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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________ 
FORM 10-Q
__________________________________ 
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2020
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                     to                    
Commission File Number: 001-34452
__________________________________ 
Apollo Commercial Real Estate Finance, Inc.
(Exact name of registrant as specified in its charter)
__________________________________ 
Maryland
 
27-0467113
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
Apollo Commercial Real Estate Finance, Inc.
c/o Apollo Global Management, Inc.
9 West 57th Street, 43rd Floor,
New York, New York 10019
(Address of principal executive offices) (Zip Code)
(212) 515–3200
(Registrant’s telephone number, including area code)
__________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value
ARI
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
  
Accelerated filer
 
 
 
 
 
 
 
 
Non-accelerated filer
 
  
Smaller reporting company
 
 
 
 
 
 
 
 
Emerging growth company
 
 
 
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of May 6, 2020, there were 153,822,782 shares, par value $0.01, of the registrant’s common stock issued and outstanding.
 




Table of Contents
 
 
Page
 
 


3




PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands—except share data)
 
March 31, 2020
 
December 31, 2019
Assets:
 
 
 
Cash and cash equivalents
$
582,138

 
$
452,282

Commercial mortgage loans, net(1)(2)
5,413,627

 
5,326,967

Subordinate loans and other lending assets, net(2)
1,016,991

 
1,048,126

Other assets
103,869

 
52,716

Derivative assets, net
57,561

 

Loan proceeds held by servicer

 
8,272

Total Assets
$
7,174,186

 
$
6,888,363

Liabilities and Stockholders' Equity
 
 
 
Liabilities:
 
 
 
Secured debt arrangements, net (net of deferred financing costs of $16,917 and $17,190 in 2020 and 2019, respectively)
$
3,539,925

 
$
3,078,366

Convertible senior notes, net
562,571

 
561,573

Senior secured term loan, net (net of deferred financing costs of $6,960 and $7,277 in 2020 and 2019, respectively)
487,117

 
487,961

Accounts payable, accrued expenses and other liabilities(3)
123,376

 
100,712

Derivative liabilities
50,018

 
19,346

Payable to related party
10,268

 
10,430

Total Liabilities
4,773,275

 
4,258,388

Commitments and Contingencies (see Note 15)


 


Stockholders’ Equity:
 
 
 
Preferred stock, $0.01 par value, 50,000,000 shares authorized:
 
 
 
Series B preferred stock, 6,770,393 shares issued and outstanding ($169,260 liquidation preference)
68

 
68

Common stock, $0.01 par value, 450,000,000 shares authorized, 153,740,547 and 153,537,296 shares issued and outstanding in 2020 and 2019, respectively
1,537

 
1,535

Additional paid-in-capital
2,820,643

 
2,825,317

Accumulated deficit
(421,337
)
 
(196,945
)
Total Stockholders’ Equity
2,400,911

 
2,629,975

Total Liabilities and Stockholders’ Equity
$
7,174,186

 
$
6,888,363

———————
(1) Includes $5,282,741 and $4,852,087 pledged as collateral under secured debt arrangements in 2020 and 2019, respectively

(2) Net of $265,254 CECL Allowances in 2020, comprised of $206,981 Specific CECL Allowance and $58,273 General CECL Allowance. Net of $56,981 provision for loan loss in 2019.

(3) Includes $6,059 of General CECL Allowance related to unfunded commitments on our loans in 2020.





See notes to unaudited condensed consolidated financial statements.

4




Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations (Unaudited)
(in thousands—except share and per share data)
 
 
Three months ended March 31,
 
2020
 
2019
Net interest income:
 
 
 
Interest income from commercial mortgage loans
$
81,855

 
$
78,286

Interest income from subordinate loans and other lending assets
34,018

 
40,839

Interest expense
(41,205
)
 
(36,295
)
Net interest income
74,668

 
82,830

Operating expenses:
 
 
 
General and administrative expenses (includes equity-based compensation of $4,263 and $3,901 in 2020 and 2019, respectively)
(6,531
)
 
(6,151
)
Management fees to related party
(10,268
)
 
(9,613
)
Total operating expenses
(16,799
)
 
(15,764
)
Other income
760

 
518

Provision for loan losses(1)
(183,465
)
 

Foreign currency gain (loss)
(37,949
)
 
6,894

Gain (loss) on foreign currency forward contracts (includes unrealized gains (losses) of $62,436 and ($14,985) in 2020 and 2019, respectively)
70,491

 
(6,720
)
Unrealized loss on interest rate swap
(35,548
)
 

Net income (loss)
$
(127,842
)
 
$
67,758

Preferred dividends
(3,385
)
 
(6,835
)
Net income (loss) available to common stockholders
$
(131,227
)
 
$
60,923

Net income (loss) per share of common stock:
 
 
 
Basic
$
(0.86
)
 
$
0.45

Diluted
$
(0.86
)
 
$
0.43

Basic weighted-average shares of common stock outstanding
153,948,191

 
134,607,107

Diluted weighted-average shares of common stock outstanding
153,948,191

 
164,683,086

Dividend declared per share of common stock
$
0.40

 
$
0.46

———————
(1) Comprised of $150,000 Specific CECL Allowance and $33,465 General CECL Allowance.


















See notes to unaudited condensed consolidated financial statements.

5




Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)
(in thousands—except share and per share data)



 
Preferred Stock
 
Common Stock
 
Additional
Paid-In-Capital
 
Accumulated
Deficit
 
Total
 
Shares
 
Par
 
Shares
 
Par
 
Balance at January 1, 2020
6,770,393

 
$
68

 
153,537,296

 
$
1,535

 
$
2,825,317

 
$
(196,945
)
 
$
2,629,975

Adoption of ASU 2016-13, see Note 2










(30,867
)

(30,867
)
Capital increase (decrease) related to Equity Incentive Plan

 

 
503,251

 
5

 
(2,236
)
 

 
(2,231
)
Repurchase of common stock

 

 
(300,000
)
 
(3
)
 
(2,438
)
 

 
(2,441
)
Net loss

 

 

 

 

 
(127,842
)
 
(127,842
)
Dividends declared on preferred stock - $0.50 per share

 

 

 

 

 
(3,385
)
 
(3,385
)
Dividends declared on common stock - $0.40 per share

 

 

 

 

 
(62,298
)
 
(62,298
)
Balance at March 31, 2020
6,770,393
 
$
68

 
153,740,547

 
$
1,537

 
$
2,820,643

 
$
(421,337
)
 
$
2,400,911


 
Preferred Stock
 
Common Stock
 
Additional
Paid-In-Capital
 
Accumulated
Deficit
 
Total
 
Shares
 
Par
 
Shares
 
Par
 
Balance at January 1, 2019
13,670,393

 
$
137

 
133,853,565

 
$
1,339

 
$
2,638,441

 
$
(130,170
)
 
$
2,509,747

Capital increase (decrease) related to Equity Incentive Plan

 

 
433,426

 
4

 
(1,099
)
 

 
(1,095
)
Conversions of convertible senior notes for common stock

 

 
1,967,361

 
20

 
33,758

 

 
33,778

Net income

 

 

 

 

 
67,758

 
67,758

Dividends declared on preferred stock - $0.50 per share

 

 

 

 

 
(6,835
)
 
(6,835
)
Dividends declared on common stock - $0.46 per share

 

 

 

 

 
(63,529
)
 
(63,529
)
Balance at March 31, 2019
13,670,393

 
$
137

 
136,254,352

 
$
1,363

 
$
2,671,100

 
$
(132,776
)
 
$
2,539,824






















See notes to unaudited condensed consolidated financial statements.

6




Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)
(in thousands)
 
For the three months ended March 31,
 
2020
 
2019
Cash flows provided by operating activities:
 
 
 
     Net income (loss)
$
(127,842
)
 
$
67,758

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
     Amortization of discount/premium and PIK
(18,270
)
 
(19,611
)
     Amortization of deferred financing costs
3,312

 
3,461

     Equity-based compensation
4,263

 
(1,095
)
     Provision for loan losses
183,465

 

     Foreign currency (gain) loss
42,108

 
(5,828
)
     Unrealized (gain) loss on derivative instruments
(26,888
)
 
14,985

     Changes in operating assets and liabilities:
 
 
 
          Other assets
(6,696
)
 
(2,898
)
          Accounts payable, accrued expenses and other liabilities
807

 
620

          Payable to related party
(162
)
 
(191
)
Net cash provided by operating activities
54,097

 
57,201

Cash flows used in investing activities:
 
 
 
     New funding of commercial mortgage loans
(439,936
)
 
(197,000
)
     Add-on funding of commercial mortgage loans
(99,768
)
 
(105,452
)
     New funding of subordinate loans and other lending assets

 
(244,844
)
     Add-on funding of subordinate loans and other lending assets
(18,753
)
 
(4,879
)
     Proceeds received from the repayment and sale of commercial mortgage loans
221,972

 
191,317

     Proceeds received from the repayment of subordinate loans and other lending assets
842

 
130,010

     Origination and exit fees received on commercial mortgage loans, and subordinate loans
and other lending assets, net
5,445

 
6,069

     Increase (Decrease) in collateral held related to derivative contracts, net
7,070

 
(18,180
)
Net cash (used in) provided by investing activities
(323,128
)
 
(242,959
)
Cash flows from financing activities:
 
 
 
     Repurchase of common stock
(2,441
)
 

     Proceeds from secured debt arrangements
1,357,442

 
412,434

     Repayments of secured debt arrangements
(844,051
)
 
(156,747
)
     Repayments of senior secured term loan principal
(1,250
)
 

     Exchanges of convertible senior notes

 
(704
)
     Payment of deferred financing costs
(2,722
)
 
(91
)
Collateral deposited under secured debt arrangements
(26,262
)
 

Other financing activities
(6,494
)


     Dividends on common stock
(71,950
)
 
(62,762
)
     Dividends on preferred stock
(3,385
)
 
(6,835
)
Net cash (used in) provided by financing activities
398,887

 
185,295

Net increase in cash and cash equivalents
129,856

 
(463
)
Cash and cash equivalents, beginning of period
452,282

 
109,806

Cash and cash equivalents, end of period
$
582,138

 
$
109,343

Supplemental disclosure of cash flow information:
 
 
 
     Interest paid
$
36,979

 
$
32,428

Supplemental disclosure of non-cash financing activities:
 
 
 
     Exchange of convertible senior notes for common stock
$

 
$
33,778

     Dividend declared, not yet paid
$
65,684

 
$
70,364

     Deferred financing costs, not yet paid
$
5,193

 
$
3,643

See notes to unaudited condensed consolidated financial statements.

7




Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1Organization
Apollo Commercial Real Estate Finance, Inc. (together with its consolidated subsidiaries, is referred to throughout this report as the "Company," "ARI," "we," "us" and "our") is a corporation that has elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes and primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments. These asset classes are referred to as our target assets.
We were formed in Maryland on June 29, 2009, commenced operations on September 29, 2009 and are externally managed and advised by ACREFI Management, LLC (the "Manager"), an indirect subsidiary of Apollo Global Management, Inc. (together with its subsidiaries, "Apollo").
We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2009. To maintain our tax qualification as a REIT, we are required to distribute at least 90% of our taxable income, excluding net capital gains, to stockholders and meet certain other asset, income, and ownership tests.
Note 2Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements include our accounts and those of our consolidated subsidiaries. All intercompany amounts have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our most significant estimates include loan loss allowances. Actual results could differ from those estimates.
These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019 ("Annual Report"), as filed with the Securities and Exchange Commission (the "SEC"). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows have been included. Our results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the full year or any other future period.
We currently operate in one reporting segment.
Risks and Uncertainties
During the first quarter of 2020, there was a global outbreak of a novel coronavirus ("COVID-19"), which was declared by the World Health Organization as a pandemic. In response to COVID-19, the United States and numerous other countries have declared national emergencies, which has led to large scale quarantines as well as restrictions to business deemed non-essential. These responses to COVID-19 have disrupted economic activities and could have a continued significant adverse effect on economic and market conditions. As we are still in the midst of the COVID-19 pandemic we are not in a position to estimate the ultimate impact this will have on our business and the economy as a whole. We believe the estimates used in preparing our financial statements and related footnotes are reasonable and supportable based on the best information available to us as of March 31, 2020. The uncertainty surrounding COVID-19 may materially impact the accuracy of the estimates and assumptions used in the financial statements and related footnotes and, as a result, actual results may vary significantly from estimates.
Current Expected Credit Losses ("CECL")
In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which we refer to as the "CECL Standard." This update has changed how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value. The CECL Standard replaced the "incurred loss" approach under existing guidance with an "expected loss" model for instruments measured at amortized cost. The CECL Standard requires entities to record allowances for held-to-maturity debt securities that are deducted from the carrying amount of the assets to present the net carrying value at the amounts expected to be collected on the assets. We continue to record loan specific allowances as a practical expedient under the CECL Standard ("Specific CECL Allowance"), which we apply to assets that are collateral dependent and where the borrower or sponsor is experiencing

8




financial difficulty. In addition, we now record a general allowance in accordance with the CECL Standard on the remainder of the loan portfolio ("General CECL Allowance", and together with the Specific CECL Allowance, "CECL Allowances") on a collective basis by assets with similar risk characteristics.
The CECL Standard requires us to record an allowance for credit losses that are deducted from the carrying amount of our loan portfolio to present the net carrying value at the amounts expected to be collected on the assets. We adopted the CECL Standard through a cumulative-effect adjustment to retained earnings on January 1, 2020. Subsequent changes to the General CECL Allowance are recognized through net income (loss) on our consolidated statement of operations.
The CECL Standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. The FASB recognizes what is known as the weighted average remaining maturity ("WARM") method as an acceptable approach for computing current expected credit losses. We have adopted the WARM method to comply with the CECL Standard in determining a General CECL Allowance for a majority of our portfolio. In the future, we may use other acceptable methods, such as a probability-of-default/loss-given-default method. For loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we have elected to apply a practical expedient in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a Specific CECL Allowance.
In accordance with the WARM method, an annual historical loss rate is applied to the amortized cost of an asset or pool of assets over the remaining expected life. The WARM method requires consideration of the timing of expected future fundings of existing commitments and repayments over each asset’s remaining life. An annual loss factor, adjusted for macroeconomic estimates, is applied over each subsequent period and aggregated to arrive at the General CECL Allowance.
In determining the General CECL Allowance, we considered various factors including (i) historical loss experience in the commercial real estate lending market, (ii) timing of expected repayments and satisfactions, (iii) expected future funding, (iv) capital subordinate to us when we are the senior lender, (v) capital senior to us when we are the subordinate lender, and (vi) our current and future view of the macroeconomic environment. The standard requires the use of significant judgment to arrive at an estimated credit loss. There is significant uncertainty related to future macroeconomic conditions as the result of COVID-19.
We derived an annual historical loss rate based on a commercial mortgage backed securities database with historical losses from 1998 to the first quarter of 2020 provided by a third party, Trepp LLC. We applied various filters to arrive at a CMBS dataset most analogous to our current portfolio from which to determine an appropriate historical loss rate. The annual historical loss rate was further adjusted to reflect our expectations of the macroeconomic environment for a reasonable and supportable forecast period which we have determined to be one year.
The General CECL Allowance on subordinate loans is calculated by incorporating both the loan balance of the position(s) of the structurally senior third-party lender(s) and the balance of our subordinate loan. The subordinate loan, by virtue of being the first loss position, is required to absorb losses prior to the senior position(s) being impacted, resulting in a higher percentage allowance attributable to the subordinate loan. The General CECL Allowance on unfunded loan commitments is time-weighted based on our expected commitment to fund such obligations. The General CECL Allowance on unfunded commitments is recorded as a liability on the condensed consolidated balance sheet within accounts payable, accrued expenses, and other liabilities. At adoption, the General CECL Allowance was $30.9 million and was recorded in the condensed consolidated statement of changes in stockholders’ equity.
Refer to Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets for further information regarding CECL.
Note 3Fair Value Disclosure
GAAP establishes a hierarchy of valuation techniques based on the observability of the inputs utilized in measuring financial instruments at fair values. Market-based or observable inputs are the preferred source of values, followed by valuation models using management's assumptions in the absence of market-based or observable inputs. The three levels of the hierarchy as noted in ASC 820 "Fair Value Measurements and Disclosures" are described below:
Level I — Quoted prices in active markets for identical assets or liabilities.
Level II — Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.
Level III — Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period),

9




unobservable inputs may be used.
While we anticipate that our valuation methods will be appropriate and consistent with valuation methods used by other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. We will use inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced.
The estimated fair values of our derivative instruments are determined using a discounted cash flow analysis on the
expected cash flows of each derivative. The fair values of foreign exchange forwards are determined by comparing the
contracted forward exchange rate to the current market exchange rate. The current market exchange rates are determined by
using market spot rates, forward rates and interest rate curves for the underlying countries. The fair value of the interest rate
swap is determined by comparing the present value of remaining fixed payments to the present value of expected floating rate payments based on the forward one-month LIBOR curve. Our derivative instruments are classified as Level II in the fair value hierarchy.
The following table summarizes the levels in the fair value hierarchy into which our derivative assets were categorized as of March 31, 2020 and December 31, 2019 ($ in thousands): 
 
Fair Value as of March 31, 2020
 
Fair Value as of December 31, 2019
 
Level I
 
Level II
 
Level III
 
Total
 
Level I
 
Level II
 
Level III
 
Total
Foreign currency forward, net
$

 
$
57,561

 
$

 
$
57,561

 
$

 
$

 
$

 
$


The following table summarizes the levels in the fair value hierarchy into which our derivative liabilities were categorized as of March 31, 2020 and December 31, 2019 ($ in thousands): 
 
Fair Value as of March 31, 2020
 
Fair Value as of December 31, 2019
 
Level I
 
Level II
 
Level III
 
Total
 
Level I
 
Level II
 
Level III
 
Total
Foreign currency forward, net
$

 
$

 
$

 
$

 
$

 
$
(4,876
)
 
$

 
$
(4,876
)
Interest rate swap liability

 
(50,018
)
 

 
(50,018
)
 

 
(14,470
)
 

 
(14,470
)
Total financial instrument liabilities
$

 
$
(50,018
)
 
$

 
$
(50,018
)
 
$

 
$
(19,346
)
 
$

 
$
(19,346
)


Note 4Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net
Our loan portfolio was comprised of the following at March 31, 2020 and December 31, 2019 ($ in thousands):
Loan Type
 
March 31, 2020
 
December 31, 2019
Commercial mortgage loans, net (1)
 
$
5,413,627

 
$
5,326,967

Subordinate loans and other lending assets, net
 
1,016,991

 
1,048,126

Total
 
$
6,430,618

 
$
6,375,093



  ———————
(1)
Includes $117.8 million and $126.7 million in 2020 and 2019, respectively, of contiguous financing structured as subordinate loans.


Our loan portfolio consisted of 95% floating rate loans, based on amortized cost, as of March 31, 2020 and December 31, 2019, respectively.

 
Activity relating to our loan portfolio, for the three months ended March 31, 2020, was as follows ($ in thousands):
 
 
Principal Balance
 
Deferred Fees/Other Items (1)
 
Provision for Loan Loss
 
Carrying Value
December 31, 2019
 
$
6,467,842

 
$
(35,768
)
 
$
(56,981
)
 
$
6,375,093

New loan fundings
 
439,936

 

 

 
439,936

Add-on loan fundings (2)
 
118,521

 

 

 
118,521


10




Loan repayments and sales
 
(210,745
)
 

 

 
(210,745
)
Gain (loss) on foreign currency translation
 
(99,009
)
 
1,428

 

 
(97,581
)
Specific CECL Allowance
 

 

 
(150,000
)
 
(150,000
)
Deferred fees
 

 
(5,053
)
 

 
(5,053
)
PIK interest and amortization of fees
 
12,008

 
6,712

 

 
18,720

March 31, 2020
 
$
6,728,553

 
$
(32,681
)
 
$
(206,981
)
 
$
6,488,891

General CECL Allowance (3)
 
 
 
 
 
 
 
(58,273
)
Carrying value net, as of March 31, 2020
 
 
 
 
 
 
 
6,430,618

———————
(1)
Other items primarily consist of purchase discounts or premiums, exit fees and deferred origination expenses.
(2)
Represents fundings for loans closed prior to 2020.
(3)
$6.1 million of the General CECL Allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under Accounts Payable, Accrued Expenses and Other Liabilities in the condensed consolidated balance sheet.

The following table details overall statistics for our loan portfolio at the dates indicated ($ in thousands):
 
 
March 31, 2020
 
December 31, 2019
Number of loans
 
75

 
72

Principal balance
 
$
6,728,553

 
$
6,467,842

Carrying value
 
$
6,430,618

 
$
6,375,093

Unfunded loan commitments (1)
 
$
1,822,967

 
$
1,952,887

Weighted-average cash coupon (2)
 
6.0
%
 
6.5
%
Weighted-average remaining fully-extended term (3)
 
3.3 years

 
3.3 years

Weighted-average expected term (4)
 
2.2 years

 
1.8 years

  ———————
(1)
Unfunded loan commitments are funded to finance construction costs, tenant improvements, leasing commissions, or carrying costs. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.
(2)
For floating rate loans, based on applicable benchmark rates as of the specified dates. For loans placed on non-accrual or cost recovery the interest rate used in calculating weighted-average cash coupon is 0%.
(3)
Assumes all extension options are exercised.
(4)
Expected term represents our estimated timing of repayments as of March 31, 2020 and December 31, 2019, respectively.

Property Type

The table below details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):
 
 
March 31, 2020
 
December 31, 2019
Property Type
 
Carrying
Value
 
% of
Portfolio
(1)
 
Carrying
Value
 
% of
Portfolio
Office
 
$
1,803,605

 
27.8
%
 
$
1,401,400

 
22.0
%
Hotel
 
1,537,796

 
23.7

 
1,660,162

 
26.0

Residential-for-sale: construction
 
763,381

 
11.8

 
692,816

 
10.9

Residential-for-sale: inventory
 
283,909

 
4.4

 
321,673

 
5.1

Urban Retail
 
623,564

 
9.6

 
643,706

 
10.1

Healthcare
 
356,215

 
5.5

 
371,423

 
5.8

Urban Predevelopment
 
306,503

 
4.7

 
409,864

 
6.4

Other
 
813,918

 
12.5

 
874,049

 
13.7

Total
 
$
6,488,891

 
100.0
%
 
$
6,375,093

 
100.0
%
General CECL Allowance
 
(58,273
)
 
 
 
 
 
 
Total investments, net
 
$
6,430,618

 
 
 


 



  ———————
(1) Percentage of portfolio calculations are made prior to consideration of General CECL Allowance.
Geography

11





The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):
 
 
March 31, 2020
 
December 31, 2019
Geographic Location
 
Carrying
Value
 
% of
Portfolio
(1)
 
Carrying
Value
 
% of
Portfolio
New York City
 
$
2,319,325

 
35.8
%
 
$
2,167,487

 
34.0
%
Northeast
 
118,251

 
1.8

 
110,771

 
1.7

United Kingdom
 
1,347,897

 
20.8

 
1,274,390

 
20.0

West
 
747,515

 
11.5

 
728,182

 
11.4

Midwest
 
557,780

 
8.6

 
614,337

 
9.6

Southeast
 
512,469

 
7.9

 
564,166

 
8.9

Other
 
885,654

 
13.6

 
915,760

 
14.4

Total
 
$
6,488,891

 
100.0
%
 
$
6,375,093

 
100.0
%
General CECL Allowance
 
(58,273
)
 
 
 
 
 
 
Total investments, net
 
$
6,430,618

 
 
 
 
 
 

  ———————
(1) Percentage of portfolio calculations are made prior to consideration of the General CECL Allowance.

Risk Rating

We assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio ("LTV"), debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. This review is performed quarterly. Based on a 5-point scale, our loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:
1.    Very low risk
2.    Low risk
3. Moderate/average risk
4. High risk/potential for loss: a loan that has a risk of realizing a principal loss
5. Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or an impairment has been recorded

The following tables allocate the carrying value of our loan portfolio based on our internal risk ratings and date of origination at the dates indicated ($ in thousands):
March 31, 2020
 
 
 
 
 
 
 
 
 
Year Originated
Risk Rating
 
Number of Loans
 
Total
 
% of Portfolio
 
 
2020
 
2019
 
2018
 
2017
 
2016
 
Prior
1
 

 
 
%
 
 
$

 
$

 
$

 
$

 
$

 
$

2
 
5

 
130,609
 
2.0
%
 
 

 

 
23,990
 

 
36,287
 
70,332

3
 
63

 
5,822,078
 
89.7
%
 
 
423,419

 
2,609,209

 
1,490,045
 
779,882

 
62,580
 
456,943

4
 

 

 
%
 
 

 

 

 

 

 

5
 
7

 
536,204

 
8.3
%
 
 

 

 
31,372
 
126,013

 
117,910
 
260,909

Total
 
75

 
$
6,488,891

 
100.0
%
 
 
$
423,419

 
$
2,609,209

 
$1,545,407
 
$
905,895

 
$216,777
 
$
788,184

General CECL Allowance
 
(58,273
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total investments, net
$
6,430,618

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
W.A. Risk Rating
3.1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


12





December 31, 2019
 
 
 
 
 
 
 
 
 
Year Originated
Risk Rating
 
Number of Loans
 
Total
 
% of Portfolio
 
 
2019
 
2018
 
2017
 
2016
 
2015
 
Prior
1
 

 
$

 
%
 
 
$

 
$

 
$

 
$

 
$

 
$

2
 
8

 
348,324

 
5.5
%
 
 

 
241,676

 

 
36,250

 
24,546

 
45,852

3
 
61

 
5,707,555

 
89.5
%
 
 
2,736,825

 
1,355,014

 
912,636

 
72,540

 
499,700

 
130,840

4
 
1

 
182,910

 
2.9
%
 
 

 

 

 
182,910

 

 

5
 
2

 
136,304

 
2.1
%
 
 

 

 

 

 

 
136,304

Total
 
72

 
$
6,375,093

 
100.0
%
 
 
$
2,736,825

 
$
1,596,690

 
$
912,636

 
$
291,700

 
$
524,246

 
$
312,996

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
W.A. Risk Rating
 
3.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Current Expected Credit Losses

Refer to the following schedule of the General CECL Allowance as of March 31, 2020, and as of the date of adoption, January 1, 2020 ($ in thousands):

 
 
March 31, 2020
 
January 1, 2020(1)
Commercial mortgage loans, net
 
$
28,336

 
$
12,149

Subordinate loans and other lending assets, net
 
29,937

 
15,630

Unfunded commitments(2)
 
6,059

 
3,088

Total General CECL Allowance
 
$
64,332

 
$
30,867

  ———————
(1) As of January 1, 2020, we adopted the CECL Standard through a cumulative-effect adjustment to retained earnings
(2) The General CECL Allowance on Unfunded commitments is recorded as a liability on the condensed consolidated balance sheet within accounts payable, accrued expenses, and other liabilities

The General CECL Allowance increased by $33.5 million from initial adoption on January 1, 2020, to March 31, 2020. The increase is predominantly related to a change in our view of estimated macroeconomic conditions, including the unemployment rate and the commercial real estate price index, in the backdrop of the global pandemic. Other factors that contributed to the increase include an increase in our view of remaining expected term of our loan portfolio and growth in the portfolio from new investments during the quarter.
The macroeconomic factors considered were the unemployment rate, commercial real estate prices, and market liquidity. We compared the historical data for each metric to historical commercial real estate losses in order to determine the correlation of the data. We used projections, obtained from third-party service providers, of each factor to approximate the impact the macroeconomic outlook may have on our loss rate.

Refer to the following roll forward schedule of the General CECL Allowance for the quarter ended March 31, 2020 ($ in thousands):
 
 
General CECL Allowance
General CECL Allowance as of January 1, 2020
 
$
30,867

Increase in General CECL Allowance
 
34,500

Transfer to Specific CECL Allowance
 
(1,035
)
General CECL Allowance as of March 31, 2020(1)
 
$
64,332


———————
(1) Includes $6.1 million of the General CECL Allowance that relates to unfunded commitments and has been recorded as a liability under Accounts Payable, Accrued Expenses and Other Liabilities in the condensed consolidated balance sheet.


Our secured debt obligations and senior secured term loan financing have a minimum tangible net worth

13




maintenance covenant. The General CECL Allowance has no impact on these covenants as we are permitted to add back the General CECL Allowance for the computation of tangible net worth as defined in the respective agreements.

We have made an accounting policy election to exclude $41.9 million accrued interest receivable, included in Other assets on the condensed consolidated balance sheet, from the amortized cost basis of the related commercial mortgage loans and subordinate loans and other lending assets in determining the General CECL Allowance as any uncollected accrued interest receivable is written off in a timely manner. We discontinue accruing interest on loans if deemed uncollectible with any accrued uncollected interest on the loan charged to interest income in the same period. Under certain circumstances, we may apply the cost recovery method under which interest collected on a loan is a reduction to its amortized cost. The amortized cost basis for loans on cost recovery was $536.2 million and $136.3 million as of March 31, 2020 and December 31, 2019, respectively. For the three months ended March 31, 2020, we received $0.6 million in interest that reduced amortized cost under the cost recovery method.

The following schedule illustrates the CECL Allowance as percentages of amortized cost and total commitment as of March 31, 2020, and as of the date of adoption, January 1, 2020 ($ in thousands):
CECL Allowances
 
CECL ($)
 
% of
Amortized Cost
General CECL Allowance(1)
 
 
 
 
January 1, 2020
 
$
30,867

 
0.49
%
March 31, 2020(2)
 
64,332

 
1.08
%
 
 
 
 
 
Total CECL Allowances(3)
 
 
 


March 31, 2020
 
$
271,313

 
4.05
%
  ———————
(1) Amortized Cost of the General CECL Allowance excludes amortized cost of loans evaluated for the Specific CECL Allowance
(2) Includes $6.1 million of the General CECL Allowance that relates to unfunded commitments and has been recorded as a liability under Accounts Payable, Accrued Expenses and Other Liabilities in the condensed consolidated balance sheet.
(3) Total CECL Allowances includes the General CECL Allowance and the Specific CECL Allowance


Specific CECL Allowance

We regularly evaluate the extent and impact of any credit migration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan by loan basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the liquidation value of the underlying collateral. We also evaluate the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the properties. In addition, we consider the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. Such impairment analysis is completed and reviewed by asset management and finance personnel who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants.

We evaluate our loans on a quarterly basis. For loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we have elected to apply a practical expedient in accordance with the CECL Standard. In accordance with the practical expedient approach, we determine the loan loss provision to be the difference between the fair value of the underlying collateral and the carrying value of the loan (prior to the loan loss provision). The fair value of the underlying collateral is determined by using method(s) including a discounted cash flow (DCF) or direct capitalization approach. The key unobservable inputs used to determine the fair value of the underlying collateral may vary depending on the information available to us and market conditions as of the valuation date.

The following table summarizes the specific provision for loan losses that has been recorded on our portfolio as of March 31, 2020 ($ in thousands):




14




Type
Property type
Location
Amortized cost(1)
Interest recognition status/ as of date
Mortgage
 
 
 
 
Hotel(2)
Manhattan, NY
$
144,295

Cost Recovery/ 3/31/2020
 
Urban Predevelopment(3)
Brooklyn, NY
126,013

Cost Recovery/ 3/1/2020
 
Urban Predevelopment(3)
Miami, FL
117,910

Cost Recovery/ 3/1/2020
 
Retail Center(4)(5)
Cincinnati, OH
103,921

 Cost Recovery/ 10/1/2019
 
Hotel(2)
Pittsburgh, PA
31,372

Cost Recovery/ 3/31/2020
 
Residential-for-sale: inventory(6)(7)
Bethesda, MD
2,695

 Cost Recovery/ 1/1/2018
Mortgage total:
 
$
526,206

 
Mezzanine
 
 
 
 
Hotel(2)
Washington, DC
$
10,000

 Cost Recovery/ 3/31/2020
Mezzanine total:
 
$
10,000

 
Grand total:
 
$
536,206

 
  ———————

(1)
Amortized cost is shown net of $207 million of provisions, $150 million of which were taken during the three months ended March 31, 2020 due to factors including COVID-19. See Note 2 for additional information regarding COVID-19.
(2)
The fair value of hotel collateral was determined by applying a discount and capitalization rate ranging from 8.3% to 11.0% and 6.6% to 9.0%, respectively.
(3)
The fair value of urban predevelopment collateral was determined by assuming rent per square foot and capitalization rate ranging from $48 to $225 and 5.0% to 5.5%, respectively.
(4)
The fair value of retail collateral was determined by applying a capitalization rate of 8.3%.
(5)
The entity in which we own an interest and which owns the underlying property was deemed to be a Variable Interest Entity ("VIE") and we determined that we are not the primary beneficiary of that VIE. During the three months ended March 31, 2020, $0.6 million of interest paid was applied towards reducing the carrying value of the loan.
(6)
The fair value of residential-for-sale: inventory was determined by assuming a sales price per square foot of $371.
(7)
A $3.0 million portion of this provision was recorded on an investment previously recorded under other assets on our condensed consolidated balance sheet.

Other Loan and Lending Assets Activity
We recognized payment-in-kind ("PIK") interest of $12.4 million and $14.5 million for the three months ended March 31, 2020 and 2019, respectively.
We recognized $0.2 million and $3.7 million in pre-payment penalties and accelerated fees for the three months ended March 31, 2020 and 2019, respectively.
Our portfolio includes two other lending assets, which are subordinate risk retention interests in securitization vehicles. The underlying mortgages related to our subordinate risk retention interests are secured by a portfolio of properties located throughout the United States. Our maximum exposure to loss from the subordinate risk retention interests is limited to the book value of such interests of $68.1 million as of March 31, 2020. These interests have a weighted average maturity of 6.57 years. We are not obligated to provide, and do not intend to provide financial support to these subordinate risk retention interests. Both interests are accounted for as held-to-maturity and recorded at amortized cost on the condensed consolidated balance sheet.
In January 2020, we sold £62.2 million ($81.3 million assuming conversion into U.S. dollars) in a mezzanine loan and £50.0 million ($65.3 million assuming conversion into U.S. dollars) unfunded commitment of a senior mortgage secured by a mixed-use property in London, UK to a fund managed by an affiliate of the Manager, that was originated by us in December 2019. This transaction was evaluated under ASC 860 - Transfers and Servicing, and we determined that it qualifies as a sale and accounted for as such. We recorded no gain or loss related to this sale.

Note 5Loan Proceeds Held by Servicer
Loan proceeds held by servicer represents principal payments held by our third-party loan servicer as of the balance sheet date which were remitted to us subsequent to the balance sheet date. There were no loan proceeds held by servicer as of March 31, 2020. Loan proceeds held by servicer were $8.3 million as of December 31, 2019.



15




Note 6Other Assets
The following table details the components of our other assets at the dates indicated ($ in thousands):
 
March 31, 2020
 
December 31, 2019
Interest receivable
$
41,860

 
$
35,581

Collateral deposited under derivative agreements
35,540

 
17,090

Collateral deposited under secured debt arrangements(1)
26,262

 

Other
207

 
45

Total
$
103,869

 
$
52,716


———————
(1)
Subsequent to March 31, 2020, this amount was applied to reduce the related outstanding secured debt arrangement


Note 7Secured Debt Arrangements, Net
At March 31, 2020 and December 31, 2019, our borrowings had the following secured debt arrangements, maturities and weighted-average interest rates ($ in thousands):
 
 
 
March 31, 2020
 
December 31, 2019
 
 
Maximum Amount of Borrowings(1)
 
Borrowings Outstanding(1)
 
Maturity (2)
 
Maximum Amount of Borrowings(1)
 
Borrowings Outstanding(1)
 
Maturity (2)
 
JPMorgan (USD)
$
1,139,932

 
$
1,024,617

 
June 2024
 
$
1,154,109

 
$
1,090,160

 
June 2024
 
JPMorgan (GBP)
93,882

 
93,882

 
June 2024
 
51,702

 
50,410

 
June 2024
 
JPMorgan (EUR)
66,186

 
66,186

 
June 2024
 
94,189

 
94,189

 
June 2024
 
DB (USD)
1,000,000

 
506,977

 
March 2023
 
1,250,000

 
513,876

 
March 2021
 
Goldman (USD)
500,000

 
359,540

 
November 2021
 
500,000

 
322,170

 
November 2021
 
CS - USD
328,141

 
325,868

 
January 2023(3)
 
226,068

 
218,644

 
June 2020
 
CS - GBP
84,748

 
84,748

 
September 2020
 
93,915

 
93,915

 
June 2020
 
HSBC - USD
50,625

 
50,625

 
January 2021
 
50,625

 
50,625

 
October 2020
 
HSBC - GBP
32,230

 
32,230

 
June 2020
 
34,634

 
34,634

 
June 2020
 
HSBC - EUR
151,537

 
151,537

 
July 2021
 
154,037

 
154,037

 
January 2021
 
Barclays (USD)
200,000

 
35,192

 
March 2024
 
N/A

 
N/A

 
N/A
 
Barclays (GBP)
645,854

 
645,854

 
November 2023(4)
 
538,916

 
290,347

 
February 2024(4)
 
Barclays (EUR)
179,586

 
179,586

 
August 2024(3)
 
182,549

 
182,549

 
November 2020
 
Sub-total(5)(6)(7)
4,472,721

 
3,556,842

 

 
4,330,744

 
3,095,556

 
 
 
less: deferred financing costs
N/A

 
(16,917
)
 
 
 
N/A

 
(17,190
)
 
 
 
Total
$
4,472,721

 
$
3,539,925

  
$
4,330,744

 
$
3,078,366

 
 
———————
(1) As of March 31, 2020, GBP and EUR borrowings were converted at a rate of 1.24 and 1.10, respectively. As of December 31, 2019, GBP and EUR borrowings were converted at a rate of 1.33 and 1.12, respectively.
(2) Maturity date assumes extensions at our option are exercised with consent of financing providers, where applicable.
(3) Assumes financings are extended in line with the underlying loans.
(4) Represents weighted average maturity across various financings with the counterparty. See below for additional details.
(5) Weighted-average borrowing costs as of March 31, 2020 and December 31, 2019 were USD L + 2.05% / GBP L + 1.66% / EUR L + 1.35% and USD L + 2.07% / GBP L + 1.75% / EUR L + 1.36%, respectively.
(6) Weighted average advance rates based on cost as of March 31, 2020 and December 31, 2019 were 67.3% (65.6% (USD) / 70.6% (GBP) / 70.7% (EUR)) and 63.8% (66.7% (USD) / 47.1% (GBP) / 76.1% (EUR)).
(7) As of March 31, 2020 and December 31, 2019, approximately 54% of the outstanding balance under these secured borrowings were recourse to us.

Each of our existing secured debt arrangements include "credit based and other mark-to-market" features. "Credit mark-to-market" provisions in repurchase facilities are designed to keep the lenders' credit exposure generally constant as a percentage of the underlying collateral value of the assets pledged as security to them. If the credit underlying collateral value decreases, the amount of leverage available to us will be reduced as our assets are marked-to-market, which would reduce our

16




liquidity. The lender under the applicable repurchase facility sets the valuation and any revaluation of the collateral assets in its sole, good faith discretion. Generally, if the lender determines (subject to certain conditions) that the market value of the collateral in a repurchase transaction has decreased by more than a defined minimum amount, the lender may require us to provide additional collateral or may make margin calls, which may require us to repay all or a portion of the funds advanced. We closely monitor our liquidity and intend to maintain sufficient liquidity on our balance sheet in order to meet any margin calls in the event of any significant decreases in asset values. As of March 31, 2020 and December 31, 2019, the weighted average haircut under our repurchase agreements was approximately 33% and 36%, respectively. In addition, our existing secured debt arrangements are not entirely term-matched financings and may mature before our commercial real estate debt investments that represent underlying collateral to those financings. We are in frequent dialogue with the lenders under our secured debt arrangements regarding our management of their collateral assets and as we negotiate renewals and extensions of these liabilities, we may experience lower advance rates and higher pricing under the renewed or extended agreements.
JPMorgan Facility
In November 2019, through three indirect wholly-owned subsidiaries, we entered into a Sixth Amended and Restated Master Repurchase Agreement with JPMorgan Chase Bank, National Association (as amended, the "JPMorgan Facility"). The JPMorgan Facility allows for $1.3 billion of maximum borrowings (with amounts borrowed in British pounds and Euros converted to U.S. dollars for purposes of calculating availability based on the greater of the spot rate as of the initial financing under the corresponding mortgage loan and the then-current spot rate) and matures in June 2022 and has two one-year extensions available at our option, which are subject to certain conditions. The JPMorgan Facility enables us to elect to receive advances in U.S. dollars ("USD"), British pounds ("GBP"), or Euros ("EUR"). Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $1.2 billion (including £75.6 million and 60.0 million assuming conversion into USD) of borrowings outstanding under the JPMorgan Facility secured by certain of our commercial mortgage loans.
DB Facility
In March 2020, through an indirect wholly-owned subsidiary, we entered into a Third Amended and Restated Master Repurchase Agreement with Deutsche Bank AG, Cayman Islands Branch, London Branch (as amended, the "DB Facility"), which provides for advances of up to $1.0 billion for the sale and repurchase of eligible first mortgage loans secured by commercial or multifamily properties located in the United States, United Kingdom and the European Union, and enables us to elect to receive advances in USD, GBP, or EUR. The repurchase facility matures in March 2021, and has two one-year extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $507.0 million of borrowings outstanding under the DB Facility secured by certain of our commercial mortgage loans.
Goldman Facility
In November 2017, through an indirect wholly-owned subsidiary, we entered into a master repurchase and securities contract agreement with Goldman Sachs Bank USA (the "Goldman Facility"), which provides advances up to $500.0 million and matures in November 2020, and has one one-year extension available at our option, subject to certain conditions. Margin calls may occur any time at specified margin deficit thresholds.
As of March 31, 2020, we had $359.5 million of borrowings outstanding under the Goldman Facility secured by certain of our commercial mortgage loans.
CS Facility - USD
In July 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS Facility - USD"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - USD has an "evergreen" feature such that the facility continues unless terminated at any time by Credit Suisse with six months' notice. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $325.9 million of borrowings outstanding under the CS Facility - USD secured by certain of our commercial mortgage loans.
CS Facility - GBP

17




In June 2018, through an indirect wholly-owned subsidiary, we entered into a Global Master Repurchase Agreement with Credit Suisse Securities (Europe) Limited (the "CS Facility - GBP"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - GBP matures in September 2020. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $84.7 million (£68.2 million assuming conversion into USD) of borrowings outstanding under the CS Facility - GBP secured by one commercial mortgage loan.
HSBC Facility - USD    
In October 2019, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - USD"), which provides for a single asset financing. The facility is scheduled to mature in January 2021. Margin calls may occur any time at specified aggregate margin thresholds.
As of March 31, 2020, we had $50.6 million of borrowings under the HSBC Facility - USD secured by one commercial mortgage loan.
HSBC Facility - GBP
In September 2018, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - GBP"), which provides for a single asset financing. The facility is scheduled to mature in June 2020. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $32.2 million (£26.0 million assuming conversion into USD) of borrowings outstanding under the HSBC Facility - GBP secured by one commercial mortgage loan.
HSBC Facility - EUR
In July 2019, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - EUR"), which provides for a single asset financing. The facility matures in July 2021. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $151.5 million (137.4 million assuming conversion into USD) of borrowings outstanding under the HSBC Facility - EUR secured by one of our commercial mortgage loans.
Barclays Facility - USD
In March 2020, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement pursuant to a Master Repurchase Agreement with Barclays Bank plc ("Barclays Facility - USD"). The Barclays Facility - USD allows for $200.0 million of maximum borrowings and initially matures in March 2023 with extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds.
Barclays Facility - GBP/EUR
Beginning in October 2019, through an indirect wholly-owned subsidiary, we entered into five secured debt arrangements pursuant to a Global Master Repurchase Agreement with Barclays Bank plc (the "Barclays Facility - GBP/EUR"). Margin calls may occur any time at specified aggregate margin deficit thresholds.
The table below provides the currency, outstanding balance, stated maturity, and extended maturity for each of the five secured debt arrangements under the Barclays Facility - GBP/EUR:
Local Currency
Borrowings outstanding (in $)
Fully-Extended Maturity(1)
GBP
$217,350
December 2023
GBP
156,958
February 2023
GBP
149,830
October 2024
GBP
121,716
September 2023
Sub-total/Weighted-Average
$645,854
November 2023
EUR
179,586
see below(2)
Total/Weighted-Average
$825,440
 

18




———————
(1) Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.
(2) The Barclays Facility - EUR has an "evergreen" feature such that the facility continues for one year and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve month notice.
As of March 31, 2020, we had $825.4 million (£520.0 million and 162.8 million assuming conversion into U.S.
dollars) of borrowings outstanding under the Barclays Facility - GBP/EUR secured by five of our commercial mortgage loans.
At March 31, 2020, our borrowings had the following remaining maturities ($ in thousands):
 
Less than
1 year
 
 
1 to 3
years
 
3 to 5
years
 
More than
5 years
 
Total
JPMorgan
$
61,836

 
$
289,842

 
$
833,007


$

 
$
1,184,685

DB
27,900

 
196,477

 
282,600



 
506,977

Goldman

 
359,540

 

 

 
359,540

CS - USD

 
200,307

 
125,561

 

 
325,868

CS - GBP
84,748

 

 

 

 
84,748

HSBC - USD
50,625

 

 

 

 
50,625

HSBC - GBP
32,230

 

 

 

 
32,230

HSBC - EUR

 
151,537

 

 

 
151,537

Barclays (GBP)

 

 
645,854

 

 
645,854

Barclays (EUR)

 

 
179,586

 

 
179,586

Barclays (USD)

 

 
35,192

 

 
35,192

Total
$
257,339

 
$
1,197,703

 
$
2,101,800

 
$

 
$
3,556,842

———————
(1) The table above reflects the fully extended maturity date of the facility and assumes facilities with an "evergreen" feature continue to extend through the fully-extended maturity of the underlying asset and assumes underlying loans are extended with consent of financing providers.
The table below summarizes the outstanding balances at March 31, 2020, as well as the maximum and average month-end balances for the three months ended March 31, 2020 for our borrowings under secured debt arrangements ($ in thousands).
 
As of March 31, 2020
 
For the three months ended March 31, 2020
 
Balance
 
Amortized Cost of Collateral
 
Maximum Month-End
Balance
 
Average Month-End
Balance
JPMorgan
$
1,184,685

 
$
1,912,345

 
$
1,184,685

 
$
989,915

DB
506,977

 
778,607

 
506,977

 
470,077

Goldman
359,540

 
537,249

 
359,540

 
319,369

CS - USD
325,868

 
439,725

 
336,448

 
326,684

CS - GBP
84,748

 
121,286

 
90,111

 
87,452

HSBC - USD
50,625

 
67,041

 
50,625

 
50,625

HSBC - GBP
32,230

 
46,565

 
34,501

 
33,336

HSBC - EUR
151,537

 
191,565

 
152,389

 
151,798

Barclays (USD)
35,192

 
49,800

 
35,192

 
11,731

Barclays (GBP)
645,854

 
899,075

 
666,810

 
610,833

Barclays (EUR)
179,586

 
239,483

 
180,595

 
179,895

Total
$
3,556,842

 
$
5,282,741

 

 
 

The table below summarizes the outstanding balances at December 31, 2019, as well as the maximum and average month-end balances for the year ended December 31, 2019 for our borrowings under secured debt arrangements ($ in thousands).
 
As of December 31, 2019
 
For the year ended December 31, 2019


19




 
Balance
 
Amortized Cost of Collateral
 
Maximum Month-End
Balance
 
Average Month-End
Balance
JPMorgan
$
1,234,759

 
$
1,845,400

 
$
1,234,759

 
$
947,400

DB
513,876

 
766,676

 
757,117

 
604,067

Goldman
322,170

 
513,559

 
324,821

 
246,318

CS - USD
218,644

 
308,884

 
218,644

 
182,646

CS - GBP
93,915

 
129,723

 
150,811

 
134,694

HSBC - USD
50,625

 
66,960

 
50,625

 
50,625

HSBC - GBP
34,634

 
49,976

 
50,784

 
42,296

HSBC - EUR
154,037

 
190,780

 
154,037

 
151,889

Barclays (GBP)
290,347

 
738,455

 
290,347

 
139,004

Barclays (EUR)
182,549

 
241,674

 
182,549

 
181,159

Total
$
3,095,556

 
$
4,852,087

 

 
 

We were in compliance with the covenants under each of our secured debt arrangements at March 31, 2020 and December 31, 2019.

Note 8Senior Secured Term Loan, Net
In May 2019, we entered into a $500.0 million senior secured term loan. The senior secured term loan bears interest at LIBOR plus 2.75% and was issued at a price of 99.5%. The senior secured term loan matures in May 2026 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities.
During the three months ended March 31, 2020, we repaid $1.3 million of principal related to the senior secured term loan. The outstanding principal balance as of March 31, 2020 and December 31, 2019 was $496.3 million and $497.5 million, respectively. As of March 31, 2020, the senior secured term loan had a carrying value of $487.1 million net of deferred financing costs of $7.0 million and an unamortized discount of $2.2 million. As of December 31, 2019, the senior secured term loan had a carrying value of $488.0 million net of deferred financing costs of $7.3 million and an unamortized discount of $2.2 million.
Covenants
The senior secured term loan includes the following financial covenants: (i) our ratio of total recourse debt to tangible net worth cannot be greater than 3:1; and (ii) our ratio of total unencumbered assets to total pari-passu indebtedness must be at least 1.25:1.
We were in compliance with the covenants under the senior secured term loan at March 31, 2020 and December 31, 2019.
Interest Rate Swap
In connection with the senior secured term loan, we entered into an interest rate swap to fix LIBOR at 2.12% effectively fixing our all-in coupon on the senior secured term loan at 4.87%.

Note 9Convertible Senior Notes, Net
In two separate offerings during 2014, we issued an aggregate principal amount of $254.8 million of 5.50% Convertible Senior Notes due 2019 (the "2019 Notes"), for which we received $248.6 million, after deducting the underwriting discount and offering expenses. The 2019 Notes were exchanged or converted for shares of our common stock and cash as follows:
(i) On August 2, 2018, we entered into privately negotiated exchange agreements with a limited number of holders of the 2019 Notes pursuant to which we exchanged $206.2 million of the 2019 Notes for an aggregate of (a) 10,020,328 newly issued shares of our common stock, and (b) $39.3 million in cash. We recorded $166.0 million of additional paid-in-capital in the condensed consolidated statement of changes in stockholders' equity in connection with these transactions,

20




(ii) Certain holders elected to convert $47.9 million of the 2019 Notes, which were settled for an aggregate of (a) 2,775,509 newly issued shares of our common stock, and (b) $0.2 million in cash. We recorded $13.9 million of additional paid-in-capital in the condensed consolidated statement of changes in stockholders' equity in connection with these transactions. These conversions occurred from August 2018 through maturity.
The remaining $0.7 million in principal amount of the 2019 Notes was repaid at maturity on March 15, 2019.
In two separate offerings during 2017, we issued an aggregate principal amount of $345.0 million of 4.75% Convertible Senior Notes due 2022 (the "2022 Notes"), for which we received $337.5 million, after deducting the underwriting discount and offering expenses. At March 31, 2020, the 2022 Notes had a carrying value of $338.4 million and an unamortized discount of $6.6 million.
During the fourth quarter of 2018, we issued $230.0 million of 5.375% Convertible Senior Notes due 2023 (the "2023 Notes" and, together with the 2022 Notes, the "Notes"), for which we received $223.7 million after deducting the underwriting discount and offering expenses. At March 31, 2020, the 2023 Notes had a carrying value of $224.2 million and an unamortized discount of $5.8 million.
The following table summarizes the terms of the Notes ($ in thousands):
 
Principal Amount
Coupon Rate
Effective Rate (1)
Conversion Rate (2)
Maturity Date
Remaining Period of Amortization
2022 Notes
$
345,000

4.75
%
5.60
%
50.2260

8/23/2022
2.40
2023 Notes
230,000

5.38
%
6.16
%
48.7187

10/15/2023
3.54
Total
$
575,000

 
 
 
 
 
———————
(1)
Effective rate includes the effect of the adjustment for the conversion option (See endnote (2) below), the value of which reduced the initial liability and was recorded in additional paid-in-capital.
(2)
We have the option to settle any conversions in cash, shares of common stock or a combination thereof.  The conversion rate represents the number of shares of common stock issuable per one thousand principal amount of the Notes converted, and includes adjustments relating to cash dividend payments made by us to stockholders that have been deferred and carried-forward in accordance with, and are not yet required to be made pursuant to, the terms of the applicable supplemental indenture.

We may not redeem the Notes prior to maturity except in limited circumstances. The closing price of our common
stock on March 31, 2020 of $7.42 was less than the per share conversion price of the Notes.
In accordance with ASC 470 "Debt," the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) is to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. GAAP requires that the initial proceeds from the sale of the Notes be allocated between a liability component and an equity component in a manner that reflects interest expense at the interest rate of similar nonconvertible debt that could have been issued by us at such time. We measured the fair value of the debt components of the Notes as of their issuance date based on effective interest rates.  As a result, we attributed approximately $15.4 million of the proceeds to the equity component of the Notes ($11.0 million to the 2022 Notes and $4.4 million to the 2023 Notes), which represents the excess proceeds received over the fair value of the liability component of the Notes at the date of issuance. The equity component of the Notes has been reflected within additional paid-in capital in the condensed consolidated balance sheet as of March 31, 2020. The resulting debt discount is being amortized over the period during which the Notes are expected to be outstanding (the maturity date) as additional non-cash interest expense. The additional non-cash interest expense attributable to each of the Notes will increase in subsequent reporting periods through the maturity date as the Notes accrete to their par value over the same period.
The aggregate contractual interest expense was approximately $7.2 million and $7.6 million for the three months ended March 31, 2020 and 2019, respectively. With respect to the amortization of the discount on the liability component of the Notes as well as the amortization of deferred financing costs, we reported additional non-cash interest expense of approximately $1.5 million and $1.7 million for the three months ended March 31, 2020 and 2019, respectively.
Note 10Derivatives
We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than USD.
We have entered into a series of forward contracts to sell an amount of foreign currency (GBP and EUR) for an agreed

21




upon amount of USD at various dates through December 2024. These forward contracts were executed to economically fix the USD amounts of foreign denominated cash flows expected to be received by us related to foreign denominated loan investments.
The following table summarizes our non-designated foreign exchange ("Fx") forwards and our interest rate swap as of March 31, 2020:

March 31, 2020
 
Number of Contracts
 
Aggregate Notional Amount (in thousands)
 
Notional Currency
 
Maturity
 
Weighted-Average Years to Maturity
Fx Contracts - GBP
157
 
526,613
 
GBP
 
April 2020 - December 2024
 
2.26
Fx Contracts - EUR
63
 
219,130
 
EUR
 
May 2020 - August 2024
 
3.11
Interest Rate Swap
1
 
500,000
 
USD
 
May 2026
 
6.12

The following table summarizes our non-designated Fx forwards and our interest rate swap as of December 31, 2019:
 
December 31, 2019
 
Number of Contracts
 
Aggregate Notional Amount (in thousands)
 
Notional Currency
 
Maturity
 
Weighted-Average Years to Maturity
Fx Contracts - GBP
156
 
735,349
 
GBP
 
January 2020 - December 2024
 
1.49
FX Contracts - EUR
44
 
168,879
 
EUR
 
February 2020 - August 2024
 
3.22
Interest Rate Swap
1
 
500,000
 
USD
 
May 2026
 
6.37


We have not designated any of our derivative instruments as hedges as defined in ASC 815 "Derivatives and Hedging" and, therefore, changes in the fair value of our derivative instruments are recorded directly in earnings. The following table summarizes the amounts recognized on the condensed consolidated statements of operations related to our derivatives for the three months ended March 31, 2020 and 2019 ($ in thousands):
 
 
 
 
Amount of gain (loss)
recognized in income
 
 
 
Three months ended March 31,
 
Location of Gain (Loss) Recognized in Income
 
2020
 
2019
Forward currency contracts
Gain (loss) on derivative instruments - unrealized
 
$
62,436

 
$
(14,985
)
Forward currency contracts
Gain on derivative instruments - realized
 
8,055

 
8,265

Total
 
 
$
70,491

 
$
(6,720
)

  
In connection with our senior secured term loan, we entered into an interest rate swap to fix LIBOR at 2.12% or an all-in interest rate of 4.87%. We use our interest rate swap to manage exposure to variable cash flows on our borrowings under our senior secured term loan. Our interest rate swap allows us to receive a variable rate cash flow based on LIBOR and pay a fixed rate cash flow, mitigating the impact of this exposure. Gains or losses related to the interest rate swap are recorded net under interest expense in our condensed consolidated statement of operations.

 
 
 
Amount of loss
recognized in income
 
 
 
Three months ended March 31,
 
Location of Loss Recognized in Income
 
2020
 
2019
Interest rate swap(1)
Unrealized loss on interest rate swap
 
(35,548
)
 

———————
(1)
With a notional amount of $500.0 million and $0 at March 31, 2020, and 2019, respectively.


22




The following tables summarize the gross asset and liability amounts related to our derivatives at March 31, 2020 and December 31, 2019 ($ in thousands)
 
March 31, 2020
 
December 31, 2019
 
Gross
Amount of
Recognized
Assets
 
Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet
 
Net Amounts
of Assets
Presented in
the Condensed Consolidated Balance Sheet
 
Gross
Amount of
Recognized
Assets
 
Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet
 
Net Amounts
of Assets
Presented in
the Condensed Consolidated Balance Sheet
Forward currency contracts
$
58,759

 
$
(1,198
)
 
$
57,561

 
$

 
$

 
$

 
 
March 31, 2020
 
December 31, 2019
 
Gross
Amount of
Recognized
Liability
 
Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet
 
Net Amounts
of Liability
Presented in
the Condensed Consolidated Balance Sheet
 
Gross Amount of Recognized Liabilities
 
Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet
 
Net Amounts of Liabilities Presented in the Condensed Consolidated Balance Sheet
Interest rate swap
$
(50,018
)
 
$

 
$
(50,018
)
 
$
(14,470
)
 
$

 
$
(14,470
)
Forward currency contracts

 

 

 
(12,687
)
 
7,811

 
(4,876
)
Total derivative liabilities
$
(50,018
)
 
$

 
$
(50,018
)
 
$
(27,157
)
 
$
7,811

 
$
(19,346
)


Note 11Accounts Payable, Accrued Expenses and Other Liabilities
The following table details the components of our accounts payable, accrued expense and other liabilities ($ in thousands):
 
March 31, 2020
 
December 31, 2019
Accrued dividends payable
$
65,119

 
$
74,771

Collateral deposited under derivative agreements
28,450

 
2,930

Accrued interest payable
15,930

 
16,089

Accounts payable and other liabilities
7,818

 
6,922

General CECL Allowance on unfunded commitments(1)
6,059

 

Total
$
123,376

 
$
100,712


  ———————
(1)
Refer to Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net for additional disclosure related to the General CECL Allowance on unfunded commitments for the quarter ended March 31, 2020.
 
Note 12Related Party Transactions
Management Agreement
In connection with our initial public offering in September 2009, we entered into a management agreement (the "Management Agreement") with the Manager, which describes the services to be provided by the Manager and its compensation for those services. The Manager is responsible for managing our day-to-day operations, subject to the direction and oversight of our board of directors.
Pursuant to the terms of the Management Agreement, the Manager is paid a base management fee equal to 1.5% per annum of our stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears.
The current term of the Management Agreement will expire on September 29, 2020, and is automatically renewed for successive one-year terms on each anniversary thereafter. The Management Agreement may be terminated upon expiration of the one-year extension term only upon the affirmative vote of at least two-thirds of our independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to ARI or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair fees by

23




accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of our independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual base management fee 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. Following a meeting by our independent directors in February 2020, which included a discussion of the Manager’s performance and the level of the management fees thereunder, we determined not to seek termination of the Management Agreement.
We incurred approximately $10.3 million and $9.6 million in base management fees under the Management Agreement for the three months ended March 31, 2020 and 2019, respectively.
In addition to the base management fee, we are also responsible for reimbursing the Manager for certain expenses paid by the Manager on our behalf or for certain services provided by the Manager to us. For the three months ended March 31, 2020 and 2019, we paid expenses totaling $0.6 million and $0.7 million, respectively, related to reimbursements for certain expenses paid by the Manager on our behalf under the Management Agreement. Expenses incurred by the Manager and reimbursed by us are reflected in the respective condensed consolidated statement of operations expense category or the condensed consolidated balance sheet based on the nature of the item.
Included in payable to related party on the condensed consolidated balance sheet at March 31, 2020 and December 31, 2019 are approximately $10.3 million and $10.4 million, respectively, for base management fees incurred but not yet paid under the Management Agreement.
Loans receivable
In January 2020, we sold £62.2 million ($81.3 million assuming conversion into U.S. dollars) in a mezzanine loan and £50.0 million ($65.3 million assuming conversion into U.S. dollars) unfunded commitment of a senior mortgage secured by a mixed-use property in London, UK to a fund managed by an affiliate of the Manager, that was originated by us in December 2019. This transaction was evaluated under ASC 860 - Transfers and Servicing, and we determined that it qualifies as a sale and accounted for as such.
Term Loan
In May 2019, Apollo Global Funding, LLC, an affiliate of the Manager, served as one of the five arrangers for the issuance of our senior secured term loan and received $0.6 million of arrangement fees.

Note 13Share-Based Payments
On September 23, 2009, our board of directors approved the Apollo Commercial Real Estate Finance, Inc. 2009 Equity Incentive Plan ("2009 LTIP") and on April 16, 2019, our board of directors approved the Amended and Restated Apollo Commercial Real Estate Finance, Inc. 2019 Equity Incentive Plan ("2019 LTIP," and together with the 2009 LTIP, the "LTIPs"), which amended and restated the 2009 LTIP. Following the approval of the 2019 LTIP by our stockholders at our 2019 annual meeting of stockholders on June 12, 2019, no additional awards will be granted under the 2009 LTIP and all outstanding awards granted under the 2009 LTIP remain in effect in accordance with the terms in the 2009 LTIP.
The 2019 LTIP provides for grants of restricted common stock, restricted stock units ("RSUs") and other equity-based awards up to an aggregate of 7,000,000 shares of our common stock. The LTIPs are administered by the compensation committee of our board of directors (the "Compensation Committee") and all grants under the LTIPs must be approved by the Compensation Committee.
We recognized stock-based compensation expense of $4.3 million and $3.9 million related to restricted stock and RSU vesting for the three months ended March 31, 2020 and 2019, respectively.

24




The following table summarizes the grants, vesting and forfeitures of restricted common stock and RSUs during the three months ended March 31, 2020:
 
Type
 
Restricted Stock
 
RSUs
 
Grant Date Fair Value ($ in thousands)
Outstanding at December 31, 2019
 
25,356

 
2,007,355

 
 
 
Granted
 

 

 

 
Vested
 

 

 
N/A

 
Forfeiture
 

 
(2,064
)
 
N/A

Outstanding at March 31, 2020
 
25,356

 
2,005,291

 
 

Below is a summary of restricted stock and RSU vesting dates as of March 31, 2020
Vesting Year
 
Restricted Stock
 
RSU
 
Total Awards
2020
 
25,356

 
963,927

 
989,283

2021
 

 
685,410

 
685,410

2022
 

 
355,954

 
355,954

Total
 
25,356

 
2,005,291

 
2,030,647



At March 31, 2020, we had unrecognized compensation expense of approximately $0.1 million and $35.0 million, respectively, related to the vesting of restricted stock awards and RSUs noted in the table above.

RSU Deliveries
During the three months ended March 31, 2020 and 2019, we delivered 503,251 and 433,585 shares of common stock for 868,157 and 730,717 vested RSUs, respectively. We allow RSU participants to settle their tax liabilities with a reduction of their share delivery from the originally granted and vested RSUs. The amount, when agreed to by the participant, results in a cash payment to the Manager related to this tax liability and a corresponding adjustment to additional paid in capital on the condensed consolidated statement of changes in stockholders' equity. The adjustment was $6.5 million and $5.0 million for the three months ended March 31, 2020 and 2019, respectively. The adjustment is a reduction of capital related to our equity incentive plan and is presented net of increases of capital related to our equity incentive plan in the condensed consolidated statement of changes in stockholders' equity.
Note 14Stockholders’ Equity
Our authorized capital stock consists of 450,000,000 shares of common stock, $0.01 par value per share and 50,000,000 shares of preferred stock, $0.01 par value per share. As of March 31, 2020, 153,740,547 shares of common stock were issued and outstanding, and 6,770,393 shares of 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock ("Series B Preferred Stock") were issued and outstanding.
On June 10, 2019, we redeemed all 6,900,000 shares of 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock ("Series C Preferred Stock") outstanding. Holders of the Series C Preferred Stock received the redemption price of $25.00 plus accumulated but unpaid dividends to the redemption date of $0.2223 per share.
Dividends. During the three months ended 2020 and 2019, we declared the following dividends:
 
Three months ended
Dividend declared per share of:
March 31, 2020
 
March 31, 2019
Common Stock
$0.40
 
$0.46
Series B Preferred Stock
0.50
 
0.50
Series C Preferred Stock
N/A
 
0.50



25




Common Stock Offerings. During the first quarter of 2019, we issued 1,967,361 shares of our common stock, at a per share conversion price of $17.17, related to conversions of the 2019 Notes, the remainder of which matured on March 15, 2019. We recorded a $33.8 million increase in additional paid in capital in the condensed consolidated statement of changes in stockholders' equity. Refer to "Note 9 - Convertible Senior Notes, Net" for a further discussion on the conversions of the 2019 Notes.
During the second quarter of 2019, we completed a follow-on public offering of 17,250,000 shares of our common stock, including shares issued pursuant to the underwriters' option to purchase additional shares, at a price of $18.27 per share. The aggregate net proceeds from the offering were $314.8 million after deducting offering expenses.
Common Stock Repurchases. During the first quarter of 2020, we repurchased 300,000 shares of our common stock at an average price of $8.11 per share.
Note 15Commitments and Contingencies
Legal Proceedings. From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57th Investment LLC commenced an action captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No 653251/2018) in New York Supreme Court. The complaint names as defendants (i) ACREFI Mortgage Lending, LLC, a subsidiary of the Company, (ii) the Company, and (iii) certain funds managed by Apollo, which are co-lenders on a mezzanine loan against the development of a residential condominium building in Manhattan, New York. The plaintiffs allege that the defendants tortiously interfered with the contractual equity put right in the plaintiffs’ joint venture agreement with the developers of the project, and that the defendants aided and abetted breaches of fiduciary duty by the developers of the project. The plaintiffs allege the loss of a $70.0 million investment as part of total damages of $700.0 million, which includes punitive damages. The defendants' motion to dismiss was granted on October 23, 2019 and the Court entered judgment dismissing the complaint in its entirety on November 8, 2019. Plaintiffs filed a timely notice of appeal on December 6, 2019 but have not yet filed their appellate brief. We believe the claims are without merit and plan to vigorously defend the case on appeal. We do not believe this will have a material adverse effect on our condensed consolidated financial statements.
Loan Commitments. As described in "Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net" at March 31, 2020, we had $1.8 billion of unfunded commitments related to our commercial mortgage and subordinate loan portfolios. The timings and amounts of fundings are uncertain as these commitments relate to loans for construction costs, capital expenditures, leasing costs, interest and carry costs, among others. As such, the timings and amounts of future fundings will rely on progress and performance of the underlying assets of our loans. Certain of our lenders are contractually obligated to fund their ratable portion of these loan commitments over time, while other lenders have some degree of discretion over future loan funding obligations. The total unfunded commitment is expected to be funded over the remaining expected 4.3 year weighted average tenor of these loans.
COVID-19. The COVID-19 global pandemic has brought forth uncertainty and disruption to the global economy. The magnitude and duration of the COVID 19 pandemic and its impact on our borrowers and their tenants, cash flows and future results of operations could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID 19 pandemic, the success of actions taken to contain or treat the pandemic, and reactions by consumers, companies, governmental entities and capital markets. The prolonged duration and impact of the COVID 19 pandemic could materially disrupt our business operations and impact our financial performance.
As of March 31, 2020, we have not recorded any contingencies on our condensed consolidated balance sheet related to COVID-19. To the extent COVID-19 continues to cause dislocations in the global economy, our financial condition, results of operations, and cash flows may continue to be adversely impacted. Refer to “Note 2 - Summary of Significant Accounting Policies” for further discussion regarding COVID-19.

Note 16Fair Value of Financial Instruments
The following table presents the carrying value and estimated fair value of our financial instruments not carried at fair value on the condensed consolidated balance sheet at March 31, 2020 and December 31, 2019 ($ in thousands):

26




 
March 31, 2020
 
December 31, 2019
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Cash and cash equivalents
$
582,138

 
$
582,138

 
$
452,282

 
$
452,282

Commercial mortgage loans, net
5,413,627

 
5,382,796

 
5,326,967

 
5,380,693

Subordinate loans and other lending assets, net(1)
1,016,991

 
1,013,646

 
1,048,126

 
1,050,961

Secured debt arrangements, net
(3,539,925
)
 
(3,539,925
)
 
(3,078,366
)
 
(3,078,366
)
Senior secured term loan, net
(487,117
)
 
(389,556
)
 
(487,961
)
 
(499,988
)
2022 Notes
(338,393
)
 
(239,775
)
 
(337,755
)
 
(348,060
)
2023 Notes
(224,178
)
 
(151,800
)
 
(223,818
)
 
(234,600
)

———————
(1) Includes subordinate risk retention interests in securitization vehicles with an estimated fair value that approximates their carrying value.
To determine estimated fair values of the financial instruments listed above, market rates of interest, which include credit assumptions, are used to discount contractual cash flows. The estimated fair values are not necessarily indicative of the amount we could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. Estimates of fair value for cash and cash equivalents, convertible senior notes, net and senior secured term loan, net are measured using observable Level I inputs as defined in "Note 3 - Fair Value Disclosure." Estimates of fair value for all other financial instruments in the table above are measured using significant estimates, or unobservable Level III inputs as defined in "Note 3 - Fair Value Disclosure."
Note 17Net Income (Loss) per Share
ASC 260 "Earnings per share" requires the use of the two-class method of computing earnings per share for all periods presented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for dividends declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for dividends declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.
The remaining earnings are allocated to common stockholders and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. Each total is then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding shares of common stock and all potential shares of common stock assumed issued if they are dilutive. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of these potential shares of common stock.

27




The table below presents the computation of basic and diluted net income (loss) per share of common stock for the three months ended March 31, 2020 and 2019 ($ in thousands except per share data): 
 
For the three months ended March 31,
 
2020
 
2019
Basic Earnings
 
 
 
Net income (loss)
$
(127,842
)
 
$
67,758

Less: Preferred dividends
(3,385
)
 
(6,835
)
Net income (loss) available to common stockholders
$
(131,227
)
 
$
60,923

Less: Dividends on participating securities
(802
)
 
(851
)
Basic Earnings
$
(132,029
)
 
$
60,072

 
 
 
 
Diluted Earnings
 
 
 
Basic Earnings
$
(132,029
)
 
$
60,072

Add: Dividends on participating securities

 
851

Add: Interest expense on Notes

 
9,262

Diluted Earnings
$
(132,029
)
 
$
70,185

 
 
 
 
Number of Shares:
 
 
 
Basic weighted-average shares of common stock outstanding
153,948,191

 
134,607,107

Diluted weighted-average shares of common stock outstanding
153,948,191

 
164,683,086

 
 
 


Earnings Per Share Attributable to Common Stockholders
 
 
 
Basic
$
(0.86
)
 
$
0.45

Diluted
$
(0.86
)
 
$
0.43


The dilutive effect to earnings per share is determined using the "if-converted" method whereby interest expense on the outstanding Notes is added back to the diluted earnings per share numerator and all of the potentially dilutive shares are included in the diluted earnings per share denominator. For the three months ended March 31, 2020, 28,533,271 weighted-average potentially issuable shares with respect to the Notes were excluded from the calculation of diluted net income per share because the effect was anti-dilutive. For the three months ended March 31, 2019, 30,093,312 weighted-average potentially issuable shares with respect to the Notes were included in the calculation of diluted net income per share. Refer to "Note 9 - Convertible Senior Notes, Net" for further discussion.
For the three months ended March 31, 2020 and 2019, 2,007,242 and 1,849,564 weighted-average unvested RSUs, respectively, were excluded from the calculation of diluted net income per share because the effect was anti-dilutive.
Note 18Subsequent Events
Subsequent to the quarter ended March 31, 2020, the following events took place:
Investment activity. We funded approximately $56.2 million for previously closed loans.
Loan Repayments. We received approximately $3.7 million from loan repayments.
Loan Sales. We sold interests in three construction loans, with aggregate commitments of $262 million (of which approximately $90 million was funded at the time of sale) for a realized loss of approximately $0.5 million. The sales are comprised of 100% of our interests in two loans and 40% of our interest in one loan. The sales were to entities managed by an affiliate of the Manager. In connection with these sales, we decreased our future unfunded commitments by $172.6 million.
Interest Rate Swap. Subsequent to quarter end, we terminated our interest rate swap with a notional amount of $500.0 million that fixed LIBOR at 2.12%. The termination resulted in a realized loss of $54.3 million, $50.0 million of which has already been recorded as an unrealized loss as of March 31, 2020. There is no impact on our current liquidity in connection with this termination as we had already posted cash collateral to the counterparty.

28




Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING INFORMATION

We make forward-looking statements herein and will make forward-looking statements in future filings with the SEC, press releases or other written or oral communications within the meaning of Section 27A of the Securities Act of
1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For these statements, we claim the protections of the safe harbor for forward-looking statements contained in such Sections. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. When we use the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions, it intends to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: the macro- and micro-economic impact of the COVID-19 pandemic; the severity and duration of the COVID-19 pandemic; actions taken by governmental authorities to contain the COVID-19 pandemic or treat its impact; the impact of the COVID-19 pandemic on our financial condition, results of operations, liquidity and capital resources; market trends in our industry, interest rates, real estate values, the debt securities markets or the general economy; the demand for commercial real estate loans; our business and investment strategy; our operating results; actions and initiatives of the U.S. government and governments outside of the United States, changes to government policies and the execution and impact of these actions, initiatives and policies; the state of the economy generally or in specific geographic regions; economic trends and economic recoveries; our ability to obtain and maintain financing arrangements, including secured debt arrangements and securitizations; the timing and amount of expected future fundings of unfunded commitments; the availability of debt financing from traditional lenders; the volume of short-term loan extensions; the demand for new capital to replace maturing loans; expected leverage; general volatility of the securities markets in which we participate; changes in the value of our assets; the scope of our target assets; interest rate mismatches between our target assets and any borrowings used to fund such assets; changes in interest rates and the market value of our target assets; changes in prepayment rates on our target assets; effects of hedging instruments on our target assets; rates of default or decreased recovery rates on our target assets; the degree to which hedging strategies may or may not protect us from interest rate volatility; impact of and changes in governmental regulations, tax law and rates, accounting, legal or regulatory issues or guidance and similar matters; our continued maintenance of our qualification as a REIT for U.S. federal income tax purposes; our continued exclusion from registration under the Investment Company Act of 1940, as amended; the availability of opportunities to acquire commercial mortgage-related, real estate-related and other securities; the availability of qualified personnel; estimates relating to our ability to make distributions to our stockholders in the future; our present and potential future competition; and unexpected costs or unexpected liabilities, including those related to litigation.
The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. See "Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q and our Annual Report. These and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that we file with the SEC, could cause our actual results to differ materially from those included in any forward-looking statements we make. All forward-looking statements speak only as of the date they are made. New risks and uncertainties arise over time and it is not possible to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
We are a Maryland corporation and have elected to be taxed as a REIT for U.S. federal income tax purposes. We primarily originate, acquire, invest in and manage performing commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments. These asset classes are referred to as our target assets.
We are externally managed and advised by the Manager, an indirect subsidiary of Apollo, a leading global alternative investment manager with a contrarian and value-oriented investment approach in private equity, credit and real estate with assets under management of approximately $315.5 billion as of March 31, 2020.
The Manager is led by an experienced team of senior real estate professionals who have significant expertise in underwriting and structuring commercial real estate financing transactions. We benefit from Apollo’s global infrastructure and operating platform, through which we are able to source, evaluate and manage potential investments in our target

29




assets.
Current Market Conditions

During the first quarter of 2020, there was a global outbreak of COVID-19, which was declared by the World Health Organization as a pandemic. In response to COVID-19, the United States and numerous other countries declared national emergencies, which has led to large scale quarantines as well as restrictions to business deemed non-essential. These responses to COVID-19 have disrupted economic activities and could have a significant continued adverse effect on economic and market conditions, and could result in a recession. As we are still in the midst of the COVID-19 pandemic we are not in a position to estimate the ultimate impact this will have on our business and the economy as a whole. The effects of COVID-19 have adversely impacted the value of our assets, business, financial condition, results of operations and cash flows, and our ability to operate successfully. Some of the factors that impacted us to date and may continue to affect us are outlined in "Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q. Please see "Liquidity and Capital Resources" below for additional discussion surrounding the ongoing impact we expect COVID-19 will have on our liquidity and capital resources.
Critical Accounting Policies

A summary of our critical accounting policies is set forth in our Annual Report under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Use of Estimates." There have been no material changes to our critical accounting policies described in our Annual Report other than the adoption of the CECL Standard, as described in "Note 2 - Summary of Significant Accounting Policies."
Results of Operations
All non-USD denominated assets and liabilities are translated to USD at the exchange rate prevailing at the reporting date and income, expenses, gains, and losses are translated at the prevailing exchange rate on the dates that they were recorded.
Loan Portfolio Overview
The following table sets forth certain information regarding our commercial real estate debt portfolio as of March 31, 2020 ($ in thousands):
Description
 
Amortized
Cost
 
Weighted-Average Coupon (1)
 
Weighted Average All-in Yield (1)(2)
 
Secured Debt Arrangements (3)
 
Cost of Funds
 
Equity at
cost
(4)
 
Commercial mortgage loans, net
 
$
5,413,627

 
4.8
%
 
5.3
%
 
$
3,556,842

 
2.7
%
 
$
1,856,785

Subordinate loans and other lending assets, net
 
1,016,991

 
12.4
%
 
13.9
%
 

 

 
1,016,991

Total/Weighted-Average
 
$
6,430,618


6.0
%

6.7
%

$
3,556,842


2.7
%

$
2,873,776

———————    
(1)
Weighted-Average Coupon and Weighted-Average All-in Yield are based on the applicable benchmark rates as of March 31, 2020 on the floating rate loans.
(2)
Weighted-Average All-in Yield includes the amortization of deferred origination fees, loan origination costs and accrual of both extension and exit fees. Weighted-Average All-in Yield excludes the benefit of forward points on currency hedges relating to loans denominated in currencies other than USD.
(3)
Gross of deferred financing costs of $16.9 million.
(4)
Represents loan portfolio at amortized cost less secured debt outstanding.
The following table provides details of our commercial mortgage loan portfolio and subordinate and other lending assets portfolio, on a loan-by-loan basis, as of March 31, 2020 ($ in millions):
Commercial Mortgage Loan Portfolio
#
Property Type
Risk Rating
Origination Date
Amortized Cost
Unfunded Commitment
Construction
Loan
Fully-extended Maturity
Location
1
Urban Retail
3
08/2019
$316
$—
 
09/2024
Manhattan, NY
2
Urban Retail
3
12/2019
308
 
12/2023
London, UK

30




3
Hotel
3
10/2019
240
52
 
08/2024
Various
4
Healthcare
3
10/2019
212
28
 
10/2024
Various
5
Office
3
02/2020
207
 
02/2025
London, UK
6
Industrial
3
01/2019
196
7
 
02/2024
Brooklyn, NY
7
Office
3
06/2019
192
27
 
11/2026
Berlin, Germany
8
Office
3
10/2018
191
8
 
10/2021
Manhattan, NY
9
Office
3
09/2019
172
 
09/2023
London, UK
10
Office
3
01/2020
166
121
 
02/2025
Long Island City, NY
11
Office
3
11/2017
158
 
01/2023
Chicago, IL
12
Hotel
3
04/2018
152
2
 
04/2023
Honolulu, HI
13
Hotel
3
05/2018
140
 
06/2023
Miami, FL
14
Hotel (1)
5
09/2015
144
 
06/2023
Manhattan, NY
15
Hotel
3
08/2019
131
 
08/2024
Puglia, Italy
16
Office
3
01/2018
130
60
 
01/2022
Renton, WA
17
Urban Predevelopment (1)
5
03/2017
126
9
 
12/2020
Brooklyn, NY
18
Urban Predevelopment (1)
5
01/2016
118
 
09/2021
Miami, FL
19
Residential-for-sale: inventory
3
03/2018
121
 
03/2021
London, UK
20
Office
3
10/2018
121
65
Y
10/2023
Manhattan, NY
21
Residential-for-sale: construction
3
12/2019
114
35
Y
01/2023
Boston, MA
22
Hotel
3
03/2017
105
 
03/2022
Atlanta, GA
23
Retail center
5
11/2014
104
 
09/2020
Cincinnati, OH
24
Hotel
3
11/2018
99
 
12/2023
Vail, CO
25
Hotel
3
12/2017
89
 
12/2022
Manhattan, NY
26
Office
3
03/2018
89
3
 
04/2023
Chicago, IL
27
Residential-for-sale: inventory
3
12/2019
82
 
07/2021
Manhattan, NY
28
Office
3
04/2019
76
83
Y
09/2025
Culver City, CA
29
Office
3
12/2017
74
45
 
07/2022
London, UK
30
Mixed Use
3
12/2019
72
1
 
12/2024
London, UK
31
Residential-for-sale: construction
3
12/2018
70
107
Y
12/2023
Manhattan, NY
32
Multifamily
3
04/2014
69
 
07/2023
Various
33
Hotel
3
08/2019
67
 
09/2022
Manhattan, NY
34
Hotel
3
04/2018
63
 
05/2023
Scottsdale, AZ
35
Urban Predevelopment
3
12/2016
63
 
06/2020
Los Angeles, CA
36
Hotel
3
09/2019
60
 
10/2024
Miami, FL
37
Residential-for-sale: construction
3
01/2018
60
20
Y
01/2023
Manhattan, NY
38
Hotel
3
12/2019
60
 
01/2025
Tucson, AZ
39
Multifamily
3
11/2014
54
 
11/2021
Various
40
Hotel
3
05/2019
52
 
06/2024
Chicago, IL
41
Multifamily
3
02/2020
50
1
 
03/2024
Cleveland, Ohio
42
Multifamily
3
06/2018
47
 
06/2020
London, UK
43
Office
3
08/2018
42
148
Y
12/2022
London, UK
44
Hotel
3
12/2015
42
 
08/2024
St. Thomas, USVI
45
Residential-for-sale: construction
3
12/2018
40
62
Y
01/2024
Hallandale Beach, FL
46
Office
3
04/2019
35
37
Y
08/2022
Birmingham, UK
47
Hotel (1)
5
02/2018
31
 
03/2023
Pittsburgh, PA
48
Office
3
12/2019
29
6
 
12/2022
Edinburgh, Scotland
49
Residential-for-sale: construction
3
03/2018
26
88
Y
03/2023
San Francisco, CA
50
Residential-for-sale: inventory
2
05/2018
24
 
04/2021
Manhattan, NY
51
Residential-for-sale: inventory
3
06/2018
18
 
06/2020
Manhattan, NY
52
Residential-for-sale: inventory (1)
5
02/2014
3
 
04/2021
Bethesda, MD
53
Mixed Use
3
12/2019
(8)
777
Y
06/2025
London, UK
 
General CECL Allowance
N/A
 
(28)
 
 
 
 
 
Sub total / Weighted-Average Commercial Mortgage Loans
3.2
 
$5,414
$1,792
 
3.3 Years
 

31






Subordinate Loan and Other Lending Asset Portfolio
#
Property Type
Risk Rating
Origination Date
Amortized Cost
Unfunded Commitment
Construction Loan(5)
Fully-extended Maturity
Location
1
Residential-for-sale: construction (2)
3
06/2015
$216
Y
02/2021
Manhattan, NY
2
Residential-for-sale: construction
3
12/2017
100
15
Y
06/2022
Manhattan, NY
3
Office
3
01/2019
100
 
12/2025
Manhattan, NY
4
Healthcare
3
01/2019
76
 
01/2024
Various
5
Multifamily
3
10/2015
69
 
11/2020
Manhattan, NY
6
Residential-for-sale: construction
3
12/2017
68
Y
04/2023
Los Angeles, CA
7
Residential-for-sale: construction (2)
3
11/2017
68
Y
02/2021
Manhattan, NY
8
Healthcare (3)
3
07/2019
51
 
06/2024
Various
9
Mixed Use
3
01/2017
42
 
02/2027
Cleveland, OH
10
Residential-for-sale: inventory
2
10/2016
36
 
10/2020
Manhattan, NY
11
Mixed Use
3
02/2019
36
Y
12/2022
London, UK
12
Industrial
2
05/2013
32
 
05/2023
Various
13
Mixed Use
3
12/2018
26
25
Y
12/2023
Brooklyn, NY
14
Hotel
2
06/2015
24
 
07/2025
Phoenix, AZ
15
Hotel
3
06/2018
20
 
06/2023
Las Vegas, NV
16
Multifamily
3
05/2018
19
 
05/2028
Cleveland, OH
17
Healthcare (3)
3
02/2019
17

01/2034
Various
18
Office
2
07/2013
14
 
07/2022
Manhattan, NY
19
Hotel (3)
5
06/2015
10
 
12/2022
Washington, DC
20
Hotel
3
05/2017
8
 
06/2027
Anaheim, CA
21
Office
3
08/2017
8
 
09/2024
Troy, MI
22
Mixed Use
3
07/2012
7
 
08/2022
Chapel Hill, NC
 
General CECL Allowance
 
 
(30)
 
 
 
 
 
Sub total / Weighted-Average Subordinate Loans and Other Lending Assets
2.9
 
$1,017
$40
 
3.0 Years
 
 
 
 
 
 
 
 
 
 
 
Total / Weighted-Average
Loan Portfolio
3.1
 
$6,431
$1,832
 
3.3 Years
 
———————
(1) Amortized cost for these loans is net of the recorded provisions for loan losses.
(2) Both loans are secured by the same property.
(3) Single Asset, Single Borrower CMBS.

Our average asset and debt balances for the three months ended March 31, 2020 were ($ in thousands):
 
 
Average month-end balances for the three months ended March 31, 2020
Description
 
Assets
 
Related debt
Commercial mortgage loans, net
 
$
5,579,719

 
$
3,231,713

Subordinate loans and other lending assets, net
 
1,063,453

 

Investment Activity
During the three months ended March 31, 2020, we committed $562.0 million of capital to loans ($439.9 million of which was funded during the three months ended March 31, 2020). In addition, during the three months ended March 31, 2020, we funded $118.5 million for loans closed prior to 2020, and received $210.7 million in repayments and sales.

Net Income (Loss) Available to Common Stockholders
For the three months ended March 31, 2020 and 2019, respectively, our net income (loss) available to common stockholders was $(131.2) million, or $(0.86) per diluted share of common stock, and $60.9 million, or $0.43 per diluted

32




share of common stock, respectively.
Operating Results
The following table sets forth information regarding our consolidated results of operations and certain key operating metrics ($ in thousands):
 
Three months ended March 31,
 
2020 vs 2019
 
2020
 
2019
 
 
Net interest income:
 
 
 
 
 
Interest income from commercial mortgage loans
$
81,855

 
$
78,286

 
$
3,569

Interest income from subordinate loans and other lending assets
34,018

 
40,839

 
(6,821
)
Interest expense
(41,205
)
 
(36,295
)
 
(4,910
)
Net interest income
74,668

 
82,830

 
(8,162
)
Operating expenses:
 
 
 
 
 
General and administrative expenses
(6,531
)
 
(6,151
)
 
(380
)
Management fees to related party
(10,268
)
 
(9,613
)
 
(655
)
Total operating expenses
(16,799
)
 
(15,764
)
 
(1,035
)
Other income
760

 
518

 
242

Provision for loan losses - Specific CECL Allowance
(150,000
)
 

 
(150,000
)
Provision for loan losses - General CECL Allowance
(33,465
)
 

 
(33,465
)
Foreign currency gain (loss)
(37,949
)
 
6,894

 
(44,843
)
Gain (loss) on foreign currency forwards
70,491

 
(6,720
)
 
77,211

Unrealized loss on interest rate swap
(35,548
)
 

 
(35,548
)
Net income (loss)
$
(127,842
)
 
$
67,758

 
$
(195,600
)
Net Interest Income

Net interest income decreased by $8.2 million during the three months ended March 31, 2020 as compared to the same period in 2019. The decrease was primarily due to (i) a 1.09% decrease in average one-month LIBOR for the three months ended March 31, 2020 compared to March 31, 2019 and (ii) an increase in interest expense due to an increase in our net debt balance of $1.9 billion as of March 31, 2020 compared to March 31, 2019. This decrease was offset by (i) a $1.5 billion increase in loan principal balance as of March 31, 2020 compared to March 31, 2019 and (ii) in the money LIBOR floors on several of our loans.
We recognized $0.2 million and $3.7 million in pre-payment penalties and accelerated fees for the three months ended March 31, 2020 and 2019, respectively.

We recognized PIK interest of $12.4 million and $14.5 million for the three months ended March 31, 2020 and 2019, respectively.
Operating Expenses
General and administrative expenses
General and administrative expenses increased by $0.4 million for the three months ended March 31, 2020 compared to the same period in 2019. The increase was primarily driven by a $0.4 million increase in non-cash restricted stock and RSU amortization related to shares of common stock awarded under the LTIPs.
Management fees to related party
Management fee expense increased by $0.7 million during the three months ended March 31, 2020 as compared to the same periods in 2019. The increase is primarily attributable to an increase in our stockholders’ equity (as defined in the Management Agreement) as a result of us completing the follow-on public offering of 17,250,000 shares during the second quarter of 2019 (as described in "Note 14 - Stockholders' Equity").

33




Management fees and the relationship between us and the Manager under the Management Agreement are discussed further in the accompanying condensed consolidated financial statements, in "Note 12 - Related Party Transactions."
Provision for loan losses - General CECL Allowance
The General CECL Allowance increased by $33.5 million during the three months ended March 31, 2020. The increase is predominantly related to a change in our view of estimated macro-economic conditions, including unemployment rate and commercial real estate price index, in the backdrop of the COVID-19 global pandemic. Other factors that contributed to the increase include an increase in our view of remaining expected term of our loan portfolio and growth in the portfolio from new investments during the quarter. Refer to "Note 2 - Summary of Significant Accounting Policies" and "Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net" for additional information related to our General CECL Allowance.
Provision for loan losses - Specific CECL Allowance
During the three months ended March 31, 2020, we recorded impairments on five new loans and increased the Specific CECL Allowance on two loans that previously had loan loss provisions, primarily due to the impact from COVID-19. Refer to "Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net" for additional information related to our Specific CECL Allowance.
Foreign currency gain and (loss) on derivative instruments
We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than USD. When foreign currency gain and (loss) on derivative instruments are evaluated on a combined basis, the net impact for the three months ended March 31, 2020 and 2019 was $32.5 million and $0.2 million, respectively.
Unrealized loss on interest rate swap
We use an interest rate swap to manage exposure to variable cash flows on portions of our borrowings under our senior secured term loan. The interest rate swap agreement allows us to receive a variable rate cash flow based on LIBOR and pay a fixed rate cash flow, mitigating the impact of this exposure. For the three months ended March 31, 2020, we had an unrealized loss on the interest rate swap of $35.5 million. We did not have the interest rate swap at any point during the three months ended March 31, 2019.
Dividends
We have declared the following dividends in 2020:
 
 
 
Dividend declared per share of:
March 31, 2020
Common Stock
$0.40
Series B Preferred Stock
0.50
Subsequent Events
Refer to "Note 18 - Subsequent Events" to the accompanying condensed consolidated financial statements for disclosure regarding significant transactions that occurred subsequent to March 31, 2020.
Liquidity and Capital Resources
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make distributions to our stockholders and other general business needs. As of March 31, 2020, we had $1.1 billion of corporate debt and $3.6 billion of asset specific financings. We have no corporate debt maturities until August 2022. As of March 31, 2020, we had $582 million of cash on hand and $8 million of approved and undrawn capacity from our secured debt arrangements. In addition, we have a significant amount of unencumbered loan assets. In light of COVID-19 and its severe impact on the economy we have taken steps to increase our cash balances in order to maintain an adequate level of liquidity to meet future outflows. As the duration and severity of COVID-19 remain unknown, so does the impact it will have on our borrowers, lenders, and the economy as a whole. We will continue to closely monitor developments related to COVID-19 as it relates to our liquidity position and

34




financial obligations. At this time we believe we have sufficient liquidity and access to additional liquidity to meet financial obligations for at least the next 12 months.
Debt-to-Equity Ratio
The following table presents our debt-to-equity ratio:
 
March 31, 2020
 
December 31, 2019
Debt to Equity Ratio (1)
1.6
 
1.4
———————
(1) Represents total debt less cash and loan proceeds held by servicer to total stockholders' equity.
Our primary sources of liquidity are as follows:
Cash Generated from Operations
Cash from operations is generally comprised of interest income from our investments, net of any associated financing expense, principal repayments from our investments, net of associated financing repayments, proceeds from the sale of investments, and changes in working capital balances. See "Results of Operations – Loan Portfolio Overview" above for a summary of interest rates related to our investment portfolio as of March 31, 2020.

Borrowings Under Various Financing Arrangements
JPMorgan Facility
In November 2019, through three indirect wholly-owned subsidiaries, we entered into a Sixth Amended and Restated Master Repurchase Agreement with JPMorgan Chase Bank, National Association. The JPMorgan Facility allows for $1.3 billion of maximum borrowings (with amounts borrowed in British pounds and Euros converted to U.S. dollars for purposes of calculating availability based on the greater of the spot rate as of the initial financing under the corresponding mortgage loan and the then-current spot rate) and matures in June 2022 and has two one-year extensions available at our option, which are subject to the approval of JPMorgan and certain other conditions. The JPMorgan Facility enables us to elect to receive advances in U.S. dollars, British pounds, or Euros. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $1.2 billion (including £75.6 million and €60.0 million assuming conversion into USD) of borrowings outstanding under the JPMorgan Facility secured by certain of our commercial mortgage loans.
DB Facility
In March 2020, through an indirect wholly-owned subsidiary, we entered into a Third Amended and Restated Master Repurchase Agreement with Deutsche Bank AG, Cayman Islands Branch, London Branch, which provides for advances of up to $1.0 billion for the sale and repurchase of eligible first mortgage loans secured by commercial or multifamily properties located in the United States, United Kingdom and the European Union, and enables us to elect to receive advances in USD, GBP, or EUR. The repurchase facility matures in March 2021, and has two one-year extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $507.0 million of borrowings outstanding under the DB Facility secured by certain of our commercial mortgage loans.
Goldman Facility
In November 2017, through an indirect wholly-owned subsidiary, we entered into a master repurchase and securities contract agreement with Goldman Sachs Bank USA, which provides advances up to $500.0 million and matures in November 2020, and has one one-year extension available at our option, subject to certain conditions. Margin calls may occur any time at specified margin deficit thresholds.
As of March 31, 2020, we had $359.5 million of borrowings outstanding under the Goldman Facility secured by certain of our commercial mortgage loans.
CS Facility - USD

35




In July 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd, which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - USD has an "evergreen" feature such that the facility continues unless terminated at any time by Credit Suisse with six months' notice. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $325.9 million of borrowings outstanding under the CS Facility - USD secured by certain of our commercial mortgage loans.
CS Facility - GBP
In June 2018, through an indirect wholly-owned subsidiary, we entered into a Global Master Repurchase Agreement with Credit Suisse Securities (Europe) Limited, which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - GBP matures in September 2020. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $84.7 million (£68.2 million assuming conversion into USD) of borrowings outstanding under the CS Facility - GBP secured by one commercial mortgage loan.
HSBC Facility - USD
In October 2019, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc, which provides for a single asset financing. The facility is scheduled to mature in January 2021. Margin calls may occur any time at specified aggregate margin thresholds.
As of March 31, 2020, we had $50.6 million of borrowings under the HSBC Facility - USD secured by one commercial mortgage loan.
HSBC Facility - GBP
In September 2018, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc, which provides for a single asset financing. The facility is scheduled to mature in June 2020. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $32.2 million (£26.0 million assuming conversion into USD) of borrowings outstanding under the HSBC Facility - GBP secured by one commercial mortgage loan.
HSBC Facility - EUR
In July 2019, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc, which provides for a single asset financing. The facility matures in July 2021. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $151.5 million (€137.4 million assuming conversion into USD) of borrowings outstanding under the HSBC Facility - EUR secured by one of our commercial mortgage loans.
Barclays Facility - USD
In March 2020, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement pursuant to a Master Repurchase Agreement with Barclays Bank plc. The Barclays Facility - USD allows for $200.0 million of maximum borrowings and initially matures in March 2023 with extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds.
Barclays Facility - GBP/EUR
Beginning in October 2019, through an indirect wholly-owned subsidiary, we entered into five secured debt arrangements pursuant to a Global Master Repurchase Agreement with Barclays Bank plc. Margin calls may occur any time at specified aggregate margin deficit thresholds.
The table below provides the currency, outstanding balance, stated maturity, and extended maturity for each of the five secured debt arrangements under the Barclays Facility - GBP/EUR:

36




Local Currency
Borrowings outstanding (in $)
Fully-Extended Maturity(1)
GBP
$217,350
December 2023
GBP
156,958
February 2023
GBP
149,830
October 2024
GBP
121,716
September 2023
Sub-total/Weighted-Average
$645,854
November 2023
EUR
179,586
see below
Total/Weighted-Average
$825,440
 
———————
(1) Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.
The Barclays Facility - EUR has an "evergreen" feature such that the facility continues for one year and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve month notice.
As of March 31, 2020, we had $825.4 million (£520.0 million and €162.8 million assuming conversion into U.S.
dollars) of borrowings outstanding under the Barclays Facility - GBP/EUR secured by five of our commercial mortgage loans.
Debt Covenants
The guarantees related to our secured debt arrangements contain the following financial covenants (i) tangible net worth must be greater than $1.25 billion plus 75% of the net cash proceeds of any equity issuance after March 31, 2017 (ii) our ratio of total indebtedness to tangible net worth cannot be greater than 3.75:1; and (iii) our liquidity cannot be less than an amount equal to the greater of 5% of total recourse indebtedness or $30.0 million.
Senior Secured Term Loan
In May 2019, we entered into the $500.0 million senior secured term loan. During the three months ended March 31, 2020, we repaid $1.3 million of principal related to the senior secured term loan. The senior secured term loan bears interest at LIBOR plus 2.75% and was issued at a price of 99.5%. The outstanding balance as of March 31, 2020 was $496.3 million. The senior secured term loan matures in May 2026 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities. The senior secured term loan includes the following financial covenants: (i) our ratio of total recourse debt to tangible net worth cannot be greater than 3:1; and (ii) our ratio of total unencumbered assets to total pari-passu indebtedness must be at least 1.25:1.
Convertible Senior Notes
In two separate offerings during 2017, we issued an aggregate principal amount of $345.0 million of 4.75% Convertible Senior Notes due 2022, for which we received $337.5 million, after deducting the underwriting discount and offering expenses. At March 31, 2020, the 2022 Notes had a carrying value of $338.4 million and an unamortized discount of $6.6 million.
During the fourth quarter of 2018, we issued $230.0 million of 5.375% Convertible Senior Notes due 2023, for which we received $223.7 million after deducting the underwriting discount and offering expenses. At March 31, 2020, the 2023 Notes had a carrying value of $224.2 million and an unamortized discount of $5.8 million.
Cash Generated from Equity Offerings
During the second quarter of 2019, we completed a follow-on public offering of 17,250,000 shares of our common stock, including shares issued pursuant to the underwriters' option to purchase additional shares, at a price of $18.27 per share. The aggregate net proceeds from the offering were $314.8 million after deducting offering expenses.
In March 2020, our board of directors approved a stock repurchase program for up to an aggregate of $150.0 million of our common stock. In March 2020, we repurchased 300,000 shares of common stock under this plan for $2.4 million.
Other Potential Sources of Financing

37




Our primary sources of cash currently consist of cash available, which was $582.1 million as of March 31, 2020, principal and interest payments we receive on our portfolio of assets, and available borrowings under our secured debt arrangements. We expect our other sources of cash to consist of cash generated from operations and prepayments of principal received on our portfolio of assets. Such prepayments are difficult to estimate in advance. Depending on market conditions, we may utilize additional borrowings as a source of cash, which may also include additional secured debt arrangements as well as other borrowings such as credit facilities, or conduct additional public and private debt and equity offerings. As of March 31, 2020 we also held $1.2 billion of unencumbered assets, consisting of $0.2 billion of senior mortgages and $1.0 billion of mezzanine loans.
We maintain policies relating to our borrowings and use of leverage. See "Leverage Policies" below. In the future, we may seek to raise further equity or debt capital or engage in other forms of borrowings in order to fund future investments or to refinance expiring indebtedness.
We generally intend to hold our target assets as long-term investments, although we may sell certain of our investments in order to manage our interest rate risk and liquidity needs, meet other operating objectives and adapt to market conditions.
To maintain our qualification as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain. These distribution requirements limit our ability to retain earnings and replenish or increase capital for operations.
Leverage Policies
We use leverage for the sole purpose of financing our portfolio and not for the purpose of speculating on changes in interest rates. In addition to our secured debt arrangements and senior secured term loan, we access additional sources of borrowings. Our charter and bylaws do not limit the amount of indebtedness we can incur; however, we are subject to and carefully monitor the limits placed on us by our credit providers and those that assign ratings on our Company.

At March 31, 2020, our debt-to-equity ratio was 1.6 and our portfolio was comprised of $5.4 billion of commercial mortgage loans and $1.0 billion of subordinate loans and other lending assets. In order to achieve our return on equity, we generally finance our mortgage loans with 2.0 to 3.0 turns of leverage and generally do not finance our subordinate loan portfolio given built-in inherent structural leverage. Consequently, depending on our portfolio mix, our debt-to-equity ratio may exceed our previously disclosed thresholds.
Investment Guidelines
Our current investment guidelines, approved by our board of directors, are comprised of the following:
no investment will be made that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes;
no investment will be made that would cause us to register as an investment company under the 1940 Act;
investments will be predominantly in our target assets;
no more than 20% of our cash equity (on a consolidated basis) will be invested in any single investment at the time of the investment; and
until appropriate investments can be identified, the Manager may invest the proceeds of any offering in interest bearing, short-term investments, including money market accounts and/or funds, that are consistent with our intention to qualify as a REIT.
The board of directors must approve any change in or waiver to these investment guidelines.
Contractual Obligations and Commitments
Our contractual obligations including expected interest payments as of March 31, 2020 are summarized as follows ($ in thousands):
 

38




 
Less than 1
year
(1)
 
1 to 2 years(1)
 
2 to 3
years
(1)
 
3 to 5
years
(1)
 
More
than 5
years
(1)
 
Total
Secured debt arrangements(1)(2)
$
344,787

 
$
1,117,097

 
$
205,964

 
$
2,144,893

 
$

 
$
3,812,741

Senior secured term loan(2)
22,316

 
22,141

 
21,965

 
43,451

 
523,406

 
633,279

Convertible senior notes
28,750

 
28,750

 
363,978

 
237,211

 

 
658,689

Unfunded loan commitments (3)(4)
528,627

 
729,951

 
289,918

 
17,482

 
11,793

 
1,577,771

Total
$
924,480

 
$
1,897,939

 
$
881,825

 
$
2,443,037

 
$
535,199

 
$
6,682,480

———————
(1)
Assumes underlying assets are financed through the fully extended maturity date of the secured debt arrangement.
(2)
Based on the applicable benchmark rates as of March 31, 2020 on the floating rate debt for interest payments due.
(3)
Based on our expected funding schedule, which is based upon the Manager’s estimates based upon the best information available to the Manager at the time. There is no assurance that the payments will occur in accordance with these estimates or at all, which could affect our operating results. Refer to "Note 15– Commitments and Contingencies" for further detail regarding unfunded loan commitments.
(4)
In connection with the sale of three loans, which sale closed subsequent to March 31, 2020, as discussed in "Note 18 - Subsequent Events," we were relieved of future funding obligations totaling $172.6 million, which is excluded from the above table, all of which was expected to be funded within two years of March 31, 2020.

Loan Commitments. As of March 31, 2020, we had $1.8 billion of unfunded loan commitments, comprised of $1.8 billion related to our commercial mortgage loan portfolio, and $40.5 million related to our subordinate loan portfolio.
Management Agreement. On September 23, 2009, we entered into the Management Agreement with the Manager pursuant to which the Manager is entitled to receive a management fee and the reimbursement of certain expenses. The table above does not include amounts due under the Management Agreement as those obligations do not have fixed and determinable payments. Pursuant to the Management Agreement, the Manager is entitled to a base management fee calculated and payable quarterly in arrears in an amount equal to 1.5% of our stockholders’ equity (as defined in the Management Agreement), per annum. The Manager will use the proceeds from its management fee in part to pay compensation to its officers and personnel. We do not reimburse the Manager or its affiliates for the salaries and other compensation of their personnel, except for the allocable share of the compensation of (1) our Chief Financial Officer based on the percentage of time spent on our affairs and (2) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment professional personnel of the Manager or its affiliates who spend all or a portion of their time managing our affairs based on the percentage of time devoted by such personnel to our affairs. We are also required to reimburse the Manager for operating expenses related to us incurred by the Manager, including expenses relating to legal, accounting, due diligence and other services. Expense reimbursements to the Manager are made in cash on a monthly basis following the end of each month. Our reimbursement obligation is not subject to any dollar limitation.
The current term of the Management Agreement will expire on September 29, 2020. Absent certain action by the independent directors of our board of directors, as described below, the Management Agreement will automatically renew on each anniversary for a one-year term. The Management Agreement may be terminated upon expiration of the one-year term only upon the affirmative vote of at least two-thirds of our independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to us or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair fees by accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of our independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual base management fee 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. Amounts payable under the Management Agreement are not fixed and determinable. Following a meeting by our independent directors in February 2020, which included a discussion of the Manager’s performance and the level of the management fees thereunder, we determined not to terminate the Management Agreement.
Forward Currency Contracts. We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than U.S. dollars. We have entered into a series of forward contracts to sell an amount of foreign currency (GBP and EUR) for an agreed upon amount of U.S. dollars at various dates through December 2024. These forward contracts were executed to economically fix the U.S. dollar amounts of foreign denominated cash flows expected to be received by us related to foreign denominated loan investments. Refer to "Note 10- Derivatives, Net" to the accompanying condensed consolidated financial statements for details regarding our forward currency contracts.

39




Interest Rate Swap. In connection with the senior secured term loan, we entered into an interest rate swap to fix LIBOR at 2.12%, effectively fixing our all-in coupon on the senior secured term loan at 4.87%. Refer to "Note 10- Derivatives, Net" to the accompanying condensed consolidated financial statements for details regarding our interest rate swap.
Off-balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, or special purpose or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities or entered into any commitment to provide additional funding to any such entities.
Dividends
We intend to continue to make regular quarterly distributions to holders of our common stock. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that we pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our net taxable income. We generally intend over time to pay dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our board of directors. Any distributions we make are at the discretion of our board of directors and depend upon, among other things, our actual results of operations. These results and our ability to pay distributions are affected by various factors, including the net interest and other income from our portfolio, our operating expenses and any other expenditures. If our cash available for distribution is less than our net taxable income, we could be required to sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.
As of March 31, 2020, we had 6,770,393 shares of Series B Preferred Stock outstanding, which entitles holders to receive dividends that are payable quarterly in arrears. The Series B Preferred Stock pay cumulative cash dividends, which are payable quarterly in equal amounts in arrears on the 15th day of each January, April, July and October: (i) from, and including, the original date of issuance of the Series B Preferred Stock to, but excluding, September 20, 2020, at an initial rate of 8.00% per annum of the $25.00 per share liquidation preference; and (ii) from, and including, September 20, 2020, at the rate per annum equal to the greater of (a) 8.00% and (b) a floating rate equal to the 3-month LIBOR rate as calculated on each applicable date of determination plus 6.46% of the $25.00 liquidation preference. Except under certain limited circumstances, the Series B Preferred Stock is generally not convertible into or exchangeable for any other property or any other of our securities at the election of the holders. On or after September 21, 2020, we may, at our option, redeem the shares at a redemption price of $25.00, plus any accrued unpaid distribution through the date of the redemption.
On June 10, 2019, we redeemed all 6,900,000 shares of Series C Preferred Stock outstanding. Holders of the Series C Preferred Stock received the redemption price of $25.00 plus accumulated but unpaid dividends to the redemption date of $0.2223.

Non-GAAP Financial Measures

Operating Earnings
For the three months ended March 31, 2020, our Operating Earnings were $62.7 million, or $0.40 per share as compared to $68.4 million, or $0.50 per share for the same period in the prior year. Operating Earnings is a non-GAAP financial measure that we define as net income available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity-based compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share settlement to satisfy income tax withholding), (ii) any unrealized gains or losses or other non-cash items included in net income available to common stockholders, (iii) unrealized income from unconsolidated joint ventures, (iv) foreign currency gains (losses), other than (a) realized gains/(losses) related to interest income, and (b) forward point gains/(losses) realized on our foreign currency hedges, (v) the non-cash amortization expense related to the reclassification of a portion of the Notes to stockholders’ equity in accordance with GAAP, and (vi) provision for loan losses. Beginning with the quarter ended December 31, 2018, we modified our definition of Operating Earnings to include the impact from forward points on our foreign currency hedges, which reflect the interest rate differentials between the applicable base rate for our foreign currency investments and USD LIBOR. These forward contracts effectively convert the rate exposure to USD LIBOR, resulting in additional interest income earned in U.S. dollar terms. These amounts may not be included in GAAP net income in the same period as this

40




adjustment. Generally these amounts would be included in prior period GAAP net income as unrealized gains on forward currency contracts. Operating Earnings may also be adjusted to exclude certain other non-cash items, as determined by the Manager and approved by a majority of our independent directors.
The weighted-average diluted shares outstanding used for Operating Earnings per weighted-average diluted share has been adjusted from weighted-average diluted shares under GAAP to exclude shares issued from a potential conversion of the Notes. Consistent with the treatment of other unrealized adjustments to Operating Earnings, these potentially issuable shares are excluded until a conversion occurs, which we believe is a useful presentation for investors. We believe that excluding shares issued in connection with a potential conversion of the Notes from our computation of Operating Earnings per weighted-average diluted share is useful to investors for various reasons, including the following: (i) conversion of Notes to shares requires both the holder of a Note to elect to convert the Note and for us to elect to settle the conversion in the form of shares; (ii) future conversion decisions by Note holders will be based on our stock price in the future, which is presently not determinable; (iii) the exclusion of shares issued in connection with a potential conversion of the Notes from the computation of Operating Earnings per weighted-average diluted share is consistent with how we treat other unrealized items in our computation of Operating Earnings per weighted-average diluted share; and (iv) we believe that when evaluating our operating performance, investors and potential investors consider our Operating Earnings relative to our actual distributions, which are based on shares outstanding and not shares that might be issued in the future. The table below summarizes the reconciliation from weighted-average diluted shares under GAAP to the weighted-average diluted shares used for Operating Earnings ($ in thousands, except Price):
 
Three months ended March 31,
 
2020
 
2019
Weighted-Averages
Shares
 
Shares
Weighted-average diluted shares - GAAP
153,948,191

 
134,607,107

Unvested RSUs
2,007,242

 
1,849,564

Weighted-average diluted shares - Operating Earnings
155,955,433

 
136,456,671



 
Three months ended March 31, 2020
 
Three months ended March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-Averages
Face
 
Price
 
Shares
 
Face
 
Price
 
Shares
Weighted-average diluted shares - GAAP
 
 
 
 
153,948,191

 
 
 
 
 
164,683,086

2019 Notes(1)
N/A

 
N/A
 

 
$
26,487

 
$17.17
 
(1,542,708
)
2022 Notes
$
345,000

 
$19.91
 

 
$
345,000

 
$19.91
 
(17,327,970
)
2023 Notes
$
230,000

 
$20.53
 

 
$
230,000

 
$20.53
 
(11,205,301
)
Unvested RSUs
N/A

 
N/A
 
2,007,242

 
N/A

 
N/A
 
1,849,564

Weighted-average diluted shares - Operating Earnings
 
 
 
 
155,955,433

 
 
 
 
 
136,456,671

———————
(1) Face represents the weighted-average balances during the period.


Computation of Share Count for Operating Earnings
 
 
Three months ended March 31,
 
 
2020
 
2019
Basic weighted-average shares of common stock outstanding
 
153,948,191

 
134,607,107

Weighted-average unvested RSUs
 
2,007,242

 
1,849,564

Weighted-average diluted shares - Operating Earnings
 
155,955,433

 
136,456,671


In order to evaluate the effective yield of the portfolio, we use Operating Earnings to reflect the net investment income of our portfolio as adjusted to include the net interest expense related to our derivative instruments. Operating Earnings allows us to isolate the net interest expense associated with our swaps in order to monitor and project our full cost of borrowings. We also believe that our investors use Operating Earnings, or a comparable supplemental performance

41




measure, to evaluate and compare the performance of our company and our peers and, as such, we believe that the disclosure of Operating Earnings is useful to our investors. Forward points effectively convert our foreign rate exposure to USD LIBOR, which we believe is a better reflection of our operating results and we believe the inclusion of the resulting gain or loss in Operating Earnings is useful to our investors. Our operating results are primarily comprised of earning interest income on our investments net of borrowing and administrative costs.
A significant limitation associated with Operating Earnings as a measure of our financial performance over any period is that it excludes unrealized gains (losses) from investments. In addition, our presentation of Operating Earnings may not be comparable to similarly-titled measures of other companies, who may use different calculations. As a result, Operating Earnings should not be considered as a substitute for our GAAP net income as a measure of our financial performance or any measure of our liquidity under GAAP.
The table below summarizes the reconciliation from net income (loss) available to common stockholders to Operating Earnings ($ in thousands):
 
Three months ended March 31,
 
2020
 
2019
Net income (loss) available to common stockholders
$
(131,227
)
 
$
60,923

Adjustments:

 

Equity-based compensation expense
4,263

 
3,901

Unrealized loss on interest rate swap
35,548

 

(Gain) loss on currency forwards
(70,491
)
 
6,720

Foreign currency (gain) loss, net
37,949

 
(6,894
)
Realized gains relating to interest income on foreign currency hedges, net
256

 
418

Realized gains relating to forward points on foreign currency hedges, net
2,171

 
2,431

Amortization of the convertible senior notes related to equity reclassification
754

 
909

Provision for loan losses
183,465

 

Total adjustments:
193,915

 
7,485

Operating Earnings
$
62,688

 
$
68,408

Diluted Operating Earnings per share of common stock (1)
$
0.40

 
$
0.50

Basic weighted-average shares of common stock outstanding
153,948,191

 
134,607,107

Weighted-average diluted shares - Operating Earnings
155,955,433

 
136,456,671

———————
(1) For the computation of diluted Operating Earnings per share of common stock, for the three months ended March 31, 2020 and 2019, $0.0 million and $8.4 million, respectively, of interest expense related to the Notes is not deducted from the numerator and the potentially dilutive shares related to the Notes are excluded from the denominator.

Book Value Per Share

The table below calculates our book value per share ($ in thousands, except per share data):

 
March 31, 2020
 
December 31, 2019
Stockholders' Equity
$
2,400,911

 
$
2,629,975

     Series B Preferred Stock (Liquidation Preference)
(169,260
)
 
(169,260
)
Common Stockholders' Equity
$
2,231,651

 
$
2,460,715

Common Stock
153,740,547

 
153,537,296

Book value per share
$
14.52

 
$
16.03


The table below shows the changes in our book value per share:
 
Book value per share
Book value per share at December 31, 2019
$
16.03

Net unrealized gain on currency hedges
0.20


42




Repurchase of common stock
0.01

Decrease in fair value on interest rate swap
(0.24
)
Vesting and delivery of RSUs
(0.07
)
Other
(0.01
)
Book value per share at March 31, 2020 prior to CECL Allowances
$
15.92

Specific CECL Allowance
$
(0.98
)
Book value per share at March 31, 2020 prior to General CECL Allowance
$
14.94

General CECL Allowance
$
(0.42
)
Book value per share at March 31, 2020
$
14.52


We believe that presenting book value per share with sub-totals prior to the CECL Allowances is useful for investors for various reasons. These include, among other things, the calculations for our covenants related to tangible net worth and debt-to-equity under our secured debt arrangements and senior secured term loan B permit us to add the General CECL Allowance to our GAAP stockholders' equity.

43




Item 3. Quantitative and Qualitative Disclosures About Market Risk
We seek to manage our risks related to the credit quality of our assets, interest rates, liquidity, prepayment speeds and market value, while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns through ownership of our capital stock. While risks are inherent in any business enterprise, we seek to quantify and justify risks in light of available returns and to maintain capital levels consistent with the risks we undertake.
Credit Risk
One of our strategic focuses is acquiring assets that we believe to be of high credit quality. We believe this strategy will generally keep our credit losses and financing costs low. However, we are subject to varying degrees of credit risk in connection with our other target assets. We seek to mitigate this risk by seeking to acquire high quality assets, at appropriate prices given anticipated and unanticipated losses, and by deploying a value-driven approach to underwriting and diligence, consistent with the Manager’s historical investment strategy, with a focus on current cash flows and potential risks to cash flow. The Manager seeks to enhance its due diligence and underwriting efforts by accessing the Manager’s knowledge base and industry contacts. Nevertheless, unanticipated credit losses could occur, which could adversely impact our operating results.
Interest Rate Risk
Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk in connection with our target assets and our related financing obligations.
To the extent consistent with maintaining our REIT qualification, we seek to manage risk exposure to protect our portfolio of financial assets against the effects of major interest rate changes. We generally seek to manage this risk by:
attempting to structure our financing agreements to have a range of different maturities, terms, amortizations and interest rate adjustment periods;
using hedging instruments, interest rate swaps; and
to the extent available, using securitization financing to better match the maturity of our financing with the duration of our assets.

The following table estimates the hypothetical impact on our net interest income for the twelve-month period following March 31, 2020, assuming an immediate increase or decrease of 50 basis points in the applicable interest rate benchmark by currency ($ in thousands, except per share data):
 
 
 
 
50 basis point increase
 
50 basis point decrease
Currency
 
Net floating rate assets subject to interest rate sensitivity
 
Increase (Decrease) to net interest income (1)(2)
 
Increase (Decrease) to net interest income (per share) (1)(2)
 
Increase to net interest income (1)(2)
 
Increase to net interest income (per share) (1)(2)
USD
 
$
1,407,945

 
$
(3,888
)
 
$
(0.02
)
 
$
7,272

 
$
0.04

GBP
 
510,947

 
2,191

 
0.01

 
402

 
0.01

EUR
 
169,820

 
417

 

 

 

Total:
 
$
2,088,712

 
$
(1,280
)
 
$
(0.01
)
 
$
7,674

 
$
0.05

———————
(1) Any such hypothetical impact on interest rates on our variable rate borrowings does not consider the effect of any change in overall economic activity that could occur in a rising or falling interest rate environment. Further, in the event of a change in interest rates of that magnitude, we may take actions to further mitigate our exposure to such a change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, this analysis assumes no changes in our financial structure.
(2) Certain of our floating rate loans are subject to a LIBOR floor.
Prepayment Risk
Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, causing the return on an asset to be less than expected. In certain cases, we adapt to prepayment risk by stating prepayment penalties in loan agreements.


44




Market Risk
Commercial mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; retroactive changes to building or similar codes; pandemics; natural disasters and other acts of god. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans or loans, as the case may be, which could also cause us to suffer losses. Market volatility has been particularly heightened due to the COVID-19 global pandemic. COVID-19 has disrupted economic activities and could have a continued significant adverse effect on economic and market conditions including limited lending from financial institutions, depressed asset values, and limited market liquidity.
Inflation
Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our financial statements are prepared in accordance with GAAP and distributions are determined by our board of directors consistent with our obligation to distribute to our stockholders at least 90% of our REIT taxable income, excluding net capital gains and determined without regard to the dividends paid deduction, on an annual basis in order to maintain our REIT qualification. In each case, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.

Currency Risk
Some of our loans and secured debt arrangements are denominated in a foreign currency and subject to risks related to
fluctuations in currency rates. We mitigate this exposure through foreign currency forward contracts, which match the net
principal and interest of our foreign currency loans and secured debt arrangements.


45




Item 4. Controls and Procedures.

Our Chief Executive Officer and Chief Financial Officer, based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) required by paragraph (b) of Rule 13a-15 or Rule 15d-15, have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to ARI that would potentially be subject to disclosure under the Exchange Act, and the rules and regulations promulgated thereunder.
During the period ended March 31, 2020, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within ARI to disclose material information otherwise required to be set forth in our periodic reports.

PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57th Investment LLC commenced an action captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No 653251/2018) in New York Supreme Court. The complaint names as defendants (i) ACREFI Mortgage Lending, LLC, a subsidiary of the Company, (ii) the Company, and (iii) certain funds managed by Apollo, who are co-lenders on a mezzanine loan against the development of a residential condominium building in Manhattan, New York. The plaintiffs allege that the defendants tortiously interfered with the contractual equity put right in the plaintiffs’ joint venture agreement with the developers of the project, and that the defendants aided and abetted breaches of fiduciary duty by the developers of the project. The plaintiffs allege the loss of a $70.0 million investment as part of total damages of $700.0 million, which includes punitive damages. The defendants' motion to dismiss was granted on October 23, 2019 and the Court entered judgment dismissing the complaint in its entirety on November 8, 2019. Plaintiffs filed a timely notice of appeal on December 6, 2019 but have not yet filed their appellate brief. We believe the claims are without merit and plan to vigorously defend the case on appeal. We do not believe this will have a material adverse effect on our consolidated financial statements.

Item 1A. Risk Factors
For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed in "Item 1A. Risk Factors" in our Annual Report.

In light of developments relating to the COVID-19 pandemic occurring subsequent to the filing of our Annual Report, we are supplementing the risk factors discussed in our Annual Report with the following risk factor, which should be read in conjunction with the risk factors contained in our Annual Report.


Major public health issues, including the current outbreak of COVID-19, and related disruptions in the U.S. and global economy and financial markets have and continue to adversely impact or disrupt our financial condition and results of operations.
The recent outbreak of COVID-19 in many countries continues to adversely impact global economic activity and has contributed to significant volatility in financial markets. On March 11, 2020, the World Health Organization publicly characterized COVID-19 as a pandemic. On March 13, 2020, the President of the United States declared the COVID-19 outbreak a national emergency. The global impact of the outbreak has been rapidly evolving, and as cases of the virus increased around the world, governments and organizations have implemented a variety of actions to mobilize efforts to mitigate the ongoing and expected impact. Many governments, including where real estate is located that secures or underlies a significant portion of our mortgage and other real estate-related loans, have reacted by instituting quarantines, restrictions on travel, school closures, bans on public events and on public gatherings, “shelter in place” or “stay at home” rules, restrictions on types of business that may continue to operate, with exceptions, in certain cases, available for certain essential operations

46




and businesses, and/or restrictions on types of construction projects that may continue. Further, such actions have created, and expect to continue to create disruption in real estate financing transactions and the commercial real estate market and adversely impact a number of industries. The outbreak could have a continued adverse impact on economic and market conditions and continue to cause regional, national and global economic slowdowns and potentially trigger recessions in any or all of these areas.
In the United States, there have been a number of federal, state and local government initiatives applicable to a significant number of mortgage loans, to manage the spread of the virus and its impact on the economy, financial markets and continuity of businesses of all sizes and industries. On March 27, 2020, the U.S. Congress approved the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), and President Trump signed it into law. The CARES Act provides approximately $2 trillion in financial assistance to individuals and businesses resulting from the outbreak of COVID-19. The CARES Act, among other things, provides certain measures to support individuals and businesses in maintaining solvency through monetary relief, including in the form of financing and loan forgiveness and/or forbearance. Although this action by the federal government, together with other actions taken at the federal, regional and local levels are intended to support these economies, there is no guarantee that such measures will provide sufficient relief to avoid continued adverse effects on the economy and potentially a recession. Similar actions have been taken by governments around the globe but as is the case in the United States there is no assurance that such measures will prevent further economic disruptions, which may be significant, around the world.
We believe that our and the Manager's ability to operate, our level of business activity and the profitability of our business, as well as the values of, and the cash flows from, the assets we own have been, and will continue to be impacted by the effects of COVID-19 and could in the future be impacted by another pandemic or other major public health issues. While we have implemented risk management and contingency plans and taken preventive measures and other precautions, no predictions of specific scenarios can be made with respect to the COVID-19 pandemic and such measures may not adequately predict the impact on our business from such events.
The effects of COVID-19 have adversely impacted the value of our assets, business, financial condition, results of operations and cash flows, and our ability to operate successfully. Some of the factors that impacted us to date and may continue to affect us include the following:
difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the financial markets or deteriorations in credit and financing conditions may affect our ability and our borrowers’ ability to make regular payments of principal and interest (whether due to an inability to make such payments, an unwillingness to make such payments, or a waiver of the requirement to make such payments on a timely basis or at all);
the extent the value of commercial real estate declines, which would also likely negatively impact the value of the loans we own, which could lead to additional margin calls;
our ability to continue to satisfy any additional margin calls from our lenders and to the extent we are unable to satisfy any such margin calls, any acceleration of our indebtedness, increase in the interest rate on advanced funds, termination of our ability to borrow funds from them, or foreclosure by our lenders on our assets;
our ability to remain in compliance with the financial covenants in our financing agreements with our lenders in the event of impairments in the value of the loans we own;
disruptions to the efficient function of our operations because of, among other factors, any inability to access short-term or long-term financing for the mortgage loans and other real estate-related loans we make;
our need to sell assets, including at a loss;
to the extent we elect or are forced to reduce our loan origination activities;
inability of borrowers under our construction loans to continue or complete construction as planned for their operations, which may affect their ability to complete construction and collect rent and, consequently, their ability to pay principal or interest on our construction loans;
inability by loan servicers to operate in affected areas or at all, including due to the bankruptcy of one or more servicers, or the inability of the Manager to effectively oversee servicers in certain of their activities or perform certain loan administration functions;
inability of other third-party vendors we rely on to conduct our business to operate effectively and continue to support our business and operations, including vendors that provide IT services, legal and accounting services, or other operational support services;
decreases in observable market activity or unavailability of information, resulting in restricted access to key inputs used to derive certain estimates and assumptions made in connection with financial reporting or otherwise, including valuing the loans we own, including estimated impairments, and estimates and changes in long term macro-economic assumptions relating to accounting for CECL Allowances;
effects of legal and regulatory responses to concerns about the COVID-19 pandemic and related public health issues, which could result in additional regulation or restrictions affecting the conduct of our business; and

47




our ability to ensure operational continuity in the event our business continuity plan is not effective or ineffectually implemented or deployed during a disruption.

The rapid development and fluidity of the circumstances resulting from this pandemic precludes any prediction as to the ultimate adverse impact of COVID-19. There are no comparable recent events which provide guidance as to the effect of the spread of COVID-19 and a pandemic on our business. Nevertheless, COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present material uncertainty and risk with respect to our performance, financial condition, volume of business, results of operations and cash flows. Moreover, many risk factors set forth in our Annual Report should be interpreted as heightened risks as a result of the impact of the COVID-19 pandemic.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table sets forth the Company's repurchases of common stock during the three months ended March 31, 2020 ($ in thousands, except per share data):
Period
Total Number of Shares Purchased(1)
 
Average Price Paid per Share
 
Total Number of Shares of Common Stock Purchased as Part of Publicly Announced Plans or Programs
 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2020 through January 31, 2020

 

 

 

February 1, 2020 through February 29, 2020

 

 

 

March 1, 2020 through March 31, 2020

300,000
 
$
8.11

 
300,000

 
$
147,564

Total
300,000

 
$
8.11

 
300,000

 
$
147,564

———————
(1) On March 16, 2020, we announced that our board of directors approved a stock repurchase program to authorize the Company to repurchase up to an aggregate of $150.0 million of our common stock. This repurchase program has no expiration date and may be suspended or terminated by us at any time without prior notice. This $150.0 million program replaces the previous program authorized in November 2013, which has been terminated.


Item 3. Defaults Upon Senior Securities
None.


Item 4. Mine Safety Disclosures
    
Not Applicable.

Item 5. Other Information
      
None.

Item 6. Exhibits
3.1
 
 
 
 

48




3.2
 
 
 
 
3.3
 
 
 
4.1
 
 
 
4.2
 
 
 
 
4.3
  
 
 
 
4.4
 
 
 
 
4.5
 
 
 
 
31.1*
  
 
 
31.2*
  
 
 
32.1*
  
 
 
101.INS*
  
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
 
 
101.SCH*
  
Inline XBRL Taxonomy Extension Schema
 
 
101.CAL*
  
Inline XBRL Taxonomy Extension Calculation Linkbase
 
 
101.DEF*
  
Inline XBRL Taxonomy Extension Definition Linkbase
 
 
101.LAB*
  
Inline XBRL Taxonomy Extension Label Linkbase
 
 
101.PRE*
  
Inline XBRL Taxonomy Extension Presentation Linkbase
 
 
104*
 
Cover Page Interactive Data File (embedded with the Inline XBRL document)

*
Filed herewith.

49




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
  
APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.
 
 
 
May 7, 2020
 
  
 
 
 
 
 
By:
  
/s/ Stuart A. Rothstein
 
 
  
Stuart A. Rothstein
 
 
  
President and Chief Executive Officer
 
 
  
(Principal Executive Officer)
 
 
 
 
By:
  
/s/ Jai Agarwal
 
 
  
Jai Agarwal
 
 
  
Chief Financial Officer, Treasurer and Secretary
 
 
  
(Principal Financial Officer and Principal Accounting Officer)




50


Exhibit


Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Stuart A. Rothstein, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Apollo Commercial Real Estate Finance, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: May 7, 2020
By:
 
/s/ Stuart A. Rothstein
 
Name:
 
Stuart A. Rothstein
 
Title:
 
President and Chief Executive Officer



Exhibit


Exhibit 31.2
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Jai Agarwal, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Apollo Commercial Real Estate Finance, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: May 7, 2020
By:
 
/s/ Jai Agarwal
 
Name:
 
Jai Agarwal
 
Title:
 
Chief Financial Officer, Treasurer and Secretary



Exhibit


Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S. C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, the President and Chief Executive Officer of Apollo Commercial Real Estate Finance, Inc. (the "Company"), hereby certifies on the date hereof, pursuant to 18 U.S.C. 1350(a), as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the "Form 10-Q"), filed concurrently herewith by the Company, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: May 7, 2020
By:
 
/s/ Stuart A. Rothstein
 
Name:
 
Stuart A. Rothstein
 
Title:
 
President and Chief Executive Officer

The undersigned, the Chief Financial Officer, Treasurer and Secretary of Apollo Commercial Real Estate Finance, Inc. (the "Company"), hereby certifies on the date hereof, pursuant to 18 U.S.C. 1350(a), as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the "Form 10-Q"), filed concurrently herewith by the Company, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: May 7, 2020
By:
 
/s/ Jai Agarwal
 
Name:
 
Jai Agarwal
 
Title:
 
Chief Financial Officer, Treasurer and Secretary

Pursuant to the Securities and Exchange Commission Release 33-8238, dated June 5, 2003, this certification is being furnished and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended or incorporated by reference in any registration statement of the Company filed under the Securities Act of 1933, as amended.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.



v3.20.1
Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net - Additional Information (Details)
$ in Thousands, £ in Millions
1 Months Ended 3 Months Ended 12 Months Ended
Jan. 31, 2020
USD ($)
Jan. 31, 2020
GBP (£)
Mar. 31, 2020
USD ($)
Mar. 31, 2019
USD ($)
Dec. 31, 2019
USD ($)
Financing Receivable, Allowance for Credit Loss [Line Items]          
Percentage of loan portfolio     100.00%   100.00%
Increase in General CECL Allowance     $ 33,500    
Interest receivable     41,860   $ 35,581
Amortized cost of loans in cost recovery     536,206   $ 136,300
Interest received for loans in cost recovery     600    
Payment in kind interest     12,400 $ 14,500  
Proceeds from pre-payment penalties or accelerated fees     200 $ 3,700  
Subordinate Mortgage Portfolio Segment          
Financing Receivable, Allowance for Credit Loss [Line Items]          
Maximum exposure to loss     $ 68,100    
Maximum exposure to loss, term     6 years 6 months 25 days    
Floating Rate Loan          
Financing Receivable, Allowance for Credit Loss [Line Items]          
Percentage of loan portfolio     95.00%   95.00%
Sale of mezzanine loan          
Financing Receivable, Allowance for Credit Loss [Line Items]          
Proceeds from sale of loan $ 81,300 £ 62.2      
Sale of unfunded commitment of senior mortgage          
Financing Receivable, Allowance for Credit Loss [Line Items]          
Proceeds from sale of loan $ 65,300 £ 50.0      
v3.20.1
Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net - Current Expected Credit Losses (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2020
Jan. 01, 2020
Dec. 31, 2019
Financing Receivable, Allowance for Credit Loss [Line Items]        
Loan reserves   $ 58,273    
General CECL Allowance on unfunded commitments   6,059 $ 3,088 $ 0
Total General CECL Allowance $ 64,332 64,332 30,867  
General CECL Allowance [Roll Forward]        
Increase in General CECL Allowance 34,500      
Transfer to Specific CECL Allowance (1,035)      
General CECL Allowance as of March 31, 2020 $ 64,332      
Commercial Mortgage Portfolio Segment        
Financing Receivable, Allowance for Credit Loss [Line Items]        
Loan reserves   28,336 12,149  
Subordinate Mortgage Portfolio Segment        
Financing Receivable, Allowance for Credit Loss [Line Items]        
Loan reserves   $ 29,937 $ 15,630  
v3.20.1
Accounts Payable, Accrued Expenses and Other Liabilities (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Jan. 01, 2020
Dec. 31, 2019
Payables and Accruals [Abstract]      
Accrued dividends payable $ 65,119   $ 74,771
Collateral deposited under derivative agreements 28,450   2,930
Accrued interest payable 15,930   16,089
Accounts payable and other liabilities 7,818   6,922
General CECL Allowance on unfunded commitments 6,059 $ 3,088 0
Total [1] $ 123,376   $ 100,712
[1] $6,059 of General CECL Allowance related to unfunded commitments on our loans in 2020.

v3.20.1
Derivatives - Additional Information (Details)
May 31, 2019
London Interbank Offered Rate (LIBOR) | Interest rate swap liability  
Derivative [Line Items]  
Fixed interest rate 2.12%
Secured Debt  
Derivative [Line Items]  
Effective interest rate 4.87%
v3.20.1
Share-Based Payments - Summary of Restricted Stock and RSU Vesting Dates (Details) - LTIP
Mar. 31, 2020
shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares vesting (in shares) 2,030,647
2020  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares vesting (in shares) 989,283
2021  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares vesting (in shares) 685,410
2022  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares vesting (in shares) 355,954
Restricted Stock  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares vesting (in shares) 25,356
Restricted Stock | 2020  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares vesting (in shares) 25,356
Restricted Stock | 2021  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares vesting (in shares) 0
Restricted Stock | 2022  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares vesting (in shares) 0
RSU  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares vesting (in shares) 2,005,291
RSU | 2020  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares vesting (in shares) 963,927
RSU | 2021  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares vesting (in shares) 685,410
RSU | 2022  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares vesting (in shares) 355,954
v3.20.1
Subsequent Events
3 Months Ended
Mar. 31, 2020
Subsequent Events [Abstract]  
Subsequent Events Subsequent Events
Subsequent to the quarter ended March 31, 2020, the following events took place:
Investment activity. We funded approximately $56.2 million for previously closed loans.
Loan Repayments. We received approximately $3.7 million from loan repayments.
Loan Sales. We sold interests in three construction loans, with aggregate commitments of $262 million (of which approximately $90 million was funded at the time of sale) for a realized loss of approximately $0.5 million. The sales are comprised of 100% of our interests in two loans and 40% of our interest in one loan. The sales were to entities managed by an affiliate of the Manager. In connection with these sales, we decreased our future unfunded commitments by $172.6 million.
Interest Rate Swap. Subsequent to quarter end, we terminated our interest rate swap with a notional amount of $500.0 million that fixed LIBOR at 2.12%. The termination resulted in a realized loss of $54.3 million, $50.0 million of which has already been recorded as an unrealized loss as of March 31, 2020. There is no impact on our current liquidity in connection with this termination as we had already posted cash collateral to the counterparty.
v3.20.1
Stockholders' Equity
3 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Stockholders' Equity Stockholders’ Equity
Our authorized capital stock consists of 450,000,000 shares of common stock, $0.01 par value per share and 50,000,000 shares of preferred stock, $0.01 par value per share. As of March 31, 2020, 153,740,547 shares of common stock were issued and outstanding, and 6,770,393 shares of 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock ("Series B Preferred Stock") were issued and outstanding.
On June 10, 2019, we redeemed all 6,900,000 shares of 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock ("Series C Preferred Stock") outstanding. Holders of the Series C Preferred Stock received the redemption price of $25.00 plus accumulated but unpaid dividends to the redemption date of $0.2223 per share.
Dividends. During the three months ended 2020 and 2019, we declared the following dividends:
 
Three months ended
Dividend declared per share of:
March 31, 2020
 
March 31, 2019
Common Stock
$0.40
 
$0.46
Series B Preferred Stock
0.50
 
0.50
Series C Preferred Stock
N/A
 
0.50


Common Stock Offerings. During the first quarter of 2019, we issued 1,967,361 shares of our common stock, at a per share conversion price of $17.17, related to conversions of the 2019 Notes, the remainder of which matured on March 15, 2019. We recorded a $33.8 million increase in additional paid in capital in the condensed consolidated statement of changes in stockholders' equity. Refer to "Note 9 - Convertible Senior Notes, Net" for a further discussion on the conversions of the 2019 Notes.
During the second quarter of 2019, we completed a follow-on public offering of 17,250,000 shares of our common stock, including shares issued pursuant to the underwriters' option to purchase additional shares, at a price of $18.27 per share. The aggregate net proceeds from the offering were $314.8 million after deducting offering expenses.
Common Stock Repurchases. During the first quarter of 2020, we repurchased 300,000 shares of our common stock at an average price of $8.11 per share.
v3.20.1
Other Assets
3 Months Ended
Mar. 31, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Other Assets Other Assets
The following table details the components of our other assets at the dates indicated ($ in thousands):
 
March 31, 2020
 
December 31, 2019
Interest receivable
$
41,860

 
$
35,581

Collateral deposited under derivative agreements
35,540

 
17,090

Collateral deposited under secured debt arrangements(1)
26,262

 

Other
207

 
45

Total
$
103,869

 
$
52,716


———————
(1)
Subsequent to March 31, 2020, this amount was applied to reduce the related outstanding secured debt arrangement
v3.20.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements include our accounts and those of our consolidated subsidiaries. All intercompany amounts have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our most significant estimates include loan loss allowances. Actual results could differ from those estimates.
These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019 ("Annual Report"), as filed with the Securities and Exchange Commission (the "SEC"). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows have been included. Our results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the full year or any other future period.
We currently operate in one reporting segment.
Risks and Uncertainties
During the first quarter of 2020, there was a global outbreak of a novel coronavirus ("COVID-19"), which was declared by the World Health Organization as a pandemic. In response to COVID-19, the United States and numerous other countries have declared national emergencies, which has led to large scale quarantines as well as restrictions to business deemed non-essential. These responses to COVID-19 have disrupted economic activities and could have a continued significant adverse effect on economic and market conditions. As we are still in the midst of the COVID-19 pandemic we are not in a position to estimate the ultimate impact this will have on our business and the economy as a whole. We believe the estimates used in preparing our financial statements and related footnotes are reasonable and supportable based on the best information available to us as of March 31, 2020. The uncertainty surrounding COVID-19 may materially impact the accuracy of the estimates and assumptions used in the financial statements and related footnotes and, as a result, actual results may vary significantly from estimates.
Current Expected Credit Losses ("CECL")
In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which we refer to as the "CECL Standard." This update has changed how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value. The CECL Standard replaced the "incurred loss" approach under existing guidance with an "expected loss" model for instruments measured at amortized cost. The CECL Standard requires entities to record allowances for held-to-maturity debt securities that are deducted from the carrying amount of the assets to present the net carrying value at the amounts expected to be collected on the assets. We continue to record loan specific allowances as a practical expedient under the CECL Standard ("Specific CECL Allowance"), which we apply to assets that are collateral dependent and where the borrower or sponsor is experiencing
financial difficulty. In addition, we now record a general allowance in accordance with the CECL Standard on the remainder of the loan portfolio ("General CECL Allowance", and together with the Specific CECL Allowance, "CECL Allowances") on a collective basis by assets with similar risk characteristics.
The CECL Standard requires us to record an allowance for credit losses that are deducted from the carrying amount of our loan portfolio to present the net carrying value at the amounts expected to be collected on the assets. We adopted the CECL Standard through a cumulative-effect adjustment to retained earnings on January 1, 2020. Subsequent changes to the General CECL Allowance are recognized through net income (loss) on our consolidated statement of operations.
The CECL Standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. The FASB recognizes what is known as the weighted average remaining maturity ("WARM") method as an acceptable approach for computing current expected credit losses. We have adopted the WARM method to comply with the CECL Standard in determining a General CECL Allowance for a majority of our portfolio. In the future, we may use other acceptable methods, such as a probability-of-default/loss-given-default method. For loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we have elected to apply a practical expedient in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a Specific CECL Allowance.
In accordance with the WARM method, an annual historical loss rate is applied to the amortized cost of an asset or pool of assets over the remaining expected life. The WARM method requires consideration of the timing of expected future fundings of existing commitments and repayments over each asset’s remaining life. An annual loss factor, adjusted for macroeconomic estimates, is applied over each subsequent period and aggregated to arrive at the General CECL Allowance.
In determining the General CECL Allowance, we considered various factors including (i) historical loss experience in the commercial real estate lending market, (ii) timing of expected repayments and satisfactions, (iii) expected future funding, (iv) capital subordinate to us when we are the senior lender, (v) capital senior to us when we are the subordinate lender, and (vi) our current and future view of the macroeconomic environment. The standard requires the use of significant judgment to arrive at an estimated credit loss. There is significant uncertainty related to future macroeconomic conditions as the result of COVID-19.
We derived an annual historical loss rate based on a commercial mortgage backed securities database with historical losses from 1998 to the first quarter of 2020 provided by a third party, Trepp LLC. We applied various filters to arrive at a CMBS dataset most analogous to our current portfolio from which to determine an appropriate historical loss rate. The annual historical loss rate was further adjusted to reflect our expectations of the macroeconomic environment for a reasonable and supportable forecast period which we have determined to be one year.
The General CECL Allowance on subordinate loans is calculated by incorporating both the loan balance of the position(s) of the structurally senior third-party lender(s) and the balance of our subordinate loan. The subordinate loan, by virtue of being the first loss position, is required to absorb losses prior to the senior position(s) being impacted, resulting in a higher percentage allowance attributable to the subordinate loan. The General CECL Allowance on unfunded loan commitments is time-weighted based on our expected commitment to fund such obligations. The General CECL Allowance on unfunded commitments is recorded as a liability on the condensed consolidated balance sheet within accounts payable, accrued expenses, and other liabilities. At adoption, the General CECL Allowance was $30.9 million and was recorded in the condensed consolidated statement of changes in stockholders’ equity.
Refer to Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets for further information regarding CECL.
v3.20.1
Derivatives
3 Months Ended
Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives Derivatives
We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than USD.
We have entered into a series of forward contracts to sell an amount of foreign currency (GBP and EUR) for an agreed
upon amount of USD at various dates through December 2024. These forward contracts were executed to economically fix the USD amounts of foreign denominated cash flows expected to be received by us related to foreign denominated loan investments.
The following table summarizes our non-designated foreign exchange ("Fx") forwards and our interest rate swap as of March 31, 2020:

March 31, 2020
 
Number of Contracts
 
Aggregate Notional Amount (in thousands)
 
Notional Currency
 
Maturity
 
Weighted-Average Years to Maturity
Fx Contracts - GBP
157
 
526,613
 
GBP
 
April 2020 - December 2024
 
2.26
Fx Contracts - EUR
63
 
219,130
 
EUR
 
May 2020 - August 2024
 
3.11
Interest Rate Swap
1
 
500,000
 
USD
 
May 2026
 
6.12

The following table summarizes our non-designated Fx forwards and our interest rate swap as of December 31, 2019:
 
December 31, 2019
 
Number of Contracts
 
Aggregate Notional Amount (in thousands)
 
Notional Currency
 
Maturity
 
Weighted-Average Years to Maturity
Fx Contracts - GBP
156
 
735,349
 
GBP
 
January 2020 - December 2024
 
1.49
FX Contracts - EUR
44
 
168,879
 
EUR
 
February 2020 - August 2024
 
3.22
Interest Rate Swap
1
 
500,000
 
USD
 
May 2026
 
6.37


We have not designated any of our derivative instruments as hedges as defined in ASC 815 "Derivatives and Hedging" and, therefore, changes in the fair value of our derivative instruments are recorded directly in earnings. The following table summarizes the amounts recognized on the condensed consolidated statements of operations related to our derivatives for the three months ended March 31, 2020 and 2019 ($ in thousands):
 
 
 
 
Amount of gain (loss)
recognized in income
 
 
 
Three months ended March 31,
 
Location of Gain (Loss) Recognized in Income
 
2020
 
2019
Forward currency contracts
Gain (loss) on derivative instruments - unrealized
 
$
62,436

 
$
(14,985
)
Forward currency contracts
Gain on derivative instruments - realized
 
8,055

 
8,265

Total
 
 
$
70,491

 
$
(6,720
)

  
In connection with our senior secured term loan, we entered into an interest rate swap to fix LIBOR at 2.12% or an all-in interest rate of 4.87%. We use our interest rate swap to manage exposure to variable cash flows on our borrowings under our senior secured term loan. Our interest rate swap allows us to receive a variable rate cash flow based on LIBOR and pay a fixed rate cash flow, mitigating the impact of this exposure. Gains or losses related to the interest rate swap are recorded net under interest expense in our condensed consolidated statement of operations.

 
 
 
Amount of loss
recognized in income
 
 
 
Three months ended March 31,
 
Location of Loss Recognized in Income
 
2020
 
2019
Interest rate swap(1)
Unrealized loss on interest rate swap
 
(35,548
)
 

———————
(1)
With a notional amount of $500.0 million and $0 at March 31, 2020, and 2019, respectively.

The following tables summarize the gross asset and liability amounts related to our derivatives at March 31, 2020 and December 31, 2019 ($ in thousands)
 
March 31, 2020
 
December 31, 2019
 
Gross
Amount of
Recognized
Assets
 
Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet
 
Net Amounts
of Assets
Presented in
the Condensed Consolidated Balance Sheet
 
Gross
Amount of
Recognized
Assets
 
Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet
 
Net Amounts
of Assets
Presented in
the Condensed Consolidated Balance Sheet
Forward currency contracts
$
58,759

 
$
(1,198
)
 
$
57,561

 
$

 
$

 
$

 
 
March 31, 2020
 
December 31, 2019
 
Gross
Amount of
Recognized
Liability
 
Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet
 
Net Amounts
of Liability
Presented in
the Condensed Consolidated Balance Sheet
 
Gross Amount of Recognized Liabilities
 
Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet
 
Net Amounts of Liabilities Presented in the Condensed Consolidated Balance Sheet
Interest rate swap
$
(50,018
)
 
$

 
$
(50,018
)
 
$
(14,470
)
 
$

 
$
(14,470
)
Forward currency contracts

 

 

 
(12,687
)
 
7,811

 
(4,876
)
Total derivative liabilities
$
(50,018
)
 
$

 
$
(50,018
)
 
$
(27,157
)
 
$
7,811

 
$
(19,346
)

v3.20.1
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Assets:    
Cash and cash equivalents $ 582,138,000 $ 452,282,000
Commercial mortgage loans and subordinate loans and other lending assets, net 6,430,618,000 6,375,093,000
Other assets 103,869,000 52,716,000
Derivative assets, net 57,561,000 0
Loan proceeds held by servicer 0 8,272,000
Total Assets 7,174,186,000 6,888,363,000
Liabilities:    
Secured debt arrangements, net (net of deferred financing costs of $16,917 and $17,190 in 2020 and 2019, respectively) 3,539,925,000 3,078,366,000
Convertible senior notes, net 562,571,000 561,573,000
Senior secured term loan, net (net of deferred financing costs of $6,960 and $7,277 in 2020 and 2019, respectively) 487,117,000 487,961,000
Accounts payable, accrued expenses and other liabilities [1] 123,376,000 100,712,000
Derivative liabilities 50,018,000 19,346,000
Payable to related party 10,268,000 10,430,000
Total Liabilities 4,773,275,000 4,258,388,000
Commitments and Contingencies (see Note 15)
Stockholders’ Equity:    
Preferred stock 68,000 68,000
Common stock, $0.01 par value, 450,000,000 shares authorized, 153,740,547 and 153,537,296 shares issued and outstanding in 2020 and 2019, respectively 1,537,000 1,535,000
Additional paid-in-capital 2,820,643,000 2,825,317,000
Accumulated deficit (421,337,000) (196,945,000)
Total Stockholders’ Equity 2,400,911,000 2,629,975,000
Total Liabilities and Stockholders’ Equity 7,174,186,000 6,888,363,000
Commercial Mortgage Portfolio Segment    
Assets:    
Commercial mortgage loans and subordinate loans and other lending assets, net [2],[3] 5,413,627,000 5,326,967,000
Subordinate Mortgage Portfolio Segment    
Assets:    
Commercial mortgage loans and subordinate loans and other lending assets, net [3] $ 1,016,991,000 $ 1,048,126,000
[1] $6,059 of General CECL Allowance related to unfunded commitments on our loans in 2020.

[2] Includes $5,282,741 and $4,852,087 pledged as collateral under secured debt arrangements in 2020 and 2019, respectively
[3] Net of $265,254 CECL Allowances in 2020, comprised of $206,981 Specific CECL Allowance and $58,273 General CECL Allowance. Net of $56,981 provision for loan loss in 2019.

v3.20.1
Derivatives (Tables)
3 Months Ended
Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Summary of Non-Designated Foreign Exchange Forwards
The following table summarizes our non-designated foreign exchange ("Fx") forwards and our interest rate swap as of March 31, 2020:

March 31, 2020
 
Number of Contracts
 
Aggregate Notional Amount (in thousands)
 
Notional Currency
 
Maturity
 
Weighted-Average Years to Maturity
Fx Contracts - GBP
157
 
526,613
 
GBP
 
April 2020 - December 2024
 
2.26
Fx Contracts - EUR
63
 
219,130
 
EUR
 
May 2020 - August 2024
 
3.11
Interest Rate Swap
1
 
500,000
 
USD
 
May 2026
 
6.12

The following table summarizes our non-designated Fx forwards and our interest rate swap as of December 31, 2019:
 
December 31, 2019
 
Number of Contracts
 
Aggregate Notional Amount (in thousands)
 
Notional Currency
 
Maturity
 
Weighted-Average Years to Maturity
Fx Contracts - GBP
156
 
735,349
 
GBP
 
January 2020 - December 2024
 
1.49
FX Contracts - EUR
44
 
168,879
 
EUR
 
February 2020 - August 2024
 
3.22
Interest Rate Swap
1
 
500,000
 
USD
 
May 2026
 
6.37

Summary of Amounts Recognized on Consolidated Statements of Operations Related to Company's Derivatives The following table summarizes the amounts recognized on the condensed consolidated statements of operations related to our derivatives for the three months ended March 31, 2020 and 2019 ($ in thousands):
 
 
 
 
Amount of gain (loss)
recognized in income
 
 
 
Three months ended March 31,
 
Location of Gain (Loss) Recognized in Income
 
2020
 
2019
Forward currency contracts
Gain (loss) on derivative instruments - unrealized
 
$
62,436

 
$
(14,985
)
Forward currency contracts
Gain on derivative instruments - realized
 
8,055

 
8,265

Total
 
 
$
70,491

 
$
(6,720
)

  
In connection with our senior secured term loan, we entered into an interest rate swap to fix LIBOR at 2.12% or an all-in interest rate of 4.87%. We use our interest rate swap to manage exposure to variable cash flows on our borrowings under our senior secured term loan. Our interest rate swap allows us to receive a variable rate cash flow based on LIBOR and pay a fixed rate cash flow, mitigating the impact of this exposure. Gains or losses related to the interest rate swap are recorded net under interest expense in our condensed consolidated statement of operations.

 
 
 
Amount of loss
recognized in income
 
 
 
Three months ended March 31,
 
Location of Loss Recognized in Income
 
2020
 
2019
Interest rate swap(1)
Unrealized loss on interest rate swap
 
(35,548
)
 

———————
(1)
With a notional amount of $500.0 million and $0 at March 31, 2020, and 2019, respectively.
Summarizes Gross Asset and Liability Amounts Related to Derivatives
The following tables summarize the gross asset and liability amounts related to our derivatives at March 31, 2020 and December 31, 2019 ($ in thousands)
 
March 31, 2020
 
December 31, 2019
 
Gross
Amount of
Recognized
Assets
 
Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet
 
Net Amounts
of Assets
Presented in
the Condensed Consolidated Balance Sheet
 
Gross
Amount of
Recognized
Assets
 
Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet
 
Net Amounts
of Assets
Presented in
the Condensed Consolidated Balance Sheet
Forward currency contracts
$
58,759

 
$
(1,198
)
 
$
57,561

 
$

 
$

 
$

 
 
March 31, 2020
 
December 31, 2019
 
Gross
Amount of
Recognized
Liability
 
Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet
 
Net Amounts
of Liability
Presented in
the Condensed Consolidated Balance Sheet
 
Gross Amount of Recognized Liabilities
 
Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet
 
Net Amounts of Liabilities Presented in the Condensed Consolidated Balance Sheet
Interest rate swap
$
(50,018
)
 
$

 
$
(50,018
)
 
$
(14,470
)
 
$

 
$
(14,470
)
Forward currency contracts

 

 

 
(12,687
)
 
7,811

 
(4,876
)
Total derivative liabilities
$
(50,018
)
 
$

 
$
(50,018
)
 
$
(27,157
)
 
$
7,811

 
$
(19,346
)

v3.20.1
Fair Value of Financial Instruments (Tables)
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Carrying Value and Estimated Fair Value of Company's Financial Instruments
The following table presents the carrying value and estimated fair value of our financial instruments not carried at fair value on the condensed consolidated balance sheet at March 31, 2020 and December 31, 2019 ($ in thousands):
 
March 31, 2020
 
December 31, 2019
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Cash and cash equivalents
$
582,138

 
$
582,138

 
$
452,282

 
$
452,282

Commercial mortgage loans, net
5,413,627

 
5,382,796

 
5,326,967

 
5,380,693

Subordinate loans and other lending assets, net(1)
1,016,991

 
1,013,646

 
1,048,126

 
1,050,961

Secured debt arrangements, net
(3,539,925
)
 
(3,539,925
)
 
(3,078,366
)
 
(3,078,366
)
Senior secured term loan, net
(487,117
)
 
(389,556
)
 
(487,961
)
 
(499,988
)
2022 Notes
(338,393
)
 
(239,775
)
 
(337,755
)
 
(348,060
)
2023 Notes
(224,178
)
 
(151,800
)
 
(223,818
)
 
(234,600
)

———————
(1) Includes subordinate risk retention interests in securitization vehicles with an estimated fair value that approximates their carrying value.
v3.20.1
Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - USD ($)
$ in Thousands
Total
Preferred Stock
Common Stock
Additional Paid In Capital
Accumulated Deficit
Stockholders' equity, beginning balance (in shares) at Dec. 31, 2018   13,670,393 133,853,565    
Stockholders' equity, beginning balance at Dec. 31, 2018 $ 2,509,747 $ 137 $ 1,339 $ 2,638,441 $ (130,170)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Capital increase (decrease) related to Equity Incentive Plan (in shares)     433,426    
Capital increase (decrease) related to Equity Incentive Plan (1,095)   $ 4 (1,099)  
Conversions of convertible senior notes for common stock (in shares)     1,967,361    
Conversions of convertible senior notes for common stock 33,778   $ 20 33,758  
Net income (loss) 67,758       67,758
Dividends declared on preferred stock (6,835)       (6,835)
Dividends declared on common stock - $0.46 per share (63,529)       (63,529)
Stockholders' equity, ending balance (in shares) at Mar. 31, 2019   13,670,393 136,254,352    
Stockholders' equity, ending balance at Mar. 31, 2019 2,539,824 $ 137 $ 1,363 2,671,100 (132,776)
Stockholders' equity, beginning balance (in shares) at Dec. 31, 2019   6,770,393 153,537,296    
Stockholders' equity, beginning balance at Dec. 31, 2019 2,629,975 $ 68 $ 1,535 2,825,317 (196,945)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Capital increase (decrease) related to Equity Incentive Plan (in shares)     503,251    
Capital increase (decrease) related to Equity Incentive Plan (2,231)   $ 5 (2,236)  
Repurchase of common stock (in shares)     (300,000)    
Repurchase of common stock (2,441)   $ (3) (2,438)  
Net income (loss) (127,842)       (127,842)
Dividends declared on preferred stock (3,385)       (3,385)
Dividends declared on common stock - $0.46 per share (62,298)       (62,298)
Stockholders' equity, ending balance (in shares) at Mar. 31, 2020   6,770,393 153,740,547    
Stockholders' equity, ending balance at Mar. 31, 2020 $ 2,400,911 $ 68 $ 1,537 $ 2,820,643 $ (421,337)
v3.20.1
Secured Debt Arrangements, Net - Summary of Outstanding Balances, Maximum and Average Balances of Borrowings (Details) - Line of Credit
£ in Thousands, $ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
USD ($)
Mar. 31, 2020
GBP (£)
Dec. 31, 2019
USD ($)
Dec. 31, 2019
GBP (£)
Mar. 31, 2020
GBP (£)
Dec. 31, 2019
GBP (£)
Line of Credit Facility [Line Items]            
Balance $ 3,556,842   $ 3,095,556      
Amortized Cost of Collateral 5,282,741   4,852,087      
JP Morgan Facility            
Line of Credit Facility [Line Items]            
Balance 1,184,685   1,234,759      
Amortized Cost of Collateral 1,912,345   1,845,400      
Maximum Month-End Balance 1,184,685   1,234,759      
Average Month-End Balance 989,915   947,400      
DB Repurchase Facility            
Line of Credit Facility [Line Items]            
Balance 506,977   513,876      
Amortized Cost of Collateral 778,607   766,676      
Maximum Month-End Balance 506,977   757,117      
Average Month-End Balance 470,077   604,067      
Goldman Facility            
Line of Credit Facility [Line Items]            
Balance 359,540   322,170      
Amortized Cost of Collateral 537,249   513,559      
Maximum Month-End Balance 359,540   324,821      
Average Month-End Balance 319,369   246,318      
USD | CS Facility            
Line of Credit Facility [Line Items]            
Balance 325,868   218,644      
Amortized Cost of Collateral 439,725   308,884      
Maximum Month-End Balance 336,448   218,644      
Average Month-End Balance 326,684   182,646      
USD | HSBC Facility            
Line of Credit Facility [Line Items]            
Balance 50,625   50,625      
Amortized Cost of Collateral 67,041   66,960      
Maximum Month-End Balance 50,625   50,625      
Average Month-End Balance 50,625   50,625      
USD | Barclays Facility            
Line of Credit Facility [Line Items]            
Balance 35,192          
Amortized Cost of Collateral 49,800          
Maximum Month-End Balance 35,192          
Average Month-End Balance 11,731          
GBP | CS Facility            
Line of Credit Facility [Line Items]            
Balance | £         £ 84,748 £ 93,915
Amortized Cost of Collateral | £         £ 121,286 £ 129,723
Maximum Month-End Balance | £   £ 90,111   £ 150,811    
Average Month-End Balance | £   £ 87,452   £ 134,694    
GBP | HSBC Facility            
Line of Credit Facility [Line Items]            
Balance 32,230   34,634      
Amortized Cost of Collateral 46,565   49,976      
Maximum Month-End Balance 34,501   50,784      
Average Month-End Balance 33,336   42,296      
GBP | Barclays Facility            
Line of Credit Facility [Line Items]            
Balance 645,854   290,347      
Amortized Cost of Collateral 899,075   738,455      
Maximum Month-End Balance 666,810   290,347      
Average Month-End Balance 610,833   139,004      
EUR | HSBC Facility            
Line of Credit Facility [Line Items]            
Balance 151,537   154,037      
Amortized Cost of Collateral 191,565   190,780      
Maximum Month-End Balance 152,389   154,037      
Average Month-End Balance 151,798   151,889      
EUR | Barclays Facility            
Line of Credit Facility [Line Items]            
Balance 179,586   182,549      
Amortized Cost of Collateral 239,483   241,674      
Maximum Month-End Balance 180,595   182,549      
Average Month-End Balance $ 179,895   $ 181,159      
v3.20.1
Secured Debt Arrangements, Net - Weighted Average Maturities and Interest Rates of Borrowings (Details)
€ in Millions, £ in Millions
3 Months Ended 12 Months Ended
Mar. 31, 2020
USD ($)
Dec. 31, 2019
USD ($)
Mar. 31, 2020
GBP (£)
Mar. 31, 2020
EUR (€)
Nov. 30, 2017
USD ($)
Debt Instrument [Line Items]          
Borrowings Outstanding(1) $ 3,539,925,000 $ 3,078,366,000      
less: deferred financing costs $ (6,960,000) $ (7,277,000)      
Percentage of secured debt that is recourse debt 54.00% 54.00% 54.00% 54.00%  
Line of Credit          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) $ 4,472,721,000 $ 4,330,744,000      
Borrowings Outstanding(1) 3,539,925,000 3,078,366,000      
less: deferred financing costs $ (16,917,000) $ (17,190,000)      
Line of Credit | Weighted Average          
Debt Instrument [Line Items]          
Weighted average advance rate 67.30% 63.80%      
Line of Credit | London Interbank Offered Rate (LIBOR) | Weighted Average          
Debt Instrument [Line Items]          
Weighted Average Rate 2.05% 2.07%      
Line of Credit | GBP London Interbank Offered Rate (LIBOR) | Weighted Average          
Debt Instrument [Line Items]          
Weighted Average Rate 1.66% 1.75%      
Line of Credit | EUR London Interbank Offered Rate (LIBOR) | Weighted Average          
Debt Instrument [Line Items]          
Weighted Average Rate 1.35% 1.36%      
Line of Credit | JP Morgan Chase, DB Repurchase Facility, Goldman Sachs, Credit Suisse and HSBC Facilities          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) $ 4,472,721,000 $ 4,330,744,000      
Borrowings Outstanding(1) 3,556,842,000 3,095,556,000      
Line of Credit | Deutsche Bank Repurchase Facility          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) 1,000,000,000.0        
Borrowings Outstanding(1) 507,000,000.0        
Line of Credit | Goldman Facility          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) 500,000,000 500,000,000     $ 500,000,000.0
Borrowings Outstanding(1) 359,540,000 $ 322,170,000      
Line of Credit | Barclays Facility          
Debt Instrument [Line Items]          
Borrowings Outstanding(1) $ 825,440,000        
USD | Line of Credit | Weighted Average          
Debt Instrument [Line Items]          
Weighted average advance rate 65.60% 66.70%      
USD | Line of Credit | JP Morgan Facility          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) $ 1,139,932,000 $ 1,154,109,000      
Borrowings Outstanding(1) 1,024,617,000 1,090,160,000      
USD | Line of Credit | Deutsche Bank Repurchase Facility          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) 1,000,000,000 1,250,000,000      
Borrowings Outstanding(1) 506,977,000 513,876,000      
USD | Line of Credit | Credit Suisse Facility          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) 328,141,000 226,068,000      
Borrowings Outstanding(1) 325,868,000 218,644,000      
USD | Line of Credit | HSBC Facility          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) 50,625,000 50,625,000      
Borrowings Outstanding(1) 50,625,000 $ 50,625,000      
USD | Line of Credit | Barclays Facility          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) 200,000,000.0        
Borrowings Outstanding(1) $ 35,192,000        
GBP | Line of Credit          
Debt Instrument [Line Items]          
Currency conversion rate 1.24 1.33 1.24 1.24  
GBP | Line of Credit | Weighted Average          
Debt Instrument [Line Items]          
Weighted average advance rate 70.60% 47.10%      
GBP | Line of Credit | JP Morgan Facility          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) $ 93,882,000 $ 51,702,000      
Borrowings Outstanding(1) 93,882,000 50,410,000      
GBP | Line of Credit | Credit Suisse Facility          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) 84,748,000 93,915,000      
Borrowings Outstanding(1) 84,748,000 93,915,000 £ 68.2    
GBP | Line of Credit | HSBC Facility          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) 32,230,000 34,634,000      
Borrowings Outstanding(1) 32,230,000 34,634,000      
GBP | Line of Credit | Barclays Facility          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) 645,854,000 538,916,000      
Borrowings Outstanding(1) $ 645,854,000 $ 290,347,000 £ 520.0    
EUR | Line of Credit          
Debt Instrument [Line Items]          
Currency conversion rate 1.10 1.12 1.10 1.10  
EUR | Line of Credit | Weighted Average          
Debt Instrument [Line Items]          
Weighted average advance rate 70.70% 76.10%      
EUR | Line of Credit | JP Morgan Facility          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) $ 66,186,000 $ 94,189,000      
Borrowings Outstanding(1) 66,186,000 94,189,000      
EUR | Line of Credit | HSBC Facility          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) 151,537,000 154,037,000      
Borrowings Outstanding(1) 151,537,000 154,037,000      
EUR | Line of Credit | Barclays Facility          
Debt Instrument [Line Items]          
Maximum Amount of Borrowings(1) 179,586,000 182,549,000      
Borrowings Outstanding(1) $ 179,586,000 $ 182,549,000   € 162.8  
v3.20.1
Commitments and Contingencies (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Schedule of Equity Method Investments [Line Items]    
Total damages including punitive $ 70,000  
Damages sought by plaintiff 700,000  
Unfunded loan commitments 1,822,967 $ 1,952,887
Commercial Mortgage and Subordinated Portfolio Segment    
Schedule of Equity Method Investments [Line Items]    
Unfunded loan commitments $ 1,800,000  
Term of unfunded loan commitment 4 years 3 months 18 days  
v3.20.1
Subsequent Events (Details) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 3 Months Ended
May 07, 2020
Mar. 31, 2020
Mar. 31, 2019
Subsequent Event [Line Items]      
Proceeds from loan repayments   $ 221,972 $ 191,317
Loss on sale of derivatives   70,491 (6,720)
Unrealized loss on interest rate swap   35,548 $ 0
Subsequent Event      
Subsequent Event [Line Items]      
Funded amount of mortgages $ 56,200    
Proceeds from loan repayments 3,700    
Derivative notional amount $ 500,000    
Fixed interest rate 2.12%    
Loss on sale of derivatives $ (54,300)    
Decrease in book value per share (in dollars per share) $ 0.02    
Sale Of Construction Loan Interests [Member] | Subsequent Event      
Subsequent Event [Line Items]      
Commitments sold $ 262,000    
Funded amount of interests sold 90,000    
Realized loss 500    
Decrease in future unfunded commitments $ 172,600    
Sale of Construction Loan Interests, Two Loans | Subsequent Event      
Subsequent Event [Line Items]      
Percentage of loan interests sold 100.00%    
Sale of Construction Loan Interests, One Loan | Subsequent Event      
Subsequent Event [Line Items]      
Percentage of loan interests sold 40.00%    
Interest rate swaps      
Subsequent Event [Line Items]      
Unrealized loss on interest rate swap   $ 50,000  
v3.20.1
Accounts Payable, Accrued Expenses and Other Liabilities
3 Months Ended
Mar. 31, 2020
Payables and Accruals [Abstract]  
Accounts Payable, Accrued Expenses and Other Liabilities Accounts Payable, Accrued Expenses and Other Liabilities
The following table details the components of our accounts payable, accrued expense and other liabilities ($ in thousands):
 
March 31, 2020
 
December 31, 2019
Accrued dividends payable
$
65,119

 
$
74,771

Collateral deposited under derivative agreements
28,450

 
2,930

Accrued interest payable
15,930

 
16,089

Accounts payable and other liabilities
7,818

 
6,922

General CECL Allowance on unfunded commitments(1)
6,059

 

Total
$
123,376

 
$
100,712


  ———————
(1)
Refer to Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net for additional disclosure related to the General CECL Allowance on unfunded commitments for the quarter ended March 31, 2020.
v3.20.1
Secured Debt Arrangements, Net
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Secured Debt Arrangements, Net Secured Debt Arrangements, Net
At March 31, 2020 and December 31, 2019, our borrowings had the following secured debt arrangements, maturities and weighted-average interest rates ($ in thousands):
 
 
 
March 31, 2020
 
December 31, 2019
 
 
Maximum Amount of Borrowings(1)
 
Borrowings Outstanding(1)
 
Maturity (2)
 
Maximum Amount of Borrowings(1)
 
Borrowings Outstanding(1)
 
Maturity (2)
 
JPMorgan (USD)
$
1,139,932

 
$
1,024,617

 
June 2024
 
$
1,154,109

 
$
1,090,160

 
June 2024
 
JPMorgan (GBP)
93,882

 
93,882

 
June 2024
 
51,702

 
50,410

 
June 2024
 
JPMorgan (EUR)
66,186

 
66,186

 
June 2024
 
94,189

 
94,189

 
June 2024
 
DB (USD)
1,000,000

 
506,977

 
March 2023
 
1,250,000

 
513,876

 
March 2021
 
Goldman (USD)
500,000

 
359,540

 
November 2021
 
500,000

 
322,170

 
November 2021
 
CS - USD
328,141

 
325,868

 
January 2023(3)
 
226,068

 
218,644

 
June 2020
 
CS - GBP
84,748

 
84,748

 
September 2020
 
93,915

 
93,915

 
June 2020
 
HSBC - USD
50,625

 
50,625

 
January 2021
 
50,625

 
50,625

 
October 2020
 
HSBC - GBP
32,230

 
32,230

 
June 2020
 
34,634

 
34,634

 
June 2020
 
HSBC - EUR
151,537

 
151,537

 
July 2021
 
154,037

 
154,037

 
January 2021
 
Barclays (USD)
200,000

 
35,192

 
March 2024
 
N/A

 
N/A

 
N/A
 
Barclays (GBP)
645,854

 
645,854

 
November 2023(4)
 
538,916

 
290,347

 
February 2024(4)
 
Barclays (EUR)
179,586

 
179,586

 
August 2024(3)
 
182,549

 
182,549

 
November 2020
 
Sub-total(5)(6)(7)
4,472,721

 
3,556,842

 

 
4,330,744

 
3,095,556

 
 
 
less: deferred financing costs
N/A

 
(16,917
)
 
 
 
N/A

 
(17,190
)
 
 
 
Total
$
4,472,721

 
$
3,539,925

  
$
4,330,744

 
$
3,078,366

 
 
———————
(1) As of March 31, 2020, GBP and EUR borrowings were converted at a rate of 1.24 and 1.10, respectively. As of December 31, 2019, GBP and EUR borrowings were converted at a rate of 1.33 and 1.12, respectively.
(2) Maturity date assumes extensions at our option are exercised with consent of financing providers, where applicable.
(3) Assumes financings are extended in line with the underlying loans.
(4) Represents weighted average maturity across various financings with the counterparty. See below for additional details.
(5) Weighted-average borrowing costs as of March 31, 2020 and December 31, 2019 were USD L + 2.05% / GBP L + 1.66% / EUR L + 1.35% and USD L + 2.07% / GBP L + 1.75% / EUR L + 1.36%, respectively.
(6) Weighted average advance rates based on cost as of March 31, 2020 and December 31, 2019 were 67.3% (65.6% (USD) / 70.6% (GBP) / 70.7% (EUR)) and 63.8% (66.7% (USD) / 47.1% (GBP) / 76.1% (EUR)).
(7) As of March 31, 2020 and December 31, 2019, approximately 54% of the outstanding balance under these secured borrowings were recourse to us.

Each of our existing secured debt arrangements include "credit based and other mark-to-market" features. "Credit mark-to-market" provisions in repurchase facilities are designed to keep the lenders' credit exposure generally constant as a percentage of the underlying collateral value of the assets pledged as security to them. If the credit underlying collateral value decreases, the amount of leverage available to us will be reduced as our assets are marked-to-market, which would reduce our
liquidity. The lender under the applicable repurchase facility sets the valuation and any revaluation of the collateral assets in its sole, good faith discretion. Generally, if the lender determines (subject to certain conditions) that the market value of the collateral in a repurchase transaction has decreased by more than a defined minimum amount, the lender may require us to provide additional collateral or may make margin calls, which may require us to repay all or a portion of the funds advanced. We closely monitor our liquidity and intend to maintain sufficient liquidity on our balance sheet in order to meet any margin calls in the event of any significant decreases in asset values. As of March 31, 2020 and December 31, 2019, the weighted average haircut under our repurchase agreements was approximately 33% and 36%, respectively. In addition, our existing secured debt arrangements are not entirely term-matched financings and may mature before our commercial real estate debt investments that represent underlying collateral to those financings. We are in frequent dialogue with the lenders under our secured debt arrangements regarding our management of their collateral assets and as we negotiate renewals and extensions of these liabilities, we may experience lower advance rates and higher pricing under the renewed or extended agreements.
JPMorgan Facility
In November 2019, through three indirect wholly-owned subsidiaries, we entered into a Sixth Amended and Restated Master Repurchase Agreement with JPMorgan Chase Bank, National Association (as amended, the "JPMorgan Facility"). The JPMorgan Facility allows for $1.3 billion of maximum borrowings (with amounts borrowed in British pounds and Euros converted to U.S. dollars for purposes of calculating availability based on the greater of the spot rate as of the initial financing under the corresponding mortgage loan and the then-current spot rate) and matures in June 2022 and has two one-year extensions available at our option, which are subject to certain conditions. The JPMorgan Facility enables us to elect to receive advances in U.S. dollars ("USD"), British pounds ("GBP"), or Euros ("EUR"). Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $1.2 billion (including £75.6 million and €60.0 million assuming conversion into USD) of borrowings outstanding under the JPMorgan Facility secured by certain of our commercial mortgage loans.
DB Facility
In March 2020, through an indirect wholly-owned subsidiary, we entered into a Third Amended and Restated Master Repurchase Agreement with Deutsche Bank AG, Cayman Islands Branch, London Branch (as amended, the "DB Facility"), which provides for advances of up to $1.0 billion for the sale and repurchase of eligible first mortgage loans secured by commercial or multifamily properties located in the United States, United Kingdom and the European Union, and enables us to elect to receive advances in USD, GBP, or EUR. The repurchase facility matures in March 2021, and has two one-year extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $507.0 million of borrowings outstanding under the DB Facility secured by certain of our commercial mortgage loans.
Goldman Facility
In November 2017, through an indirect wholly-owned subsidiary, we entered into a master repurchase and securities contract agreement with Goldman Sachs Bank USA (the "Goldman Facility"), which provides advances up to $500.0 million and matures in November 2020, and has one one-year extension available at our option, subject to certain conditions. Margin calls may occur any time at specified margin deficit thresholds.
As of March 31, 2020, we had $359.5 million of borrowings outstanding under the Goldman Facility secured by certain of our commercial mortgage loans.
CS Facility - USD
In July 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS Facility - USD"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - USD has an "evergreen" feature such that the facility continues unless terminated at any time by Credit Suisse with six months' notice. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $325.9 million of borrowings outstanding under the CS Facility - USD secured by certain of our commercial mortgage loans.
CS Facility - GBP
In June 2018, through an indirect wholly-owned subsidiary, we entered into a Global Master Repurchase Agreement with Credit Suisse Securities (Europe) Limited (the "CS Facility - GBP"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - GBP matures in September 2020. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $84.7 million (£68.2 million assuming conversion into USD) of borrowings outstanding under the CS Facility - GBP secured by one commercial mortgage loan.
HSBC Facility - USD    
In October 2019, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - USD"), which provides for a single asset financing. The facility is scheduled to mature in January 2021. Margin calls may occur any time at specified aggregate margin thresholds.
As of March 31, 2020, we had $50.6 million of borrowings under the HSBC Facility - USD secured by one commercial mortgage loan.
HSBC Facility - GBP
In September 2018, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - GBP"), which provides for a single asset financing. The facility is scheduled to mature in June 2020. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $32.2 million (£26.0 million assuming conversion into USD) of borrowings outstanding under the HSBC Facility - GBP secured by one commercial mortgage loan.
HSBC Facility - EUR
In July 2019, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - EUR"), which provides for a single asset financing. The facility matures in July 2021. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $151.5 million (€137.4 million assuming conversion into USD) of borrowings outstanding under the HSBC Facility - EUR secured by one of our commercial mortgage loans.
Barclays Facility - USD
In March 2020, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement pursuant to a Master Repurchase Agreement with Barclays Bank plc ("Barclays Facility - USD"). The Barclays Facility - USD allows for $200.0 million of maximum borrowings and initially matures in March 2023 with extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds.
Barclays Facility - GBP/EUR
Beginning in October 2019, through an indirect wholly-owned subsidiary, we entered into five secured debt arrangements pursuant to a Global Master Repurchase Agreement with Barclays Bank plc (the "Barclays Facility - GBP/EUR"). Margin calls may occur any time at specified aggregate margin deficit thresholds.
The table below provides the currency, outstanding balance, stated maturity, and extended maturity for each of the five secured debt arrangements under the Barclays Facility - GBP/EUR:
Local Currency
Borrowings outstanding (in $)
Fully-Extended Maturity(1)
GBP
$217,350
December 2023
GBP
156,958
February 2023
GBP
149,830
October 2024
GBP
121,716
September 2023
Sub-total/Weighted-Average
$645,854
November 2023
EUR
179,586
see below(2)
Total/Weighted-Average
$825,440
 
———————
(1) Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.
(2) The Barclays Facility - EUR has an "evergreen" feature such that the facility continues for one year and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve month notice.
As of March 31, 2020, we had $825.4 million (£520.0 million and €162.8 million assuming conversion into U.S.
dollars) of borrowings outstanding under the Barclays Facility - GBP/EUR secured by five of our commercial mortgage loans.
At March 31, 2020, our borrowings had the following remaining maturities ($ in thousands):
 
Less than
1 year
 
 
1 to 3
years
 
3 to 5
years
 
More than
5 years
 
Total
JPMorgan
$
61,836

 
$
289,842

 
$
833,007


$

 
$
1,184,685

DB
27,900

 
196,477

 
282,600



 
506,977

Goldman

 
359,540

 

 

 
359,540

CS - USD

 
200,307

 
125,561

 

 
325,868

CS - GBP
84,748

 

 

 

 
84,748

HSBC - USD
50,625

 

 

 

 
50,625

HSBC - GBP
32,230

 

 

 

 
32,230

HSBC - EUR

 
151,537

 

 

 
151,537

Barclays (GBP)

 

 
645,854

 

 
645,854

Barclays (EUR)

 

 
179,586

 

 
179,586

Barclays (USD)

 

 
35,192

 

 
35,192

Total
$
257,339

 
$
1,197,703

 
$
2,101,800

 
$

 
$
3,556,842

———————
(1) The table above reflects the fully extended maturity date of the facility and assumes facilities with an "evergreen" feature continue to extend through the fully-extended maturity of the underlying asset and assumes underlying loans are extended with consent of financing providers.
The table below summarizes the outstanding balances at March 31, 2020, as well as the maximum and average month-end balances for the three months ended March 31, 2020 for our borrowings under secured debt arrangements ($ in thousands).
 
As of March 31, 2020
 
For the three months ended March 31, 2020
 
Balance
 
Amortized Cost of Collateral
 
Maximum Month-End
Balance
 
Average Month-End
Balance
JPMorgan
$
1,184,685

 
$
1,912,345

 
$
1,184,685

 
$
989,915

DB
506,977

 
778,607

 
506,977

 
470,077

Goldman
359,540

 
537,249

 
359,540

 
319,369

CS - USD
325,868

 
439,725

 
336,448

 
326,684

CS - GBP
84,748

 
121,286

 
90,111

 
87,452

HSBC - USD
50,625

 
67,041

 
50,625

 
50,625

HSBC - GBP
32,230

 
46,565

 
34,501

 
33,336

HSBC - EUR
151,537

 
191,565

 
152,389

 
151,798

Barclays (USD)
35,192

 
49,800

 
35,192

 
11,731

Barclays (GBP)
645,854

 
899,075

 
666,810

 
610,833

Barclays (EUR)
179,586

 
239,483

 
180,595

 
179,895

Total
$
3,556,842

 
$
5,282,741

 

 
 

The table below summarizes the outstanding balances at December 31, 2019, as well as the maximum and average month-end balances for the year ended December 31, 2019 for our borrowings under secured debt arrangements ($ in thousands).
 
As of December 31, 2019
 
For the year ended December 31, 2019

 
Balance
 
Amortized Cost of Collateral
 
Maximum Month-End
Balance
 
Average Month-End
Balance
JPMorgan
$
1,234,759

 
$
1,845,400

 
$
1,234,759

 
$
947,400

DB
513,876

 
766,676

 
757,117

 
604,067

Goldman
322,170

 
513,559

 
324,821

 
246,318

CS - USD
218,644

 
308,884

 
218,644

 
182,646

CS - GBP
93,915

 
129,723

 
150,811

 
134,694

HSBC - USD
50,625

 
66,960

 
50,625

 
50,625

HSBC - GBP
34,634

 
49,976

 
50,784

 
42,296

HSBC - EUR
154,037

 
190,780

 
154,037

 
151,889

Barclays (GBP)
290,347

 
738,455

 
290,347

 
139,004

Barclays (EUR)
182,549

 
241,674

 
182,549

 
181,159

Total
$
3,095,556

 
$
4,852,087

 

 
 

We were in compliance with the covenants under each of our secured debt arrangements at March 31, 2020 and December 31, 2019.
Senior Secured Term Loan, Net
In May 2019, we entered into a $500.0 million senior secured term loan. The senior secured term loan bears interest at LIBOR plus 2.75% and was issued at a price of 99.5%. The senior secured term loan matures in May 2026 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities.
During the three months ended March 31, 2020, we repaid $1.3 million of principal related to the senior secured term loan. The outstanding principal balance as of March 31, 2020 and December 31, 2019 was $496.3 million and $497.5 million, respectively. As of March 31, 2020, the senior secured term loan had a carrying value of $487.1 million net of deferred financing costs of $7.0 million and an unamortized discount of $2.2 million. As of December 31, 2019, the senior secured term loan had a carrying value of $488.0 million net of deferred financing costs of $7.3 million and an unamortized discount of $2.2 million.
Covenants
The senior secured term loan includes the following financial covenants: (i) our ratio of total recourse debt to tangible net worth cannot be greater than 3:1; and (ii) our ratio of total unencumbered assets to total pari-passu indebtedness must be at least 1.25:1.
We were in compliance with the covenants under the senior secured term loan at March 31, 2020 and December 31, 2019.
Interest Rate Swap
In connection with the senior secured term loan, we entered into an interest rate swap to fix LIBOR at 2.12% effectively fixing our all-in coupon on the senior secured term loan at 4.87%.
v3.20.1
Fair Value Disclosure
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Disclosure Fair Value Disclosure
GAAP establishes a hierarchy of valuation techniques based on the observability of the inputs utilized in measuring financial instruments at fair values. Market-based or observable inputs are the preferred source of values, followed by valuation models using management's assumptions in the absence of market-based or observable inputs. The three levels of the hierarchy as noted in ASC 820 "Fair Value Measurements and Disclosures" are described below:
Level I — Quoted prices in active markets for identical assets or liabilities.
Level II — Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.
Level III — Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period),
unobservable inputs may be used.
While we anticipate that our valuation methods will be appropriate and consistent with valuation methods used by other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. We will use inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced.
The estimated fair values of our derivative instruments are determined using a discounted cash flow analysis on the
expected cash flows of each derivative. The fair values of foreign exchange forwards are determined by comparing the
contracted forward exchange rate to the current market exchange rate. The current market exchange rates are determined by
using market spot rates, forward rates and interest rate curves for the underlying countries. The fair value of the interest rate
swap is determined by comparing the present value of remaining fixed payments to the present value of expected floating rate payments based on the forward one-month LIBOR curve. Our derivative instruments are classified as Level II in the fair value hierarchy.
The following table summarizes the levels in the fair value hierarchy into which our derivative assets were categorized as of March 31, 2020 and December 31, 2019 ($ in thousands): 
 
Fair Value as of March 31, 2020
 
Fair Value as of December 31, 2019
 
Level I
 
Level II
 
Level III
 
Total
 
Level I
 
Level II
 
Level III
 
Total
Foreign currency forward, net
$

 
$
57,561

 
$

 
$
57,561

 
$

 
$

 
$

 
$


The following table summarizes the levels in the fair value hierarchy into which our derivative liabilities were categorized as of March 31, 2020 and December 31, 2019 ($ in thousands): 
 
Fair Value as of March 31, 2020
 
Fair Value as of December 31, 2019
 
Level I
 
Level II
 
Level III
 
Total
 
Level I
 
Level II
 
Level III
 
Total
Foreign currency forward, net
$

 
$

 
$

 
$

 
$

 
$
(4,876
)
 
$

 
$
(4,876
)
Interest rate swap liability

 
(50,018
)
 

 
(50,018
)
 

 
(14,470
)
 

 
(14,470
)
Total financial instrument liabilities
$

 
$
(50,018
)
 
$

 
$
(50,018
)
 
$

 
$
(19,346
)
 
$

 
$
(19,346
)

v3.20.1
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
CECL Allowance $ 265,254  
Loan Specific Reserves 206,981 $ 56,981
General CECL Reserves 58,273  
Deferred financing costs 16,917 17,190
Deferred financing costs 6,960 7,277
General CECL Allowance $ 6,059 $ 0
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 50,000,000 50,000,000
Preferred stock, shares issued (in shares) 6,770,393 6,770,393
Preferred stock, shares outstanding (in shares) 6,770,393 6,770,393
Preferred stock, liquidation preference $ 169,260 $ 169,260
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 450,000,000 450,000,000
Common stock, shares issued (in shares) 153,740,547 153,537,296
Common stock, shares outstanding (in shares) 153,740,547 153,537,296
Commercial Mortgage Portfolio Segment    
Loans pledged as collateral $ 5,282,741 $ 4,852,087
General CECL Reserves 28,336  
Subordinate Mortgage Portfolio Segment    
General CECL Reserves $ 29,937  
v3.20.1
Convertible Senior Notes, Net (Tables)
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Schedule of Convertible Senior Notes
The following table summarizes the terms of the Notes ($ in thousands):
 
Principal Amount
Coupon Rate
Effective Rate (1)
Conversion Rate (2)
Maturity Date
Remaining Period of Amortization
2022 Notes
$
345,000

4.75
%
5.60
%
50.2260

8/23/2022
2.40
2023 Notes
230,000

5.38
%
6.16
%
48.7187

10/15/2023
3.54
Total
$
575,000

 
 
 
 
 
———————
(1)
Effective rate includes the effect of the adjustment for the conversion option (See endnote (2) below), the value of which reduced the initial liability and was recorded in additional paid-in-capital.
(2)
We have the option to settle any conversions in cash, shares of common stock or a combination thereof.  The conversion rate represents the number of shares of common stock issuable per one thousand principal amount of the Notes converted, and includes adjustments relating to cash dividend payments made by us to stockholders that have been deferred and carried-forward in accordance with, and are not yet required to be made pursuant to, the terms of the applicable supplemental indenture.

v3.20.1
Stockholders' Equity (Tables)
3 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Schedule of Dividends Declared During the three months ended 2020 and 2019, we declared the following dividends:
 
Three months ended
Dividend declared per share of:
March 31, 2020
 
March 31, 2019
Common Stock
$0.40
 
$0.46
Series B Preferred Stock
0.50
 
0.50
Series C Preferred Stock
N/A
 
0.50


v3.20.1
Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) (Parenthetical) - $ / shares
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Statement of Stockholders' Equity [Abstract]    
Dividends declared on common stock (in dollars per share) $ 0.40 $ 0.46
Dividends declared on preferred stock (in dollars per share) $ 0.50 $ 0.50
v3.20.1
Senior Secured Term Loan, Net (Details) - USD ($)
1 Months Ended 3 Months Ended
May 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Debt Instrument [Line Items]        
Repayments of senior secured term loan principal   $ 1,250,000 $ 0  
Deferred financing costs   6,960,000   $ 7,277,000
London Interbank Offered Rate (LIBOR) | Interest rate swap liability        
Debt Instrument [Line Items]        
Fixed interest rate 2.12%      
Secured Debt        
Debt Instrument [Line Items]        
Debt instrument, face amount $ 500,000,000.0      
Debt instrument, issuance price as a percentage 99.50%      
Long-term debt, gross   496,300,000   497,500,000
Long-term debt   487,100,000   488,000,000.0
Deferred financing costs   7,000,000.0   7,300,000
Unamortized discount   $ 2,200,000   $ 2,200,000
Debt instrument, covenant, non-recourse debt to tangible net worth ratio, maximum 3      
Debt instrument, covenant, unencumbered assets to pari-passu indebtedness ratio, maximum 1.25      
Effective interest rate 4.87%      
Secured Debt | London Interbank Offered Rate (LIBOR)        
Debt Instrument [Line Items]        
Basis spread on variable rate 2.75%      
v3.20.1
Secured Debt Arrangements, Net - Debt Arrangements Under Barclays Facility (Details)
$ in Thousands, € in Millions, £ in Millions
Mar. 31, 2020
USD ($)
Mar. 31, 2020
GBP (£)
Mar. 31, 2020
EUR (€)
Dec. 31, 2019
USD ($)
Debt Instrument [Line Items]        
Secured debt arrangements, net (net of deferred financing costs of $16,917 and $17,190 in 2020 and 2019, respectively) $ 3,539,925     $ 3,078,366
Line of Credit        
Debt Instrument [Line Items]        
Secured debt arrangements, net (net of deferred financing costs of $16,917 and $17,190 in 2020 and 2019, respectively) 3,539,925     3,078,366
Barclays Facility | Line of Credit        
Debt Instrument [Line Items]        
Secured debt arrangements, net (net of deferred financing costs of $16,917 and $17,190 in 2020 and 2019, respectively) 825,440      
GBP | Barclays Facility | Line of Credit        
Debt Instrument [Line Items]        
Secured debt arrangements, net (net of deferred financing costs of $16,917 and $17,190 in 2020 and 2019, respectively) 645,854 £ 520.0   290,347
GBP | Barclays Facility | Line of Credit | Secured Debt Arrangement, December 2023 [Member]        
Debt Instrument [Line Items]        
Secured debt arrangements, net (net of deferred financing costs of $16,917 and $17,190 in 2020 and 2019, respectively) 217,350      
GBP | Barclays Facility | Line of Credit | Secured Debt Arrangement, February 2023 [Member]        
Debt Instrument [Line Items]        
Secured debt arrangements, net (net of deferred financing costs of $16,917 and $17,190 in 2020 and 2019, respectively) 156,958      
GBP | Barclays Facility | Line of Credit | Secured Debt Arrangement, October 2024 [Member]        
Debt Instrument [Line Items]        
Secured debt arrangements, net (net of deferred financing costs of $16,917 and $17,190 in 2020 and 2019, respectively) 149,830      
GBP | Barclays Facility | Line of Credit | Secured Debt Arrangement, September 2023 [Member]        
Debt Instrument [Line Items]        
Secured debt arrangements, net (net of deferred financing costs of $16,917 and $17,190 in 2020 and 2019, respectively) 121,716      
EUR | Barclays Facility | Line of Credit        
Debt Instrument [Line Items]        
Secured debt arrangements, net (net of deferred financing costs of $16,917 and $17,190 in 2020 and 2019, respectively) $ 179,586   € 162.8 $ 182,549
v3.20.1
Stockholders' Equity - Dividends Declared (Details) - $ / shares
3 Months Ended
Jun. 10, 2019
Mar. 31, 2020
Mar. 31, 2019
Class of Stock [Line Items]      
Dividends declared (in dollars per share)   $ 0.40 $ 0.46
Common stock      
Class of Stock [Line Items]      
Dividends declared (in dollars per share)   0.40 0.46
Series B Preferred Stock      
Class of Stock [Line Items]      
Dividends declared (in dollars per share)   $ 0.50 0.50
Series C Preferred Stock      
Class of Stock [Line Items]      
Dividends declared (in dollars per share) $ 0.2223   $ 0.50
v3.20.1
Net Income (Loss) per Share - Additional Information (Details) - shares
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Effect of dilutive securities - Convertible Notes (in shares) 28,533,271 30,093,312
RSU    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Unvested RSUs excluded from calculation of diluted net income per share (in shares) 2,007,242 1,849,564
v3.20.1
Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net - Activity Relating to Loan Investment Portfolio (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Jan. 01, 2020
Dec. 31, 2019
Carrying Value      
Carrying value, beginning balance $ 6,375,093    
Carrying value, ending balance 6,488,891    
General CECL Allowance (58,273)    
Carrying value 6,430,618   $ 6,375,093
General CECL Allowance on unfunded commitments 6,059 $ 3,088 0
Commercial Mortgage and Subordinated Portfolio Segment      
Principal Balance      
Principal balance, beginning 6,467,842    
New loan fundings 439,936    
Add-on loan fundings 118,521    
Loan repayments and sales (210,745)    
Gain (loss) on foreign currency translation (99,009)    
PIK interest and amortization of fees 12,008    
Principal balance, ending 6,728,553    
Deferred Fees/Other Items      
Deferred fees/other items, beginning (35,768)    
Gain (loss) on foreign currency translation 1,428    
Deferred fees (5,053)    
PIK interest and amortization of fees 6,712    
Deferred fees/other items, ending (32,681)    
Provision for Loan Loss      
Provision for Loan Loss, beginning (56,981)    
Specific CECL Allowance (150,000)    
Provision for Loan Loss, ending (206,981)    
Carrying Value      
Carrying value, beginning balance 6,375,093    
Gain (loss) on foreign currency translation (97,581)    
Specific CECL Allowance (150,000)    
Deferred fees (5,053)    
PIK interest and amortization of fees 18,720    
Carrying value, ending balance 6,488,891    
Carrying value $ 117,800   $ 126,700
v3.20.1
Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net - Allocation of Carrying Value of Loan Portfolio Based on Internal Risk Ratings (Details)
3 Months Ended 12 Months Ended
Mar. 31, 2020
USD ($)
loan
Dec. 31, 2019
USD ($)
loan
Financing Receivable, Credit Quality Indicator [Line Items]    
Number of Loans | loan 75 72
Financing Receivable, before Allowance for Credit Loss $ 6,488,891,000 $ 6,375,093,000
% of Portfolio 100.00% 100.00%
2020 $ 423,419,000 $ 2,736,825,000
2019 2,609,209,000 1,596,690,000
2018 1,545,407,000 912,636,000
2017 905,895,000 291,700,000
2016 216,777,000 524,246,000
Prior 788,184,000 $ 312,996,000
General CECL Reserves $ 58,273,000  
W.A. Risk Rating 3.1 3.0
1    
Financing Receivable, Credit Quality Indicator [Line Items]    
Number of Loans | loan 0 0
Financing Receivable, before Allowance for Credit Loss $ 0 $ 0
% of Portfolio 0.00% 0.00%
2020 $ 0 $ 0
2019 0 0
2018 0 0
2017 0 0
2016 0 0
Prior $ 0 $ 0
2    
Financing Receivable, Credit Quality Indicator [Line Items]    
Number of Loans | loan 5 8
Financing Receivable, before Allowance for Credit Loss $ 130,609,000 $ 348,324,000
% of Portfolio 2.00% 5.50%
2020 $ 0 $ 0
2019 0 241,676,000
2018 23,990,000 0
2017 0 36,250,000
2016 36,287,000 24,546,000
Prior $ 70,332,000 $ 45,852,000
3    
Financing Receivable, Credit Quality Indicator [Line Items]    
Number of Loans | loan 63 61
Financing Receivable, before Allowance for Credit Loss $ 5,822,078,000 $ 5,707,555,000
% of Portfolio 89.70% 89.50%
2020 $ 423,419,000 $ 2,736,825,000
2019 2,609,209,000 1,355,014,000
2018 1,490,045,000 912,636,000
2017 779,882,000 72,540,000
2016 62,580,000 499,700,000
Prior $ 456,943,000 $ 130,840,000
4    
Financing Receivable, Credit Quality Indicator [Line Items]    
Number of Loans | loan 0 1
Financing Receivable, before Allowance for Credit Loss $ 0 $ 182,910,000
% of Portfolio 0.00% 2.90%
2020 $ 0 $ 0
2019 0 0
2018 0 0
2017 0 182,910,000
2016 0 0
Prior $ 0 $ 0
5    
Financing Receivable, Credit Quality Indicator [Line Items]    
Number of Loans | loan 7 2
Financing Receivable, before Allowance for Credit Loss $ 536,204,000 $ 136,304,000
% of Portfolio 8.30% 2.10%
2020 $ 0 $ 0
2019 0 0
2018 31,372,000 0
2017 126,013,000 0
2016 117,910,000 0
Prior $ 260,909,000 $ 136,304,000
v3.20.1
Stockholders' Equity - Additional Information (Details) - USD ($)
$ / shares in Units, $ in Thousands
2 Months Ended 3 Months Ended
Jun. 10, 2019
Aug. 02, 2018
Sep. 30, 2018
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2019
Class of Stock [Line Items]              
Common stock, shares authorized (in shares)       450,000,000     450,000,000
Common stock, par value (in dollars per share)       $ 0.01     $ 0.01
Preferred stock, shares authorized (in shares)       50,000,000     50,000,000
Preferred stock, par value (in dollars per share)       $ 0.01     $ 0.01
Common stock, shares issued (in shares)       153,740,547     153,537,296
Common stock, shares, outstanding (in shares)       153,740,547     153,537,296
Preferred stock, shares issued (in shares)       6,770,393     6,770,393
Preferred stock, shares outstanding (in shares)       6,770,393     6,770,393
Proceeds from issuance of common stock net of offering costs         $ 314,800    
Increase to additional paid in capital as a result of conversion of 2019 Notes           $ 33,778  
Shares repurchased (in shares)       300,000      
Share repurchase, average price per share (in dollars per share)       $ 8.11      
Series B Preferred Stock              
Class of Stock [Line Items]              
Preferred stock, shares issued (in shares)       6,770,393      
Preferred stock, shares outstanding (in shares)       6,770,393      
Preferred stock dividend percentage       8.00%      
Unpaid dividends (in dollars per share)       $ 0.50   $ 0.50  
Series C Preferred Stock              
Class of Stock [Line Items]              
Preferred stock dividend percentage 8.00%            
Redemption of preferred stock (in shares) 6,900,000            
Redemption price (in dollars per share) $ 25.00            
Unpaid dividends (in dollars per share) $ 0.2223         $ 0.50  
Common Stock              
Class of Stock [Line Items]              
Conversions of convertible senior notes for common stock (in shares)           1,967,361  
Increase to additional paid in capital as a result of conversion of 2019 Notes           $ 20  
2019 Notes | Convertible Debt | Common Stock              
Class of Stock [Line Items]              
Shares issued, price per share (in dollars per share)           $ 17.17  
Conversions of convertible senior notes for common stock (in shares)   10,020,328 2,775,509     1,967,361  
Increase to additional paid in capital as a result of conversion of 2019 Notes           $ 33,800  
Follow On Public Offering | Common Stock              
Class of Stock [Line Items]              
Issuance of common stock (in shares)         17,250,000    
Shares issued, price per share (in dollars per share)         $ 18.27    
v3.20.1
Related Party Transactions (Details)
$ in Thousands, £ in Millions
1 Months Ended 3 Months Ended
Jan. 31, 2020
USD ($)
Jan. 31, 2020
GBP (£)
May 31, 2019
USD ($)
Mar. 31, 2020
USD ($)
Mar. 31, 2019
USD ($)
Dec. 31, 2019
USD ($)
Related Party Transaction [Line Items]            
Base management fees incurred but not yet paid       $ 10,268   $ 10,430
Related party expenses       $ 10,268 $ 9,613  
Sale of mezzanine loan            
Related Party Transaction [Line Items]            
Proceeds from sale of loan $ 81,300 £ 62.2        
Sale of unfunded commitment of senior mortgage            
Related Party Transaction [Line Items]            
Proceeds from sale of loan $ 65,300 £ 50.0        
Arrangement fees            
Related Party Transaction [Line Items]            
Related party expenses     $ 600      
Limited Liability Company            
Related Party Transaction [Line Items]            
Rate of management fees       1.50%    
Extension period       1 year    
Period of termination       180 days    
Termination fee calculation period       24 months    
Limited Liability Company | Management fees            
Related Party Transaction [Line Items]            
Base management fees incurred but not yet paid       $ 10,300   $ 10,400
Affiliated Entity | Management fees            
Related Party Transaction [Line Items]            
Related party expenses       10,300 9,600  
Affiliated Entity | Reimbursements            
Related Party Transaction [Line Items]            
Related party expenses       $ 600 $ 700  
v3.20.1
Derivatives - Summary of Non-Designated Foreign Exchange Forwards (Details) - Not Designated as Hedging Instrument
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
USD ($)
contract
Dec. 31, 2019
USD ($)
contract
Interest rate swap liability    
Derivative [Line Items]    
Number of Contracts | contract 1 1
Aggregate Notional Amount (in thousands) | $ $ 500,000 $ 500,000
Weighted-Average Years to Maturity 6 years 1 month 13 days 6 years 4 months 13 days
GBP | Foreign currency forward, net    
Derivative [Line Items]    
Number of Contracts | contract 157 156
Aggregate Notional Amount (in thousands) | $ $ 526,613 $ 735,349
Weighted-Average Years to Maturity 2 years 3 months 3 days 1 year 5 months 26 days
EUR | Foreign currency forward, net    
Derivative [Line Items]    
Number of Contracts | contract 63 44
Aggregate Notional Amount (in thousands) | $ $ 219,130 $ 168,879
Weighted-Average Years to Maturity 3 years 1 month 9 days 3 years 2 months 19 days
v3.20.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation
The accompanying condensed consolidated financial statements include our accounts and those of our consolidated subsidiaries. All intercompany amounts have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our most significant estimates include loan loss allowances. Actual results could differ from those estimates.
These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019 ("Annual Report"), as filed with the Securities and Exchange Commission (the "SEC"). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows have been included. Our results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the full year or any other future period.
Recent Accounting Pronouncements
Current Expected Credit Losses ("CECL")
In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which we refer to as the "CECL Standard." This update has changed how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value. The CECL Standard replaced the "incurred loss" approach under existing guidance with an "expected loss" model for instruments measured at amortized cost. The CECL Standard requires entities to record allowances for held-to-maturity debt securities that are deducted from the carrying amount of the assets to present the net carrying value at the amounts expected to be collected on the assets. We continue to record loan specific allowances as a practical expedient under the CECL Standard ("Specific CECL Allowance"), which we apply to assets that are collateral dependent and where the borrower or sponsor is experiencing
financial difficulty. In addition, we now record a general allowance in accordance with the CECL Standard on the remainder of the loan portfolio ("General CECL Allowance", and together with the Specific CECL Allowance, "CECL Allowances") on a collective basis by assets with similar risk characteristics.
The CECL Standard requires us to record an allowance for credit losses that are deducted from the carrying amount of our loan portfolio to present the net carrying value at the amounts expected to be collected on the assets. We adopted the CECL Standard through a cumulative-effect adjustment to retained earnings on January 1, 2020. Subsequent changes to the General CECL Allowance are recognized through net income (loss) on our consolidated statement of operations.
The CECL Standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. The FASB recognizes what is known as the weighted average remaining maturity ("WARM") method as an acceptable approach for computing current expected credit losses. We have adopted the WARM method to comply with the CECL Standard in determining a General CECL Allowance for a majority of our portfolio. In the future, we may use other acceptable methods, such as a probability-of-default/loss-given-default method. For loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we have elected to apply a practical expedient in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a Specific CECL Allowance.
In accordance with the WARM method, an annual historical loss rate is applied to the amortized cost of an asset or pool of assets over the remaining expected life. The WARM method requires consideration of the timing of expected future fundings of existing commitments and repayments over each asset’s remaining life. An annual loss factor, adjusted for macroeconomic estimates, is applied over each subsequent period and aggregated to arrive at the General CECL Allowance.
In determining the General CECL Allowance, we considered various factors including (i) historical loss experience in the commercial real estate lending market, (ii) timing of expected repayments and satisfactions, (iii) expected future funding, (iv) capital subordinate to us when we are the senior lender, (v) capital senior to us when we are the subordinate lender, and (vi) our current and future view of the macroeconomic environment. The standard requires the use of significant judgment to arrive at an estimated credit loss. There is significant uncertainty related to future macroeconomic conditions as the result of COVID-19.
We derived an annual historical loss rate based on a commercial mortgage backed securities database with historical losses from 1998 to the first quarter of 2020 provided by a third party, Trepp LLC. We applied various filters to arrive at a CMBS dataset most analogous to our current portfolio from which to determine an appropriate historical loss rate. The annual historical loss rate was further adjusted to reflect our expectations of the macroeconomic environment for a reasonable and supportable forecast period which we have determined to be one year.
The General CECL Allowance on subordinate loans is calculated by incorporating both the loan balance of the position(s) of the structurally senior third-party lender(s) and the balance of our subordinate loan. The subordinate loan, by virtue of being the first loss position, is required to absorb losses prior to the senior position(s) being impacted, resulting in a higher percentage allowance attributable to the subordinate loan. The General CECL Allowance on unfunded loan commitments is time-weighted based on our expected commitment to fund such obligations. The General CECL Allowance on unfunded commitments is recorded as a liability on the condensed consolidated balance sheet within accounts payable, accrued expenses, and other liabilities. At adoption, the General CECL Allowance was $30.9 million and was recorded in the condensed consolidated statement of changes in stockholders’ equity.
v3.20.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Legal Proceedings. From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57th Investment LLC commenced an action captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No 653251/2018) in New York Supreme Court. The complaint names as defendants (i) ACREFI Mortgage Lending, LLC, a subsidiary of the Company, (ii) the Company, and (iii) certain funds managed by Apollo, which are co-lenders on a mezzanine loan against the development of a residential condominium building in Manhattan, New York. The plaintiffs allege that the defendants tortiously interfered with the contractual equity put right in the plaintiffs’ joint venture agreement with the developers of the project, and that the defendants aided and abetted breaches of fiduciary duty by the developers of the project. The plaintiffs allege the loss of a $70.0 million investment as part of total damages of $700.0 million, which includes punitive damages. The defendants' motion to dismiss was granted on October 23, 2019 and the Court entered judgment dismissing the complaint in its entirety on November 8, 2019. Plaintiffs filed a timely notice of appeal on December 6, 2019 but have not yet filed their appellate brief. We believe the claims are without merit and plan to vigorously defend the case on appeal. We do not believe this will have a material adverse effect on our condensed consolidated financial statements.
Loan Commitments. As described in "Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net" at March 31, 2020, we had $1.8 billion of unfunded commitments related to our commercial mortgage and subordinate loan portfolios. The timings and amounts of fundings are uncertain as these commitments relate to loans for construction costs, capital expenditures, leasing costs, interest and carry costs, among others. As such, the timings and amounts of future fundings will rely on progress and performance of the underlying assets of our loans. Certain of our lenders are contractually obligated to fund their ratable portion of these loan commitments over time, while other lenders have some degree of discretion over future loan funding obligations. The total unfunded commitment is expected to be funded over the remaining expected 4.3 year weighted average tenor of these loans.
COVID-19. The COVID-19 global pandemic has brought forth uncertainty and disruption to the global economy. The magnitude and duration of the COVID 19 pandemic and its impact on our borrowers and their tenants, cash flows and future results of operations could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID 19 pandemic, the success of actions taken to contain or treat the pandemic, and reactions by consumers, companies, governmental entities and capital markets. The prolonged duration and impact of the COVID 19 pandemic could materially disrupt our business operations and impact our financial performance.
As of March 31, 2020, we have not recorded any contingencies on our condensed consolidated balance sheet related to COVID-19. To the extent COVID-19 continues to cause dislocations in the global economy, our financial condition, results of operations, and cash flows may continue to be adversely impacted. Refer to “Note 2 - Summary of Significant Accounting Policies” for further discussion regarding COVID-19.
v3.20.1
Organization
3 Months Ended
Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization Organization
Apollo Commercial Real Estate Finance, Inc. (together with its consolidated subsidiaries, is referred to throughout this report as the "Company," "ARI," "we," "us" and "our") is a corporation that has elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes and primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments. These asset classes are referred to as our target assets.
We were formed in Maryland on June 29, 2009, commenced operations on September 29, 2009 and are externally managed and advised by ACREFI Management, LLC (the "Manager"), an indirect subsidiary of Apollo Global Management, Inc. (together with its subsidiaries, "Apollo").
We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2009. To maintain our tax qualification as a REIT, we are required to distribute at least 90% of our taxable income, excluding net capital gains, to stockholders and meet certain other asset, income, and ownership tests.
v3.20.1
Net Income (Loss) per Share (Tables)
3 Months Ended
Mar. 31, 2020
Earnings Per Share [Abstract]  
Basic and Diluted Net Income per Share of Common Stock Using Two-Class Method
The table below presents the computation of basic and diluted net income (loss) per share of common stock for the three months ended March 31, 2020 and 2019 ($ in thousands except per share data): 
 
For the three months ended March 31,
 
2020
 
2019
Basic Earnings
 
 
 
Net income (loss)
$
(127,842
)
 
$
67,758

Less: Preferred dividends
(3,385
)
 
(6,835
)
Net income (loss) available to common stockholders
$
(131,227
)
 
$
60,923

Less: Dividends on participating securities
(802
)
 
(851
)
Basic Earnings
$
(132,029
)
 
$
60,072

 
 
 
 
Diluted Earnings
 
 
 
Basic Earnings
$
(132,029
)
 
$
60,072

Add: Dividends on participating securities

 
851

Add: Interest expense on Notes

 
9,262

Diluted Earnings
$
(132,029
)
 
$
70,185

 
 
 
 
Number of Shares:
 
 
 
Basic weighted-average shares of common stock outstanding
153,948,191

 
134,607,107

Diluted weighted-average shares of common stock outstanding
153,948,191

 
164,683,086

 
 
 


Earnings Per Share Attributable to Common Stockholders
 
 
 
Basic
$
(0.86
)
 
$
0.45

Diluted
$
(0.86
)
 
$
0.43


v3.20.1
Cover Page - shares
3 Months Ended
Mar. 31, 2020
May 06, 2020
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Mar. 31, 2020  
Document Transition Report false  
Entity File Number 001-34452  
Entity Registrant Name Apollo Commercial Real Estate Finance, Inc.  
Entity Incorporation, State or Country Code MD  
Entity Tax Identification Number 27-0467113  
Entity Address, Address Line One 9 West 57th Street  
Entity Address, Address Line Two 43rd Floor  
Entity Address, City or Town New York  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 10019  
City Area Code 212  
Local Phone Number 515–3200  
Title of 12(b) Security Common Stock, $0.01 par value  
Trading Symbol ARI  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Small Business Entity false  
Emerging Growth Company false  
Entity Shell Company false  
Amendment Flag false  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Entity Central Index Key 0001467760  
Current Fiscal Year End Date --12-31  
Entity Common Stock, Shares Outstanding   153,822,782
v3.20.1
Other Assets (Tables)
3 Months Ended
Mar. 31, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Schedule of Components of Other Assets
The following table details the components of our other assets at the dates indicated ($ in thousands):
 
March 31, 2020
 
December 31, 2019
Interest receivable
$
41,860

 
$
35,581

Collateral deposited under derivative agreements
35,540

 
17,090

Collateral deposited under secured debt arrangements(1)
26,262

 

Other
207

 
45

Total
$
103,869

 
$
52,716


———————
(1)
Subsequent to March 31, 2020, this amount was applied to reduce the related outstanding secured debt arrangement

v3.20.1
Accounts Payable, Accrued Expenses and Other Liabilities (Tables)
3 Months Ended
Mar. 31, 2020
Payables and Accruals [Abstract]  
Schedule of Accounts Payable, Accrued Expense and Other Liabilities
The following table details the components of our accounts payable, accrued expense and other liabilities ($ in thousands):
 
March 31, 2020
 
December 31, 2019
Accrued dividends payable
$
65,119

 
$
74,771

Collateral deposited under derivative agreements
28,450

 
2,930

Accrued interest payable
15,930

 
16,089

Accounts payable and other liabilities
7,818

 
6,922

General CECL Allowance on unfunded commitments(1)
6,059

 

Total
$
123,376

 
$
100,712


  ———————
(1)
Refer to Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net for additional disclosure related to the General CECL Allowance on unfunded commitments for the quarter ended March 31, 2020.
v3.20.1
Condensed Consolidated Statement of Operations (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Income Statement [Abstract]    
General and administrative expenses, equity-based compensation $ 4,263 $ 3,901
Unrealized gain on foreign currency forward 62,436 $ (14,985)
Loan specific provision 150,000  
General CECL Allowance $ 33,465  
v3.20.1
Convertible Senior Notes, Net
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Convertible Senior Notes, Net Convertible Senior Notes, Net
In two separate offerings during 2014, we issued an aggregate principal amount of $254.8 million of 5.50% Convertible Senior Notes due 2019 (the "2019 Notes"), for which we received $248.6 million, after deducting the underwriting discount and offering expenses. The 2019 Notes were exchanged or converted for shares of our common stock and cash as follows:
(i) On August 2, 2018, we entered into privately negotiated exchange agreements with a limited number of holders of the 2019 Notes pursuant to which we exchanged $206.2 million of the 2019 Notes for an aggregate of (a) 10,020,328 newly issued shares of our common stock, and (b) $39.3 million in cash. We recorded $166.0 million of additional paid-in-capital in the condensed consolidated statement of changes in stockholders' equity in connection with these transactions,
(ii) Certain holders elected to convert $47.9 million of the 2019 Notes, which were settled for an aggregate of (a) 2,775,509 newly issued shares of our common stock, and (b) $0.2 million in cash. We recorded $13.9 million of additional paid-in-capital in the condensed consolidated statement of changes in stockholders' equity in connection with these transactions. These conversions occurred from August 2018 through maturity.
The remaining $0.7 million in principal amount of the 2019 Notes was repaid at maturity on March 15, 2019.
In two separate offerings during 2017, we issued an aggregate principal amount of $345.0 million of 4.75% Convertible Senior Notes due 2022 (the "2022 Notes"), for which we received $337.5 million, after deducting the underwriting discount and offering expenses. At March 31, 2020, the 2022 Notes had a carrying value of $338.4 million and an unamortized discount of $6.6 million.
During the fourth quarter of 2018, we issued $230.0 million of 5.375% Convertible Senior Notes due 2023 (the "2023 Notes" and, together with the 2022 Notes, the "Notes"), for which we received $223.7 million after deducting the underwriting discount and offering expenses. At March 31, 2020, the 2023 Notes had a carrying value of $224.2 million and an unamortized discount of $5.8 million.
The following table summarizes the terms of the Notes ($ in thousands):
 
Principal Amount
Coupon Rate
Effective Rate (1)
Conversion Rate (2)
Maturity Date
Remaining Period of Amortization
2022 Notes
$
345,000

4.75
%
5.60
%
50.2260

8/23/2022
2.40
2023 Notes
230,000

5.38
%
6.16
%
48.7187

10/15/2023
3.54
Total
$
575,000

 
 
 
 
 
———————
(1)
Effective rate includes the effect of the adjustment for the conversion option (See endnote (2) below), the value of which reduced the initial liability and was recorded in additional paid-in-capital.
(2)
We have the option to settle any conversions in cash, shares of common stock or a combination thereof.  The conversion rate represents the number of shares of common stock issuable per one thousand principal amount of the Notes converted, and includes adjustments relating to cash dividend payments made by us to stockholders that have been deferred and carried-forward in accordance with, and are not yet required to be made pursuant to, the terms of the applicable supplemental indenture.

We may not redeem the Notes prior to maturity except in limited circumstances. The closing price of our common
stock on March 31, 2020 of $7.42 was less than the per share conversion price of the Notes.
In accordance with ASC 470 "Debt," the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) is to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. GAAP requires that the initial proceeds from the sale of the Notes be allocated between a liability component and an equity component in a manner that reflects interest expense at the interest rate of similar nonconvertible debt that could have been issued by us at such time. We measured the fair value of the debt components of the Notes as of their issuance date based on effective interest rates.  As a result, we attributed approximately $15.4 million of the proceeds to the equity component of the Notes ($11.0 million to the 2022 Notes and $4.4 million to the 2023 Notes), which represents the excess proceeds received over the fair value of the liability component of the Notes at the date of issuance. The equity component of the Notes has been reflected within additional paid-in capital in the condensed consolidated balance sheet as of March 31, 2020. The resulting debt discount is being amortized over the period during which the Notes are expected to be outstanding (the maturity date) as additional non-cash interest expense. The additional non-cash interest expense attributable to each of the Notes will increase in subsequent reporting periods through the maturity date as the Notes accrete to their par value over the same period.
The aggregate contractual interest expense was approximately $7.2 million and $7.6 million for the three months ended March 31, 2020 and 2019, respectively. With respect to the amortization of the discount on the liability component of the Notes as well as the amortization of deferred financing costs, we reported additional non-cash interest expense of approximately $1.5 million and $1.7 million for the three months ended March 31, 2020 and 2019, respectively.
v3.20.1
Loan Proceeds Held by Servicer
3 Months Ended
Mar. 31, 2020
Receivables [Abstract]  
Loan Proceeds Held by Servicer Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net
Our loan portfolio was comprised of the following at March 31, 2020 and December 31, 2019 ($ in thousands):
Loan Type
 
March 31, 2020
 
December 31, 2019
Commercial mortgage loans, net (1)
 
$
5,413,627

 
$
5,326,967

Subordinate loans and other lending assets, net
 
1,016,991

 
1,048,126

Total
 
$
6,430,618

 
$
6,375,093



  ———————
(1)
Includes $117.8 million and $126.7 million in 2020 and 2019, respectively, of contiguous financing structured as subordinate loans.


Our loan portfolio consisted of 95% floating rate loans, based on amortized cost, as of March 31, 2020 and December 31, 2019, respectively.

 
Activity relating to our loan portfolio, for the three months ended March 31, 2020, was as follows ($ in thousands):
 
 
Principal Balance
 
Deferred Fees/Other Items (1)
 
Provision for Loan Loss
 
Carrying Value
December 31, 2019
 
$
6,467,842

 
$
(35,768
)
 
$
(56,981
)
 
$
6,375,093

New loan fundings
 
439,936

 

 

 
439,936

Add-on loan fundings (2)
 
118,521

 

 

 
118,521

Loan repayments and sales
 
(210,745
)
 

 

 
(210,745
)
Gain (loss) on foreign currency translation
 
(99,009
)
 
1,428

 

 
(97,581
)
Specific CECL Allowance
 

 

 
(150,000
)
 
(150,000
)
Deferred fees
 

 
(5,053
)
 

 
(5,053
)
PIK interest and amortization of fees
 
12,008

 
6,712

 

 
18,720

March 31, 2020
 
$
6,728,553

 
$
(32,681
)
 
$
(206,981
)
 
$
6,488,891

General CECL Allowance (3)
 
 
 
 
 
 
 
(58,273
)
Carrying value net, as of March 31, 2020
 
 
 
 
 
 
 
6,430,618

———————
(1)
Other items primarily consist of purchase discounts or premiums, exit fees and deferred origination expenses.
(2)
Represents fundings for loans closed prior to 2020.
(3)
$6.1 million of the General CECL Allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under Accounts Payable, Accrued Expenses and Other Liabilities in the condensed consolidated balance sheet.

The following table details overall statistics for our loan portfolio at the dates indicated ($ in thousands):
 
 
March 31, 2020
 
December 31, 2019
Number of loans
 
75

 
72

Principal balance
 
$
6,728,553

 
$
6,467,842

Carrying value
 
$
6,430,618

 
$
6,375,093

Unfunded loan commitments (1)
 
$
1,822,967

 
$
1,952,887

Weighted-average cash coupon (2)
 
6.0
%
 
6.5
%
Weighted-average remaining fully-extended term (3)
 
3.3 years

 
3.3 years

Weighted-average expected term (4)
 
2.2 years

 
1.8 years

  ———————
(1)
Unfunded loan commitments are funded to finance construction costs, tenant improvements, leasing commissions, or carrying costs. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.
(2)
For floating rate loans, based on applicable benchmark rates as of the specified dates. For loans placed on non-accrual or cost recovery the interest rate used in calculating weighted-average cash coupon is 0%.
(3)
Assumes all extension options are exercised.
(4)
Expected term represents our estimated timing of repayments as of March 31, 2020 and December 31, 2019, respectively.

Property Type

The table below details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):
 
 
March 31, 2020
 
December 31, 2019
Property Type
 
Carrying
Value
 
% of
Portfolio
(1)
 
Carrying
Value
 
% of
Portfolio
Office
 
$
1,803,605

 
27.8
%
 
$
1,401,400

 
22.0
%
Hotel
 
1,537,796

 
23.7

 
1,660,162

 
26.0

Residential-for-sale: construction
 
763,381

 
11.8

 
692,816

 
10.9

Residential-for-sale: inventory
 
283,909

 
4.4

 
321,673

 
5.1

Urban Retail
 
623,564

 
9.6

 
643,706

 
10.1

Healthcare
 
356,215

 
5.5

 
371,423

 
5.8

Urban Predevelopment
 
306,503

 
4.7

 
409,864

 
6.4

Other
 
813,918

 
12.5

 
874,049

 
13.7

Total
 
$
6,488,891

 
100.0
%
 
$
6,375,093

 
100.0
%
General CECL Allowance
 
(58,273
)
 
 
 
 
 
 
Total investments, net
 
$
6,430,618

 
 
 


 



  ———————
(1) Percentage of portfolio calculations are made prior to consideration of General CECL Allowance.
Geography

The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):
 
 
March 31, 2020
 
December 31, 2019
Geographic Location
 
Carrying
Value
 
% of
Portfolio
(1)
 
Carrying
Value
 
% of
Portfolio
New York City
 
$
2,319,325

 
35.8
%
 
$
2,167,487

 
34.0
%
Northeast
 
118,251

 
1.8

 
110,771

 
1.7

United Kingdom
 
1,347,897

 
20.8

 
1,274,390

 
20.0

West
 
747,515

 
11.5

 
728,182

 
11.4

Midwest
 
557,780

 
8.6

 
614,337

 
9.6

Southeast
 
512,469

 
7.9

 
564,166

 
8.9

Other
 
885,654

 
13.6

 
915,760

 
14.4

Total
 
$
6,488,891

 
100.0
%
 
$
6,375,093

 
100.0
%
General CECL Allowance
 
(58,273
)
 
 
 
 
 
 
Total investments, net
 
$
6,430,618

 
 
 
 
 
 

  ———————
(1) Percentage of portfolio calculations are made prior to consideration of the General CECL Allowance.

Risk Rating

We assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio ("LTV"), debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. This review is performed quarterly. Based on a 5-point scale, our loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:
1.    Very low risk
2.    Low risk
3. Moderate/average risk
4. High risk/potential for loss: a loan that has a risk of realizing a principal loss
5. Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or an impairment has been recorded

The following tables allocate the carrying value of our loan portfolio based on our internal risk ratings and date of origination at the dates indicated ($ in thousands):
March 31, 2020
 
 
 
 
 
 
 
 
 
Year Originated
Risk Rating
 
Number of Loans
 
Total
 
% of Portfolio
 
 
2020
 
2019
 
2018
 
2017
 
2016
 
Prior
1
 

 
 
%
 
 
$

 
$

 
$

 
$

 
$

 
$

2
 
5

 
130,609
 
2.0
%
 
 

 

 
23,990
 

 
36,287
 
70,332

3
 
63

 
5,822,078
 
89.7
%
 
 
423,419

 
2,609,209

 
1,490,045
 
779,882

 
62,580
 
456,943

4
 

 

 
%
 
 

 

 

 

 

 

5
 
7

 
536,204

 
8.3
%
 
 

 

 
31,372
 
126,013

 
117,910
 
260,909

Total
 
75

 
$
6,488,891

 
100.0
%
 
 
$
423,419

 
$
2,609,209

 
$1,545,407
 
$
905,895

 
$216,777
 
$
788,184

General CECL Allowance
 
(58,273
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total investments, net
$
6,430,618

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
W.A. Risk Rating
3.1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


December 31, 2019
 
 
 
 
 
 
 
 
 
Year Originated
Risk Rating
 
Number of Loans
 
Total
 
% of Portfolio
 
 
2019
 
2018
 
2017
 
2016
 
2015
 
Prior
1
 

 
$

 
%
 
 
$

 
$

 
$

 
$

 
$

 
$

2
 
8

 
348,324

 
5.5
%
 
 

 
241,676

 

 
36,250

 
24,546

 
45,852

3
 
61

 
5,707,555

 
89.5
%
 
 
2,736,825

 
1,355,014

 
912,636

 
72,540

 
499,700

 
130,840

4
 
1

 
182,910

 
2.9
%
 
 

 

 

 
182,910

 

 

5
 
2

 
136,304

 
2.1
%
 
 

 

 

 

 

 
136,304

Total
 
72

 
$
6,375,093

 
100.0
%
 
 
$
2,736,825

 
$
1,596,690

 
$
912,636

 
$
291,700

 
$
524,246

 
$
312,996

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
W.A. Risk Rating
 
3.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Current Expected Credit Losses

Refer to the following schedule of the General CECL Allowance as of March 31, 2020, and as of the date of adoption, January 1, 2020 ($ in thousands):

 
 
March 31, 2020
 
January 1, 2020(1)
Commercial mortgage loans, net
 
$
28,336

 
$
12,149

Subordinate loans and other lending assets, net
 
29,937

 
15,630

Unfunded commitments(2)
 
6,059

 
3,088

Total General CECL Allowance
 
$
64,332

 
$
30,867

  ———————
(1) As of January 1, 2020, we adopted the CECL Standard through a cumulative-effect adjustment to retained earnings
(2) The General CECL Allowance on Unfunded commitments is recorded as a liability on the condensed consolidated balance sheet within accounts payable, accrued expenses, and other liabilities

The General CECL Allowance increased by $33.5 million from initial adoption on January 1, 2020, to March 31, 2020. The increase is predominantly related to a change in our view of estimated macroeconomic conditions, including the unemployment rate and the commercial real estate price index, in the backdrop of the global pandemic. Other factors that contributed to the increase include an increase in our view of remaining expected term of our loan portfolio and growth in the portfolio from new investments during the quarter.
The macroeconomic factors considered were the unemployment rate, commercial real estate prices, and market liquidity. We compared the historical data for each metric to historical commercial real estate losses in order to determine the correlation of the data. We used projections, obtained from third-party service providers, of each factor to approximate the impact the macroeconomic outlook may have on our loss rate.

Refer to the following roll forward schedule of the General CECL Allowance for the quarter ended March 31, 2020 ($ in thousands):
 
 
General CECL Allowance
General CECL Allowance as of January 1, 2020
 
$
30,867

Increase in General CECL Allowance
 
34,500

Transfer to Specific CECL Allowance
 
(1,035
)
General CECL Allowance as of March 31, 2020(1)
 
$
64,332


———————
(1) Includes $6.1 million of the General CECL Allowance that relates to unfunded commitments and has been recorded as a liability under Accounts Payable, Accrued Expenses and Other Liabilities in the condensed consolidated balance sheet.


Our secured debt obligations and senior secured term loan financing have a minimum tangible net worth
maintenance covenant. The General CECL Allowance has no impact on these covenants as we are permitted to add back the General CECL Allowance for the computation of tangible net worth as defined in the respective agreements.

We have made an accounting policy election to exclude $41.9 million accrued interest receivable, included in Other assets on the condensed consolidated balance sheet, from the amortized cost basis of the related commercial mortgage loans and subordinate loans and other lending assets in determining the General CECL Allowance as any uncollected accrued interest receivable is written off in a timely manner. We discontinue accruing interest on loans if deemed uncollectible with any accrued uncollected interest on the loan charged to interest income in the same period. Under certain circumstances, we may apply the cost recovery method under which interest collected on a loan is a reduction to its amortized cost. The amortized cost basis for loans on cost recovery was $536.2 million and $136.3 million as of March 31, 2020 and December 31, 2019, respectively. For the three months ended March 31, 2020, we received $0.6 million in interest that reduced amortized cost under the cost recovery method.

The following schedule illustrates the CECL Allowance as percentages of amortized cost and total commitment as of March 31, 2020, and as of the date of adoption, January 1, 2020 ($ in thousands):
CECL Allowances
 
CECL ($)
 
% of
Amortized Cost
General CECL Allowance(1)
 
 
 
 
January 1, 2020
 
$
30,867

 
0.49
%
March 31, 2020(2)
 
64,332

 
1.08
%
 
 
 
 
 
Total CECL Allowances(3)
 
 
 


March 31, 2020
 
$
271,313

 
4.05
%
  ———————
(1) Amortized Cost of the General CECL Allowance excludes amortized cost of loans evaluated for the Specific CECL Allowance
(2) Includes $6.1 million of the General CECL Allowance that relates to unfunded commitments and has been recorded as a liability under Accounts Payable, Accrued Expenses and Other Liabilities in the condensed consolidated balance sheet.
(3) Total CECL Allowances includes the General CECL Allowance and the Specific CECL Allowance


Specific CECL Allowance

We regularly evaluate the extent and impact of any credit migration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan by loan basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the liquidation value of the underlying collateral. We also evaluate the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the properties. In addition, we consider the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. Such impairment analysis is completed and reviewed by asset management and finance personnel who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants.

We evaluate our loans on a quarterly basis. For loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we have elected to apply a practical expedient in accordance with the CECL Standard. In accordance with the practical expedient approach, we determine the loan loss provision to be the difference between the fair value of the underlying collateral and the carrying value of the loan (prior to the loan loss provision). The fair value of the underlying collateral is determined by using method(s) including a discounted cash flow (DCF) or direct capitalization approach. The key unobservable inputs used to determine the fair value of the underlying collateral may vary depending on the information available to us and market conditions as of the valuation date.

The following table summarizes the specific provision for loan losses that has been recorded on our portfolio as of March 31, 2020 ($ in thousands):



Type
Property type
Location
Amortized cost(1)
Interest recognition status/ as of date
Mortgage
 
 
 
 
Hotel(2)
Manhattan, NY
$
144,295

Cost Recovery/ 3/31/2020
 
Urban Predevelopment(3)
Brooklyn, NY
126,013

Cost Recovery/ 3/1/2020
 
Urban Predevelopment(3)
Miami, FL
117,910

Cost Recovery/ 3/1/2020
 
Retail Center(4)(5)
Cincinnati, OH
103,921

 Cost Recovery/ 10/1/2019
 
Hotel(2)
Pittsburgh, PA
31,372

Cost Recovery/ 3/31/2020
 
Residential-for-sale: inventory(6)(7)
Bethesda, MD
2,695

 Cost Recovery/ 1/1/2018
Mortgage total:
 
$
526,206

 
Mezzanine
 
 
 
 
Hotel(2)
Washington, DC
$
10,000

 Cost Recovery/ 3/31/2020
Mezzanine total:
 
$
10,000

 
Grand total:
 
$
536,206

 
  ———————

(1)
Amortized cost is shown net of $207 million of provisions, $150 million of which were taken during the three months ended March 31, 2020 due to factors including COVID-19. See Note 2 for additional information regarding COVID-19.
(2)
The fair value of hotel collateral was determined by applying a discount and capitalization rate ranging from 8.3% to 11.0% and 6.6% to 9.0%, respectively.
(3)
The fair value of urban predevelopment collateral was determined by assuming rent per square foot and capitalization rate ranging from $48 to $225 and 5.0% to 5.5%, respectively.
(4)
The fair value of retail collateral was determined by applying a capitalization rate of 8.3%.
(5)
The entity in which we own an interest and which owns the underlying property was deemed to be a Variable Interest Entity ("VIE") and we determined that we are not the primary beneficiary of that VIE. During the three months ended March 31, 2020, $0.6 million of interest paid was applied towards reducing the carrying value of the loan.
(6)
The fair value of residential-for-sale: inventory was determined by assuming a sales price per square foot of $371.
(7)
A $3.0 million portion of this provision was recorded on an investment previously recorded under other assets on our condensed consolidated balance sheet.

Other Loan and Lending Assets Activity
We recognized payment-in-kind ("PIK") interest of $12.4 million and $14.5 million for the three months ended March 31, 2020 and 2019, respectively.
We recognized $0.2 million and $3.7 million in pre-payment penalties and accelerated fees for the three months ended March 31, 2020 and 2019, respectively.
Our portfolio includes two other lending assets, which are subordinate risk retention interests in securitization vehicles. The underlying mortgages related to our subordinate risk retention interests are secured by a portfolio of properties located throughout the United States. Our maximum exposure to loss from the subordinate risk retention interests is limited to the book value of such interests of $68.1 million as of March 31, 2020. These interests have a weighted average maturity of 6.57 years. We are not obligated to provide, and do not intend to provide financial support to these subordinate risk retention interests. Both interests are accounted for as held-to-maturity and recorded at amortized cost on the condensed consolidated balance sheet.
In January 2020, we sold £62.2 million ($81.3 million assuming conversion into U.S. dollars) in a mezzanine loan and £50.0 million ($65.3 million assuming conversion into U.S. dollars) unfunded commitment of a senior mortgage secured by a mixed-use property in London, UK to a fund managed by an affiliate of the Manager, that was originated by us in December 2019. This transaction was evaluated under ASC 860 - Transfers and Servicing, and we determined that it qualifies as a sale and accounted for as such. We recorded no gain or loss related to this sale.
Loan Proceeds Held by Servicer Loan proceeds held by servicer represents principal payments held by our third-party loan servicer as of the balance sheet date which were remitted to us subsequent to the balance sheet date. There were no loan proceeds held by servicer as of March 31, 2020. Loan proceeds held by servicer were $8.3 million as of December 31, 2019.
v3.20.1
Fair Value of Financial Instruments - Carrying Value and Estimated Fair Value of Company's Financial Instruments (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Carrying Value    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Cash and cash equivalents $ 582,138 $ 452,282
Estimate of Fair Value Measurement    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Cash and cash equivalents 582,138 452,282
Level 3 | Carrying Value    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Secured debt arrangements, net (3,539,925) (3,078,366)
Senior secured term loan, net (487,117) (487,961)
Level 3 | Estimate of Fair Value Measurement    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Secured debt arrangements, net (3,539,925) (3,078,366)
Senior secured term loan, net (389,556) (499,988)
Level 3 | 2022 Notes | Carrying Value    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Notes (338,393) (337,755)
Level 3 | 2022 Notes | Estimate of Fair Value Measurement    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Notes (239,775) (348,060)
Level 3 | 2023 Notes | Carrying Value    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Notes (224,178) (223,818)
Level 3 | 2023 Notes | Estimate of Fair Value Measurement    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Notes (151,800) (234,600)
Level 3 | Commercial Mortgage Portfolio Segment | Carrying Value    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Loans 5,413,627 5,326,967
Level 3 | Commercial Mortgage Portfolio Segment | Estimate of Fair Value Measurement    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Loans 5,382,796 5,380,693
Level 3 | Subordinate Mortgage Portfolio Segment | Carrying Value    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Loans 1,016,991 1,048,126
Level 3 | Subordinate Mortgage Portfolio Segment | Estimate of Fair Value Measurement    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Loans $ 1,013,646 $ 1,050,961
v3.20.1
Secured Debt Arrangements, Net - Remaining Maturities of Borrowings (Details) - Mar. 31, 2020 - Line of Credit
£ in Thousands, $ in Thousands
USD ($)
GBP (£)
Line of Credit Facility [Line Items]    
Less than 1 year $ 257,339  
1 to 3 years 1,197,703  
3 to 5 years 2,101,800  
More than 5 years 0  
Total 3,556,842  
JP Morgan Facility    
Line of Credit Facility [Line Items]    
Less than 1 year 61,836  
1 to 3 years 289,842  
3 to 5 years 833,007  
More than 5 years 0  
Total 1,184,685  
DB Repurchase Facility    
Line of Credit Facility [Line Items]    
Less than 1 year 27,900  
1 to 3 years 196,477  
3 to 5 years 282,600  
More than 5 years 0  
Total 506,977  
Goldman Facility    
Line of Credit Facility [Line Items]    
Less than 1 year 0  
1 to 3 years 359,540  
3 to 5 years 0  
More than 5 years 0  
Total 359,540  
USD | CS Facility    
Line of Credit Facility [Line Items]    
Less than 1 year 0  
1 to 3 years 200,307  
3 to 5 years 125,561  
More than 5 years 0  
Total 325,868  
USD | HSBC Facility    
Line of Credit Facility [Line Items]    
Less than 1 year 50,625  
1 to 3 years 0  
3 to 5 years 0  
More than 5 years 0  
Total 50,625  
USD | Barclays Facility    
Line of Credit Facility [Line Items]    
Less than 1 year 0  
1 to 3 years 0  
3 to 5 years 35,192  
More than 5 years 0  
Total 35,192  
GBP | CS Facility    
Line of Credit Facility [Line Items]    
Less than 1 year | £   £ 84,748
1 to 3 years | £   0
3 to 5 years | £   0
More than 5 years | £   0
Total | £   £ 84,748
GBP | HSBC Facility    
Line of Credit Facility [Line Items]    
Less than 1 year 32,230  
1 to 3 years 0  
3 to 5 years 0  
More than 5 years 0  
Total 32,230  
GBP | Barclays Facility    
Line of Credit Facility [Line Items]    
Less than 1 year 0  
1 to 3 years 0  
3 to 5 years 645,854  
More than 5 years 0  
Total 645,854  
EUR | HSBC Facility    
Line of Credit Facility [Line Items]    
Less than 1 year 0  
1 to 3 years 151,537  
3 to 5 years 0  
More than 5 years 0  
Total 151,537  
EUR | Barclays Facility    
Line of Credit Facility [Line Items]    
Less than 1 year 0  
1 to 3 years 0  
3 to 5 years 179,586  
More than 5 years 0  
Total $ 179,586  
v3.20.1
Other Assets (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]    
Interest receivable $ 41,860 $ 35,581
Collateral deposited under derivative agreements 35,540 17,090
Collateral deposited under secured debt arrangements 26,262 0
Other 207 45
Total $ 103,869 $ 52,716
v3.20.1
Convertible Senior Notes, Net - Summary of Note Terms (Details) - Convertible Debt
3 Months Ended 12 Months Ended
Mar. 31, 2020
USD ($)
Dec. 31, 2018
USD ($)
Dec. 31, 2018
USD ($)
Dec. 31, 2017
USD ($)
Debt Instrument [Line Items]        
Principal Amount $ 575,000,000      
Conversion rate basis, principal amount $ 1,000,000      
2022 Notes        
Debt Instrument [Line Items]        
Principal Amount       $ 345,000,000
Coupon Rate       4.75%
Effective Rate       5.60%
Conversion Rate       0.0502260
Remaining Period of Amortization       2 years 4 months 24 days
2023 Notes        
Debt Instrument [Line Items]        
Principal Amount   $ 230,000,000.0 $ 230,000,000.0  
Coupon Rate   5.375% 5.375%  
Effective Rate   6.16% 6.16%  
Conversion Rate   0.0487187    
Remaining Period of Amortization     3 years 6 months 14 days  
v3.20.1
Share-Based Payments - Summary of Grants, Exchanges and Forfeitures of Restricted Stock and RSUs (Details) - LTIP
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
shares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]  
Grant Date Fair Value | $ $ 0
Restricted Stock  
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]  
Outstanding, beginning balance (in shares) 25,356
Granted (in shares) 0
Vested (in shares) 0
Forfeitures (in shares) 0
Outstanding, ending balance (in shares) 25,356
RSU  
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]  
Outstanding, beginning balance (in shares) 2,007,355
Granted (in shares) 0
Vested (in shares) 0
Forfeitures (in shares) (2,064)
Outstanding, ending balance (in shares) 2,005,291
v3.20.1
Derivatives - Summarizes Gross Asset and Liability Amounts Related to Derivatives (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Derivative [Line Items]    
Gross Amount of Recognized Liabilities $ (50,018) $ (27,157)
Gross Amounts Offset in the Condensed Consolidated Balance Sheet 0 7,811
Net Amounts of Liabilities Presented in the Condensed Consolidated Balance Sheet (50,018) (19,346)
Forward currency contracts    
Derivative [Line Items]    
Gross Amount of Recognized Assets 58,759 0
Gross Amounts Offset in the Condensed Consolidated Balance Sheet (1,198) 0
Net Amounts of Assets Presented in the Condensed Consolidated Balance Sheet 57,561 0
Gross Amount of Recognized Liabilities 0 (12,687)
Gross Amounts Offset in the Condensed Consolidated Balance Sheet 0 7,811
Net Amounts of Liabilities Presented in the Condensed Consolidated Balance Sheet 0 (4,876)
Interest rate swaps    
Derivative [Line Items]    
Gross Amount of Recognized Liabilities (50,018) (14,470)
Gross Amounts Offset in the Condensed Consolidated Balance Sheet 0 0
Net Amounts of Liabilities Presented in the Condensed Consolidated Balance Sheet $ (50,018) $ (14,470)
v3.20.1
Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net - CECL Allowance as Percentage of Amortized Cost and Total Commitment (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Jan. 01, 2020
Receivables [Abstract]    
CECL Allowance $ 64,332 $ 30,867
% of Amortized Cost 1.08% 0.49%
Total CECL Allowance $ 271,313  
% of Amortized Cost 4.05%  
v3.20.1
Fair Value Disclosure - Summarizes Levels in Fair Value Hierarchy of Financial Instruments (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Foreign currency forward, net $ 57,561 $ 0
Interest rate swap liability (50,018) (19,346)
Estimate of Fair Value    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Interest rate swap liability (50,018) (19,346)
Level 1 | Estimate of Fair Value    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Interest rate swap liability 0 0
Level 2 | Estimate of Fair Value    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Interest rate swap liability (50,018) (19,346)
Level 3 | Estimate of Fair Value    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Interest rate swap liability 0 0
Foreign currency forward, net | Estimate of Fair Value    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Foreign currency forward, net 57,561 0
Interest rate swap liability 0 (4,876)
Foreign currency forward, net | Level 1 | Estimate of Fair Value    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Foreign currency forward, net 0 0
Interest rate swap liability 0 0
Foreign currency forward, net | Level 2 | Estimate of Fair Value    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Foreign currency forward, net 57,561 0
Interest rate swap liability 0 (4,876)
Foreign currency forward, net | Level 3 | Estimate of Fair Value    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Foreign currency forward, net 0 0
Interest rate swap liability 0 0
Interest rate swap liability | Estimate of Fair Value    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Interest rate swap liability (50,018) (14,470)
Interest rate swap liability | Level 1 | Estimate of Fair Value    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Interest rate swap liability 0 0
Interest rate swap liability | Level 2 | Estimate of Fair Value    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Interest rate swap liability (50,018) (14,470)
Interest rate swap liability | Level 3 | Estimate of Fair Value    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Interest rate swap liability $ 0 $ 0
v3.20.1
Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net - Statistics for Loan Portfolio (Details)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
USD ($)
loan
Dec. 31, 2019
USD ($)
loan
Loans and Leases Receivable Disclosure [Line Items]    
Number of loans | loan 75 72
Principal balance $ 6,488,891 $ 6,375,093
Carrying value 6,430,618 6,375,093
Unfunded loan commitments $ 1,822,967 $ 1,952,887
Weighted-average cash coupon 6.00% 6.50%
Weighted-average remaining term 3 years 3 months 18 days 3 years 3 months 18 days
Weighted-average expected maturity 2 years 2 months 12 days 1 year 9 months 18 days
Interest rate used in calculating weighted-average cash coupon for non-accrual or cost recovery loans 0.00%  
Mortgage loans    
Loans and Leases Receivable Disclosure [Line Items]    
Principal balance $ 6,728,553 $ 6,467,842
v3.20.1
Net Income (Loss) per Share
3 Months Ended
Mar. 31, 2020
Earnings Per Share [Abstract]  
Net Income (Loss) per Share Net Income (Loss) per Share
ASC 260 "Earnings per share" requires the use of the two-class method of computing earnings per share for all periods presented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for dividends declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for dividends declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.
The remaining earnings are allocated to common stockholders and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. Each total is then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding shares of common stock and all potential shares of common stock assumed issued if they are dilutive. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of these potential shares of common stock.
The table below presents the computation of basic and diluted net income (loss) per share of common stock for the three months ended March 31, 2020 and 2019 ($ in thousands except per share data): 
 
For the three months ended March 31,
 
2020
 
2019
Basic Earnings
 
 
 
Net income (loss)
$
(127,842
)
 
$
67,758

Less: Preferred dividends
(3,385
)
 
(6,835
)
Net income (loss) available to common stockholders
$
(131,227
)
 
$
60,923

Less: Dividends on participating securities
(802
)
 
(851
)
Basic Earnings
$
(132,029
)
 
$
60,072

 
 
 
 
Diluted Earnings
 
 
 
Basic Earnings
$
(132,029
)
 
$
60,072

Add: Dividends on participating securities

 
851

Add: Interest expense on Notes

 
9,262

Diluted Earnings
$
(132,029
)
 
$
70,185

 
 
 
 
Number of Shares:
 
 
 
Basic weighted-average shares of common stock outstanding
153,948,191

 
134,607,107

Diluted weighted-average shares of common stock outstanding
153,948,191

 
164,683,086

 
 
 


Earnings Per Share Attributable to Common Stockholders
 
 
 
Basic
$
(0.86
)
 
$
0.45

Diluted
$
(0.86
)
 
$
0.43


The dilutive effect to earnings per share is determined using the "if-converted" method whereby interest expense on the outstanding Notes is added back to the diluted earnings per share numerator and all of the potentially dilutive shares are included in the diluted earnings per share denominator. For the three months ended March 31, 2020, 28,533,271 weighted-average potentially issuable shares with respect to the Notes were excluded from the calculation of diluted net income per share because the effect was anti-dilutive. For the three months ended March 31, 2019, 30,093,312 weighted-average potentially issuable shares with respect to the Notes were included in the calculation of diluted net income per share. Refer to "Note 9 - Convertible Senior Notes, Net" for further discussion.
For the three months ended March 31, 2020 and 2019, 2,007,242 and 1,849,564 weighted-average unvested RSUs, respectively, were excluded from the calculation of diluted net income per share because the effect was anti-dilutive.
v3.20.1
Share-Based Payments
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Share-Based Payments Share-Based Payments
On September 23, 2009, our board of directors approved the Apollo Commercial Real Estate Finance, Inc. 2009 Equity Incentive Plan ("2009 LTIP") and on April 16, 2019, our board of directors approved the Amended and Restated Apollo Commercial Real Estate Finance, Inc. 2019 Equity Incentive Plan ("2019 LTIP," and together with the 2009 LTIP, the "LTIPs"), which amended and restated the 2009 LTIP. Following the approval of the 2019 LTIP by our stockholders at our 2019 annual meeting of stockholders on June 12, 2019, no additional awards will be granted under the 2009 LTIP and all outstanding awards granted under the 2009 LTIP remain in effect in accordance with the terms in the 2009 LTIP.
The 2019 LTIP provides for grants of restricted common stock, restricted stock units ("RSUs") and other equity-based awards up to an aggregate of 7,000,000 shares of our common stock. The LTIPs are administered by the compensation committee of our board of directors (the "Compensation Committee") and all grants under the LTIPs must be approved by the Compensation Committee.
We recognized stock-based compensation expense of $4.3 million and $3.9 million related to restricted stock and RSU vesting for the three months ended March 31, 2020 and 2019, respectively.
The following table summarizes the grants, vesting and forfeitures of restricted common stock and RSUs during the three months ended March 31, 2020:
 
Type
 
Restricted Stock
 
RSUs
 
Grant Date Fair Value ($ in thousands)
Outstanding at December 31, 2019
 
25,356

 
2,007,355

 
 
 
Granted
 

 

 

 
Vested
 

 

 
N/A

 
Forfeiture
 

 
(2,064
)
 
N/A

Outstanding at March 31, 2020
 
25,356

 
2,005,291

 
 

Below is a summary of restricted stock and RSU vesting dates as of March 31, 2020
Vesting Year
 
Restricted Stock
 
RSU
 
Total Awards
2020
 
25,356

 
963,927

 
989,283

2021
 

 
685,410

 
685,410

2022
 

 
355,954

 
355,954

Total
 
25,356

 
2,005,291

 
2,030,647



At March 31, 2020, we had unrecognized compensation expense of approximately $0.1 million and $35.0 million, respectively, related to the vesting of restricted stock awards and RSUs noted in the table above.

RSU Deliveries
During the three months ended March 31, 2020 and 2019, we delivered 503,251 and 433,585 shares of common stock for 868,157 and 730,717 vested RSUs, respectively. We allow RSU participants to settle their tax liabilities with a reduction of their share delivery from the originally granted and vested RSUs. The amount, when agreed to by the participant, results in a cash payment to the Manager related to this tax liability and a corresponding adjustment to additional paid in capital on the condensed consolidated statement of changes in stockholders' equity. The adjustment was $6.5 million and $5.0 million for the three months ended March 31, 2020 and 2019, respectively. The adjustment is a reduction of capital related to our equity incentive plan and is presented net of increases of capital related to our equity incentive plan in the condensed consolidated statement of changes in stockholders' equity.
v3.20.1
Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net (Tables)
3 Months Ended
Mar. 31, 2020
Receivables [Abstract]  
Schedule of Loan Portfolio
Our loan portfolio was comprised of the following at March 31, 2020 and December 31, 2019 ($ in thousands):
Loan Type
 
March 31, 2020
 
December 31, 2019
Commercial mortgage loans, net (1)
 
$
5,413,627

 
$
5,326,967

Subordinate loans and other lending assets, net
 
1,016,991

 
1,048,126

Total
 
$
6,430,618

 
$
6,375,093



  ———————
(1)
Includes $117.8 million and $126.7 million in 2020 and 2019, respectively, of contiguous financing structured as subordinate loans.

Activity Related to Loan Investment Portfolio
Activity relating to our loan portfolio, for the three months ended March 31, 2020, was as follows ($ in thousands):
 
 
Principal Balance
 
Deferred Fees/Other Items (1)
 
Provision for Loan Loss
 
Carrying Value
December 31, 2019
 
$
6,467,842

 
$
(35,768
)
 
$
(56,981
)
 
$
6,375,093

New loan fundings
 
439,936

 

 

 
439,936

Add-on loan fundings (2)
 
118,521

 

 

 
118,521

Loan repayments and sales
 
(210,745
)
 

 

 
(210,745
)
Gain (loss) on foreign currency translation
 
(99,009
)
 
1,428

 

 
(97,581
)
Specific CECL Allowance
 

 

 
(150,000
)
 
(150,000
)
Deferred fees
 

 
(5,053
)
 

 
(5,053
)
PIK interest and amortization of fees
 
12,008

 
6,712

 

 
18,720

March 31, 2020
 
$
6,728,553

 
$
(32,681
)
 
$
(206,981
)
 
$
6,488,891

General CECL Allowance (3)
 
 
 
 
 
 
 
(58,273
)
Carrying value net, as of March 31, 2020
 
 
 
 
 
 
 
6,430,618

———————
(1)
Other items primarily consist of purchase discounts or premiums, exit fees and deferred origination expenses.
(2)
Represents fundings for loans closed prior to 2020.
(3)
$6.1 million of the General CECL Allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under Accounts Payable, Accrued Expenses and Other Liabilities in the condensed consolidated balance sheet.
Schedule of Overall Statistics for the Loan Portfolio
The following table details overall statistics for our loan portfolio at the dates indicated ($ in thousands):
 
 
March 31, 2020
 
December 31, 2019
Number of loans
 
75

 
72

Principal balance
 
$
6,728,553

 
$
6,467,842

Carrying value
 
$
6,430,618

 
$
6,375,093

Unfunded loan commitments (1)
 
$
1,822,967

 
$
1,952,887

Weighted-average cash coupon (2)
 
6.0
%
 
6.5
%
Weighted-average remaining fully-extended term (3)
 
3.3 years

 
3.3 years

Weighted-average expected term (4)
 
2.2 years

 
1.8 years

  ———————
(1)
Unfunded loan commitments are funded to finance construction costs, tenant improvements, leasing commissions, or carrying costs. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.
(2)
For floating rate loans, based on applicable benchmark rates as of the specified dates. For loans placed on non-accrual or cost recovery the interest rate used in calculating weighted-average cash coupon is 0%.
(3)
Assumes all extension options are exercised.
(4)
Expected term represents our estimated timing of repayments as of March 31, 2020 and December 31, 2019, respectively.
Schedule of Mortgage Loans on Real Estate
The table below details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):
 
 
March 31, 2020
 
December 31, 2019
Property Type
 
Carrying
Value
 
% of
Portfolio
(1)
 
Carrying
Value
 
% of
Portfolio
Office
 
$
1,803,605

 
27.8
%
 
$
1,401,400

 
22.0
%
Hotel
 
1,537,796

 
23.7

 
1,660,162

 
26.0

Residential-for-sale: construction
 
763,381

 
11.8

 
692,816

 
10.9

Residential-for-sale: inventory
 
283,909

 
4.4

 
321,673

 
5.1

Urban Retail
 
623,564

 
9.6

 
643,706

 
10.1

Healthcare
 
356,215

 
5.5

 
371,423

 
5.8

Urban Predevelopment
 
306,503

 
4.7

 
409,864

 
6.4

Other
 
813,918

 
12.5

 
874,049

 
13.7

Total
 
$
6,488,891

 
100.0
%
 
$
6,375,093

 
100.0
%
General CECL Allowance
 
(58,273
)
 
 
 
 
 
 
Total investments, net
 
$
6,430,618

 
 
 


 



  ———————
(1) Percentage of portfolio calculations are made prior to consideration of General CECL Allowance.
Geography

The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):
 
 
March 31, 2020
 
December 31, 2019
Geographic Location
 
Carrying
Value
 
% of
Portfolio
(1)
 
Carrying
Value
 
% of
Portfolio
New York City
 
$
2,319,325

 
35.8
%
 
$
2,167,487

 
34.0
%
Northeast
 
118,251

 
1.8

 
110,771

 
1.7

United Kingdom
 
1,347,897

 
20.8

 
1,274,390

 
20.0

West
 
747,515

 
11.5

 
728,182

 
11.4

Midwest
 
557,780

 
8.6

 
614,337

 
9.6

Southeast
 
512,469

 
7.9

 
564,166

 
8.9

Other
 
885,654

 
13.6

 
915,760

 
14.4

Total
 
$
6,488,891

 
100.0
%
 
$
6,375,093

 
100.0
%
General CECL Allowance
 
(58,273
)
 
 
 
 
 
 
Total investments, net
 
$
6,430,618

 
 
 
 
 
 

  ———————
(1) Percentage of portfolio calculations are made prior to consideration of the General CECL Allowance.
Carrying Value of Loan Portfolio Based on Internal Risk Ratings
The following tables allocate the carrying value of our loan portfolio based on our internal risk ratings and date of origination at the dates indicated ($ in thousands):
March 31, 2020
 
 
 
 
 
 
 
 
 
Year Originated
Risk Rating
 
Number of Loans
 
Total
 
% of Portfolio
 
 
2020
 
2019
 
2018
 
2017
 
2016
 
Prior
1
 

 
 
%
 
 
$

 
$

 
$

 
$

 
$

 
$

2
 
5

 
130,609
 
2.0
%
 
 

 

 
23,990
 

 
36,287
 
70,332

3
 
63

 
5,822,078
 
89.7
%
 
 
423,419

 
2,609,209

 
1,490,045
 
779,882

 
62,580
 
456,943

4
 

 

 
%
 
 

 

 

 

 

 

5
 
7

 
536,204

 
8.3
%
 
 

 

 
31,372
 
126,013

 
117,910
 
260,909

Total
 
75

 
$
6,488,891

 
100.0
%
 
 
$
423,419

 
$
2,609,209

 
$1,545,407
 
$
905,895

 
$216,777
 
$
788,184

General CECL Allowance
 
(58,273
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total investments, net
$
6,430,618

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
W.A. Risk Rating
3.1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


December 31, 2019
 
 
 
 
 
 
 
 
 
Year Originated
Risk Rating
 
Number of Loans
 
Total
 
% of Portfolio
 
 
2019
 
2018
 
2017
 
2016
 
2015
 
Prior
1
 

 
$

 
%
 
 
$

 
$

 
$

 
$

 
$

 
$

2
 
8

 
348,324

 
5.5
%
 
 

 
241,676

 

 
36,250

 
24,546

 
45,852

3
 
61

 
5,707,555

 
89.5
%
 
 
2,736,825

 
1,355,014

 
912,636

 
72,540

 
499,700

 
130,840

4
 
1

 
182,910

 
2.9
%
 
 

 

 

 
182,910

 

 

5
 
2

 
136,304

 
2.1
%
 
 

 

 

 

 

 
136,304

Total
 
72

 
$
6,375,093

 
100.0
%
 
 
$
2,736,825

 
$
1,596,690

 
$
912,636

 
$
291,700

 
$
524,246

 
$
312,996

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
W.A. Risk Rating
 
3.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Schedule of CECL Reserves
Refer to the following roll forward schedule of the General CECL Allowance for the quarter ended March 31, 2020 ($ in thousands):
 
 
General CECL Allowance
General CECL Allowance as of January 1, 2020
 
$
30,867

Increase in General CECL Allowance
 
34,500

Transfer to Specific CECL Allowance
 
(1,035
)
General CECL Allowance as of March 31, 2020(1)
 
$
64,332


The following schedule illustrates the CECL Allowance as percentages of amortized cost and total commitment as of March 31, 2020, and as of the date of adoption, January 1, 2020 ($ in thousands):
CECL Allowances
 
CECL ($)
 
% of
Amortized Cost
General CECL Allowance(1)
 
 
 
 
January 1, 2020
 
$
30,867

 
0.49
%
March 31, 2020(2)
 
64,332

 
1.08
%
 
 
 
 
 
Total CECL Allowances(3)
 
 
 


March 31, 2020
 
$
271,313

 
4.05
%
  ———————
(1) Amortized Cost of the General CECL Allowance excludes amortized cost of loans evaluated for the Specific CECL Allowance
Refer to the following schedule of the General CECL Allowance as of March 31, 2020, and as of the date of adoption, January 1, 2020 ($ in thousands):

 
 
March 31, 2020
 
January 1, 2020(1)
Commercial mortgage loans, net
 
$
28,336

 
$
12,149

Subordinate loans and other lending assets, net
 
29,937

 
15,630

Unfunded commitments(2)
 
6,059

 
3,088

Total General CECL Allowance
 
$
64,332

 
$
30,867

  ———————
(1) As of January 1, 2020, we adopted the CECL Standard through a cumulative-effect adjustment to retained earnings
(2) The General CECL Allowance on Unfunded commitments is recorded as a liability on the condensed consolidated balance sheet within accounts payable, accrued expenses, and other liabilities
Schedule of Loans in Cost Recovery
The following table summarizes the specific provision for loan losses that has been recorded on our portfolio as of March 31, 2020 ($ in thousands):



Type
Property type
Location
Amortized cost(1)
Interest recognition status/ as of date
Mortgage
 
 
 
 
Hotel(2)
Manhattan, NY
$
144,295

Cost Recovery/ 3/31/2020
 
Urban Predevelopment(3)
Brooklyn, NY
126,013

Cost Recovery/ 3/1/2020
 
Urban Predevelopment(3)
Miami, FL
117,910

Cost Recovery/ 3/1/2020
 
Retail Center(4)(5)
Cincinnati, OH
103,921

 Cost Recovery/ 10/1/2019
 
Hotel(2)
Pittsburgh, PA
31,372

Cost Recovery/ 3/31/2020
 
Residential-for-sale: inventory(6)(7)
Bethesda, MD
2,695

 Cost Recovery/ 1/1/2018
Mortgage total:
 
$
526,206

 
Mezzanine
 
 
 
 
Hotel(2)
Washington, DC
$
10,000

 Cost Recovery/ 3/31/2020
Mezzanine total:
 
$
10,000

 
Grand total:
 
$
536,206

 
  ———————

(1)
Amortized cost is shown net of $207 million of provisions, $150 million of which were taken during the three months ended March 31, 2020 due to factors including COVID-19. See Note 2 for additional information regarding COVID-19.
(2)
The fair value of hotel collateral was determined by applying a discount and capitalization rate ranging from 8.3% to 11.0% and 6.6% to 9.0%, respectively.
(3)
The fair value of urban predevelopment collateral was determined by assuming rent per square foot and capitalization rate ranging from $48 to $225 and 5.0% to 5.5%, respectively.
(4)
The fair value of retail collateral was determined by applying a capitalization rate of 8.3%.
(5)
The entity in which we own an interest and which owns the underlying property was deemed to be a Variable Interest Entity ("VIE") and we determined that we are not the primary beneficiary of that VIE. During the three months ended March 31, 2020, $0.6 million of interest paid was applied towards reducing the carrying value of the loan.
(6)
The fair value of residential-for-sale: inventory was determined by assuming a sales price per square foot of $371.
(7)
A $3.0 million portion of this provision was recorded on an investment previously recorded under other assets on our condensed consolidated balance sheet.
v3.20.1
Share-Based Payments - Additional Information (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Apr. 16, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Recognized stock-based compensation expense $ 4,263 $ 3,901  
Restricted Stock      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Unrecognized stock-based compensation expense 100    
RSU      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Unrecognized stock-based compensation expense $ 35,000    
LTIP      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Number of shares authorized (in shares)     7,000,000
Common stock, shares delivered 503,251 433,585  
LTIP | RSU      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Stock units vested 868,157 730,717  
Adjustments to additional paid in capital, income tax deficiency from share-based compensation $ 6,500 $ 5,000  
v3.20.1
Derivatives - Summary of Amounts Recognized on Consolidated Statements of Operations Related to Company's Derivatives (Details) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Derivative Instruments, Gain (Loss) [Line Items]    
Gain (loss) on derivative instruments - unrealized $ 26,888,000 $ (14,985,000)
Foreign currency forward, net | Gain (Loss) on Derivative Instruments    
Derivative Instruments, Gain (Loss) [Line Items]    
Gain (loss) on derivative instruments - unrealized 62,436,000 (14,985,000)
Gain on derivative instruments - realized 8,055,000 8,265,000
Interest Rate Cap | Gain (Loss) on Derivative Instruments    
Derivative Instruments, Gain (Loss) [Line Items]    
Gain on derivative instruments - realized 70,491,000 (6,720,000)
Interest rate swap liability | Gain (Loss) on Derivative Instruments    
Derivative Instruments, Gain (Loss) [Line Items]    
Gain (loss) on derivative instruments - unrealized (35,548,000) 0
Derivative notional amount $ 500,000,000.0 $ 0
v3.20.1
Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net - Loan Portfolio (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Carrying value $ 6,430,618 $ 6,375,093
Commercial Mortgage and Subordinated Portfolio Segment    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Carrying value 117,800 126,700
Commercial Mortgage Portfolio Segment    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Carrying value [1],[2] 5,413,627 5,326,967
Subordinate Mortgage Portfolio Segment    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Carrying value [2] $ 1,016,991 $ 1,048,126
[1] Includes $5,282,741 and $4,852,087 pledged as collateral under secured debt arrangements in 2020 and 2019, respectively
[2] Net of $265,254 CECL Allowances in 2020, comprised of $206,981 Specific CECL Allowance and $58,273 General CECL Allowance. Net of $56,981 provision for loan loss in 2019.

v3.20.1
Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net - Schedule of Mortgage Loans by Property Type and Geographic Distribution (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 100.00% 100.00%
Principal balance $ 6,488,891 $ 6,375,093
General CECL Allowance (58,273)  
Carrying value $ 6,430,618 $ 6,375,093
Office    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 27.80% 22.00%
Principal balance $ 1,803,605 $ 1,401,400
Hotel    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 23.70% 26.00%
Principal balance $ 1,537,796 $ 1,660,162
Residential-for-sale: construction    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 11.80% 10.90%
Principal balance $ 763,381 $ 692,816
Residential-for-sale: inventory    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 4.40% 5.10%
Principal balance $ 283,909 $ 321,673
Urban Retail    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 9.60% 10.10%
Principal balance $ 623,564 $ 643,706
Healthcare    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 5.50% 5.80%
Principal balance $ 356,215 $ 371,423
Urban Predevelopment    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 4.70% 6.40%
Principal balance $ 306,503 $ 409,864
Other    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 12.50% 13.70%
Principal balance $ 813,918 $ 874,049
New York City    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 35.80% 34.00%
Principal balance $ 2,319,325 $ 2,167,487
Northeast    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 1.80% 1.70%
Principal balance $ 118,251 $ 110,771
United Kingdom    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 20.80% 20.00%
Principal balance $ 1,347,897 $ 1,274,390
West    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 11.50% 11.40%
Principal balance $ 747,515 $ 728,182
Midwest    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 8.60% 9.60%
Principal balance $ 557,780 $ 614,337
Southeast    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 7.90% 8.90%
Principal balance $ 512,469 $ 564,166
Other International    
Loans and Leases Receivable Disclosure [Line Items]    
% of Portfolio 13.60% 14.40%
Principal balance $ 885,654 $ 915,760
v3.20.1
Label Element Value
Retained Earnings [Member]  
Cumulative Effect of New Accounting Principle in Period of Adoption us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption $ (30,867,000)
v3.20.1
Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net - Cost Recovery Loans (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
$ / ft²
Mar. 31, 2019
USD ($)
Dec. 31, 2019
USD ($)
Financing Receivable, Credit Quality Indicator [Line Items]      
Amortized cost $ 536,206   $ 136,300
Loan Specific Reserves 206,981   $ 56,981
Loan specific provision 150,000    
Payment in kind interest 12,400 $ 14,500  
Retail Center - Cincinnati, OH      
Financing Receivable, Credit Quality Indicator [Line Items]      
Payment in kind interest $ 600    
Capitalization rate | Retail Center - Cincinnati, OH      
Financing Receivable, Credit Quality Indicator [Line Items]      
Loan collateral, measurement input 0.083    
Dollars per square foot | Residential-For-Sale - Bethesda, MD      
Financing Receivable, Credit Quality Indicator [Line Items]      
Loan collateral, measurement input | $ / ft² 371    
Minimum | Hotel | Discount rate      
Financing Receivable, Credit Quality Indicator [Line Items]      
Loan collateral, measurement input 0.083    
Minimum | Hotel | Capitalization rate      
Financing Receivable, Credit Quality Indicator [Line Items]      
Loan collateral, measurement input 0.066    
Minimum | Urban Predevelopment | Capitalization rate      
Financing Receivable, Credit Quality Indicator [Line Items]      
Loan collateral, measurement input 0.050    
Minimum | Urban Predevelopment | Dollars per square foot      
Financing Receivable, Credit Quality Indicator [Line Items]      
Loan collateral, measurement input | $ / ft² 48    
Maximum | Hotel | Discount rate      
Financing Receivable, Credit Quality Indicator [Line Items]      
Loan collateral, measurement input 0.110    
Maximum | Hotel | Capitalization rate      
Financing Receivable, Credit Quality Indicator [Line Items]      
Loan collateral, measurement input 0.090    
Maximum | Urban Predevelopment | Capitalization rate      
Financing Receivable, Credit Quality Indicator [Line Items]      
Loan collateral, measurement input 0.055    
Maximum | Urban Predevelopment | Dollars per square foot      
Financing Receivable, Credit Quality Indicator [Line Items]      
Loan collateral, measurement input | $ / ft² 225    
Mortgage loans      
Financing Receivable, Credit Quality Indicator [Line Items]      
Amortized cost $ 526,206    
Mortgage loans | Hotel - Manhattan, NY      
Financing Receivable, Credit Quality Indicator [Line Items]      
Amortized cost 144,295    
Mortgage loans | Urban Predevelopment - Miami, FL      
Financing Receivable, Credit Quality Indicator [Line Items]      
Amortized cost 117,910    
Mortgage loans | Retail Center - Cincinnati, OH      
Financing Receivable, Credit Quality Indicator [Line Items]      
Amortized cost 103,921    
Mortgage loans | Urban Predevelopment - Brooklyn, NY      
Financing Receivable, Credit Quality Indicator [Line Items]      
Amortized cost 126,013    
Mortgage loans | Hotel - Pittsburgh, PA      
Financing Receivable, Credit Quality Indicator [Line Items]      
Amortized cost 31,372    
Mortgage loans | Residential-For-Sale - Bethesda, MD      
Financing Receivable, Credit Quality Indicator [Line Items]      
Amortized cost 2,695    
Provision previously recorded under other assets 3,000    
Mezzanine      
Financing Receivable, Credit Quality Indicator [Line Items]      
Amortized cost 10,000    
Mezzanine | Hotel - Washington D.C.      
Financing Receivable, Credit Quality Indicator [Line Items]      
Amortized cost $ 10,000    
v3.20.1
Fair Value Disclosure (Tables)
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Summary of Levels in Fair Value Hierarchy of Financial Instruments
The following table summarizes the levels in the fair value hierarchy into which our derivative assets were categorized as of March 31, 2020 and December 31, 2019 ($ in thousands): 
 
Fair Value as of March 31, 2020
 
Fair Value as of December 31, 2019
 
Level I
 
Level II
 
Level III
 
Total
 
Level I
 
Level II
 
Level III
 
Total
Foreign currency forward, net
$

 
$
57,561

 
$

 
$
57,561

 
$

 
$

 
$

 
$


The following table summarizes the levels in the fair value hierarchy into which our derivative liabilities were categorized as of March 31, 2020 and December 31, 2019 ($ in thousands): 
 
Fair Value as of March 31, 2020
 
Fair Value as of December 31, 2019
 
Level I
 
Level II
 
Level III
 
Total
 
Level I
 
Level II
 
Level III
 
Total
Foreign currency forward, net
$

 
$

 
$

 
$

 
$

 
$
(4,876
)
 
$

 
$
(4,876
)
Interest rate swap liability

 
(50,018
)
 

 
(50,018
)
 

 
(14,470
)
 

 
(14,470
)
Total financial instrument liabilities
$

 
$
(50,018
)
 
$

 
$
(50,018
)
 
$

 
$
(19,346
)
 
$

 
$
(19,346
)

v3.20.1
Fair Value of Financial Instruments
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments Fair Value of Financial Instruments
The following table presents the carrying value and estimated fair value of our financial instruments not carried at fair value on the condensed consolidated balance sheet at March 31, 2020 and December 31, 2019 ($ in thousands):
 
March 31, 2020
 
December 31, 2019
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Cash and cash equivalents
$
582,138

 
$
582,138

 
$
452,282

 
$
452,282

Commercial mortgage loans, net
5,413,627

 
5,382,796

 
5,326,967

 
5,380,693

Subordinate loans and other lending assets, net(1)
1,016,991

 
1,013,646

 
1,048,126

 
1,050,961

Secured debt arrangements, net
(3,539,925
)
 
(3,539,925
)
 
(3,078,366
)
 
(3,078,366
)
Senior secured term loan, net
(487,117
)
 
(389,556
)
 
(487,961
)
 
(499,988
)
2022 Notes
(338,393
)
 
(239,775
)
 
(337,755
)
 
(348,060
)
2023 Notes
(224,178
)
 
(151,800
)
 
(223,818
)
 
(234,600
)

———————
(1) Includes subordinate risk retention interests in securitization vehicles with an estimated fair value that approximates their carrying value.
To determine estimated fair values of the financial instruments listed above, market rates of interest, which include credit assumptions, are used to discount contractual cash flows. The estimated fair values are not necessarily indicative of the amount we could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. Estimates of fair value for cash and cash equivalents, convertible senior notes, net and senior secured term loan, net are measured using observable Level I inputs as defined in "Note 3 - Fair Value Disclosure." Estimates of fair value for all other financial instruments in the table above are measured using significant estimates, or unobservable Level III inputs as defined in "Note 3 - Fair Value Disclosure."
v3.20.1
Related Party Transactions
3 Months Ended
Mar. 31, 2020
Related Party Transactions [Abstract]  
Related Party Transactions Related Party Transactions
Management Agreement
In connection with our initial public offering in September 2009, we entered into a management agreement (the "Management Agreement") with the Manager, which describes the services to be provided by the Manager and its compensation for those services. The Manager is responsible for managing our day-to-day operations, subject to the direction and oversight of our board of directors.
Pursuant to the terms of the Management Agreement, the Manager is paid a base management fee equal to 1.5% per annum of our stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears.
The current term of the Management Agreement will expire on September 29, 2020, and is automatically renewed for successive one-year terms on each anniversary thereafter. The Management Agreement may be terminated upon expiration of the one-year extension term only upon the affirmative vote of at least two-thirds of our independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to ARI or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair fees by
accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of our independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual base management fee 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. Following a meeting by our independent directors in February 2020, which included a discussion of the Manager’s performance and the level of the management fees thereunder, we determined not to seek termination of the Management Agreement.
We incurred approximately $10.3 million and $9.6 million in base management fees under the Management Agreement for the three months ended March 31, 2020 and 2019, respectively.
In addition to the base management fee, we are also responsible for reimbursing the Manager for certain expenses paid by the Manager on our behalf or for certain services provided by the Manager to us. For the three months ended March 31, 2020 and 2019, we paid expenses totaling $0.6 million and $0.7 million, respectively, related to reimbursements for certain expenses paid by the Manager on our behalf under the Management Agreement. Expenses incurred by the Manager and reimbursed by us are reflected in the respective condensed consolidated statement of operations expense category or the condensed consolidated balance sheet based on the nature of the item.
Included in payable to related party on the condensed consolidated balance sheet at March 31, 2020 and December 31, 2019 are approximately $10.3 million and $10.4 million, respectively, for base management fees incurred but not yet paid under the Management Agreement.
Loans receivable
In January 2020, we sold £62.2 million ($81.3 million assuming conversion into U.S. dollars) in a mezzanine loan and £50.0 million ($65.3 million assuming conversion into U.S. dollars) unfunded commitment of a senior mortgage secured by a mixed-use property in London, UK to a fund managed by an affiliate of the Manager, that was originated by us in December 2019. This transaction was evaluated under ASC 860 - Transfers and Servicing, and we determined that it qualifies as a sale and accounted for as such.
Term Loan
In May 2019, Apollo Global Funding, LLC, an affiliate of the Manager, served as one of the five arrangers for the issuance of our senior secured term loan and received $0.6 million of arrangement fees.
v3.20.1
Secured Debt Arrangements, Net (Tables)
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Weighted Average Maturities and Interest Rates of Borrowings
At March 31, 2020 and December 31, 2019, our borrowings had the following secured debt arrangements, maturities and weighted-average interest rates ($ in thousands):
 
 
 
March 31, 2020
 
December 31, 2019
 
 
Maximum Amount of Borrowings(1)
 
Borrowings Outstanding(1)
 
Maturity (2)
 
Maximum Amount of Borrowings(1)
 
Borrowings Outstanding(1)
 
Maturity (2)
 
JPMorgan (USD)
$
1,139,932

 
$
1,024,617

 
June 2024
 
$
1,154,109

 
$
1,090,160

 
June 2024
 
JPMorgan (GBP)
93,882

 
93,882

 
June 2024
 
51,702

 
50,410

 
June 2024
 
JPMorgan (EUR)
66,186

 
66,186

 
June 2024
 
94,189

 
94,189

 
June 2024
 
DB (USD)
1,000,000

 
506,977

 
March 2023
 
1,250,000

 
513,876

 
March 2021
 
Goldman (USD)
500,000

 
359,540

 
November 2021
 
500,000

 
322,170

 
November 2021
 
CS - USD
328,141

 
325,868

 
January 2023(3)
 
226,068

 
218,644

 
June 2020
 
CS - GBP
84,748

 
84,748

 
September 2020
 
93,915

 
93,915

 
June 2020
 
HSBC - USD
50,625

 
50,625

 
January 2021
 
50,625

 
50,625

 
October 2020
 
HSBC - GBP
32,230

 
32,230

 
June 2020
 
34,634

 
34,634

 
June 2020
 
HSBC - EUR
151,537

 
151,537

 
July 2021
 
154,037

 
154,037

 
January 2021
 
Barclays (USD)
200,000

 
35,192

 
March 2024
 
N/A

 
N/A

 
N/A
 
Barclays (GBP)
645,854

 
645,854

 
November 2023(4)
 
538,916

 
290,347

 
February 2024(4)
 
Barclays (EUR)
179,586

 
179,586

 
August 2024(3)
 
182,549

 
182,549

 
November 2020
 
Sub-total(5)(6)(7)
4,472,721

 
3,556,842

 

 
4,330,744

 
3,095,556

 
 
 
less: deferred financing costs
N/A

 
(16,917
)
 
 
 
N/A

 
(17,190
)
 
 
 
Total
$
4,472,721

 
$
3,539,925

  
$
4,330,744

 
$
3,078,366

 
 
———————
(1) As of March 31, 2020, GBP and EUR borrowings were converted at a rate of 1.24 and 1.10, respectively. As of December 31, 2019, GBP and EUR borrowings were converted at a rate of 1.33 and 1.12, respectively.
(2) Maturity date assumes extensions at our option are exercised with consent of financing providers, where applicable.
(3) Assumes financings are extended in line with the underlying loans.
(4) Represents weighted average maturity across various financings with the counterparty. See below for additional details.
(5) Weighted-average borrowing costs as of March 31, 2020 and December 31, 2019 were USD L + 2.05% / GBP L + 1.66% / EUR L + 1.35% and USD L + 2.07% / GBP L + 1.75% / EUR L + 1.36%, respectively.
(6) Weighted average advance rates based on cost as of March 31, 2020 and December 31, 2019 were 67.3% (65.6% (USD) / 70.6% (GBP) / 70.7% (EUR)) and 63.8% (66.7% (USD) / 47.1% (GBP) / 76.1% (EUR)).
(7) As of March 31, 2020 and December 31, 2019, approximately 54% of the outstanding balance under these secured borrowings were recourse to us.
Schedule of Secured Debt Arrangements
The table below provides the currency, outstanding balance, stated maturity, and extended maturity for each of the five secured debt arrangements under the Barclays Facility - GBP/EUR:
Local Currency
Borrowings outstanding (in $)
Fully-Extended Maturity(1)
GBP
$217,350
December 2023
GBP
156,958
February 2023
GBP
149,830
October 2024
GBP
121,716
September 2023
Sub-total/Weighted-Average
$645,854
November 2023
EUR
179,586
see below(2)
Total/Weighted-Average
$825,440
 
———————
(1) Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.
(2) The Barclays Facility - EUR has an "evergreen" feature such that the facility continues for one year and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve month notice.
Remaining Maturities of Borrowings
At March 31, 2020, our borrowings had the following remaining maturities ($ in thousands):
 
Less than
1 year
 
 
1 to 3
years
 
3 to 5
years
 
More than
5 years
 
Total
JPMorgan
$
61,836

 
$
289,842

 
$
833,007


$

 
$
1,184,685

DB
27,900

 
196,477

 
282,600



 
506,977

Goldman

 
359,540

 

 

 
359,540

CS - USD

 
200,307

 
125,561

 

 
325,868

CS - GBP
84,748

 

 

 

 
84,748

HSBC - USD
50,625

 

 

 

 
50,625

HSBC - GBP
32,230

 

 

 

 
32,230

HSBC - EUR

 
151,537

 

 

 
151,537

Barclays (GBP)

 

 
645,854

 

 
645,854

Barclays (EUR)

 

 
179,586

 

 
179,586

Barclays (USD)

 

 
35,192

 

 
35,192

Total
$
257,339

 
$
1,197,703

 
$
2,101,800

 
$

 
$
3,556,842

———————
(1) The table above reflects the fully extended maturity date of the facility and assumes facilities with an "evergreen" feature continue to extend through the fully-extended maturity of the underlying asset and assumes underlying loans are extended with consent of financing providers.
Schedule of Outstanding, Maximum and Average Balances of Debt
The table below summarizes the outstanding balances at March 31, 2020, as well as the maximum and average month-end balances for the three months ended March 31, 2020 for our borrowings under secured debt arrangements ($ in thousands).
 
As of March 31, 2020
 
For the three months ended March 31, 2020
 
Balance
 
Amortized Cost of Collateral
 
Maximum Month-End
Balance
 
Average Month-End
Balance
JPMorgan
$
1,184,685

 
$
1,912,345

 
$
1,184,685

 
$
989,915

DB
506,977

 
778,607

 
506,977

 
470,077

Goldman
359,540

 
537,249

 
359,540

 
319,369

CS - USD
325,868

 
439,725

 
336,448

 
326,684

CS - GBP
84,748

 
121,286

 
90,111

 
87,452

HSBC - USD
50,625

 
67,041

 
50,625

 
50,625

HSBC - GBP
32,230

 
46,565

 
34,501

 
33,336

HSBC - EUR
151,537

 
191,565

 
152,389

 
151,798

Barclays (USD)
35,192

 
49,800

 
35,192

 
11,731

Barclays (GBP)
645,854

 
899,075

 
666,810

 
610,833

Barclays (EUR)
179,586

 
239,483

 
180,595

 
179,895

Total
$
3,556,842

 
$
5,282,741

 

 
 

The table below summarizes the outstanding balances at December 31, 2019, as well as the maximum and average month-end balances for the year ended December 31, 2019 for our borrowings under secured debt arrangements ($ in thousands).
 
As of December 31, 2019
 
For the year ended December 31, 2019

 
Balance
 
Amortized Cost of Collateral
 
Maximum Month-End
Balance
 
Average Month-End
Balance
JPMorgan
$
1,234,759

 
$
1,845,400

 
$
1,234,759

 
$
947,400

DB
513,876

 
766,676

 
757,117

 
604,067

Goldman
322,170

 
513,559

 
324,821

 
246,318

CS - USD
218,644

 
308,884

 
218,644

 
182,646

CS - GBP
93,915

 
129,723

 
150,811

 
134,694

HSBC - USD
50,625

 
66,960

 
50,625

 
50,625

HSBC - GBP
34,634

 
49,976

 
50,784

 
42,296

HSBC - EUR
154,037

 
190,780

 
154,037

 
151,889

Barclays (GBP)
290,347

 
738,455

 
290,347

 
139,004

Barclays (EUR)
182,549

 
241,674

 
182,549

 
181,159

Total
$
3,095,556

 
$
4,852,087

 

 
 

v3.20.1
Share-Based Payments (Tables)
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Summary of Grants, Exchanges and Forfeitures of Restricted Stock and RSUs
The following table summarizes the grants, vesting and forfeitures of restricted common stock and RSUs during the three months ended March 31, 2020:
 
Type
 
Restricted Stock
 
RSUs
 
Grant Date Fair Value ($ in thousands)
Outstanding at December 31, 2019
 
25,356

 
2,007,355

 
 
 
Granted
 

 

 

 
Vested
 

 

 
N/A

 
Forfeiture
 

 
(2,064
)
 
N/A

Outstanding at March 31, 2020
 
25,356

 
2,005,291

 
 

Below is a summary of restricted stock and RSU vesting dates as of March 31, 2020
Vesting Year
 
Restricted Stock
 
RSU
 
Total Awards
2020
 
25,356

 
963,927

 
989,283

2021
 

 
685,410

 
685,410

2022
 

 
355,954

 
355,954

Total
 
25,356

 
2,005,291

 
2,030,647


v3.20.1
Condensed Consolidated Statement of Operations (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Net interest income:    
Interest income from commercial mortgage loans $ 81,855 $ 78,286
Interest income from subordinate loans and other lending assets 34,018 40,839
Interest expense (41,205) (36,295)
Net interest income 74,668 82,830
Operating expenses:    
General and administrative expenses (includes equity-based compensation of $4,263 and $3,901 in 2020 and 2019, respectively) (6,531) (6,151)
Management fees to related party (10,268) (9,613)
Total operating expenses (16,799) (15,764)
Other income 760 518
Provision for loan losses [1] (183,465) 0
Foreign currency gain (loss) (37,949) 6,894
Gain (loss) on foreign currency forward contracts (includes unrealized gains (losses) of $62,436 and ($14,985) in 2020 and 2019, respectively) 70,491 (6,720)
Unrealized loss on interest rate swap (35,548) 0
Net income (loss) (127,842) 67,758
Preferred dividends (3,385) (6,835)
Net income (loss) available to common stockholders $ (131,227) $ 60,923
Net income (loss) per share of common stock:    
Basic (in dollars per share) $ (0.86) $ 0.45
Diluted (in dollars per share) $ (0.86) $ 0.43
Basic weighted-average shares of common stock outstanding (in shares) 153,948,191 134,607,107
Diluted weighted-average shares of common stock outstanding (in shares) 153,948,191 164,683,086
Dividend declared per share of common stock (in dollars per share) $ 0.40 $ 0.46
[1] Comprised of $150,000 Specific CECL Allowance and $33,465 General CECL Allowance.
v3.20.1
Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Cash flows provided by operating activities:    
Net income (loss) $ (127,842) $ 67,758
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Amortization of discount/premium and PIK (18,270) (19,611)
Amortization of deferred financing costs 3,312 3,461
Equity-based compensation 4,263 (1,095)
Provision for loan losses [1] 183,465 0
Foreign currency (gain) loss 42,108 (5,828)
Unrealized loss on derivative instruments (26,888) 14,985
Changes in operating assets and liabilities:    
Other assets (6,696) (2,898)
Accounts payable, accrued expenses and other liabilities 807 620
Payable to related party (162) (191)
Net cash provided by operating activities 54,097 57,201
Cash flows used in investing activities:    
New funding of commercial mortgage loans (439,936) (197,000)
Add-on funding of commercial mortgage loans (99,768) (105,452)
New funding of subordinate loans and other lending assets 0 (244,844)
Add-on funding of subordinate loans and other lending assets (18,753) (4,879)
Proceeds received from the repayment and sale of commercial mortgage loans 221,972 191,317
Proceeds received from the repayment of subordinate loans and other lending assets 842 130,010
Origination and exit fees received on commercial mortgage loans, and subordinate loans and other lending assets, net 5,445 6,069
Increase (Decrease) in collateral held related to derivative contracts, net 7,070 (18,180)
Net cash (used in) provided by investing activities (323,128) (242,959)
Cash flows from financing activities:    
Repurchase of common stock (2,441) 0
Proceeds from secured debt arrangements 1,357,442 412,434
Repayments of secured debt arrangements (844,051) (156,747)
Repayments of senior secured term loan principal (1,250) 0
Exchanges of convertible senior notes 0 (704)
Payment of deferred financing costs (2,722) (91)
Collateral deposited under secured debt arrangements (26,262) 0
Other financing activities (6,494) 0
Dividends on common stock (71,950) (62,762)
Dividends on preferred stock (3,385) (6,835)
Net cash (used in) provided by financing activities 398,887 185,295
Net increase in cash and cash equivalents 129,856 (463)
Cash and cash equivalents, beginning of period 452,282 109,806
Cash and cash equivalents, end of period 582,138 109,343
Supplemental disclosure of cash flow information:    
Interest paid 36,979 32,428
Supplemental disclosure of non-cash financing activities:    
Exchange of convertible senior notes for common stock 0 33,778
Dividend declared, not yet paid 65,684 70,364
Deferred financing costs, not yet paid $ 5,193 $ 3,643
[1] Comprised of $150,000 Specific CECL Allowance and $33,465 General CECL Allowance.
v3.20.1
Summary of Significant Accounting Policies - Additional Information (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
segment
Jan. 01, 2020
USD ($)
Accounting Policies [Abstract]    
Number of business segments | segment 1  
New Accounting Pronouncements or Change in Accounting Principle [Line Items]    
General CECL Reserve   $ (30,867)
Accounting Standards Update 2016-13    
New Accounting Pronouncements or Change in Accounting Principle [Line Items]    
General CECL Reserve   $ 30,900
v3.20.1
Senior Secured Term Loan, Net
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Senior Secured Term Loan, Net Secured Debt Arrangements, Net
At March 31, 2020 and December 31, 2019, our borrowings had the following secured debt arrangements, maturities and weighted-average interest rates ($ in thousands):
 
 
 
March 31, 2020
 
December 31, 2019
 
 
Maximum Amount of Borrowings(1)
 
Borrowings Outstanding(1)
 
Maturity (2)
 
Maximum Amount of Borrowings(1)
 
Borrowings Outstanding(1)
 
Maturity (2)
 
JPMorgan (USD)
$
1,139,932

 
$
1,024,617

 
June 2024
 
$
1,154,109

 
$
1,090,160

 
June 2024
 
JPMorgan (GBP)
93,882

 
93,882

 
June 2024
 
51,702

 
50,410

 
June 2024
 
JPMorgan (EUR)
66,186

 
66,186

 
June 2024
 
94,189

 
94,189

 
June 2024
 
DB (USD)
1,000,000

 
506,977

 
March 2023
 
1,250,000

 
513,876

 
March 2021
 
Goldman (USD)
500,000

 
359,540

 
November 2021
 
500,000

 
322,170

 
November 2021
 
CS - USD
328,141

 
325,868

 
January 2023(3)
 
226,068

 
218,644

 
June 2020
 
CS - GBP
84,748

 
84,748

 
September 2020
 
93,915

 
93,915

 
June 2020
 
HSBC - USD
50,625

 
50,625

 
January 2021
 
50,625

 
50,625

 
October 2020
 
HSBC - GBP
32,230

 
32,230

 
June 2020
 
34,634

 
34,634

 
June 2020
 
HSBC - EUR
151,537

 
151,537

 
July 2021
 
154,037

 
154,037

 
January 2021
 
Barclays (USD)
200,000

 
35,192

 
March 2024
 
N/A

 
N/A

 
N/A
 
Barclays (GBP)
645,854

 
645,854

 
November 2023(4)
 
538,916

 
290,347

 
February 2024(4)
 
Barclays (EUR)
179,586

 
179,586

 
August 2024(3)
 
182,549

 
182,549

 
November 2020
 
Sub-total(5)(6)(7)
4,472,721

 
3,556,842

 

 
4,330,744

 
3,095,556

 
 
 
less: deferred financing costs
N/A

 
(16,917
)
 
 
 
N/A

 
(17,190
)
 
 
 
Total
$
4,472,721

 
$
3,539,925

  
$
4,330,744

 
$
3,078,366

 
 
———————
(1) As of March 31, 2020, GBP and EUR borrowings were converted at a rate of 1.24 and 1.10, respectively. As of December 31, 2019, GBP and EUR borrowings were converted at a rate of 1.33 and 1.12, respectively.
(2) Maturity date assumes extensions at our option are exercised with consent of financing providers, where applicable.
(3) Assumes financings are extended in line with the underlying loans.
(4) Represents weighted average maturity across various financings with the counterparty. See below for additional details.
(5) Weighted-average borrowing costs as of March 31, 2020 and December 31, 2019 were USD L + 2.05% / GBP L + 1.66% / EUR L + 1.35% and USD L + 2.07% / GBP L + 1.75% / EUR L + 1.36%, respectively.
(6) Weighted average advance rates based on cost as of March 31, 2020 and December 31, 2019 were 67.3% (65.6% (USD) / 70.6% (GBP) / 70.7% (EUR)) and 63.8% (66.7% (USD) / 47.1% (GBP) / 76.1% (EUR)).
(7) As of March 31, 2020 and December 31, 2019, approximately 54% of the outstanding balance under these secured borrowings were recourse to us.

Each of our existing secured debt arrangements include "credit based and other mark-to-market" features. "Credit mark-to-market" provisions in repurchase facilities are designed to keep the lenders' credit exposure generally constant as a percentage of the underlying collateral value of the assets pledged as security to them. If the credit underlying collateral value decreases, the amount of leverage available to us will be reduced as our assets are marked-to-market, which would reduce our
liquidity. The lender under the applicable repurchase facility sets the valuation and any revaluation of the collateral assets in its sole, good faith discretion. Generally, if the lender determines (subject to certain conditions) that the market value of the collateral in a repurchase transaction has decreased by more than a defined minimum amount, the lender may require us to provide additional collateral or may make margin calls, which may require us to repay all or a portion of the funds advanced. We closely monitor our liquidity and intend to maintain sufficient liquidity on our balance sheet in order to meet any margin calls in the event of any significant decreases in asset values. As of March 31, 2020 and December 31, 2019, the weighted average haircut under our repurchase agreements was approximately 33% and 36%, respectively. In addition, our existing secured debt arrangements are not entirely term-matched financings and may mature before our commercial real estate debt investments that represent underlying collateral to those financings. We are in frequent dialogue with the lenders under our secured debt arrangements regarding our management of their collateral assets and as we negotiate renewals and extensions of these liabilities, we may experience lower advance rates and higher pricing under the renewed or extended agreements.
JPMorgan Facility
In November 2019, through three indirect wholly-owned subsidiaries, we entered into a Sixth Amended and Restated Master Repurchase Agreement with JPMorgan Chase Bank, National Association (as amended, the "JPMorgan Facility"). The JPMorgan Facility allows for $1.3 billion of maximum borrowings (with amounts borrowed in British pounds and Euros converted to U.S. dollars for purposes of calculating availability based on the greater of the spot rate as of the initial financing under the corresponding mortgage loan and the then-current spot rate) and matures in June 2022 and has two one-year extensions available at our option, which are subject to certain conditions. The JPMorgan Facility enables us to elect to receive advances in U.S. dollars ("USD"), British pounds ("GBP"), or Euros ("EUR"). Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $1.2 billion (including £75.6 million and €60.0 million assuming conversion into USD) of borrowings outstanding under the JPMorgan Facility secured by certain of our commercial mortgage loans.
DB Facility
In March 2020, through an indirect wholly-owned subsidiary, we entered into a Third Amended and Restated Master Repurchase Agreement with Deutsche Bank AG, Cayman Islands Branch, London Branch (as amended, the "DB Facility"), which provides for advances of up to $1.0 billion for the sale and repurchase of eligible first mortgage loans secured by commercial or multifamily properties located in the United States, United Kingdom and the European Union, and enables us to elect to receive advances in USD, GBP, or EUR. The repurchase facility matures in March 2021, and has two one-year extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $507.0 million of borrowings outstanding under the DB Facility secured by certain of our commercial mortgage loans.
Goldman Facility
In November 2017, through an indirect wholly-owned subsidiary, we entered into a master repurchase and securities contract agreement with Goldman Sachs Bank USA (the "Goldman Facility"), which provides advances up to $500.0 million and matures in November 2020, and has one one-year extension available at our option, subject to certain conditions. Margin calls may occur any time at specified margin deficit thresholds.
As of March 31, 2020, we had $359.5 million of borrowings outstanding under the Goldman Facility secured by certain of our commercial mortgage loans.
CS Facility - USD
In July 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS Facility - USD"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - USD has an "evergreen" feature such that the facility continues unless terminated at any time by Credit Suisse with six months' notice. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $325.9 million of borrowings outstanding under the CS Facility - USD secured by certain of our commercial mortgage loans.
CS Facility - GBP
In June 2018, through an indirect wholly-owned subsidiary, we entered into a Global Master Repurchase Agreement with Credit Suisse Securities (Europe) Limited (the "CS Facility - GBP"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - GBP matures in September 2020. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $84.7 million (£68.2 million assuming conversion into USD) of borrowings outstanding under the CS Facility - GBP secured by one commercial mortgage loan.
HSBC Facility - USD    
In October 2019, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - USD"), which provides for a single asset financing. The facility is scheduled to mature in January 2021. Margin calls may occur any time at specified aggregate margin thresholds.
As of March 31, 2020, we had $50.6 million of borrowings under the HSBC Facility - USD secured by one commercial mortgage loan.
HSBC Facility - GBP
In September 2018, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - GBP"), which provides for a single asset financing. The facility is scheduled to mature in June 2020. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $32.2 million (£26.0 million assuming conversion into USD) of borrowings outstanding under the HSBC Facility - GBP secured by one commercial mortgage loan.
HSBC Facility - EUR
In July 2019, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility - EUR"), which provides for a single asset financing. The facility matures in July 2021. Margin calls may occur any time at specified aggregate margin deficit thresholds.
As of March 31, 2020, we had $151.5 million (€137.4 million assuming conversion into USD) of borrowings outstanding under the HSBC Facility - EUR secured by one of our commercial mortgage loans.
Barclays Facility - USD
In March 2020, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement pursuant to a Master Repurchase Agreement with Barclays Bank plc ("Barclays Facility - USD"). The Barclays Facility - USD allows for $200.0 million of maximum borrowings and initially matures in March 2023 with extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds.
Barclays Facility - GBP/EUR
Beginning in October 2019, through an indirect wholly-owned subsidiary, we entered into five secured debt arrangements pursuant to a Global Master Repurchase Agreement with Barclays Bank plc (the "Barclays Facility - GBP/EUR"). Margin calls may occur any time at specified aggregate margin deficit thresholds.
The table below provides the currency, outstanding balance, stated maturity, and extended maturity for each of the five secured debt arrangements under the Barclays Facility - GBP/EUR:
Local Currency
Borrowings outstanding (in $)
Fully-Extended Maturity(1)
GBP
$217,350
December 2023
GBP
156,958
February 2023
GBP
149,830
October 2024
GBP
121,716
September 2023
Sub-total/Weighted-Average
$645,854
November 2023
EUR
179,586
see below(2)
Total/Weighted-Average
$825,440
 
———————
(1) Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.
(2) The Barclays Facility - EUR has an "evergreen" feature such that the facility continues for one year and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve month notice.
As of March 31, 2020, we had $825.4 million (£520.0 million and €162.8 million assuming conversion into U.S.
dollars) of borrowings outstanding under the Barclays Facility - GBP/EUR secured by five of our commercial mortgage loans.
At March 31, 2020, our borrowings had the following remaining maturities ($ in thousands):
 
Less than
1 year
 
 
1 to 3
years
 
3 to 5
years
 
More than
5 years
 
Total
JPMorgan
$
61,836

 
$
289,842

 
$
833,007


$

 
$
1,184,685

DB
27,900

 
196,477

 
282,600



 
506,977

Goldman

 
359,540

 

 

 
359,540

CS - USD

 
200,307

 
125,561

 

 
325,868

CS - GBP
84,748

 

 

 

 
84,748

HSBC - USD
50,625

 

 

 

 
50,625

HSBC - GBP
32,230

 

 

 

 
32,230

HSBC - EUR

 
151,537

 

 

 
151,537

Barclays (GBP)

 

 
645,854

 

 
645,854

Barclays (EUR)

 

 
179,586

 

 
179,586

Barclays (USD)

 

 
35,192

 

 
35,192

Total
$
257,339

 
$
1,197,703

 
$
2,101,800

 
$

 
$
3,556,842

———————
(1) The table above reflects the fully extended maturity date of the facility and assumes facilities with an "evergreen" feature continue to extend through the fully-extended maturity of the underlying asset and assumes underlying loans are extended with consent of financing providers.
The table below summarizes the outstanding balances at March 31, 2020, as well as the maximum and average month-end balances for the three months ended March 31, 2020 for our borrowings under secured debt arrangements ($ in thousands).
 
As of March 31, 2020
 
For the three months ended March 31, 2020
 
Balance
 
Amortized Cost of Collateral
 
Maximum Month-End
Balance
 
Average Month-End
Balance
JPMorgan
$
1,184,685

 
$
1,912,345

 
$
1,184,685

 
$
989,915

DB
506,977

 
778,607

 
506,977

 
470,077

Goldman
359,540

 
537,249

 
359,540

 
319,369

CS - USD
325,868

 
439,725

 
336,448

 
326,684

CS - GBP
84,748

 
121,286

 
90,111

 
87,452

HSBC - USD
50,625

 
67,041

 
50,625

 
50,625

HSBC - GBP
32,230

 
46,565

 
34,501

 
33,336

HSBC - EUR
151,537

 
191,565

 
152,389

 
151,798

Barclays (USD)
35,192

 
49,800

 
35,192

 
11,731

Barclays (GBP)
645,854

 
899,075

 
666,810

 
610,833

Barclays (EUR)
179,586

 
239,483

 
180,595

 
179,895

Total
$
3,556,842

 
$
5,282,741

 

 
 

The table below summarizes the outstanding balances at December 31, 2019, as well as the maximum and average month-end balances for the year ended December 31, 2019 for our borrowings under secured debt arrangements ($ in thousands).
 
As of December 31, 2019
 
For the year ended December 31, 2019

 
Balance
 
Amortized Cost of Collateral
 
Maximum Month-End
Balance
 
Average Month-End
Balance
JPMorgan
$
1,234,759

 
$
1,845,400

 
$
1,234,759

 
$
947,400

DB
513,876

 
766,676

 
757,117

 
604,067

Goldman
322,170

 
513,559

 
324,821

 
246,318

CS - USD
218,644

 
308,884

 
218,644

 
182,646

CS - GBP
93,915

 
129,723

 
150,811

 
134,694

HSBC - USD
50,625

 
66,960

 
50,625

 
50,625

HSBC - GBP
34,634

 
49,976

 
50,784

 
42,296

HSBC - EUR
154,037

 
190,780

 
154,037

 
151,889

Barclays (GBP)
290,347

 
738,455

 
290,347

 
139,004

Barclays (EUR)
182,549

 
241,674

 
182,549

 
181,159

Total
$
3,095,556

 
$
4,852,087

 

 
 

We were in compliance with the covenants under each of our secured debt arrangements at March 31, 2020 and December 31, 2019.
Senior Secured Term Loan, Net
In May 2019, we entered into a $500.0 million senior secured term loan. The senior secured term loan bears interest at LIBOR plus 2.75% and was issued at a price of 99.5%. The senior secured term loan matures in May 2026 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities.
During the three months ended March 31, 2020, we repaid $1.3 million of principal related to the senior secured term loan. The outstanding principal balance as of March 31, 2020 and December 31, 2019 was $496.3 million and $497.5 million, respectively. As of March 31, 2020, the senior secured term loan had a carrying value of $487.1 million net of deferred financing costs of $7.0 million and an unamortized discount of $2.2 million. As of December 31, 2019, the senior secured term loan had a carrying value of $488.0 million net of deferred financing costs of $7.3 million and an unamortized discount of $2.2 million.
Covenants
The senior secured term loan includes the following financial covenants: (i) our ratio of total recourse debt to tangible net worth cannot be greater than 3:1; and (ii) our ratio of total unencumbered assets to total pari-passu indebtedness must be at least 1.25:1.
We were in compliance with the covenants under the senior secured term loan at March 31, 2020 and December 31, 2019.
Interest Rate Swap
In connection with the senior secured term loan, we entered into an interest rate swap to fix LIBOR at 2.12% effectively fixing our all-in coupon on the senior secured term loan at 4.87%.
v3.20.1
Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net
3 Months Ended
Mar. 31, 2020
Receivables [Abstract]  
Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net
Our loan portfolio was comprised of the following at March 31, 2020 and December 31, 2019 ($ in thousands):
Loan Type
 
March 31, 2020
 
December 31, 2019
Commercial mortgage loans, net (1)
 
$
5,413,627

 
$
5,326,967

Subordinate loans and other lending assets, net
 
1,016,991

 
1,048,126

Total
 
$
6,430,618

 
$
6,375,093



  ———————
(1)
Includes $117.8 million and $126.7 million in 2020 and 2019, respectively, of contiguous financing structured as subordinate loans.


Our loan portfolio consisted of 95% floating rate loans, based on amortized cost, as of March 31, 2020 and December 31, 2019, respectively.

 
Activity relating to our loan portfolio, for the three months ended March 31, 2020, was as follows ($ in thousands):
 
 
Principal Balance
 
Deferred Fees/Other Items (1)
 
Provision for Loan Loss
 
Carrying Value
December 31, 2019
 
$
6,467,842

 
$
(35,768
)
 
$
(56,981
)
 
$
6,375,093

New loan fundings
 
439,936

 

 

 
439,936

Add-on loan fundings (2)
 
118,521

 

 

 
118,521

Loan repayments and sales
 
(210,745
)
 

 

 
(210,745
)
Gain (loss) on foreign currency translation
 
(99,009
)
 
1,428

 

 
(97,581
)
Specific CECL Allowance
 

 

 
(150,000
)
 
(150,000
)
Deferred fees
 

 
(5,053
)
 

 
(5,053
)
PIK interest and amortization of fees
 
12,008

 
6,712

 

 
18,720

March 31, 2020
 
$
6,728,553

 
$
(32,681
)
 
$
(206,981
)
 
$
6,488,891

General CECL Allowance (3)
 
 
 
 
 
 
 
(58,273
)
Carrying value net, as of March 31, 2020
 
 
 
 
 
 
 
6,430,618

———————
(1)
Other items primarily consist of purchase discounts or premiums, exit fees and deferred origination expenses.
(2)
Represents fundings for loans closed prior to 2020.
(3)
$6.1 million of the General CECL Allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under Accounts Payable, Accrued Expenses and Other Liabilities in the condensed consolidated balance sheet.

The following table details overall statistics for our loan portfolio at the dates indicated ($ in thousands):
 
 
March 31, 2020
 
December 31, 2019
Number of loans
 
75

 
72

Principal balance
 
$
6,728,553

 
$
6,467,842

Carrying value
 
$
6,430,618

 
$
6,375,093

Unfunded loan commitments (1)
 
$
1,822,967

 
$
1,952,887

Weighted-average cash coupon (2)
 
6.0
%
 
6.5
%
Weighted-average remaining fully-extended term (3)
 
3.3 years

 
3.3 years

Weighted-average expected term (4)
 
2.2 years

 
1.8 years

  ———————
(1)
Unfunded loan commitments are funded to finance construction costs, tenant improvements, leasing commissions, or carrying costs. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.
(2)
For floating rate loans, based on applicable benchmark rates as of the specified dates. For loans placed on non-accrual or cost recovery the interest rate used in calculating weighted-average cash coupon is 0%.
(3)
Assumes all extension options are exercised.
(4)
Expected term represents our estimated timing of repayments as of March 31, 2020 and December 31, 2019, respectively.

Property Type

The table below details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):
 
 
March 31, 2020
 
December 31, 2019
Property Type
 
Carrying
Value
 
% of
Portfolio
(1)
 
Carrying
Value
 
% of
Portfolio
Office
 
$
1,803,605

 
27.8
%
 
$
1,401,400

 
22.0
%
Hotel
 
1,537,796

 
23.7

 
1,660,162

 
26.0

Residential-for-sale: construction
 
763,381

 
11.8

 
692,816

 
10.9

Residential-for-sale: inventory
 
283,909

 
4.4

 
321,673

 
5.1

Urban Retail
 
623,564

 
9.6

 
643,706

 
10.1

Healthcare
 
356,215

 
5.5

 
371,423

 
5.8

Urban Predevelopment
 
306,503

 
4.7

 
409,864

 
6.4

Other
 
813,918

 
12.5

 
874,049

 
13.7

Total
 
$
6,488,891

 
100.0
%
 
$
6,375,093

 
100.0
%
General CECL Allowance
 
(58,273
)
 
 
 
 
 
 
Total investments, net
 
$
6,430,618

 
 
 


 



  ———————
(1) Percentage of portfolio calculations are made prior to consideration of General CECL Allowance.
Geography

The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):
 
 
March 31, 2020
 
December 31, 2019
Geographic Location
 
Carrying
Value
 
% of
Portfolio
(1)
 
Carrying
Value
 
% of
Portfolio
New York City
 
$
2,319,325

 
35.8
%
 
$
2,167,487

 
34.0
%
Northeast
 
118,251

 
1.8

 
110,771

 
1.7

United Kingdom
 
1,347,897

 
20.8

 
1,274,390

 
20.0

West
 
747,515

 
11.5

 
728,182

 
11.4

Midwest
 
557,780

 
8.6

 
614,337

 
9.6

Southeast
 
512,469

 
7.9

 
564,166

 
8.9

Other
 
885,654

 
13.6

 
915,760

 
14.4

Total
 
$
6,488,891

 
100.0
%
 
$
6,375,093

 
100.0
%
General CECL Allowance
 
(58,273
)
 
 
 
 
 
 
Total investments, net
 
$
6,430,618

 
 
 
 
 
 

  ———————
(1) Percentage of portfolio calculations are made prior to consideration of the General CECL Allowance.

Risk Rating

We assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio ("LTV"), debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. This review is performed quarterly. Based on a 5-point scale, our loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:
1.    Very low risk
2.    Low risk
3. Moderate/average risk
4. High risk/potential for loss: a loan that has a risk of realizing a principal loss
5. Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or an impairment has been recorded

The following tables allocate the carrying value of our loan portfolio based on our internal risk ratings and date of origination at the dates indicated ($ in thousands):
March 31, 2020
 
 
 
 
 
 
 
 
 
Year Originated
Risk Rating
 
Number of Loans
 
Total
 
% of Portfolio
 
 
2020
 
2019
 
2018
 
2017
 
2016
 
Prior
1
 

 
 
%
 
 
$

 
$

 
$

 
$

 
$

 
$

2
 
5

 
130,609
 
2.0
%
 
 

 

 
23,990
 

 
36,287
 
70,332

3
 
63

 
5,822,078
 
89.7
%
 
 
423,419

 
2,609,209

 
1,490,045
 
779,882

 
62,580
 
456,943

4
 

 

 
%
 
 

 

 

 

 

 

5
 
7

 
536,204

 
8.3
%
 
 

 

 
31,372
 
126,013

 
117,910
 
260,909

Total
 
75

 
$
6,488,891

 
100.0
%
 
 
$
423,419

 
$
2,609,209

 
$1,545,407
 
$
905,895

 
$216,777
 
$
788,184

General CECL Allowance
 
(58,273
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total investments, net
$
6,430,618

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
W.A. Risk Rating
3.1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


December 31, 2019
 
 
 
 
 
 
 
 
 
Year Originated
Risk Rating
 
Number of Loans
 
Total
 
% of Portfolio
 
 
2019
 
2018
 
2017
 
2016
 
2015
 
Prior
1
 

 
$

 
%
 
 
$

 
$

 
$

 
$

 
$

 
$

2
 
8

 
348,324

 
5.5
%
 
 

 
241,676

 

 
36,250

 
24,546

 
45,852

3
 
61

 
5,707,555

 
89.5
%
 
 
2,736,825

 
1,355,014

 
912,636

 
72,540

 
499,700

 
130,840

4
 
1

 
182,910

 
2.9
%
 
 

 

 

 
182,910

 

 

5
 
2

 
136,304

 
2.1
%
 
 

 

 

 

 

 
136,304

Total
 
72

 
$
6,375,093

 
100.0
%
 
 
$
2,736,825

 
$
1,596,690

 
$
912,636

 
$
291,700

 
$
524,246

 
$
312,996

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
W.A. Risk Rating
 
3.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Current Expected Credit Losses

Refer to the following schedule of the General CECL Allowance as of March 31, 2020, and as of the date of adoption, January 1, 2020 ($ in thousands):

 
 
March 31, 2020
 
January 1, 2020(1)
Commercial mortgage loans, net
 
$
28,336

 
$
12,149

Subordinate loans and other lending assets, net
 
29,937

 
15,630

Unfunded commitments(2)
 
6,059

 
3,088

Total General CECL Allowance
 
$
64,332

 
$
30,867

  ———————
(1) As of January 1, 2020, we adopted the CECL Standard through a cumulative-effect adjustment to retained earnings
(2) The General CECL Allowance on Unfunded commitments is recorded as a liability on the condensed consolidated balance sheet within accounts payable, accrued expenses, and other liabilities

The General CECL Allowance increased by $33.5 million from initial adoption on January 1, 2020, to March 31, 2020. The increase is predominantly related to a change in our view of estimated macroeconomic conditions, including the unemployment rate and the commercial real estate price index, in the backdrop of the global pandemic. Other factors that contributed to the increase include an increase in our view of remaining expected term of our loan portfolio and growth in the portfolio from new investments during the quarter.
The macroeconomic factors considered were the unemployment rate, commercial real estate prices, and market liquidity. We compared the historical data for each metric to historical commercial real estate losses in order to determine the correlation of the data. We used projections, obtained from third-party service providers, of each factor to approximate the impact the macroeconomic outlook may have on our loss rate.

Refer to the following roll forward schedule of the General CECL Allowance for the quarter ended March 31, 2020 ($ in thousands):
 
 
General CECL Allowance
General CECL Allowance as of January 1, 2020
 
$
30,867

Increase in General CECL Allowance
 
34,500

Transfer to Specific CECL Allowance
 
(1,035
)
General CECL Allowance as of March 31, 2020(1)
 
$
64,332


———————
(1) Includes $6.1 million of the General CECL Allowance that relates to unfunded commitments and has been recorded as a liability under Accounts Payable, Accrued Expenses and Other Liabilities in the condensed consolidated balance sheet.


Our secured debt obligations and senior secured term loan financing have a minimum tangible net worth
maintenance covenant. The General CECL Allowance has no impact on these covenants as we are permitted to add back the General CECL Allowance for the computation of tangible net worth as defined in the respective agreements.

We have made an accounting policy election to exclude $41.9 million accrued interest receivable, included in Other assets on the condensed consolidated balance sheet, from the amortized cost basis of the related commercial mortgage loans and subordinate loans and other lending assets in determining the General CECL Allowance as any uncollected accrued interest receivable is written off in a timely manner. We discontinue accruing interest on loans if deemed uncollectible with any accrued uncollected interest on the loan charged to interest income in the same period. Under certain circumstances, we may apply the cost recovery method under which interest collected on a loan is a reduction to its amortized cost. The amortized cost basis for loans on cost recovery was $536.2 million and $136.3 million as of March 31, 2020 and December 31, 2019, respectively. For the three months ended March 31, 2020, we received $0.6 million in interest that reduced amortized cost under the cost recovery method.

The following schedule illustrates the CECL Allowance as percentages of amortized cost and total commitment as of March 31, 2020, and as of the date of adoption, January 1, 2020 ($ in thousands):
CECL Allowances
 
CECL ($)
 
% of
Amortized Cost
General CECL Allowance(1)
 
 
 
 
January 1, 2020
 
$
30,867

 
0.49
%
March 31, 2020(2)
 
64,332

 
1.08
%
 
 
 
 
 
Total CECL Allowances(3)
 
 
 


March 31, 2020
 
$
271,313

 
4.05
%
  ———————
(1) Amortized Cost of the General CECL Allowance excludes amortized cost of loans evaluated for the Specific CECL Allowance
(2) Includes $6.1 million of the General CECL Allowance that relates to unfunded commitments and has been recorded as a liability under Accounts Payable, Accrued Expenses and Other Liabilities in the condensed consolidated balance sheet.
(3) Total CECL Allowances includes the General CECL Allowance and the Specific CECL Allowance


Specific CECL Allowance

We regularly evaluate the extent and impact of any credit migration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan by loan basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the liquidation value of the underlying collateral. We also evaluate the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the properties. In addition, we consider the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. Such impairment analysis is completed and reviewed by asset management and finance personnel who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants.

We evaluate our loans on a quarterly basis. For loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we have elected to apply a practical expedient in accordance with the CECL Standard. In accordance with the practical expedient approach, we determine the loan loss provision to be the difference between the fair value of the underlying collateral and the carrying value of the loan (prior to the loan loss provision). The fair value of the underlying collateral is determined by using method(s) including a discounted cash flow (DCF) or direct capitalization approach. The key unobservable inputs used to determine the fair value of the underlying collateral may vary depending on the information available to us and market conditions as of the valuation date.

The following table summarizes the specific provision for loan losses that has been recorded on our portfolio as of March 31, 2020 ($ in thousands):



Type
Property type
Location
Amortized cost(1)
Interest recognition status/ as of date
Mortgage
 
 
 
 
Hotel(2)
Manhattan, NY
$
144,295

Cost Recovery/ 3/31/2020
 
Urban Predevelopment(3)
Brooklyn, NY
126,013

Cost Recovery/ 3/1/2020
 
Urban Predevelopment(3)
Miami, FL
117,910

Cost Recovery/ 3/1/2020
 
Retail Center(4)(5)
Cincinnati, OH
103,921

 Cost Recovery/ 10/1/2019
 
Hotel(2)
Pittsburgh, PA
31,372

Cost Recovery/ 3/31/2020
 
Residential-for-sale: inventory(6)(7)
Bethesda, MD
2,695

 Cost Recovery/ 1/1/2018
Mortgage total:
 
$
526,206

 
Mezzanine
 
 
 
 
Hotel(2)
Washington, DC
$
10,000

 Cost Recovery/ 3/31/2020
Mezzanine total:
 
$
10,000

 
Grand total:
 
$
536,206

 
  ———————

(1)
Amortized cost is shown net of $207 million of provisions, $150 million of which were taken during the three months ended March 31, 2020 due to factors including COVID-19. See Note 2 for additional information regarding COVID-19.
(2)
The fair value of hotel collateral was determined by applying a discount and capitalization rate ranging from 8.3% to 11.0% and 6.6% to 9.0%, respectively.
(3)
The fair value of urban predevelopment collateral was determined by assuming rent per square foot and capitalization rate ranging from $48 to $225 and 5.0% to 5.5%, respectively.
(4)
The fair value of retail collateral was determined by applying a capitalization rate of 8.3%.
(5)
The entity in which we own an interest and which owns the underlying property was deemed to be a Variable Interest Entity ("VIE") and we determined that we are not the primary beneficiary of that VIE. During the three months ended March 31, 2020, $0.6 million of interest paid was applied towards reducing the carrying value of the loan.
(6)
The fair value of residential-for-sale: inventory was determined by assuming a sales price per square foot of $371.
(7)
A $3.0 million portion of this provision was recorded on an investment previously recorded under other assets on our condensed consolidated balance sheet.

Other Loan and Lending Assets Activity
We recognized payment-in-kind ("PIK") interest of $12.4 million and $14.5 million for the three months ended March 31, 2020 and 2019, respectively.
We recognized $0.2 million and $3.7 million in pre-payment penalties and accelerated fees for the three months ended March 31, 2020 and 2019, respectively.
Our portfolio includes two other lending assets, which are subordinate risk retention interests in securitization vehicles. The underlying mortgages related to our subordinate risk retention interests are secured by a portfolio of properties located throughout the United States. Our maximum exposure to loss from the subordinate risk retention interests is limited to the book value of such interests of $68.1 million as of March 31, 2020. These interests have a weighted average maturity of 6.57 years. We are not obligated to provide, and do not intend to provide financial support to these subordinate risk retention interests. Both interests are accounted for as held-to-maturity and recorded at amortized cost on the condensed consolidated balance sheet.
In January 2020, we sold £62.2 million ($81.3 million assuming conversion into U.S. dollars) in a mezzanine loan and £50.0 million ($65.3 million assuming conversion into U.S. dollars) unfunded commitment of a senior mortgage secured by a mixed-use property in London, UK to a fund managed by an affiliate of the Manager, that was originated by us in December 2019. This transaction was evaluated under ASC 860 - Transfers and Servicing, and we determined that it qualifies as a sale and accounted for as such. We recorded no gain or loss related to this sale.
Loan Proceeds Held by Servicer Loan proceeds held by servicer represents principal payments held by our third-party loan servicer as of the balance sheet date which were remitted to us subsequent to the balance sheet date. There were no loan proceeds held by servicer as of March 31, 2020. Loan proceeds held by servicer were $8.3 million as of December 31, 2019.
v3.20.1
Net Income (Loss) per Share - Basic and Diluted Net Income per Share of Common Stock Using Two-Class Method (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Basic Earnings    
Net income (loss) $ (127,842) $ 67,758
Preferred dividends (3,385) (6,835)
Net income (loss) available to common stockholders (131,227) 60,923
Less: Dividends on participating securities (802) (851)
Basic Earnings (132,029) 60,072
Diluted Earnings    
Add: Dividends on participating securities 0 851
Add: Interest expense on Notes 0 9,262
Diluted Earnings $ (132,029) $ 70,185
Number of Shares:    
Basic weighted-average shares of common stock outstanding 153,948,191 134,607,107
Diluted weighted-average shares of common stock outstanding 153,948,191 164,683,086
Earnings Per Share Attributable to Common Stockholders    
Basic (in dollars per share) $ (0.86) $ 0.45
Diluted (in dollars per share) $ (0.86) $ 0.43
v3.20.1
Convertible Senior Notes, Net (Details)
2 Months Ended 3 Months Ended 12 Months Ended
Mar. 15, 2019
USD ($)
Aug. 02, 2018
USD ($)
shares
Sep. 30, 2018
USD ($)
shares
Mar. 31, 2020
USD ($)
$ / shares
Mar. 31, 2019
USD ($)
shares
Dec. 31, 2018
USD ($)
Dec. 31, 2017
USD ($)
offering
Dec. 31, 2014
USD ($)
offering
Dec. 31, 2019
USD ($)
Debt Instrument [Line Items]                  
Cash payment for debt redemption       $ 0 $ 704,000        
Conversions of convertible senior notes for common stock         $ 33,778,000        
Convertible senior notes, net       $ 562,571,000         $ 561,573,000
Common Stock                  
Debt Instrument [Line Items]                  
Conversions of convertible senior notes for common stock (in shares) | shares         1,967,361        
Conversions of convertible senior notes for common stock         $ 20,000        
Share price (in dollars per share) | $ / shares       $ 7.42          
Additional Paid In Capital                  
Debt Instrument [Line Items]                  
Conversions of convertible senior notes for common stock         33,758,000        
Convertible Debt                  
Debt Instrument [Line Items]                  
Debt instrument, face amount       $ 575,000,000          
Interest expense       7,200,000 7,600,000        
Non-cash interest expense       1,500,000 $ 1,700,000        
Convertible Debt | 2019 and 2022 Notes | Additional Paid In Capital                  
Debt Instrument [Line Items]                  
Conversions of convertible senior notes for common stock       15,400,000          
Convertible Debt | 2019 Notes                  
Debt Instrument [Line Items]                  
Number of debt offerings issued | offering               2  
Debt instrument, face amount               $ 254,800,000  
Stated interest rate               5.50%  
Proceeds from issuance of convertible senior notes               $ 248,600,000  
Principal amount redeemed   $ 206,200,000 $ 47,900,000            
Cash payment for debt redemption $ 700,000 $ 39,300,000 $ 200,000            
Convertible Debt | 2019 Notes | Common Stock                  
Debt Instrument [Line Items]                  
Conversions of convertible senior notes for common stock (in shares) | shares   10,020,328 2,775,509   1,967,361        
Conversions of convertible senior notes for common stock         $ 33,800,000        
Convertible Debt | 2019 Notes | Additional Paid In Capital                  
Debt Instrument [Line Items]                  
Conversions of convertible senior notes for common stock   $ 166,000,000.0 $ 13,900,000            
Convertible Debt | 2022 Notes                  
Debt Instrument [Line Items]                  
Number of debt offerings issued | offering             2    
Debt instrument, face amount             $ 345,000,000    
Stated interest rate             4.75%    
Proceeds from issuance of convertible senior notes             $ 337,500,000    
Convertible senior notes, net       338,400,000          
Unamortized discount       6,600,000          
Convertible Debt | 2022 Notes | Additional Paid In Capital                  
Debt Instrument [Line Items]                  
Conversions of convertible senior notes for common stock       11,000,000.0          
Convertible Debt | 2023 Notes                  
Debt Instrument [Line Items]                  
Debt instrument, face amount           $ 230,000,000.0      
Stated interest rate           5.375%      
Proceeds from issuance of convertible senior notes           $ 223,700,000      
Convertible senior notes, net       224,200,000          
Unamortized discount       5,800,000          
Convertible Debt | 2023 Notes | Additional Paid In Capital                  
Debt Instrument [Line Items]                  
Conversions of convertible senior notes for common stock       $ 4,400,000          
v3.20.1
Secured Debt Arrangements, Net - Additional Information (Details)
£ in Thousands, € in Millions
1 Months Ended 3 Months Ended
Nov. 30, 2019
subsidiary
Jul. 31, 2018
Nov. 30, 2017
USD ($)
extension
Mar. 31, 2020
USD ($)
extension
Mar. 31, 2020
GBP (£)
Mar. 31, 2020
EUR (€)
Dec. 31, 2019
USD ($)
Dec. 31, 2019
GBP (£)
Debt Instrument [Line Items]                
Weighted average haircut under repurchase agreements       33.00% 33.00% 33.00% 36.00% 36.00%
Borrowings Outstanding(1)       $ 3,539,925,000     $ 3,078,366,000  
Line of Credit                
Debt Instrument [Line Items]                
Maximum borrowing under facility       4,472,721,000     4,330,744,000  
Balance       3,556,842,000     3,095,556,000  
Borrowings Outstanding(1)       3,539,925,000     3,078,366,000  
Line of Credit | JP Morgan Facility                
Debt Instrument [Line Items]                
Balance       1,184,685,000     1,234,759,000  
Line of Credit | DB Repurchase Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility       $ 1,000,000,000.0        
Number of extensions available | extension       2        
Extension option       1 year        
Balance       $ 506,977,000     513,876,000  
Borrowings Outstanding(1)       507,000,000.0        
Line of Credit | Goldman Sachs Repurchase Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility     $ 500,000,000.0 500,000,000     500,000,000  
Number of extensions available | extension     1          
Extension option     1 year          
Balance       359,540,000     322,170,000  
Borrowings Outstanding(1)       359,540,000     322,170,000  
Line of Credit | Barclays Facility                
Debt Instrument [Line Items]                
Borrowings Outstanding(1)       825,440,000        
JP Morgan Facility | Line of Credit | JP Morgan Facility                
Debt Instrument [Line Items]                
Number of subsidiaries | subsidiary 3              
Amended and Restated JPMorgan Facility | Line of Credit | JP Morgan Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility       $ 1,300,000,000        
Number of extensions available | extension       2        
Extension option       1 year        
Balance       $ 1,200,000,000 £ 75,600 € 60.0    
USD | Line of Credit | JP Morgan Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility       1,139,932,000     1,154,109,000  
Borrowings Outstanding(1)       1,024,617,000     1,090,160,000  
USD | Line of Credit | DB Repurchase Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility       1,000,000,000     1,250,000,000  
Borrowings Outstanding(1)       506,977,000     513,876,000  
USD | Line of Credit | Credit Suisse Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility       328,141,000     226,068,000  
Balance       325,868,000     218,644,000  
Borrowings Outstanding(1)       325,868,000     218,644,000  
Term after either party notifies the other party of intention to terminate   6 months            
USD | Line of Credit | HSBC Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility       50,625,000     50,625,000  
Balance       50,625,000     50,625,000  
Borrowings Outstanding(1)       50,625,000     50,625,000  
USD | Line of Credit | Barclays Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility       200,000,000.0        
Balance       35,192,000        
Borrowings Outstanding(1)       35,192,000        
GBP | Line of Credit | JP Morgan Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility       93,882,000     51,702,000  
Borrowings Outstanding(1)       93,882,000     50,410,000  
GBP | Line of Credit | Credit Suisse Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility       84,748,000     93,915,000  
Balance | £         84,748     £ 93,915
Borrowings Outstanding(1)       84,748,000 68,200   93,915,000  
GBP | Line of Credit | HSBC Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility       32,230,000     34,634,000  
Balance       32,230,000     34,634,000  
Borrowings Outstanding(1)       32,230,000     34,634,000  
Line of credit, amount outstanding       32,200,000 26,000      
GBP | Line of Credit | Barclays Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility       645,854,000     538,916,000  
Balance       645,854,000     290,347,000  
Borrowings Outstanding(1)       645,854,000 520,000   290,347,000  
EUR | Line of Credit | JP Morgan Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility       66,186,000     94,189,000  
Borrowings Outstanding(1)       66,186,000     94,189,000  
EUR | Line of Credit | HSBC Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility       151,537,000     154,037,000  
Balance       151,537,000     154,037,000  
Borrowings Outstanding(1)       151,537,000     154,037,000  
Line of credit, amount outstanding       151,500,000 £ 137,400      
EUR | Line of Credit | Barclays Facility                
Debt Instrument [Line Items]                
Maximum borrowing under facility       179,586,000     182,549,000  
Balance       179,586,000     182,549,000  
Borrowings Outstanding(1)       $ 179,586,000   € 162.8 $ 182,549,000  
v3.20.1
Loan Proceeds Held by Servicer (Details) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Receivables [Abstract]    
Loan proceeds held by servicer $ 0 $ 8,272,000