At the Market Offering [Member] | ||
Class of Stock [Line Items] | ||
Common stock issued during period (in shares) | 414,329 | |
Issuance of common stock, net of offering costs | $ 0 | $ 7,800 |
Preferred Stock (Details) - USD ($) |
3 Months Ended | |
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Mar. 31, 2020 |
Mar. 31, 2019 |
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Preferred Stock, Number of Shares, Par Value and Other Disclosures [Abstract] | ||
Preferred stock dividend rate | 10.00% | |
Preferred stock liquidation preference (in usd per share) | $ 1,000 | |
Period after which the company may redeem preferred stock | 5 years | |
Preferred stock, redemption price per share (in usd per share) | $ 1,000 | |
Period after which the holder may redeem preferred stock | 6 years | |
Preferred dividends declared | $ 25,000 | $ 25,000 |
Securitized Debt Obligations (Details) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
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Securitized Debt Obligations [Abstract] | ||
Securitized debt obligations | $ 982,312 | $ 1,041,044 |
Weighted average interest rate of securitized debt obligations outstanding | 3.27% | 3.32% |
Fair Value by Balance Sheet Grouping (Details) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
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Fair Value Disclosures [Abstract] | ||
Loans held-for-investment, net of allowance for credit losses | $ 4,251,251 | $ 4,226,212 |
Loans held-for-investment, at fair value | 4,269,192 | 4,261,612 |
Loans held-for-investment | 4,313,816 | 4,226,212 |
Available-for-sale securities, at fair value | 8,319 | 12,830 |
Held-to-maturity securities | 10,836 | 18,076 |
Held-to-maturity securities, at fair value | 4,711 | 18,076 |
Cash and cash equivalents | 99,332 | 80,281 |
Restricted cash | 8,533 | 79,483 |
Repurchase agreements | 2,072,099 | 1,924,021 |
Securitized debt obligations | 982,312 | 1,041,044 |
Securitized debt obligations, at fair value | 846,600 | 1,050,912 |
Asset-specific financings | 119,062 | 116,465 |
Revolving credit facilities | 38,361 | 42,008 |
Convertible senior notes | 270,031 | 269,634 |
Convertible senior notes, at fair value | $ 112,660 | $ 283,332 |
Securitized Debt Obligations |
3 Months Ended |
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Mar. 31, 2020 | |
Securitized Debt Obligations [Abstract] | |
Securitized Debt Obligations | Securitized Debt Obligations The Company finances pools of its commercial real estate loans through CLOs, which are consolidated on the Company’s condensed consolidated financial statements. See Note 3 - Variable Interest Entities for additional information regarding consolidation of the CLOs. The securitized debt obligations issued by the CLOs are recorded at outstanding principal, net of any unamortized deferred debt issuance costs, on the Company’s condensed consolidated balance sheets. As of March 31, 2020 and December 31, 2019, the outstanding amount due on securitized debt obligations was $982.3 million and $1.0 billion, net of deferred issuance costs, respectively, with a weighted average interest rate of 3.27% and 3.32%, respectively.
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Held-to-Maturity Securities |
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Debt Securities, Held-to-maturity, Fair Value to Amortized Cost [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Held-to-Maturity Securities | Held-to-Maturity Securities The following table presents the components of the carrying value of HTM securities as of March 31, 2020 and December 31, 2019:
On March 31, 2020, the Company’s HTM securities had contractual maturities of less than one year. At March 31, 2020 and December 31, 2019, the Company pledged HTM securities with a carrying value of $10.8 million and $18.1 million, respectively, as collateral for repurchase agreements. See Note 9 - Collateralized Borrowings.
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Held-to-Maturity Securities (Tables) |
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Debt Securities, Held-to-maturity, Fair Value to Amortized Cost [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Held-to-maturity Securities | The following table presents the components of the carrying value of HTM securities as of March 31, 2020 and December 31, 2019:
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Stockholders' Equity (Tables) |
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Stockholders' Equity Attributable to Parent [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rollforward of Common Stock | As of March 31, 2020, the Company had 55,136,885 shares of common stock outstanding. The following table presents a reconciliation of the common shares outstanding for the three months ended March 31, 2020 and 2019:
____________________ (1) Represents shares of restricted stock granted under the Company’s 2017 Equity Incentive Plan, net of forfeitures. See Note 15 - Equity Incentive Plan for additional information.
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Schedule of Dividends Declared | The following table presents cash dividends declared by the Company on its common stock from December 31, 2018 through March 31, 2020:
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Schedule of Accumulated Other Comprehensive Income (Loss) | Accumulated other comprehensive (loss) income at March 31, 2020 and December 31, 2019 was as follows:
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Basis of Presentation and Significant Accounting Policies (Policies) |
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Basis of Presentation and Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidation and Basis of Presentation | Consolidation and Basis of Presentation The interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles, or GAAP, have been condensed or omitted according to such SEC rules and regulations. However, management believes that the disclosures included in these interim condensed consolidated financial statements are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at March 31, 2020 and results of operations for all periods presented have been made. The results of operations for the three months ended March 31, 2020 should not be construed as indicative of the results to be expected for future periods or the full year. The unaudited condensed consolidated financial statements of the Company include the accounts of all subsidiaries; inter-company accounts and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current period presentation. All entities in which the Company holds investments that are considered VIEs for financial reporting purposes were reviewed for consolidation under the applicable consolidation guidance. Whenever the Company has both the power to direct the activities of an entity that most significantly impact the entity’s performance, and the obligation to absorb losses or the right to receive benefits of the entity that could be significant, the Company consolidates the entity.
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make a number of significant estimates. These include estimates of amount and timing of allowances for credit losses, fair value of certain assets and liabilities, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of certain revenues and expenses during the reported period. It is likely that changes in these estimates (e.g., valuation changes to the underlying collateral of loans due to changes in market capitalization rates, leasing, credit worthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, overall economic and capital markets conditions, the broader commercial real estate market, local geographic sub-markets or other factors) will occur in the near term. Over the course of the first quarter of 2020, a global outbreak of a novel strain of coronavirus (COVID-19), took place. The outbreak has spread around the world, including to every state in the United States. As a result of the pandemic, numerous countries, including the United States, have declared national emergencies. As the global impact of the outbreak has been rapidly evolving and as new cases of COVID-19 have quickly spread around the world, many countries, including the U.S., have reacted by instituting quarantines, restrictions on travel, and temporarily closing non-essential businesses. Many states in the U.S. instituted varying degrees of “shelter-in-place” guidelines or orders and other measures designed to contain the spread of COVID-19. Such actions are creating significant macroeconomic disruptions and adversely impacting many industries. The outbreak could have a continued adverse impact on macroeconomic and market conditions, and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on macroeconomic and market conditions. The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2020. However, the significant degree of uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of March 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. The Company’s actual results could ultimately differ from its estimates and the differences may be material.
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Recently Issued and/or Adopted Accounting Standards | Recently Issued and/or Adopted Accounting Standards Measurement of Credit Losses on Financial Instruments On January 1, 2020, the Company adopted Accounting Standard Update, or ASU, 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. ASU 2016-13 significantly changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the incurred loss model under existing guidance with a Current Expected Credit Loss, or CECL, model for instruments measured at amortized cost, and also require entities to record allowances for available-for-sale, or AFS, debt securities rather than reduce the amortized cost, as they did under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. In addition, the new model applies to off-balance sheet credit exposures, such as unfunded loan commitments. ASU 2016-13 was adopted by the Company through a cumulative-effect adjustment to cumulative earnings of $18.5 million as of January 1, 2020. The allowance for credit losses required under ASU 2016-13 is a valuation account that is deducted from the amortized cost basis of related loans and debt securities on the Company’s condensed consolidated balance sheets, and which reduces the Company’s total stockholders’ equity. The initial allowance for credit losses recorded on January 1, 2020 is reflected as a direct charge to cumulative earnings; however, going forward, changes to the allowance for credit losses are recognized through net income on the Company’s condensed consolidated statements of comprehensive (loss) income. While ASU 2016-13 does not require any particular method for determining the allowance for credit losses, it does specify the allowance should be based on relevant information about past events, including historical loss experience, current portfolio, market conditions, and reasonable and supportable forecasts for the duration of each respective loan. In addition, other than a few narrow exceptions, ASU 2016-13 requires that all financial instruments subject to the CECL model have some amount of expected loss to reflect the GAAP principal underlying the CECL model that all loans, debt securities, and similar assets have some inherent risk of loss, regardless of credit quality, subordinate capital or other mitigating factors. The Company’s loans typically include commitments to fund incremental proceeds to its borrowers over the life of the loan. Those future funding commitments are also subject to an allowance for credit losses. The allowance for credit losses related to future loan fundings is recorded as a component of other liabilities on the Company’s condensed consolidated balance sheets, and not as an offset to the related loan balance. This allowance for credit losses is estimated using the same process outlined below for the Company’s outstanding loan balances, and changes in this component of the allowance for credit losses similarly flow through the Company’s condensed consolidated statement of comprehensive (loss) income. The Company elected not to measure an allowance for credit losses on accrued interest receivable. The Company generally writes off accrued interest receivable balance when interest is 90 days or more past due unless the loan is both well secured and in the process of collection. Write-offs of accrued interest receivable are recognized within provision for credit losses in the condensed consolidated statements of comprehensive income. The Company did not write-off any accrued interest receivable during the three months ended March 31, 2020. The Company’s implementation process included a selection of a credit loss analytical model, completion and documentation of policies and procedures, changes to internal reporting processes and related internal controls and additional disclosures. A control framework for governance, data, forecast, and model controls was developed to support the CECL process. Estimating an allowance for credit losses requires significant judgment and a variety of subjective assumptions, including (i) determination of relevant historical loan loss data sets, (ii) the expected timing and amount of future loan fundings and repayments, (iii) the current credit quality of loans and operating performance of loan collateral and the Company’s expectations of performance and (iv) expectations for macroeconomic conditions over the relevant time period. Considering the lack of historical company data related to any realized loan losses since its inception, the Company elected to estimate its allowance for credit losses by using a probability-weighted analytical model that considers the likelihood of default and loss-given-default for each individual loan. The analytical model incorporates a third-party licensed database with historical loan losses from 1998 to 2019 for over 100,000 commercial real estate loans. At the time of adoption of ASU No. 2016-13, in determining its initial allowance for credit losses estimate, the Company employed a third-party licensed macroeconomic forecast that largely reflected management’s views at the time and projected a stable overall economic scenario over the reasonable projection period. Significant inputs to the Company’s estimate of the allowance for credit losses include the reasonable and supportable forecast period and loan specific factors such as DSCR, LTV, remaining loan term, property type, and others. In addition, the Company also considers relevant loan-specific qualitative factors to estimate its allowance for credit losses. In certain instances, for loans with unique risk characteristics, the Company may instead elect to employ different methods to estimate loan losses that also conform to ASU 2016-13 and related guidance. Upon adoption of ASU No. 2016-13 on January 1, 2020, based on the Company’s loan portfolio, pre-COVID-19 economic environment and management’s expectations for future economic and market conditions at the time, the Company recorded an initial allowance for credit losses, as a cumulative-effective adjustment to the cumulative earnings in its consolidated statement of equity, of approximately $18.5 million, or approximately $0.34 per share. The following table illustrates the day-one financial statement impact of the adoption of ASU 2016-13 on January 1, 2020:
____________________ (1) Represents expected loss on unfunded commitments.
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Income Taxes |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company has elected to be taxed as a REIT under the Code for U.S. federal income tax purposes. As long as the Company qualifies as a REIT, the Company generally will not be subject to U.S. federal income taxes on that portion of its income that it distributes to its stockholders if it annually distributes at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and does not engage in prohibited transactions. While the Company currently intends to distribute 100% of its REIT taxable income for the taxable year ending December 31, 2020 and comply with all requirements to continue to qualify as a REIT, the Company will continue to evaluate its capital and liquidity needs in light of the significant uncertainties created by the COVID-19 pandemic, including the potential for a continued and prolonged adverse impact on economic and market conditions. The majority of states also recognize the Company’s REIT status. The Company’s TRS files a separate federal tax return and is fully taxed as a standalone U.S. C-corporation. It is assumed that the Company will retain its REIT status and will incur no REIT level taxation as it intends to comply with the REIT regulations and annual distribution requirements. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s condensed consolidated financial statements of a contingent tax liability for uncertain tax positions. Additionally, there were no amounts accrued for penalties or interest as of or during the periods presented in these condensed consolidated financial statements.
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Equity Incentive Plan (Details) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of restricted common shares reserved for issuance under equity incentive plan (in shares) | 3,242,306 | |
Maximum number of shares that an individual may be granted as a proportion of outstanding common stock | 9.80% | |
Number of restricted common shares granted during period under equity incentive plan (in shares) | 297,769 | 258,918 |
Weighted average grant date fair value of restricted common shares granted during period under equity incentive plan (in usd per share) | $ 18.47 | $ 19.31 |
Key Employees [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of restricted common shares granted during period under equity incentive plan (in shares) | 297,769 | 258,918 |
Weighted average grant date fair value of restricted common shares granted during period under equity incentive plan (in usd per share) | $ 18.47 | $ 19.31 |
Award vesting period of restricted common shares granted during period under equity incentive plan | 3 years |
Stockholders' Equity Schedule of Common Dividends Declared (Details) - $ / shares |
3 Months Ended | ||||
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Mar. 31, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
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Class of Stock [Line Items] | |||||
Dividends declared per common share (in usd per share) | $ 0 | $ 0.42 | |||
Common Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Declaration Date | Dec. 18, 2019 | Sep. 18, 2019 | Jun. 20, 2019 | Mar. 20, 2019 | |
Record Date | Dec. 31, 2019 | Oct. 03, 2019 | Jul. 05, 2019 | Apr. 01, 2019 | |
Payment Date | Jan. 17, 2020 | Oct. 18, 2019 | Jul. 19, 2019 | Apr. 18, 2019 | |
Dividends declared per common share (in usd per share) | $ 0.42 | $ 0.42 | $ 0.42 | $ 0.42 |
Schedule of Related Party Transactions, by Related Party (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
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Related Party Transaction [Line Items] | ||
Percent per annum of equity used to calculate management fees | 1.50% | |
Management fees | $ 3,907 | $ 3,449 |
Incentive fees | 0 | 244 |
Equity based compensation | $ 1,400 | 1,100 |
Pine River Capital Management L.P. [Member] | ||
Related Party Transaction [Line Items] | ||
Percent per annum of equity used to calculate management fees | 1.50% | |
Management fees | $ 3,900 | 3,400 |
Incentive fees | 0 | 200 |
Direct and allocated costs incurred by manager | $ 7,800 | $ 6,600 |
Cost incurred by manager per share issued | $ 0.20 |
Rollforward of Loans Held-for-Investment (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
Dec. 31, 2019 |
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Loans Held-for-Investment [Abstract] | |||
Loans held-for-investment pledged as collateral for borrowings | $ 4,200,000 | $ 4,100,000 | |
Loans Held-for-Investment [Roll Forward] | |||
Loans held-for-investment at beginning of period | 4,226,212 | $ 3,167,913 | |
Originations, acquisitions and additional fundings | 187,422 | 279,694 | |
Repayments | (102,139) | (155,320) | |
Net discount accretion (premium amortization) | 8 | 13 | |
Increase in net deferred origination fees | (2,453) | (3,120) | |
Accretion of discounts and net deferred fees on loans held-for-investment | 4,766 | 3,809 | |
Allowance for loan losses | (62,565) | 0 | |
Loans held-for-investment at end of period | $ 4,251,251 | $ 3,292,989 |
Held-to-Maturity Securities (Details) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
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Debt Securities, Held-to-maturity, Fair Value to Amortized Cost [Abstract] | ||
Held-to-Maturity Securities, Face Value | $ 11,778 | $ 18,076 |
Held-to-Maturity Securities, Unamortized Premium (Discount) | 0 | 0 |
Held-to-maturity Securities, Allowance for Credit Losses | (942) | 0 |
Held-to-maturity securities | 10,836 | 18,076 |
Held-to-maturity securities pledged as collateral for borrowings | $ 10,800 | $ 18,100 |
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
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ASSETS | ||||
Loans held-for-investment | $ 4,313,816 | $ 4,226,212 | ||
Allowance for credit losses | (62,565) | 0 | ||
Loans held-for-investment, net | 4,251,251 | 4,226,212 | ||
Available-for-sale securities, at fair value | 8,319 | 12,830 | ||
Held-to-maturity securities | 10,836 | 18,076 | ||
Cash and cash equivalents | 99,332 | 80,281 | ||
Restricted cash | 8,533 | 79,483 | ||
Accrued interest receivable | 11,215 | 11,323 | ||
Other assets | 87,392 | 32,657 | ||
Total Assets | [1] | 4,476,878 | 4,460,862 | |
Liabilities | ||||
Repurchase agreements | 2,072,099 | 1,924,021 | ||
Securitized debt obligations | 982,312 | 1,041,044 | ||
Asset-specific financings | 119,062 | 116,465 | ||
Revolving credit facilities | 38,361 | 42,008 | ||
Convertible senior notes | 270,031 | 269,634 | ||
Dividends payable | 25 | 23,063 | ||
Other liabilities | 32,929 | 24,491 | ||
Total Liabilities | [1] | 3,514,819 | 3,440,726 | |
10% cumulative redeemable preferred stock, par value $0.01 per share; 50,000,000 shares authorized and 1,000 and 1,000 shares issued and outstanding, respectively | 1,000 | 1,000 | ||
Stockholders' Equity | ||||
Common stock, par value $0.01 per share; 450,000,000 shares authorized and 55,136,885 and 54,853,205 shares issued and outstanding, respectively | 552 | 549 | ||
Additional paid-in capital | 1,049,836 | 1,048,484 | ||
Accumulated other comprehensive (loss) income | (3,712) | 32 | ||
Cumulative earnings | 106,413 | 162,076 | ||
Cumulative distributions to stockholders | 192,030 | 192,005 | ||
Total Stockholders’ Equity | 961,059 | 1,019,136 | ||
Total Liabilities and Stockholders’ Equity | $ 4,476,878 | $ 4,460,862 | ||
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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
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Cash Flows From Operating Activities: | ||
Net (loss) income | $ (37,191) | $ 16,969 |
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||
Accretion of discounts and net deferred fees on loans held-for-investment | (4,774) | (3,822) |
Amortization of deferred debt issuance costs on convertible senior notes and securitized debt obligations | 1,665 | 2,029 |
Provision for credit losses | 53,336 | 0 |
Equity based compensation | 1,355 | 1,149 |
Net change in assets and liabilities: | ||
Decrease (increase) in accrued interest receivable | 108 | (327) |
Increase in other assets | (54,735) | (3,781) |
Increase in other liabilities | 904 | 6,327 |
Net cash (used in) provided by operating activities | (39,332) | 18,544 |
Cash Flows From Investing Activities: | ||
Originations, acquisitions and additional fundings of loans held-for-investment, net of deferred fees | (184,969) | (276,574) |
Proceeds from repayment of loans held-for-investment | 102,139 | 155,320 |
Principal payments on held-to-maturity securities | 6,298 | 881 |
Net cash used in investing activities | (76,532) | (120,373) |
Cash Flows From Financing Activities: | ||
Proceeds from repurchase agreements | 237,344 | 225,261 |
Principal payments on repurchase agreements | (89,266) | (732,170) |
Proceeds from issuance of securitized debt obligations | 0 | 646,868 |
Principal payments on securitized debt obligations | (60,000) | (105,000) |
Proceeds from asset-specific financings | 2,597 | 0 |
Proceeds from revolving credit facilities | 38,361 | 48,697 |
Repayment of revolving credit facilities | (42,008) | (123,697) |
Proceeds from issuance of common stock, net of offering costs | 0 | 157,228 |
Dividends paid on preferred stock | (25) | (25) |
Dividends paid on common stock | (23,038) | (18,321) |
Net cash provided by financing activities | 63,965 | 98,841 |
Net decrease in cash, cash equivalents and restricted cash | (51,899) | (2,988) |
Cash, cash equivalents and restricted cash at beginning of period | 159,764 | 123,423 |
Cash, cash equivalents and restricted cash at end of period | 107,865 | 120,435 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash paid for interest | 31,914 | 28,284 |
Cash paid for taxes | 0 | 0 |
Noncash Activities: | ||
Dividends declared but not paid at end of period | $ 25 | $ 21,938 |
Commitments and Contingencies Management Agreement (Details) |
3 Months Ended |
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Mar. 31, 2020
USD ($)
| |
Commitments and Contingencies Disclosure [Abstract] | |
Percent per annum of equity used to calculate management fees | 1.50% |
Incentive fee calculation, core earnings multiplication factor | 20.00% |
Incentive fee calculation, rolling period | 12 months |
Incentive fee calculation, equity multiplication factor | 8.00% |
Incentive fee calculation, period incentive fee paid | 9 months |
Incentive fee, rolling period for threshold | 3 years |
Incentive fee, threshold amount of core earnings | $ 0 |
Management agreement, renewal term | 1 year |
Management agreement, termination fee factor | 3 |
Management agreement, termination fee period | 24 months |
Schedule of Collateralized Borrowings by Maturity (Details) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements | $ 2,072,099 | $ 1,924,021 |
Asset-specific financings | 119,062 | 116,465 |
Revolving credit facilities | 38,361 | $ 42,008 |
Total collateralized borrowings | 2,229,522 | |
Maturity Within One Year [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements | 16,921 | |
Asset-specific financings | 0 | |
Revolving credit facilities | 38,361 | |
Total collateralized borrowings | 55,282 | |
Maturity One to Three Years [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements | 2,055,178 | |
Asset-specific financings | 119,062 | |
Revolving credit facilities | 0 | |
Total collateralized borrowings | 2,174,240 | |
Maturity Three to Five Years [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements | 0 | |
Asset-specific financings | 0 | |
Revolving credit facilities | 0 | |
Total collateralized borrowings | 0 | |
Maturity Over Five Years [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements | 0 | |
Asset-specific financings | 0 | |
Revolving credit facilities | 0 | |
Total collateralized borrowings | $ 0 |
Fair Value (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Measurement Inputs, Disclosure | The following tables display the Company’s assets measured at fair value on a recurring basis. The Company does not hold any liabilities measured at fair value on its condensed consolidated balance sheets.
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Fair Value, by Balance Sheet Grouping | The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at March 31, 2020 and December 31, 2019:
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Earnings Per Share (Tables) |
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Schedule of Earnings Per Share, Basic and Diluted | The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted earnings per share for the three months ended March 31, 2020 and 2019:
____________________ (1) Includes a nondiscretionary adjustment for the assumed change in the management fee calculation.
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Fair Value |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | Fair Value Fair Value Measurements ASC 820, Fair Value Measurements, or ASC 820, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 clarifies that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). Additionally, ASC 820 requires an entity to consider all aspects of nonperformance risk, including the entity’s own credit standing, when measuring fair value of a liability. ASC 820 establishes a three-level hierarchy to be used when measuring and disclosing fair value. An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. Following is a description of the three levels:
Following are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to those models and significant assumptions utilized. Available-for-sale securities. The Company holds AFS securities that are carried at fair value on the condensed consolidated balance sheets and are comprised of CMBS. In determining the fair value of the Company’s CMBS AFS, management judgment may be used to arrive at fair value that considers prices obtained from third-party pricing providers or broker quotes received using the bid price, which are both deemed indicative of market activity and other applicable market data. The third-party pricing providers and brokers use pricing models that generally incorporate credit and cash flow factors including, but not limited to, required market yields for comparable investments, coupons, expected life of the security, property type, LTV and debt yield. If observable market prices are not available or insufficient to determine fair value due principally to illiquidity in the marketplace, then fair value is based upon internally developed models that are primarily based on observable market-based inputs but also include unobservable market data inputs (including prepayment speeds, delinquency levels and credit losses). Recurring Fair Value The following tables display the Company’s assets measured at fair value on a recurring basis. The Company does not hold any liabilities measured at fair value on its condensed consolidated balance sheets.
Transfers between Levels are deemed to take place on the first day of the reporting period in which the transfer has taken place. The Company did not incur transfers between Levels for the three months ended March 31, 2020 and 2019. Nonrecurring Fair Value The Company may be required to measure certain assets or liabilities at fair value from time to time. These periodic fair value measures typically result from application of certain impairment measures under GAAP. These items would constitute nonrecurring fair value measures under ASC 820. As of March 31, 2020 and December 31, 2019, the Company did not have any assets or liabilities measured at fair value on a nonrecurring basis in the periods presented. Fair Value of Financial Instruments In accordance with ASC 820, the Company is required to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the condensed consolidated balance sheets, for which fair value can be estimated. The following describes the Company’s methods for estimating the fair value for financial instruments:
The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at March 31, 2020 and December 31, 2019:
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Loans Held-for-Investment |
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Loans Held-for-Investment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans Held-for-Investment | Loans Held-for-Investment, Net of Allowance for Credit Losses The Company originates and acquires commercial real estate debt and related instruments generally to be held as long-term investments. These assets are classified as “loans held-for-investment” on the condensed consolidated balance sheets. Loans held-for-investment are reported at cost, net of any unamortized acquisition premiums or discounts, loan fees, origination costs and allowance for credit losses as applicable. The following tables summarize the Company’s loans held-for-investment by asset type, property type and geographic location as of March 31, 2020 and December 31, 2019:
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At March 31, 2020 and December 31, 2019, the Company pledged loans held-for-investment with a carrying value, net of allowance for credit losses, of $4.2 billion and $4.1 billion, respectively, as collateral for repurchase agreements, an asset-specific financing facility, a revolving credit facility and securitized debt obligations. See Note 9 - Collateralized Borrowings and Note 10 - Securitized Debt Obligations. The following table summarizes activity related to loans held-for-investment, net of allowance for credit losses, for the three months ended March 31, 2020 and 2019:
Subsequent to the adoption of ASU 2016-13 on January 1, 2020, to estimate and recognize an allowance for credit losses on loans held-for-investment and their related unfunded commitments, the Company continues to use a probability-weighted analytical model. Given the highly uncertain current macroeconomic environment and the lack of clarity on the near-term outlook for the overall U.S. economy as a result of the COVID-19 pandemic, in determining its allowance for credit losses estimate through March 31, 2020, the Company employed an updated third-party provided macroeconomic forecast over the reasonable projection period. This updated forecast reflects the impact of the COVID-19 pandemic on the overall U.S. economy, commercial real estate markets generally and is not specific to any loans in its portfolio. These estimates may change in future periods based on available future macro-economic data and might results in a material change in the Company’s future estimates of expected credit losses for its loan portfolio. See Note 2 - Use of Estimates for further discussion of COVID-19. Significant inputs to the Company’s estimate of the allowance for credit losses include loan specific factors such as DSCR, LTV, remaining loan term, property type and others. In certain instances, for loans with unique risk characteristics, the Company may instead elect to employ different methods to estimate loan losses that also conform to ASU 2016-13 and related guidance. The allowance for credit losses related to the Company’s loans held-for-investment is deducted from the amortized cost basis of related loans, while the allowance for credit losses related to off-balance sheet future funding commitments is recorded as a component of other liabilities on the Company’s condensed consolidated balance sheets. As of March 31, 2020, the Company recognized $7.5 million in other liabilities related to the allowance for credit losses on unfunded commitments. Changes in the provision for credit losses for both loans held-for-investment and their related unfunded commitments are recognized through net income on the Company’s condensed consolidated statements of comprehensive (loss) income. The following table presents the changes for the three months ended March 31, 2020 in the allowance for credit losses on loans held-for-investment:
The Company’s primary credit quality indicators are its risk rankings. The Company evaluates the credit quality of each loan at least quarterly by assessing the risk factors of each loan and assigning a risk rating based on a variety of factors. Risk factors include property type, geographic and local market dynamics, physical condition, leasing and tenant profile, projected cash flow, loan structure and exit plan, LTV, project sponsorship and other factors deemed necessary. Risk ratings are defined as follows:
The following table presents the number of loans, unpaid principal balance and carrying value by risk rating for loans held-for-investment as of March 31, 2020 and December 31, 2019:
As of December 31, 2019 (prior to the adoption of ASU 2016-13), the Company had not identified any impaired loans and it had not recorded any allowances for losses as it was not deemed probable that the Company would not be able to collect all amounts due pursuant to the contractual terms of the loans. The following table presents the carrying value of loans held-for-investment as of March 31, 2020 by risk rating and year of origination:
As of March 31, 2020 and December 31, 2019, the Company had not identified any loans that were past-due, in nonaccrual status, or in maturity default. Additionally, during the three months ended March 31, 2020, the Company did not enter into any loan modifications which were classified as troubled debt restructuring.
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Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The following represent the material commitments and contingencies of the Company as of March 31, 2020: Impact of COVID-19. The full extent of the impact of the COVID-19 pandemic on the global economy generally, and the Company’s business in particular, is uncertain. As of March 31, 2020, no contingencies have been recorded on the Company’s condensed consolidated balance sheet as a result of COVID-19. However, as the global pandemic continues and the economic implications worsen, it may have long-term impacts on the Company’s financial condition, results of operations and cash flows. See Note 2 - Use of Estimates for further discussion of COVID-19. Management Agreement. Upon closing its initial public offering, or IPO, on June 28, 2017, the Company entered into a management agreement with the Manager. The Company pays the Manager a base management fee equal to 1.5% of the Company’s equity on an annualized basis, as defined in the management agreement. For purposes of calculating the management fee, equity means the sum of the net proceeds received by the Company from all issuances of its equity securities, plus its cumulative “core earnings” at the end of the most recently completed calendar quarter, less any distributions to stockholders, any amount that the Company has paid to repurchase its stock and any incentive fees earned by the Manager, but excluding the incentive fee earned in the current quarter. As a result, equity for purposes of calculating the management fee may differ from the amount of stockholders’ equity shown in the Company’s financial statements. Incentive fees, if earned, are payable to the Manager, as defined in the management agreement. The incentive fee is the excess of (1) the product of (a) 20% and (b) the result of (i) the Company’s “core earnings” for the previous 12-month period, minus (ii) the product of (A) the Company’s equity in the previous 12-month period, and (B) 8% per annum, less (2) the sum of any incentive fees paid to the Manager with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no incentive fees are payable with respect to any calendar quarter unless “core earnings” for the 12 most recently completed calendar quarters in the aggregate is greater than zero. In addition, under the terms of an amendment to the management agreement entered into in the fourth quarter of 2018, the Manager agreed to reimburse the Company an amount related to the compensation payable to the sales agents under the Company’s equity distribution agreement by netting such amount from the base management fee payable to the Manager for the applicable quarterly period. For purposes of calculating base management and incentive fees, “core earnings” means net income (loss) attributable to common stockholders, excluding non-cash equity compensation expense, incentive fees earned by the Manager, depreciation and amortization, any unrealized gains or losses or other similar non-cash items that are included in net income for the applicable period (regardless of whether such items are included in other comprehensive income or loss or in net income), and one-time events pursuant to changes in GAAP and certain material non-cash income or expense items, in each case after discussions between the Manager and the Company’s independent directors and approved by a majority of the Company’s independent directors. The initial term of the management agreement expires on June 28, 2020, and thereafter will automatically renew for successive one-year terms annually until terminated in accordance with the terms of the agreement. Upon termination of the management agreement by the Company without cause or by the Manager due to the Company’s material breach of the management agreement, the Company is required to pay a termination fee equal to three times the sum of the average annual base management fee and average annual incentive compensation, in each case earned by the Manager during the 24-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. On March 2, 2020, the Company announced that it has agreed to a process with the Manager to internalize the Company’s management function. The Company and the Manager have not yet executed and delivered a final agreement and definitive documentation or agreed upon fee or date by which the internalization may be completed. The Company cannot provide any assurance that the internalization will be consummated. As of March 31, 2020, the Company’s consolidated financial statements do not recognize a contingency liability under ASC 450 because management does not believe the amount of the loss or expense related to the internalization is reasonably estimable. Once the loss or expense may be reasonably estimable and management believes the internalization is a “probable” future event that may result in a loss or expense to the Company, the Company may recognize in the consolidated financial statements a contingency liability and resulting loss in such period. If the internalization is completed, the management agreement will be terminated and therefore the Company will no longer pay a management fee or reimburse expenses. Employment contracts. The Company does not directly employ any personnel. Instead, the Company relies on the resources of the Manager and its affiliates to conduct the Company’s operations. See Management Agreement above. Legal and regulatory. From time to time, the Company may be subject to liability under laws and government regulations and various claims and legal actions arising in the ordinary course of business. Liabilities are established for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than the amounts established for those claims. Based on information currently available, management is not aware of any legal or regulatory claims that would have a material effect on the Company’s consolidated financial statements and, therefore, no accrual is required as of March 31, 2020. Unfunded commitments on loans held-for-investment. Certain of the Company’s commercial real estate loan agreements contain provisions and obligations to extend credit to its borrowers through its unfunded loan commitments over the contractual period of its loans. As of March 31, 2020 and December 31, 2019, the Company had unfunded loan commitments of $762.8 million and $748.9 million, respectively, on loans held-for-investment, which it expects to fund, subject to the satisfaction of any conditions precedent to such commitments, over the tenure of these loans, which have a weighted average future funding period of approximately three years. These commitments generally provide funding for lease-related or capital improvement expenditures, as well as interest and carry costs, all of which will vary depending on the progress of capital improvement projects, leasing and cash flows at the properties that serve as collateral for the Company’s loans. Therefore, the exact timing and amounts of such loan balance future fundings are generally uncertain and will depend on the current and future performance of the collateral properties. Because of the COVID-19 pandemic and its impact on the global and U.S. economies and the U.S. commercial real estate market, the pace of lease-related or capital improvement expenditures may be slower than otherwise expected, and the pace of associated future fundings relating to these capital needs accordingly may be similarly slower; however, the exact timing and amounts are uncertain. The Company typically finances the funding of its loan commitments on terms generally consistent with its overall financing facilities; however, most of its financing agreement counterparties are not obligated to fund their ratable portion of these loan commitments over time and have varying degrees of discretion over future loan funding obligations, including the advance rates on their fundings. The Company may be obligated to fund loan commitments with respect to a pledged asset even if the applicable financing counterparty will not fund their ratable portion of the loan commitment and/or has made margin calls with respect to such pledged asset. As a result of the COVID-19 pandemic and the increased degree of uncertainty it has created, the Company’s financing agreement counterparties may be less likely to finance its future loan funding commitments than they were prior to the COVID-19 pandemic.
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