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Segment Reporting
 9 Months Ended
Sep. 30, 2019
Segment Reporting [Abstract]  
Segment Reporting
Segment Reporting
Following the Combination, the Company conducted its business through the following five operating segments: the loan portfolio, CRE debt securities, net leased real estate, other, and corporate. The Company continually monitors and reviews its segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments.
During the third quarter of 2019, the Company realigned the business and reportable segment information to reflect how the Chief Operating Decision Makers (“CODM”) regularly reviews and manages the business. As a result, effective for the quarter ended September 30, 2019, the Company presents its business segments as follows:
•
Core Portfolio, which consists of the following four segments and remain unchanged from the prior segments:
◦
Senior and Mezzanine Loans and Preferred Equity—CRE debt investments including senior mortgage loans, mezzanine loans, and preferred equity interests as well as participations in such loans. The segment also includes ADC loan arrangements accounted for as equity method investments.
◦
CRE Debt Securities—investments in CMBS (including “B-pieces” of a CMBS securitization pool) or CRE CLOs (collateralized by pools of CRE debt investments).
◦
Net Leased Real Estate—direct investments in commercial real estate with long-term leases to tenants on a net lease basis, where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance, capital expenditures and real estate taxes.
◦
Corporate—includes corporate-level asset management and other fees, related party and general and administrative expenses to the Core Portfolio only.
•
Legacy, Non-Strategic Portfolio—segment consists of direct investments in operating real estate such as multi-tenant office and multifamily residential assets such as real estate acquired in settlement of loans (“REO”) which the Company plans to exit. It also includes two portfolios of PE Investments and certain retail and other legacy loans originated prior to the Combination. This segment includes corporate-level asset management and other fees, related party and general and administrative expenses related to the Legacy, Non-Strategic Portfolio only.
There were no changes in the structure of the Company’s internal organization that prompted the change in reportable segments. Prior period amounts have been revised to conform to the current year presentation shown below.
The Company primarily generates revenue from net interest income on the loan, preferred equity and securities portfolios, rental and other income from its net leased, hotel, multi-tenant office, and multifamily real estate assets, as well as equity in earnings of unconsolidated ventures, including from PE Investments. CRE debt securities include the Company’s investment in the subordinate tranches of the securitization trusts which are eliminated in consolidation. The Company’s income is primarily derived through the difference between revenue and the cost at which the Company is able to finance its investments. The Company may also acquire investments which generate attractive returns without any leverage.
The following tables present segment reporting for the three months ended September 30, 2019 and 2018 (dollars in thousands):
 
 
Core
 
 
 
 
 
 
Senior and MezzanineLoans and Preferred Equity
 
CRE Debt Securities
 
Net Leased Real Estate
 
Corporate(1)
 
Total Core Portfolio
 
Legacy, Non-Strategic Portfolio
 
Total
Three Months Ended September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense)
 
$
21,295

 
$
5,102

 
$
—

 
$
(2,363
)
 
$
24,034

 
$
2,077

 
$
26,111

Property and other income
 
209

 
200

 
28,316

 
369

 
29,094

 
35,218

 
64,312

Management fee expense
 
—

 
—

 
—

 
(9,084
)
 
(9,084
)
 
(2,271
)
 
(11,355
)
Property operating expense
 
—

 
—

 
(8,340
)
 
—

 
(8,340
)
 
(21,416
)
 
(29,756
)
Transaction, investment and servicing expense
 
(512
)
 
(3
)
 
(103
)
 
(245
)
 
(863
)
 
(570
)
 
(1,433
)
Interest expense on real estate
 
—

 
—

 
(8,695
)
 
—

 
(8,695
)
 
(5,586
)
 
(14,281
)
Depreciation and amortization
 
—

 
—

 
(11,673
)
 
—

 
(11,673
)
 
(14,261
)
 
(25,934
)
Provision for loan losses
 
—

 
—

 
—

 
—

 
—

 
(110,314
)
 
(110,314
)
Impairment of operating real estate
 
—

 
—

 
(23,911
)
 
—

 
(23,911
)
 
(248,811
)
 
(272,722
)
Administrative expense
 
(312
)
 
(244
)
 
(78
)
 
(3,537
)
 
(4,171
)
 
(3,561
)
 
(7,732
)
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net
 
—

 
215

 
—

 
(2,191
)
 
(1,976
)
 
—

 
(1,976
)
Realized gain on mortgage loans and obligations held in securitization trusts, net
 
—

 
—

 
—

 
2,724

 
2,724

 
—

 
2,724

Other gain (loss), net
 
(15
)
 
(4,683
)
 
2,019

 
(3
)
 
(2,682
)
 
(6
)
 
(2,688
)
Income (loss) before equity in earnings of unconsolidated ventures and income taxes
 
20,665

 
587

 
(22,465
)
 
(14,330
)
 
(15,543
)
 
(369,501
)
 
(385,044
)
Equity in earnings (loss) of unconsolidated ventures
 
2,736

 
—

 
—

 
—

 
2,736

 
(18,641
)
 
(15,905
)
Income tax expense
 
—

 
—

 
(201
)
 
—

 
(201
)
 
(845
)
 
(1,046
)
Net income (loss)
 
$
23,401

 
$
587

 
$
(22,666
)
 
$
(14,330
)
 
$
(13,008
)
 
$
(388,987
)
 
$
(401,995
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense)
 
$
13,089

 
$
7,704

 
$
2

 
$
(1,794
)
 
$
19,001

 
$
10,957

 
$
29,958

Property and other income
 
34

 
6

 
27,799

 
367

 
28,206

 
25,731

 
53,937

Management fee expense
 
—

 
—

 
—

 
(9,501
)
 
(9,501
)
 
(2,376
)
 
(11,877
)
Property operating expense
 
(2
)
 
—

 
(8,261
)
 
—

 
(8,263
)
 
(12,954
)
 
(21,217
)
Transaction, investment and servicing expense
 
(412
)
 
—

 
(40
)
 
(1,283
)
 
(1,735
)
 
(1,896
)
 
(3,631
)
Interest expense on real estate
 
(9
)
 
—

 
(8,066
)
 
—

 
(8,075
)
 
(5,266
)
 
(13,341
)
Depreciation and amortization
 
—

 
—

 
(19,774
)
 
—

 
(19,774
)
 
(10,764
)
 
(30,538
)
Provision for loan losses
 
—

 
—

 
—

 
—

 
—

 
(35,059
)
 
(35,059
)
Impairment of operating real estate
 
—

 
—

 
—

 
—

 
—

 
(29,378
)
 
(29,378
)
Administrative expense
 
(154
)
 
(416
)
 
(58
)
 
(3,083
)
 
(3,711
)
 
(3,086
)
 
(6,797
)
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net
 
—

 
(1,834
)
 
—

 
895

 
(939
)
 
—

 
(939
)
Realized loss on mortgage loans and obligations held in securitization trusts, net
 
—

 
(549
)
 
—

 
—

 
(549
)
 
—

 
(549
)
Other gain (loss), net
 
—

 
(129
)
 
108

 
—

 
(21
)
 
6

 
(15
)
Income (loss) before equity in earnings of unconsolidated ventures and income taxes
 
12,546

 
4,782

 
(8,290
)
 
(14,399
)
 
(5,361
)
 
(64,085
)
 
(69,446
)
Equity in earnings (loss) of unconsolidated ventures
 
10,274

 
—

 
—

 
—

 
10,274

 
(1,950
)
 
8,324

Income tax benefit (expense)
 
—

 
—

 
91

 
—

 
91

 
2,365

 
2,456

Net income (loss)
 
$
22,820

 
$
4,782

 
$
(8,199
)
 
$
(14,399
)
 
$
5,004

 
$
(63,670
)
 
$
(58,666
)
_________________________________________
(1)
Includes income earned from the CRE securities purchased at a discount, recognized using the effective interest method had the transaction been recorded as an available for sale security, at amortized cost. During the three months ended September 30, 2019 and September 30, 2018, $2.2 million and $0.9 million,
respectively, was attributable to discount accretion income and was eliminated in consolidation in the corporate segment. The corresponding interest expense is recorded in net interest income in the Corporate column.
The following tables present segment reporting for the nine months ended September 30, 2019 and 2018 (dollars in thousands):
 
 
Core
 
 
 
 
 
Senior and MezzanineLoans and Preferred Equity
 
CRE Debt Securities
 
Net Leased Real Estate
 
Corporate(1)
 
Total Core Portfolio
 
Legacy, Non-Strategic Portfolio
 
Total
Nine Months Ended September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense)
 
$
55,077

 
$
15,856

 
$
2

 
$
(7,674
)
 
$
63,261

 
$
8,735

 
$
71,996

Property and other income
 
450

 
341

 
88,067

 
371

 
89,229

 
103,595

 
192,824

Management fee expense
 
—

 
—

 
—

 
(27,256
)
 
(27,256
)
 
(6,814
)
 
(34,070
)
Property operating expense
 
—

 
—

 
(25,187
)
 
—

 
(25,187
)
 
(60,889
)
 
(86,076
)
Transaction, investment and servicing expense
 
(1,325
)
 
(4
)
 
(208
)
 
301

 
(1,236
)
 
(1,777
)
 
(3,013
)
Interest expense on real estate
 
—

 
—

 
(26,078
)
 
—

 
(26,078
)
 
(15,708
)
 
(41,786
)
Depreciation and amortization
 
—

 
—

 
(37,645
)
 
—

 
(37,645
)
 
(45,208
)
 
(82,853
)
Provision for loan losses
 
—

 
—

 
—

 
—

 
—

 
(220,572
)
 
(220,572
)
Impairment of operating real estate
 
—

 
—

 
(23,911
)
 
—

 
(23,911
)
 
(258,935
)
 
(282,846
)
Administrative expense
 
(614
)
 
(979
)
 
(178
)
 
(10,206
)
 
(11,977
)
 
(10,418
)
 
(22,395
)
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net
 
—

 
6,035

 
—

 
(1,433
)
 
4,602

 
—

 
4,602

Realized gain on mortgage loans and obligations held in securitization trusts, net
 
—

 
48

 
—

 
2,724

 
2,772

 
—

 
2,772

Other gain (loss), net
 
(15
)
 
(14,909
)
 
2,399

 
1

 
(12,524
)
 
(1,305
)
 
(13,829
)
Income (loss) before equity in earnings of unconsolidated ventures and income taxes
 
53,573

 
6,388

 
(22,739
)
 
(43,172
)
 
(5,950
)
 
(509,296
)
 
(515,246
)
Equity in earnings (loss) of unconsolidated ventures
 
39,020

 
—

 
—

 
—

 
39,020

 
(21,058
)
 
17,962

Income tax benefit (expense)
 
(12
)
 
—

 
1,822

 
(382
)
 
1,428

 
(1,972
)
 
(544
)
Net income (loss)
 
$
92,581

 
$
6,388

 
$
(20,917
)
 
$
(43,554
)
 
$
34,498

 
$
(532,326
)
 
$
(497,828
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense)
 
$
44,872

 
$
18,406

 
$
3

 
$
(3,897
)
 
$
59,384

 
$
31,014

 
$
90,398

Property and other income
 
182

 
19

 
56,675

 
903

 
57,779

 
65,079

 
122,858

Management fee expense
 
—

 
—

 
—

 
(25,334
)
 
(25,334
)
 
(6,334
)
 
(31,668
)
Property operating expense
 
10

 
—

 
(16,423
)
 
—

 
(16,413
)
 
(32,773
)
 
(49,186
)
Transaction, investment and servicing expense
 
(1,149
)
 
—

 
(40
)
 
(34,830
)
 
(36,019
)
 
(2,193
)
 
(38,212
)
Interest expense on real estate
 
(175
)
 
—

 
(16,301
)
 
—

 
(16,476
)
 
(12,971
)
 
(29,447
)
Depreciation and amortization
 
—

 
—

 
(37,901
)
 
—

 
(37,901
)
 
(34,788
)
 
(72,689
)
Provision for loan loss
 
—

 
—

 
—

 
—

 
—

 
(34,542
)
 
(34,542
)
Impairment of operating real estate
 
—

 
—

 
—

 
—

 
—

 
(29,378
)
 
(29,378
)
Administrative expense
 
(413
)
 
(817
)
 
(62
)
 
(7,774
)
 
(9,066
)
 
(7,843
)
 
(16,909
)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net
 
—

 
655

 
—

 
2,599

 
3,254

 
—

 
3,254

Realized loss on mortgage loans and obligations held in securitization trusts, net
 
—

 
(2,752
)
 
—

 
—

 
(2,752
)
 
—

 
(2,752
)
Other gain (loss), net
 
—

 
(128
)
 
108

 
—

 
(20
)
 
480

 
460

Income (loss) before equity in earnings of unconsolidated ventures and income taxes
 
43,327

 
15,383

 
(13,941
)
 
(68,333
)
 
(23,564
)
 
(64,249
)
 
(87,813
)
Equity in earnings of unconsolidated ventures
 
25,749

 
—

 
—

 
—

 
25,749

 
14,024

 
39,773

Income tax benefit
 
—

 
—

 
91

 
—

 
91

 
2,756

 
2,847

Net income (loss)
 
$
69,076

 
$
15,383

 
$
(13,850
)
 
$
(68,333
)
 
$
2,276

 
$
(47,469
)
 
$
(45,193
)
_________________________________________
(1)
Includes income earned from the CRE securities purchased at a discount, recognized using the effective interest method had the transaction been recorded as an available for sale security, at amortized cost. During the nine months ended September 30, 2019 and September 30, 2018, $1.4 million and $2.6 million,
respectively, was attributable to discount accretion income and was eliminated in consolidation in the corporate segment. The corresponding interest expense is recorded in net interest income in the Corporate column.
The following table presents total assets by segment as of September 30, 2019 and December 31, 2018 (dollars in thousands):
 
 
Core
 
 
 
 
Total Assets
 
Senior and Mezzanine Loans and Preferred Equity(1)
 
CRE Debt Securities
 
Net Leased Real Estate
 
Corporate(2)
 
Total Core Portfolio
 
Legacy, Non-Strategic Portfolio(3)
 
Total
September 30, 2019
 
$
2,894,232

 
$
2,267,596

 
$
1,254,172

 
$
(61,122
)
 
$
6,354,878

 
$
1,088,979

 
$
7,443,857

December 31, 2018
 
2,111,443

 
3,507,404

 
1,313,220

 
(70,600
)
 
6,861,467

 
1,799,263

 
8,660,730

_________________________________________
(1)
Includes investments in unconsolidated ventures totaling $557.0 million and $742.2 million as of September 30, 2019 and December 31, 2018, respectively.
(2)
Includes cash, unallocated receivables, deferred costs and other assets, net and the elimination of the subordinate tranches of the securitization trusts in consolidation.
(3)
Includes PE Investments totaling $14.3 million and $160.9 million as of September 30, 2019 and December 31, 2018, respectively.
Geography
Geography is generally defined as the location in which the income producing assets reside or the location in which income generating services are performed. Geography information on total income includes equity in earnings of unconsolidated ventures. Geography information on total income and long lived assets are presented as follows (dollars in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Total income by geography:
 
 
 
 
 
 
 
 
United States
 
$
105,826

 
$
135,743

 
$
400,864

 
$
373,458

Europe
 
12,161

 
5,559

 
37,080

 
5,559

Other
 
(3
)
 
359

 
32

 
1,309

Total(1)
 
$
117,984

 
$
141,661

 
$
437,976

 
$
380,326


 
 
September 30, 2019
 
December 31, 2018
Long-lived assets by geography:
 
 
 
 
United States
 
$
1,386,138

 
$
1,764,247

Europe
 
307,616

 
329,511

Total(2)
 
$
1,693,754

 
$
2,093,758

_________________________________________
(1)
Includes interest income, interest income on mortgage loans held in securitization trusts, property and other income and equity in earnings of unconsolidated ventures.
(2)
Long-lived assets are comprised of real estate and real estate related intangible assets, and excludes financial instruments and assets held for sale.