Apollo Commercial Real Estate Finance, Inc. and ~~Consolidated Subsidiaries~~

~~Condensed Consolidated Statement of Comprehensive Income (Unaudited)~~

~~(in thousands)~~

Three months ended
September 30, Nine months ended
September 30,
2017 2016 2017 2016
Net income available to common stockholders $ 57,208
$ 60,583
$ 121,946
$ 77,864
Foreign currency translation adjustment —
73
3,811
499
Comprehensive income $ 57,208
$ 60,656
$ 125,757
$ 78,363

~~Apollo Commercial Real Estate Finance, Inc. and Consolidated~~ 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
Capital increase related to Equity Incentive Plan	—	—		82,235	1		4,251		—			4,252
Repurchase of common stock	—	—		(5,495,976)	(55)		(43,783)		—			(43,838)
Net income	—	—		—	—		—		60,201			60,201
Dividends declared on preferred stock - $0.50 per share	—	—		—	—		—		(3,385)			(3,385)
Dividends declared on common stock - $0.35 per share	—	—		—	—		—		(52,635)			(52,635)
Balance at June 30, 2020	6,770,393	$	68	148,326,806	$	1,483	$	2,781,111	$	(417,156)		$	2,365,506
Capital increase related to Equity Incentive Plan	—	—		160	—		4,212		—			4,212
Repurchase of common stock	—	—		(5,038,619)	(50)		(45,472)		—			(45,522)
Net income	—	—		—	—		—		49,338			49,338
Dividends declared on preferred stock - $0.50 per share	—	—		—	—		—		(3,385)			(3,385)
Dividends declared on common stock - $0.35 per share	—	—		—	—		—		(50,868)			(50,868)
Balance at September 30, 2020	6,770,393	$	68	143,288,347	$	1,433	$	2,739,851	$	(422,071)		$	2,319,281


	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
Capital increase related to Equity Incentive Plan	—	—		27,245	—		4,294		—			4,294
Issuance of common stock	—	—		17,250,000	172		314,985		—			315,157

Redemption of preferred stock	(6,900,000)	(69)		—	—		(172,431)		—			(172,500)


Offering costs	—	—		—	—		(406)		—			(406)
Net income	—	—		—	—		—		61,424			61,424

Dividends declared on preferred stock - $0.50 per share	—	—		—	—		—		(4,919)			(4,919)
Dividends declared on common stock - $0.46 per share	—	—		—	—		—		(71,475)			(71,475)

Preferred Stock Common Stock
Additional
Paid In
Capital

Retained
Earnings
(Accumulated
Deficit)

Accumulated
Other
Comprehensive
Loss

Shares Par Shares Par Total
Balance at January 1, 2017 18,350,000
$ 184
91,422,676
$ 914
$ 1,983,010
$ (48,070 ) $ (3,811 ) $ 1,932,227
Capital increase related to Equity Incentive Plan —
—
200,859
3
7,551
—
—
7,554
Issuance of common stock —
—
13,800,000
138
248,883
—
—
249,021
Redemption of preferred stock (3,450,000 ) (35 ) —
—
(86,215 ) —
—
(86,250 )
Preferred stock redemption charge —
—
—
—
3,016
—
—
3,016
Issuance of restricted common stock —
—
27,700
—
—
—
—
—
Offering costs —
—
—
—
(120 ) —
—
(120 )
Issuance of convertible senior notes —
—
—
—
7,414
—
—
7,414
Net income —
—
—
—
—
151,714
—
151,714
Change in other comprehensive loss —
—
—
—
—
—
3,811
3,811
Dividends on common stock —
—
—
—
—
(141,042 ) —
(141,042 )
Dividends on preferred stock —
—
—
—
—
(29,768 ) —
(29,768 )
Balance at September 30, 2017 14,900,000
$ 149
105,451,235
$ 1,055
$ 2,163,539
$ (67,166 ) $ —
$ 2,097,577


Balance at June 30, 2019	6,770,393	$	68	153,531,597	$	1,535	$	2,817,542	$	(147,746)	$	2,671,399
Capital increase related to Equity Incentive Plan	—	—		159	—		3,889		—		3,889





Offering costs	—	—		—	—		(12)		—		(12)
Net income	—	—		—	—		—		29,089		29,089

Dividends declared on preferred stock - $0.50 per share	—	—		—	—		—		(3,385)		(3,385)
Dividends declared on common stock - $0.46 per share	—	—		—	—		—		(71,470)		(71,470)
Balance at September 30, 2019	6,770,393	68		153,531,756	1,535		2,821,419		(193,512)		2,629,510

See notes to unaudited condensed consolidated financial statements.

Apollo Commercial Real Estate Finance, Inc. and ~~Consolidated~~ Subsidiaries

Condensed Consolidated Statement of Cash Flows (Unaudited)

(in thousands)


	For the nine months ended September 30,
	2020		2019
Cash flows provided by operating activities:
Net income (loss)	$	(18,303)	$	158,271
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of discount/premium and PIK	(53,670)		(61,949)
Amortization of deferred financing costs	9,652		8,535
Equity-based compensation	12,721		7,084
Provision for loan losses	151,954		20,000
Foreign currency loss	34,225		22,111
Unrealized (gain) loss on derivative instruments	(33,000)		11,391
Realized loss on investments	17,442		12,513
Changes in operating assets and liabilities:
Proceeds received from PIK	0		11,469
Other assets	(6,251)		(4,216)
Accounts payable, accrued expenses and other liabilities	(1,233)		2,462
Payable to related party	(503)		630
Net cash provided by operating activities	113,034		188,301
Cash flows used in investing activities:
New funding of commercial mortgage loans	(457,449)		(1,277,606)
Add-on funding of commercial mortgage loans	(262,193)		(271,720)
New funding of subordinate loans and other lending assets	0		(493,017)
Add-on funding of subordinate loans and other lending assets	(47,627)		(18,323)
Proceeds received from the repayment and sale of commercial mortgage loans	528,782		570,305
Proceeds received from the repayment of subordinate loans and other lending assets	5,122		254,019
Origination and exit fees received on commercial mortgage loans, and subordinate loans and other lending assets, net	6,420		24,524
Increase (decrease) in collateral held related to derivative contracts, net	25,130		(19,830)
Net cash (used in) provided by investing activities	(201,815)		(1,231,648)
Cash flows from financing activities:
Proceeds from issuance of common stock	0		315,157
Redemption of preferred stock	0		(172,500)
Repurchase of common stock	(91,801)		0

Payment of offering costs	0		(153)
Proceeds from secured debt arrangements	1,465,757		1,948,037
Repayments of secured debt arrangements	(1,083,849)		(1,264,223)
Repayments of senior secured term loan principal	(3,750)		(1,250)

Proceeds from issuance of senior secured term loan	0		497,500
Exchanges of convertible senior notes	0		(704)
Payment of deferred financing costs	(8,092)		(11,043)
Other financing activities	(6,494)		0
Dividends on common stock	(186,883)		(197,757)
Dividends on preferred stock	(10,155)		(18,589)
Net cash (used in) provided by financing activities	74,733		1,094,475
Net increase in cash and cash equivalents	(14,048)		51,128
Cash and cash equivalents, beginning of period	452,282		109,806
Cash and cash equivalents, end of period	$	438,234	$	160,934
Supplemental disclosure of cash flow information:
Interest paid	$	100,573	$	96,201
Supplemental disclosure of non-cash financing activities:
Exchange of convertible senior notes for common stock	$	0	$	33,778
Dividend declared, not yet paid	$	54,254	$	74,855
Offering costs payable	$	0	$	200
Loan proceeds held by servicer	$	0	$	3,323
Deferred financing costs, not yet paid	$	2,596	$	5,420
Transfer of proceeds borrowed under secured credit facilities to Barclays Private Securitization	$	782,006	$	0
Restructuring of subordinate loan to commercial mortgage loan	$	68,500	$	0

See notes to unaudited condensed consolidated financial statements.

Nine months ended September 30, 2017 Nine months ended September 30, 2016
Cash flows provided by operating activities:
Net income $ 151,714
$ 98,849
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of discount/premium and PIK interest (15,491 ) (7,443 )
Amortization of deferred financing costs 4,464
3,199
Equity-based compensation 7,551
2,808
Unrealized (gain) loss on securities (11,830 ) 36,601
Provision for loan losses and impairment 5,000
15,000
Income (loss) from unconsolidated joint venture 2,259
(207 )
Foreign currency (gain) loss (16,940 ) 21,122
Realized (gain) loss on derivative instruments 289
(21,100 )
Unrealized (gain) loss on derivative instruments 17,564
(1,731 )
Realized loss on sale of securities 5,118
225
Bargain purchase gain —
(40,021 )
Changes in operating assets and liabilities:
Accrued interest receivable, less purchased interest (27,910 ) (17,638 )
Other assets (983 ) (121 )
Accounts payable, accrued expenses and other liabilities (8,623 ) (10,410 )
Payable to related party 1,295
606
Net cash provided by operating activities 113,477
79,739
Cash flows provided by (used in) investing activities:
Funding of commercial mortgage loans (581,567 ) (548,171 )
Funding of subordinate loans (475,503 ) (51,921 )
Payments received on commercial mortgage loans 17,062
118,120
Payments received on subordinate loans 221,478
81,524
Origination and exit fees received on commercial mortgage loans and subordinate loans 13,047
7,509
Funding of unconsolidated joint venture (726 ) (362 )
Funding of other assets (1,379 ) —
Proceeds (payments) on settlements of derivative instruments (201 ) 21,100
Decrease (Increase) in collateral held related to derivative contracts (14,262 ) 13,110
Proceeds from sale of securities 128,945
86,451
Proceeds from sale of investment in unconsolidated joint venture 24,498
—
Payments received on securities 13,306
22,424
Payments received on securities, held-to-maturity 146,530
5,970
Payments received on other assets —
107
Proceeds from sale of AMTG assets, net —
1,474,111
ARI Investment in AMTG, net of cash acquired —
189,795
Net cash provided by (used in) investing activities (508,772 ) 1,419,767
Cash flows provided by (used in) financing activities:
Proceeds from issuance of common stock 249,021
—
Redemption of Series A preferred stock (86,250 ) —
Payment of offering costs (359 ) (45 )
Proceeds from repurchase agreement borrowings 866,548
448,177
Repayments of repurchase agreement borrowings (727,691 ) (352,914 )
Repayments of AMTG repurchase agreement borrowings —
(1,254,517 )
Proceeds from issuance of convertible senior notes 227,700
—
Repayments of participations sold (85,081 ) (3,770 )
Payment of deferred financing costs (8,585 ) (3,741 )
Dividends on common stock (136,404 ) (94,625 )
Dividends on preferred stock (26,752 ) (18,646 )
Net cash provided by (used in) financing activities 272,147
(1,280,081 )
Net increase (decrease) in cash, cash equivalents, and restricted cash (123,148 ) 219,425
Cash, cash equivalents, and restricted cash, beginning of period 263,453
97,542
Cash, cash equivalents, and restricted cash, end of period $ 140,305
$ 316,967
Supplemental disclosure of cash flow information:
Interest paid $ 44,303
$ 47,093
Supplemental disclosure of non-cash investing and financing activities:
Dividend declared, not yet paid $ 55,916
$ 46,028
Deferred financing costs, not yet paid $ —
$ —
Offering costs payable $ 41
$ 220
Fair value of assets acquired from AMTG $ —
$ 1,936
Fair value of liabilities assumed from AMTG $ —
$ (1,285 )
Fair value of common stock issued to AMTG $ —
$ 218
Fair value of preferred stock issued to AMTG $ —
$ 173

Apollo Commercial Real Estate Finance, Inc. and ~~Consolidated~~ Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~(in thousands—except share and per share data)~~

Note 1 – Organization

Apollo Commercial Real Estate Finance, Inc. (together with its consolidated subsidiaries, is referred to throughout this report as the ~~“Company,” “ARI,” “we,” “us”~~"Company," "ARI," "we," "us" and ~~“our”~~"our") is a corporation that has elected to be taxed as a real estate investment trust ~~(“REIT”~~("REIT") for U.S. federal income tax purposes and primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, ~~commercial mortgage-backed securities (“CMBS”)~~ and other commercial real estate-related debt ~~investments in the United States.~~investments. These asset classes are referred to as ~~the Company’s~~our target assets.

~~The Company, organized~~We were formed in Maryland on June 29, 2009, commenced operations on September 29, 2009 and isare externally managed and advised by ACREFI Management, LLC (the ~~“Manager”~~"Manager"), an indirect subsidiary of Apollo Global Management, ~~LLC~~Inc. (together with its subsidiaries, ~~“Apollo”~~"Apollo").

~~The Company~~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 ~~its~~our tax qualification as a REIT, ~~the Company is~~we are required to distribute at least 90% of ~~its~~our taxable income, excluding net capital gains, to stockholders and meet certain other asset, income, and ownership tests.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include ~~the Company’s~~our accounts and those of ~~its~~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”~~("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. ~~The Company’s~~Our most significant estimates include ~~the fair value of financial instruments,~~ loan loss ~~reserves and impairment.~~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 ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019 ("Annual Report"), as filed with the Securities and Exchange Commission (the ~~“SEC”~~"SEC"). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly ~~the Company’s~~our financial position, results of operations and cash flows have been included. ~~The Company's~~Our results of operations for the three and nine months ended September 30, ~~2017~~2020 are not necessarily indicative of the results to be expected for the full year or any other future period.

~~On August 31, 2016,~~We currently operate in 1 reporting segment.

Risks and Uncertainties

During the ~~Company, pursuant~~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 ~~terms~~United States and ~~conditions~~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 ~~Agreement~~COVID-19 pandemic we are not in a position to estimate the ultimate impact this will have on our business and ~~Plan~~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 ~~Merger, dated February 26, 2016 (as amended,~~September 30, 2020. The uncertainty surrounding COVID-19 may materially impact the ~~“AMTG Merger Agreement”) acquired Apollo Residential Mortgage, Inc. (“AMTG”). AMTG merged with~~accuracy of the estimates and ~~into~~assumptions used in the ~~Company (the “AMTG Merger”) with the Company continuing~~financial statements and related footnotes and, as ~~the surviving entity. As~~ a result, ~~all operations of AMTG and its former subsidiaries are consolidated with the operations of the Company. As of December 31, 2016 all assets acquired~~actual results may vary significantly from ~~AMTG were sold.~~estimates.

~~Under Financial Accounting Standards Board (the “FASB”~~Current Expected Credit Losses ("CECL") ASC Topic 805, “Business Combinations”, or ASC 805, the acquirer in a business combination must recognize, with certain exceptions, the fair values of assets acquired, liabilities assumed, and non-controlling interests when the acquisition constitutes a change in control of the acquired entity. We applied the provisions of ASC 805 in accounting for the Company's acquisition of AMTG. In doing so, we recorded provisional amounts for certain items as of the date of the acquisition, including the fair value of certain assets and liabilities. During the measurement period, a period which shall not exceed one year, the Company retrospectively adjusted the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of such date that, if known, would have affected the measurement of the amounts recognized. See further discussion in "Note 17 - Business Combination."

~~The Company currently operates in~~ ~~one~~ ~~business segment.~~

~~Recent Accounting Pronouncements~~

In May 2014, the FASB issued guidance which broadly amends the accounting guidance for revenue recognition. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. The Company does not anticipate that the adoption of this guidance will have a material impact on the Company's condensed consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” or ASU 2014-15. ASU 2014-15 introduces an explicit requirement for management to assess and provide certain disclosures if there is substantial doubt about an entity’s ability to continue as a going concern. ASU 2014-15 is effective for the annual period ending after December 15, 2016. The Company adopted this guidance and determined that there was no material impact on the Company's condensed consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting (Topic 718),” or ASU 2016-09. ASU 2016-09 requires all income tax effects of share-based payment awards to be recognized in the income statement when the awards vest or are settled. It also allows an employer to repurchase more of an employee’s shares for tax withholding purposes than is permitted under current guidance without triggering liability accounting. Finally, the guidance allows a policy election to account for employee forfeitures as they occur. The guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted this guidance and determined there was no material impact on the Company's condensed consolidated financial statements.

In June 2016, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ASU 2016-13 ~~“Financial~~"Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial ~~Instruments (Topic 326),” or~~ Instruments" ("ASU ~~2016-13. ASU 2016-13 significantly changes~~2016-13"), which we refer to as the "CECL Standard." This update has changed how entities ~~will~~ measure credit losses for most financial assets and certain other instruments that are not measured at fair ~~value through net income.~~value. The ~~guidance will replace~~CECL Standard replaced the ~~“incurred loss”~~"incurred loss" approach under existing guidance with an ~~“expected loss”~~"expected loss" model for instruments measured at amortized ~~cost, and require~~cost. The CECL Standard requires entities to record allowances for ~~available-for-sale~~held-to-maturity debt securities ~~rather than reduce~~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 ~~they do today~~a practical expedient under the ~~other-than-temporary impairment model. It also simplifies~~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 condensed 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 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 ("CMBS") database with historical losses from 1998 through the third 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(s). The subordinate loans, by virtue of being the first loss position, are 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 our 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 our condensed consolidated statement of changes in stockholders’ equity.

Refer to "Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net" for further information regarding CECL.

Secured Debt Arrangements

Secured debt arrangements are accounted for as financing transactions, unless they meet the criteria for sale accounting. Loans financed through a secured debt arrangement remain on our balance sheet as an asset and cash received from the purchaser is recorded on our condensed consolidated balance sheet as a liability. Interest incurred in accordance with secured debt arrangements is recorded as interest expense.

During the second quarter of 2020, we entered into a private securitization with Barclays Bank, plc (the "Barclays Private Securitization"). We have determined that the issuer of this securitization, ACRE Debt 2 PLC, is a Variable Interest Entity ("VIE") of which we were deemed to be the primary beneficiary and therefore, we consolidated the operations of this entity for GAAP. The collateral assets of the securitization are included in commercial mortgage loans, net on our condensed consolidated balance sheet. The liabilities of the securitization to the senior noteholders, excluding the notes held by us, are included in secured debt arrangements, net on our condensed consolidated balance sheet.

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06 "Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity" ("ASU 2020-06"). The intention of ASU 2020-06 is to address the complexities in accounting ~~model~~ for ~~purchased credit-impaired~~certain financial instruments with a debt ~~securities~~ and ~~loans. The guidance~~equity component. Under ASU 2020-06, the number of accounting models for convertible notes will be reduced and entities that issue convertible debt will be required to use the if-converted method for the computation of diluted "Earnings per share" under ASC 260. ASC 2020-06 is effective for fiscal years beginning after December 15, ~~2019~~2021 and ~~is to~~may be adopted through either a ~~cumulative-effect adjustment to retained earnings as~~modified retrospective method of ~~the beginning~~transition or a fully retrospective method of ~~the first reporting period in which the guidance is effective. The Company is~~transition. We are currently assessing the impact ~~if any, the~~this guidance will have on ~~the Company's condensed consolidated financial statements when adopted.~~

In August 2016, the FASB issued ASU 2016-15 “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” or ASU 2016-15. ASU 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The new guidance addresses the classification of various transactions including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, distributions received from equity method investments, beneficial interests in securitization transactions, and others. The Company adopted this guidance in the third quarter of 2016 and determined that there was no material impact on the Company'sour condensed consolidated financial statements.

In ~~November 2016,~~March 2020, the FASB issued ASU ~~2016-18 “Statement~~2020-04 “Reference Rate Reform (Topic 848) – Facilitation of ~~Cash Flows (Topic 230): Restricted Cash,”~~the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying GAAP to debt instruments, derivatives, and other contracts that reference LIBOR or ~~ASU 2016-18. ASU 2016-18 is intended~~other reference rates expected to clarify how entities present restricted cash in the statement of cash flows. The guidance requires entities to show the changes in the total of cash and cash equivalents and restricted cash in the statement of cash flows. Asbe discontinued as a result ~~entities will no longer present transfers between cash~~of reference rate reform. This guidance is optional and ~~cash equivalents~~may be elected through December 31, 2022 using a prospective application on all eligible contract modifications. We have loan agreements, debt agreements, and ~~restricted cash in the statement of cash flows. When cash and cash equivalents and restricted cash are presented in more than one line item on the balance sheet, the new guidance requires~~an interest rate cap that incorporate LIBOR as a ~~reconciliation of the totals in the statement of cash flows~~referenced interest rate. It is difficult to the related captions in the balance sheet. This reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017 and is to be applied retrospectively. The Company early adopted ASU 2016-18 on June 30, 2017, which changed the Company's condensed consolidated statement of cash flows and related disclosures for all periods presented. The following is a reconciliation of the Company's cash, cash equivalents, and restricted cash to the total presented in the Company's condensed consolidated statement of cash flows for the nine months ended September 30, 2017 and September 30, 2016, respectively:

Nine months ended September 30,
2017 2016
Cash and cash equivalents $ 140,229
$ 254,643
Restricted cash 76
62,324
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows $ 140,305
$ 316,967

In August 2017, the FASB issued ASU 2017-12 "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” or ASU 2017-12. The intention of ASU 2017-12 is to align an entity’s financial reporting for hedging activities with the economic objectives of those activities. Upon adoption of ASU 2017-12, the cumulative ineffectiveness previously recognized on existing cash flow and net investment hedges will be adjusted and removed from beginning retained earnings and placed in accumulated other comprehensive income (loss). The Company is currently assessing the impact,predict what effect, if any, the ~~guidance will~~phase-out of LIBOR and the use of alternative benchmarks may have on our business or on the ~~Company's condensed consolidated~~overall financial ~~statements when adopted. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018 and is applied retroactively.~~markets. We have not adopted any of the optional expedients or exceptions through September 30, 2020, but will continue to evaluate the possible adoption of any such expedients or exceptions.

Note 3 – 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~~Market-based or observable inputs are the preferred source of values, followed by valuation models using ~~management~~management's assumptions in the absence of ~~market~~market-based or observable inputs. The three levels of the hierarchy as noted in ASC 820 "Fair Value Measurements and ~~Disclosures~~,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 ~~the Company anticipates~~we anticipate that ~~its~~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. ~~The Company~~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 value of the Company's CMBS portfolio is determined by reference to market prices provided by certain dealers who make a market in these financial instruments. The Company believes that these dealers who are usually market makers in these securities utilize various valuation techniques and inputs including, but not limited to, observable trades, discounted cash flow, market yield and duration to price these securities. Broker quotes are only indicative of fair value and may not necessarily represent what the Company would receive in an actual trade for the applicable instrument. Management performs additional analysis on prices received based on broker quotes to validate the prices and adjustments are made as deemed necessary by management to capture current market information. As of December 31, 2016 the estimated fair values of the Company’s securities were based on observable inputs and were classified as Level II in the fair value hierarchy. In June 2017, the Manager determined that, based on illiquidity in the market for these securities, broker quotes lack observable inputs and thus a transfer into Level III in the fair value hierarchy was necessary. Based on this determination, as of June 30, 2017, we have applied Level III classification to these securities. In accordance with GAAP, the Company elects the fair value option for these securities at the date of purchase in order to allow the Company to measure these securities at fair value with the change in estimated fair value included as a component of earnings in order to reflect the performance of the investment in a timely manner.

~~The estimated fair values of the Company’s~~our derivative instruments are determined using a discounted cash flow analysis on the expected cash flows of each ~~derivative. The fair values of interest rate swaps~~instrument. Our derivative instruments are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The fair values of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts (or payments) that would occur if variable interest rates rise above the strike

~~rate of the caps. The variable interest rates used~~classified as Level II in the ~~calculation of projected cash flows are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.~~ fair value hierarchy.

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 ~~Company’s derivative instruments are classified as Level II~~fair value of interest rate swaps 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 London Inter-bank Offered Rate ("LIBOR") curve. As of September 30, 2020, we had 0 interest rate swaps on our condensed consolidated balance sheet.

The fair value of our interest rate cap is determined by using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the interest rate cap. The variable interest rates used in the ~~fair value hierarchy.~~calculation of projected receipts on the interest rate cap are based on a third party expert's expectation of future interest rates derived from observable market interest rate curves and volatilities.

The following table summarizes the levels in the fair value hierarchy into which ~~the Company’s financial instruments~~our derivative assets were categorized as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019 ($ in thousands):

Fair Value as of September 30, 2017 Fair Value as of December 31, 2016
Level I Level II Level III Total Level I Level II Level III Total
CMBS (Fair Value Option) $ —
$ —
$ 191,902
$ 191,902
$ —
$ 331,076
$ —
$ 331,076
Derivative instruments, net —
(11,746 ) —
(11,746 ) —
5,906
—
5,906
Total $ —
$ (11,746 ) $ 191,902
$ 180,156
$ —
$ 336,982
$ —
$ 336,982

~~The following is a reconciliation of investments for which Level III inputs were used in determining fair value:~~

CMBS
Fair value at December 31, 2016 $ —
Transfers into Level III ⁽¹⁾
254,484
Net realized loss on investments (4,076 )
Net increase in unrealized gain on investments 13,488
Sales and repayments of investments (71,073 )
Amortization of purchase discount, net (921 )
Fair value at September 30, 2017 $ 191,902

~~———————~~

(1) Transfers into Level III of the fair value hierarchy represent investments that experienced an insignificant level of market activity during the period and were thus valued in the absence of observable inputs. Transfers into Level III of the fair value hierarchy are recorded at the end of the reporting period. In June 2017, the Manager determined that, based on illiquidity in the market for these securities, broker quotes, which are the primary valuation technique used to mark these investments at fair value, lack observable inputs and thus a transfer into Level III was necessary. Based on this determination, as of June 30, 2017, we have applied Level III classification to these securities.


	Fair Value as of September 30, 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	$	0	$	13,481	$	0	$	13,481	$	0	$	0	$	0	$	0
Interest rate cap	0		173		0		173		0		0		0		0
Total financial instruments assets	$	0	$	13,654	$	0	$	13,654	$	0	$	0	$	0	$	0

The following table summarizes ~~information about significant unobservable inputs used~~the levels in the fair value ~~measurement of Level III investments~~hierarchy into which our derivative liabilities were categorized as of September 30, ~~2017. There were no Level III investments as of~~2020 and December 31, ~~2016:~~2019 ($ in thousands):


	Fair Value as of September 30, 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	$	0	$	0	$	0	$	0	$	0	$	4,876	$	0	$	4,876
Interest rate swap liability	0		0		0		0		0		14,470		0		14,470
Total financial instrument liabilities	$	0	$	0	$	0	$	0	$	0	$	19,346	$	0	$	19,346



			~~Unobservable Input~~
~~Asset Category~~	~~Fair Value~~	~~Primary Valuation Technique~~	~~Input~~	~~Range~~
~~CMBS~~	~~191,902~~	~~Broker quotes~~	~~Price~~ ⁽¹⁾	~~63 - 101~~

~~———————~~

~~(1) A significant increase (decrease) in the unobservable input in isolation would result in significantly higher (lower) fair value measurement.~~

Note 4 – ~~Securities~~Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net

At Our loan portfolio was comprised of the following at September 30, ~~2017, all~~2020 and December 31, 2019 ($ in thousands):


Loan Type	September 30, 2020		December 31, 2019
Commercial mortgage loans, net ⁽¹⁾	$	5,427,945	$	5,326,967
Subordinate loans and other lending assets, net	1,009,092		1,048,126
Carrying value, net	$	6,437,037	$	6,375,093

———————

(1)Includes $156.4 million and $126.7 million in 2020 and 2019, respectively, of the Company's CMBS (Fair Value Option) were pledged to secure borrowings under the Company’s master repurchase agreement Deutsche Bank AG ("DB") (the "DB Facility"). The Company's master repurchase agreement with UBS AG, London Branch ("UBS") (the "UBS Facility") matured in September, 2017 and was fully repaid by the Company. See "Note 7 - Borrowings Under Repurchase Agreements" for further information regarding these facilities.contiguous financing structured as subordinate loans.

~~CMBS (Held-to-Maturity) represents a~~

Our loan the Company closed during May 2014 that was subsequently contributed to a securitization during August 2014. During May 2014, the Company closed a $155,000 floating-rate whole loan secured by the first mortgage and equity interests in an entity that owns a resort hotel in Aruba. The property consistsportfolio consisted of 442 hotel rooms, 114 timeshare units, two casinos and approximately 131,500 square feet of retail space. During June 2014, the Company syndicated a $90,000 senior participation in the loan and retained a $65,000 junior participation. The Company evaluated this transaction and concluded that due to its continuing involvement, the transaction should not be accounted for as a sale. During August 2014, both the $90,000 senior participation and the Company's $65,000 junior participation were contributed to a CMBS securitization. In exchange for contributing its $65,000 junior participation, the Company received a CMBS secured solely by the $65,000 junior participation. During May 2017, the loan and associated CMBS (Held-to-Maturity) were fully repaid and the related Securities, held-to-maturity and participation sold line items were removed from the Company's condensed consolidated balance sheet.

~~The~~95% floating rate loans, based on amortized cost, ~~and estimated fair value~~as of ~~the Company’s debt securities at~~ September 30, ~~2017~~ ~~are summarized as follows:~~2020 and December 31, 2019, respectively.

Security Description
Face
Amount

Amortized
Cost

Gross
Unrealized
Gain

Gross
Unrealized
Loss

Estimated Fair
Value
CMBS (Fair Value Option) $ 222,522
$ 217,242
$ 247
$ (25,587 ) $ 191,902

~~During~~Activity relating to our loan portfolio, for the nine months ended September 30, ~~2017, the Company sold securities resulting~~2020, was as follows ($ in ~~a net realized loss of $5,118.~~thousands):

~~The amortized cost and estimated fair value of the Company’s debt securities at~~ ~~December 31, 2016~~ ~~are summarized as follows:~~

Security Description
Face
Amount

Amortized
Cost

Gross
Unrealized
Gain

Gross
Unrealized
Loss

Estimated
Fair
Value
CMBS (Fair Value Option) $ 375,861
$ 368,247
$ 292
$ (37,463 ) $ 331,076
CMBS (Held-to-Maturity) 146,530
146,352
—
—
146,352
Total $ 522,391
$ 514,599
$ 292
$ (37,463 ) $ 477,428

During August 2016, the Company sold CMBS with an amortized cost of $86,676 resulting in a net realized loss of $225, which was comprised of realized gains of $90 and realized losses of $315. The sale generated net proceeds of $16,222 after the repayment of $70,229 of borrowings under the DB Facility.

~~The overall statistics for the Company’s CMBS (Fair Value Option) calculated on a weighted average basis as of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~ ~~are as follows:~~

September 30, 2017 December 31, 2016
Credit Ratings * BB-D
B+-NR
Coupon 5.9 % 5.9 %
Yield 4.2 % 6.0 %
Weighted Average Life 2.0 years
2.5 years

~~-————————~~


*	~~Ratings per Fitch Ratings, Moody’s Investors Service or Standard & Poor's.~~

~~The percentage vintage, property type and location of the collateral securing the Company's CMBS (Fair Value Option) calculated on a weighted average basis as of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~ ~~are as follows:~~

Vintage September 30, 2017 December 31, 2016
2005 — % 2.0 %
2006 21.2
12.1
2007 57.0
73.5
2008 21.8
12.4
Total 100.0 % 100.0 %

Property Type September 30, 2017 December 31, 2016
Office 37.8 % 34.6 %
Retail 25.8
29.0
Multifamily 13.6
12.4
Other ⁽¹⁾
22.8
24.0
Total 100.0 % 100.0 %

~~———————~~

~~(1) No other individual category comprises more than 10% of the total.~~

Location September 30, 2017 December 31, 2016
South Atlantic 28.3 % 23.8 %
Middle Atlantic 11.9
16.7
Pacific 5.8
15.3
East North Central 16.7
10.8
Other ⁽¹⁾
37.3
33.4
Total 100.0 % 100.0 %


	Principal Balance		Deferred Fees/Other Items ⁽¹⁾		Specific Provision for Loan Loss		Carrying Value, Net
December 31, 2019	$	6,467,842	$	(35,768)	$	(56,981)	$	6,375,093
New loan fundings	457,449		—		—		457,449
Add-on loan fundings ⁽²⁾	309,820		—		—		309,820
Loan repayments and sales	(543,535)		—		—		(543,535)
Gain (loss) on foreign currency translation	(15,060)		543		—		(14,517)
Specific CECL Allowance	—		—		(139,950)		(139,950)
Realized loss on investment	(20,569)		3,127		—		(17,442)
Deferred fees	—		(6,027)		—		(6,027)
PIK interest and amortization of fees	38,197		17,225		—		55,422
September 30, 2020	$	6,694,144	$	(20,900)	$	(196,931)	$	6,476,313
General CECL Allowance ⁽³⁾							(39,276)
Carrying value, net							$	6,437,037

———————

(1) ~~No other individual category comprises more than 10% of the total.~~

~~Note 5 – Loans, Held for Investment~~

~~The Company’s loans receivable are comprised of the following:~~

Loan Type September 30, 2017 December 31, 2016
Commercial mortgage loans, held for investment, net $ 2,218,222
$ 1,641,856
Subordinate loans, held for investment, net 1,340,378
1,051,236
Total loans, held for investment, net $ 3,558,600
$ 2,693,092

~~Activity relating to our loans, held for investment portfolio was as follows:~~

Principal Balance
Deferred Fees/Other Items ⁽¹⁾

Provision for Loan Loss ⁽²⁾
Carrying Value
December 31, 2016 2,720,344
(12,252 ) (15,000 ) 2,693,092
Loan fundings 1,057,070
—
—
1,057,070
Loan repayments (238,541 ) —
—
(238,541 )
Unrealized gain on foreign currency translation 20,974
—
—
20,974
Provision for loan loss ⁽²⁾
—
—
(1,981 ) (1,981 )
Deferred fees and other items ⁽¹⁾
—
(13,047 ) —
(13,047 )
PIK interest, amortization of fees and other items ⁽¹⁾
19,321
21,712
—
41,033
September 30, 2017 3,579,168
(3,587 ) (16,981 ) 3,558,600

~~———————~~

~~(1)~~ Other items primarily consist of purchase discounts or premiums, cost recovery interest, exit fees and deferred origination expenses.

(2) ~~In addition~~Represents fundings for loans closed prior to 2020.

(3)$3.6 million of the ~~$1,981 provision for loan loss, the Company~~General CECL Allowance is excluded from this table because it relates to unfunded commitments and has been recorded ~~an impairment of $3,019 against~~as a ~~related investment previously recorded~~liability under accounts payable, accrued expenses and other ~~assets on the Company's~~liabilities in our condensed consolidated balance sheet.

The following table details overall statistics for our loan ~~portfolio:~~portfolio at the dates indicated ($ in thousands):


	September 30, 2020			December 31, 2019
Number of loans	70			72
Principal balance	$	6,694,144		$	6,467,842
Carrying value, net	$	6,437,037		$	6,375,093
Unfunded loan commitments ⁽¹⁾	$	1,426,404		$	1,952,887
Weighted-average cash coupon ⁽²⁾	5.6		%	6.5		%
Weighted-average remaining fully-extended term ⁽³⁾	2.9 years			3.3 years
Weighted-average expected term ⁽⁴⁾	2.0 years			1.8 years

September 30, 2017 December 31, 2016
Number of loans 56
45
Principal balance $ 3,579,168
$ 2,720,344
Carrying value $ 3,558,600
$ 2,693,092
Unfunded loan commitments⁽¹⁾
$ 80,164
$ 170,365
Weighted-average cash coupon ⁽²⁾
8.5 % 8.88 %

———————


~~(1)~~	Unfunded loan commitments are primarily funded to finance property improvements or lease-related expenditures by the borrowers. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.


~~(2)~~	~~For floating rate loans, assumes one-month LIBOR of 1.23%and 0.77%, as of September 30, 2017 and December 31, 2016, respectively.~~

(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 September 30, 2020 and December 31, 2019, respectively.

Property Type

The ~~tables~~table below ~~detail~~details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):


	September 30, 2020						December 31, 2019
Property Type	Carrying Value		% of Portfolio⁽¹⁾		Carrying Value		% of Portfolio
Office	$	1,832,607	28.3	%	$	1,401,400	22.0	%
Hotel	1,578,614		24.4		1,660,162		26.0
Residential-for-sale: construction	894,610		13.8		692,816		10.9
Residential-for-sale: inventory	150,015		2.3		321,673		5.1
Urban Retail	636,308		9.8		643,706		10.1
Urban Predevelopment	295,728		4.6		409,864		6.4
Healthcare	363,170		5.6		371,423		5.8
Industrial	228,674		3.5		227,940		3.6
Other	496,587		7.7		646,109		10.1
Total	$	6,476,313	100.0	%	$	6,375,093	100.0	%
General CECL Allowance ⁽²⁾	(39,276)
Carrying value, net	$	6,437,037

———————

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

(2)$3.6 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 our condensed consolidated balance sheet.

Geography

The table below details the geographic distribution of the properties securing the loans in our ~~portfolio:~~portfolio at the dates indicated ($ in thousands):


	September 30, 2020						December 31, 2019
Geographic Location	Carrying Value		% of Portfolio⁽¹⁾		Carrying Value		% of Portfolio
New York City	$	2,393,012	37.0	%	$	2,167,487	34.0	%
Northeast	138,448		2.1		110,771		1.7
United Kingdom	1,179,761		18.2		1,274,390		20.0
West	741,971		11.5		728,182		11.4
Midwest	556,011		8.6		614,337		9.6
Southeast	576,420		8.9		564,166		8.9
Other	890,690		13.7		915,760		14.4
Total	$	6,476,313	100.0	%	$	6,375,093	100.0	%
General CECL Allowance ⁽²⁾	(39,276)
Carrying value, net	$	6,437,037

———————

(1)Percentage of portfolio calculations are made prior to consideration of 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

September 30, 2017 December 31, 2016
Property Type Carrying
Value % of
Portfolio Carrying
Value % of
Portfolio
Residential - for sale 735,551
20.7 % 469,997
17.5 %
Hotel 652,745
18.3 % 408,428
15.2 %
Urban Retail Predevelopment 644,283
18.1 % 491,187
18.2 %
Mixed Use 352,094
9.9 % 134,797
5.0 %
Office 293,093
8.2 % 255,031
9.5 %
Residential Rental 278,117
7.8 % 309,243
11.5 %
Retail Center 197,120
5.5 % 209,401
7.8 %
Healthcare 174,244
4.9 % 170,549
6.3 %
Other 154,017
4.3 % 87,650
3.3 %
Industrial 77,336
2.3 % 156,809
5.7 %
3,558,600
100.0 % 2,693,092
100.0 %
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

September 30, 2017 December 31, 2016
Geographic Location Carrying
Value % of
Portfolio Carrying
Value % of
Portfolio
Manhattan, NY $1,246,235 35.0% $870,914 32.3%
Brooklyn, NY 244,501 6.9% 163,389 6.1%
Northeast 133,979 3.8% 137,770 5.1%
Southeast 530,881 14.9% 332,276 12.3%
Midwest 524,984 14.7% 405,992 15.1%
Mid Atlantic 248,786 7.0% 263,717 9.8%
West 205,274 5.8% 219,664 8.2%
Southwest 33,824 1.0% 54,614 2.0%
United Kingdom 312,159 8.7% 244,756 9.1%
Other International 77,977 2.2% — —%
Total $3,558,600 100% $2,693,092 100%
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 ~~Company evaluates its~~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):


September 30, 2020
								Year Originated
Risk Rating	Number of Loans	Total		% of Portfolio				2020		2019		2018		2017		2016		Prior
1	0	$	0	0	%			$	0	$	0	$	0	$	0	$	0	$	0
2	1	32,000		0.5	%			0		0		0		0		0		32,000
3	62	6,035,647		93.2	%			450,119		2,685,060		1,350,949		815,789		88,685		645,045
4	0	0		0	%			0		0		0		0		0		0
5	7	408,666		6.3	%			0		0		28,872		137,798		114,910		127,086
Total	70	$	6,476,313	100.0	%			$	450,119	$	2,685,060	$	1,379,821	$	953,587	$	203,595	$	804,131
General CECL Allowance				(39,276)
Total carrying value, net						$	6,437,037

Weighted Average Risk Rating						3.1


December 31, 2019
							Year Originated
Risk Rating	Number of Loans	Total		% of Portfolio			2019		2018		2017		2016		2015		Prior
1	0	$	0	0	%		$	0	$	0	$	0	$	0	$	0	$	0
2	8	348,324		5.5	%		0		241,676		0		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	%		0		0		0		182,910		0		0
5	2	136,304		2.1	%		0		0		0		0		0		136,304
Total	72	$	6,375,093	100.0	%		$	2,736,825	$	1,596,690	$	912,636	$	291,700	$	524,246	$	312,996

Weighted Average Risk Rating						3.0

Current Expected Credit Losses

Refer to the following schedule of the General CECL Allowance as of September 30, 2020, and as of the date of adoption, January 1, 2020 ($ in thousands):


	September 30, 2020		January 1, 2020⁽¹⁾
Commercial mortgage loans, net	$	20,161	$	12,149
Subordinate loans and other lending assets, net	19,115		15,630
Unfunded commitments⁽²⁾	3,595		3,088
Total General CECL Allowance	$	42,871	$	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 our condensed consolidated balance sheet within accounts payable, accrued expenses and other liabilities

In assessing the General CECL Allowance, we consider macroeconomic factors, including 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.

The General CECL Allowance increased by $12.0 million from initial adoption on January 1, 2020, to September 30, 2020. The increase is primarily related to a change in our view of estimated future macroeconomic conditions in the backdrop of the global COVID-19 pandemic and an increase in our view of the remaining expected term of our loan portfolio as of September 30, 2020.

The General CECL Allowance decreased by $5.8 million in the quarter ended September 30, 2020. The decrease is primarily related to an improved view of estimated future macroeconomic conditions since the prior quarter end.

Although 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 $38.4 million accrued interest receivable, included in Other Assets on our condensed consolidated balance sheet, from the amortized cost basis of the related commercial mortgage loans ~~for possible impairment~~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 we deem the interest to be uncollectible with any previously 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 $408.7 million and $136.3 million as of September 30, 2020 and December 31, 2019, respectively. For the three and nine months ended September 30, 2020, we received $0.3 million and $1.6 million, respectively, in interest that reduced amortized cost under the cost recovery method. Accrued interest is past due for 90 or more days for loans with an amortized cost basis of $408.7 million and $136.3 million as of September 30, 2020 and December 31, 2019, respectively.

The following schedule illustrates the quarterly ~~basis. The Company~~changes in the CECL Allowance since we adopted the CECL Standard on January 1, 2020 ($ in thousands):


		Specific CECL Allowance⁽¹⁾			General CECL Allowance										Total CECL Allowance			CECL Allowance as % of Amortized Cost
						Funded		Unfunded		Total								General		Total
December 31, 2019			$56,981			$	0	$	0	$	0		$	56,981		0	%	0	%
Changes:
	January 1, 2020 - Adoption of CECL Standard	0			27,779	3,088		30,867				30,867
	Q1 Allowances	150,000			30,494	2,971		33,465				183,465
March 31, 2020			$	206,981		$	58,273	$	6,059	$	64,332		$	271,313		1.08	%	4.05	%
Changes:
	Q2 Allowances (Reversals)	5,500			(13,729)	(1,940)		(15,669)				(10,169)
	Realized Loss	(15,000)			0	0		0				(15,000)
June 30, 2020			$	197,481		$	44,544	$	4,119	$	48,663		$	246,144		0.81	%	3.71	%
Changes:
	Q3 Reversals	(550)			(5,268)	(524)		(5,792)				(6,342)
September 30, 2020			$	196,931		$	39,276	$	3,595	$	42,871		$	239,802		0.71	%	3.59	%

———————

(1)As of December 31, 2019, amount represents specific loan loss provisions recorded on assets before the adoption of the CECL Standard. After the adoption of the CECL Standard on January 1, 2020, amounts represent Specific CECL Allowances.

Specific CECL Allowance

We regularly ~~evaluates~~evaluate the extent and impact of any credit ~~deterioration~~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 ~~are~~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 ~~property’s~~ liquidation ~~value. The Company~~value of the underlying collateral. We also ~~evaluates~~evaluate the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the properties. In addition, ~~the Company considers~~we consider the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. Such ~~loan loss analyses are~~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. ~~An allowance for loan loss is established when it is deemed probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan.~~

~~During the second quarter of 2017, the Company recorded a loan loss provision of $1,981~~We evaluate our loans on a ~~commercial mortgage loan secured by fully-built, for-sale residential condominium units located~~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 ~~Bethesda, MD.~~accordance with the CECL Standard. In ~~addition to~~accordance with the $1,981 provision for loan loss, the Company recorded an impairment of $3,019 on a related investment previously recorded under other assets on the Company's condensed consolidated balance sheet. The loan loss provision and impairment were based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior topractical expedient approach, we determine the loan loss provision and related impairment). Fair value of the collateral was determined using a discounted cash flow analysis. The significant unobservable inputs used in determining the collateral value were sales price per square foot and discount rate which were an average of $678 dollars per square foot across properties and 15%, respectively. Effective April 1, 2017, the Company ceased accruing all interest associated with the loan and accounts for the loan on a cost-recovery basis (all proceeds are applied towards the loan balance).

During 2016, the Company recorded a loan loss provision of $10,000 on a multifamily commercial mortgage loan and $5,000 on a multifamily subordinate loan secured by a multifamily property located in Williston, ND. The loan loss provision was based onto be the difference between the fair value of the underlying collateral and the carrying value of the loan (prior to the loan loss provision). ~~Fair~~When the repayment or satisfaction of a loan is dependent on a sale, rather than operations, of the collateral, the fair value is adjusted for the estimated cost to sell the collateral. The fair value of the underlying collateral ~~was~~is determined by using amethod(s) such as discounted cash flow, ~~analysis.~~the market approach, or direct capitalization approach. The ~~significant~~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.

We evaluate modifications to our loan portfolio to determine if the modifications constitute a troubled debt restructuring ("TDR") and/or substantial modification, under ASC Topic 310 "Receivables". During the second quarter of 2020, one commercial mortgage loan, secured by a hotel in ~~determining~~New York City, was restructured and was deemed to be a TDR. In connection with this restructuring, the ~~collateral value were terminal capitalization rate~~borrower contributed additional equity of $15.0 million and ~~discount rate~~concurrently we wrote down our principal on this loan by $15.0 million, which ~~were 11% and 10%, respectively. The Company ceased accruing payment in kind ("PIK") interest associated with the loan and recognizing interest income upon receipt of cash.~~

had been previously recorded as a Specific CECL Allowance. As of September 30, ~~2017,~~2020, the ~~aggregate~~loan had a principal balance and amortized cost of $142.8 million and $144.5 million, respectively, has a risk rating of 3, and is on accrual status. During the three months ended June 30, 2020, the CECL Allowance of $15.0 million was reversed through reversal of loan losses, while the write-down was recorded in realized loss on investments in our condensed consolidated statement of operations.

The following table summarizes the specific provision for loan losses that has been recorded on our portfolio as of September 30, 2020 ($ in thousands):

Type

Property type

Location

Amortized cost⁽¹⁾

Interest recognition status/ as of date

Mortgage

Urban Predevelopment⁽³⁾

Brooklyn, NY

128,418

Cost Recovery/ 3/1/2020

Urban Predevelopment⁽³⁾

Miami, FL

114,910

Cost Recovery/ 3/1/2020

Retail Center⁽⁴⁾⁽⁵⁾

Cincinnati, OH

105,561

Cost Recovery/ 10/1/2019

Hotel⁽²⁾

Pittsburgh, PA

28,872

Cost Recovery/ 3/31/2020

Residential-for-sale: inventory⁽⁶⁾⁽⁷⁾

Bethesda, MD

3,095

Cost Recovery/ 1/1/2018

Mortgage total:

380,856

Mezzanine

Hotel⁽²⁾

Washington, DC

18,430

Cost Recovery/ 3/31/2020

Hotel⁽⁸⁾

Anaheim, CA

9,380

Cost Recovery/ 9/30/2020

Mezzanine total:

27,810

Grand total:

408,666

———————

(1)Amortized cost is shown net of $196.9 million of net loan loss ~~provision~~provisions. During the three and nine months ended September 30, 2020, there was ~~$11,981~~ $(0.6) million and ~~$5,000~~$140.0 million in (reversals)/provisions taken due to factors including COVID-19. See Note 2 for ~~commercial mortgage loans~~additional information regarding COVID-19.

(2)The fair value of hotel collateral was determined by applying a discount rate ranging from 8.5% to 11.0% and ~~subordinate loans, respectively. As of December 31, 2016,~~a capitalization rate ranging from 7.0% to 9.0%. For the ~~aggregate loan loss provision was $10,000 and $5,000 for commercial mortgage loans and subordinate loans, respectively.~~

~~For~~hotel located in Washington, DC, during the three and nine months ended September 30, ~~2017,~~2020, there was $0 and $0.2 million of interest paid applied towards reducing the ~~Company received pre-payment penalties~~carrying value of ~~$3,590~~the loan, respectively.

(3)The fair value of urban predevelopment collateral was determined by assuming rent per square foot ranging from $48 to $225 and ~~$3,998, respectively. For~~a capitalization rate ranging from 5.0% to 5.5%.

(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 VIE and we determined that we are not the primary beneficiary of that VIE. During the three and nine months ended September 30, ~~2016,~~2020, $0.4 million and $1.1 million, respectively, of interest paid was applied towards reducing the ~~Company received pre-payment penalties~~carrying value of ~~$4,000~~the loan.

(6)Subsequent to September 30, 2020, the remaining collateral on this loan was sold. In connection with the sale of the underlying collateral, a $1.9 million reversal of the previously recognized specific CECL Allowance was recorded during the three months ended September 30, 2020. Refer to "Note 18 - Subsequent Events" for more information.

(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.

(8)The fair value of the hotel, located in Anaheim, California, was determined using the market approach where the fair market value of the underlying collateral, less projected closing costs, was compared to the amortized cost of the loan.

Other Loan and ~~$5,225, respectively. The Company records pre-payment penalty income under~~Lending Assets Activity

We recognized payment-in-kind ("PIK") interest ~~income.~~

~~For~~of $12.5 million and $37.3 million for the three and nine months ended September 30, ~~2017, the Company recognized PIK interest of $5,309~~2020, respectively, and ~~$19,323, respectively. For~~$13.7 million and $42.8 million for the three and nine months ended September 30, ~~2016,~~2019, respectively.

We recognized $0 and $0.2 million in pre-payment penalties and accelerated fees for the ~~Company recognized PIK~~three and nine months ended September 30, 2020, respectively, and $0.3 million and $4.0 million for the three and nine months ended September 30, 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 September 30, 2020. These interests have a weighted average maturity of 6.07 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 our 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 it as such. We recorded no gain or loss related to this sale.

In the second quarter of 2020, we sold interests in three construction loans, with aggregate commitments of $376.9 million (of which approximately $127 million was funded at the time of sale). The sales were to entities managed by affiliates of the Manager. In connection with these sales, we agreed to indemnify each buyer on a limited basis for realized losses of up to 10% of the committed amount on each of the loans provided that; (i) the loan is in default on or prior to December 15, 2020 and (ii) the buyer realized a loss from an enforcement action pursuant to the underlying loan agreement on or prior to June 15, 2021. The limited indemnity does not cover a loss on sale of the loan or an unrealized mark-to-market loss. We recorded a loss of approximately $1.4 million in connection with these sales. These transactions were evaluated under ASC 860 - Transfers and Servicing, and we determined that they qualify as sales and accounted for them as such.

In July 2020, we sold our interest in a foreign residential-for-sale inventory loan, with outstanding principal of ~~$5,808~~£97.5 million ($124.2 million assuming conversion into USD). We recorded a loss of approximately $1.0 million in connection with this sale. This transaction was evaluated under ASC 860 - Transfers and ~~$15,902, respectively.~~Servicing, and we determined that it qualifies as a sale and accounted for it as such.

Note 5 – 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 0 loan proceeds held by servicer as of September 30, 2020. Loan proceeds held by servicer were $8.3 million as of December 31, 2019.

Note 6 – ~~Unconsolidated Joint Venture~~Other Assets

InThe following table details the components of our other assets at the dates indicated ($ in thousands):


	September 30, 2020		December 31, 2019
Interest receivable	$	38,401	$	35,581
Collateral deposited under derivative agreements	1,810		17,090
Other	3,433		45
Total	$	43,644	$	52,716

Note 7 – Secured Debt Arrangements, Net

At September ~~2014,~~30, 2020 and December 31, 2019, our borrowings included the ~~Company, through a wholly owned subsidiary, acquired a 59% ownership~~following secured debt arrangements, maturities and weighted-average interest rates ($ in Champ L.P. (“Champ LP”) following which a wholly-owned subsidiary of Champ LP then acquired a 35% ownership interest in Bremer Kreditbank AG ("BKB"). The Company acquired its ownership interest in Champ LP for an initial purchase price paid at closing of approximately €30,724 (or $39,477). The Company committed to invest up to approximately €38,000 (or $50,000). Champ LP together with certain unaffiliated third party investors, in aggregate, own 100% of BKB.thousands):

BKB specializes in corporate banking and financial services for medium-sized German companies. It also provides professional real estate financing, acquisition finance, institutional asset management and private wealth management services for German high-net-worth individuals.

~~The Company evaluated Champ LP to determine if it met the definition of a variable interest entity ("VIE") in accordance with ASC 810,~~ ~~Consolidation~~. The Company determined that Champ LP met the definition of a VIE, however, the Company was not the primary beneficiary; therefore, the Company was not required to consolidate the assets and liabilities of the partnership in accordance with the authoritative guidance. Additionally, Champ LP is an Investment Company under GAAP, and is therefore reflected at fair value. The Company's investment in Champ LP was accounted for as an equity method investment and therefore the Company recorded its proportionate share of the net asset value in accordance with ASC 323, ~~Investments - Equity Method and Joint Ventures~~.


	September 30, 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)	$	1,132,013	$	989,278	June 2024	$	1,154,109	$	1,090,160	June 2024
JPMorgan (GBP)	97,661		97,661		June 2024	51,702		50,410		June 2024
JPMorgan (EUR)	70,326		70,326		June 2024	94,189		94,189		June 2024
DB (USD)	1,000,000		526,743		March 2023	1,250,000		513,876		March 2021
Goldman (USD)	500,000		362,139		November 2021	500,000		322,170		November 2021
CS - USD	378,903		378,781		January 2023⁽³⁾	226,068		218,644		June 2020
CS - GBP	—		—		N/A⁽⁴⁾	93,915		93,915		June 2020
HSBC - USD	47,223		47,223		January 2021	50,625		50,625		October 2020
HSBC - GBP	0		0		N/A	34,634		34,634		June 2020
HSBC - EUR	157,148		157,148		July 2021	154,037		154,037		January 2021
Barclays (USD)	200,000		35,192		March 2024	N/A		N/A		N/A
Barclays (GBP)	—		—		N/A⁽⁴⁾	538,916		290,347		February 2024⁽⁵⁾
Barclays (EUR)	—		—		N/A⁽⁴⁾	182,549		182,549		November 2020
Total Secured Credit Facilities	3,583,274		2,664,491			4,330,744		3,095,556
Barclays Private Securitization	813,592		813,592		March 2024⁽⁵⁾	N/A		N/A		N/A
Total Secured Debt Arrangements	4,396,866		3,478,083			4,330,744		3,095,556
less: deferred financing costs	N/A		(12,746)			N/A		(17,190)
Total Secured Debt Arrangements, net^(6)(7)(8)	$	4,396,866	$	3,465,337		$	4,330,744	$	3,078,366

In January 2015, the Company funded an additional investment of €3,331 (or $3,929) related to its investment in Champ LP. In February 2015, the Company sold approximately 48% of its ownership interest in Champ LP at cost to an investment fund managed by Apollo for €16,314 (or $20,794) (of which $2,614 related to foreign exchange losses which were previously included in accumulated other comprehensive loss). In June 2016, the Company transferred €427 of its unfunded commitment to Apollo, reducing its unfunded commitment to Champ LP to €2,802 (or $2,985).———————

~~In May 2017, the Company sold its remaining ownership interest in Champ LP to unaffiliated third parties for €21,792 or $24,498, resulting in a loss of $3,305.~~ (1)As of September 30, ~~2017, the Company had no interest in Champ LP.~~

~~Note 7 – Borrowings Under Repurchase Agreements~~

At ~~September 30, 2017~~2020, British Pound Sterling ("GBP") and Euros ("EUR") borrowings were converted to U.S. Dollars ("USD") at a rate of 1.29 and 1.17, respectively. As of December 31, ~~2016, the Company’s~~2019, GBP and EUR borrowings ~~had the following outstanding balances, maturities~~were converted at a rate of 1.33 and ~~weighted average interest rates:~~1.12, respectively.

September 30, 2017 December 31, 2016
Lender Maximum Amount of Borrowings Borrowings Outstanding
Maturity⁽¹⁾

Weighted
Average
Rate⁽²⁾
Maximum Amount of Borrowings Borrowings Outstanding
Maturity ⁽¹⁾

Weighted
Average
Rate ⁽²⁾
JPMorgan Facility ⁽³⁾
$ 1,118,000
$ 840,360
March 2020 L+2.27%
$ 943,000
$ 657,452
January 2019 L+2.25%
DB Repurchase Facility ⁽⁴⁾
565,491
265,658
March 2020 L+2.35%
300,000
137,355
September 2019 L+2.66%
Goldman Loan 34,180
34,180
April 2019 L+3.50%
N/A
40,657
April 2019 L+3.50%
Sub-total 1,717,671
1,140,198
L+2.32%

835,464
   L+2.38%

UBS Facility N/A
N/A
N/A N/A
N/A
133,899
September 2018 2.79 %
DB Facility ⁽⁵⁾
300,000
149,317
April 2018 3.48 % N/A
177,203
April 2018 3.63 %
Sub-total 300,000
149,317
3.48 %

311,102
3.27 %

Less: deferred financing costs N/A
(10,884 ) N/A
N/A
(6,763 ) N/A
Total / Weighted Average $ 2,017,671
$ 1,278,631
   3.55 %

$ 1,139,803
   3.18 %

~~———————~~

~~(1)~~ (2)Maturity date assumes ~~all~~ extensions at our option are ~~exercised.~~exercised with consent of financing providers, where applicable.

~~(2)~~ (3)Assumes ~~one-month LIBOR was 1.23% and 0.77%~~financings are extended in line with the underlying loans.

(4)As of September 30, 2020, there are no loans pledged to this facility.

(5)Represents weighted average maturity across various financings with the counterparty. See below for additional details.

(6)Weighted-average borrowing costs as of September 30, ~~2017~~2020 and December 31, ~~2016,~~2019 were USD L + 2.15% / GBP L + 1.82% / EUR L + 1.46% and USD L + 2.07% / GBP L + 1.75% / EUR L + 1.36%, respectively.

~~(3)~~ (7)Weighted average advance rates based on cost as of September 30, 2020 and December 31, 2019 were 64.3% (63.8% (USD) / 67.9% (GBP) / 61.3% (EUR)) and 63.8% (66.7% (USD) / 47.1% (GBP) / 76.1% (EUR)).

(8)As of September 30, ~~2017,~~2020 and December 31, 2019, approximately 55% and 54% of the ~~Company's master~~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 ~~agreement~~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 of the 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. Generally, the lender under the applicable secured debt arrangement calls for and/or sets the valuation and any revaluation of the collateral assets in its sole, good faith discretion. If it is determined (subject to certain conditions) that the market value of the underlying collateral 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 September 30, 2020 and December 31, 2019, the weighted average haircut under our secured debt arrangements was approximately 35.7% and 36.2%, 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 3 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") ~~provided~~. The JPMorgan Facility allows for $1.3 billion of maximum ~~total~~ borrowings ~~comprised~~(with amounts borrowed in British pounds and Euros converted to USD for purposes of calculating availability based on the greater of the ~~$975,000 repurchase facility~~spot rate as of the initial financing under the corresponding mortgage loan and ~~a $143,000 asset specific financing.~~the then-current spot rate) and matures in June 2022 and has 2 one-year extensions available at our option, which are subject to certain conditions. The JPMorgan Facility enables us to elect to receive advances in USD, GBP, or EUR. Margin calls may occur any time at specified aggregate margin deficit thresholds.

~~(4)~~ As of September 30, ~~2017,~~2020, we had $1.2 billion (including £75.6 million and €60.0 million assuming conversion into USD) of borrowings outstanding under the ~~Company's master repurchase agreement~~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, ~~(the~~London Branch (as amended, the "DB ~~Repurchase~~ Facility") ~~provided~~, which provides for ~~maximum total borrowings comprised~~advances of up to $1.0 billion for the ~~$450,000~~sale and ~~£45,000~~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 ~~a $55,200 asset specific financing.~~has 2 one-year extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds.

~~(5) Advances under the DB Facility accrue interest at a per annum pricing rate based on the rate implied by the fixed rate bid under a fixed for floating interest rate swap for the receipt~~As of ~~payments indexed to three-month U.S. dollar LIBOR, plus a financing spread ranging from 2.09% to 2.39% based on the rating of the collateral pledged.~~

At September 30, ~~2017, the Company’s borrowings~~2020, we had ~~the following remaining maturities:~~

Less than
1 year⁽¹⁾

1 to 3
years⁽¹⁾

3 to 5
years

More than
5 years
Total
JPMorgan Facility $ 166,273
$ 674,087
$ —
$ —
$ 840,360
DB Repurchase Facility —
265,658
—
—
265,658
Goldman Loan —
34,180
—
—
34,180
DB Facility 149,317
—
—
—
149,317
Total $ 315,590
$ 973,925
$ —
$ —
$ 1,289,515

~~———————~~

~~(1) Assumes underlying assets are financed through the fully extended maturity date of the facility.~~

At ~~September 30, 2017, the Company’s collateralized financings were comprised~~$526.7 million of borrowings outstanding under the ~~JPMorgan~~DB Facility ~~the DB Repurchase~~secured by certain of our commercial mortgage loans.

Goldman Facility ~~the Company's~~

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 ~~Loan"~~Facility"), which provides advances up to $500.0 million and matures in November 2020, and has 1 one-year extension available at our option, subject to certain conditions. Margin calls may occur any time at specified margin deficit thresholds.

As of September 30, 2020, we had $362.1 million of borrowings outstanding under the ~~DB Facility.~~ 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 September 30, 2020, we had $378.8 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"). During the third quarter of 2020, the facility was repaid in connection with the sale of the underlying 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 September 30, 2020, we had $47.2 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 provided for a single asset financing. The facility matured and was repaid in June 2020 in connection with the repayment of the underlying 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 September 30, 2020, we had $157.1 million (€134.1 million assuming conversion into USD) of borrowings outstanding under the HSBC Facility - EUR secured by one commercial mortgage loan.

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.

As of September 30, 2020, we had $35.2 million of borrowings outstanding under the Barclays Facility - USD secured by one commercial mortgage loan.

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"). In June 2020, all assets previously financed pursuant to this facility were refinanced under the Barclays Private Securitization.

Barclays Private Securitization

In June 2020, through a newly formed entity, we entered into a private securitization with Barclays Bank plc, of which Barclays Bank plc retained $782.0 million of senior notes. This Barclays Private Securitization finances the loans that were previously financed under the Barclays Facility - GBP/EUR. In addition, we pledged an additional commercial mortgage loan with an outstanding principal balance of £26.0 million and pledged additional collateral of a financed loan of €5.3 million as of June 30, 2020.

The securitization eliminates daily margining provisions and grants us significant discretion to modify certain terms of the underlying collateral including waiving certain loan-level covenant breaches and deferring or waiving of debt service payments for up to 18 months. The securitization includes LTV based covenants with significant headroom to existing levels that are also subject to a six-month holiday through December 2020. These deleveraging requirements are based on significant declines in the value of the collateral as determined by an annual third-party (engaged by us) appraisal process tied to the provisions of the underlying loan agreements. We believe this provides us with both cushion and predictability to avoid sudden unexpected outcomes and material repayment requirements. In addition to the pledge of the additional collateral noted above, we paid down the previous financing by €16.5 million (totaling $18.5 million in USD) and agreed to increase the financing spreads by 0.25%.

The table below provides the borrowings outstanding (on an as converted basis) and weighted-average fully-extended maturities by currency for the assets financed under the Barclays Private Securitization as of September 30, 2020 ($ in thousands):


	Borrowings outstanding	Fully-Extended Maturity⁽¹⁾
Total/Weighted-Average GBP	$670,024	January 2024
Total/Weighted-Average EUR	143,568	August 2021⁽²⁾
Total/Weighted-Average Securitization	$813,592	March 2024

———————

(1)Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.

(2)The EUR portion of the Barclays Private Securitization 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 months' notice.

The table below provides the assets and liabilities of the Barclays Private Securitization VIE included in our condensed consolidated balance sheet ($ in thousands):


	September 30, 2020
Assets:
Cash	$	921
Commercial mortgage loans, net⁽¹⁾	1,224,154
Other Assets	9,401
Total Assets	$	1,234,476
Liabilities:
Secured debt arrangements, net (net of deferred financing costs of $0.2 million)	$	813,431
Accounts payable, accrued expenses and other liabilities⁽²⁾	1,084
Total Liabilities	$	814,515

———————

(1)Net of the General CECL Allowance of $6.1 million.

(2)Represents General CECL Allowance related to unfunded commitments on commercial mortgage loans, net of $0.3 million.


	Three months ended
	September 30, 2020
Net Interest Income:
Interest income from commercial mortgage loans	$	15,075
Interest expense	(4,278)
Net interest income	$	10,797
Provision for loan losses and impairments	$	(2,318)
Foreign currency gain	17,078
Net Income	$	25,557

As of September 30, 2020, we had $813.6 million (£518.6 million and €122.5 million assuming conversion into USD) of borrowings outstanding under the Barclays Private Securitization secured by certain of our commercial mortgage loans.

At September 30, 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	$	45,918	$	432,440	$	678,907	$	0	$	1,157,265
DB	15,594		511,149		0		0		526,743
Goldman	0		362,139		0		0		362,139
CS - USD	94,299		146,994		137,488		0		378,781
HSBC - USD	47,223		0		0		0		47,223
HSBC - EUR	157,148		0		0		0		157,148
Barclays - USD	0		0		35,192		0		35,192
Barclays Private Securitization	143,568		289,769		380,255		0		813,592
Total	$	503,750	$	1,742,491	$	1,231,842	$	0	$	3,478,083

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 September 30, ~~2017~~,2020, as well as the maximum and average month-end balances for the nine months ended September 30, ~~2017~~2020 for our borrowings under secured debt arrangements ($ in thousands).


	As of September 30, 2020						For the nine months ended September 30, 2020
	Balance		Amortized Cost of Collateral		Maximum Month-End Balance		Average Month-End Balance
JPMorgan	$	1,157,265	$	1,976,965	$	1,192,288	$	1,106,461
DB	526,743		804,835		526,743		501,470
Goldman	362,139		548,671		362,139		343,882
CS - USD	378,781		523,272		378,781		339,425
CS - GBP	—		0		90,111		57,459
HSBC - USD	47,223		67,203		50,625		48,357
HSBC - GBP	0		0		34,500		32,900
HSBC - EUR	157,148		204,040		160,034		152,982
Barclays - USD	35,192		49,929		35,193		27,372
Barclays - GBP	0		0		666,810		347,590


Barclays - EUR	0		0		180,595	94,028
Barclays Private Securitization	813,592		1,230,305		839,563	814,844
Total	$	3,478,083	$	5,405,220

The table below summarizes the outstanding balances at December 31, 2019, as well as the maximum and average month-end balances for the ~~Company's~~year ended December 31, 2019 for our borrowings under ~~repurchase agreements.~~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 September 30, 2020 and December 31, 2019.

Note 8 – Senior Secured Term Loan, Net

For the nine months ended September 30, 2017
Balance at September 30, 2017
Maximum Month-End
Balance

Average Month-End
Balance
JPMorgan Facility borrowings $ 840,360
$ 986,611
$ 849,355
DB Repurchase Facility borrowings 265,658
367,010
286,326
Goldman Loan borrowings 34,180
39,590
37,554
DB Facility borrowings 149,317
177,203
136,930
Total $ 1,289,515

~~JPMorgan Facility~~

On March 31, 2017, the Company, through two indirect wholly owned subsidiaries, amended and restated the JPMorgan Facility, which currently provides for maximum total borrowings of $1,118,000, comprised of the $975,000 repurchase facility andIn May 2019, we entered into a ~~$143,000 asset specific financing, and a~~$500.0 million senior secured term ~~expiring in March 2019 plus a one-year extension option available at the Company's option, subject to certain conditions. Amounts borrowed under the JPMorgan Facility bear~~loan. The senior secured term loan bears interest at ~~spreads ranging from 2.25%~~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 ~~3.50% over one-month LIBOR. Margin calls may occur any time~~liens, asset sales, indebtedness, and investments in non-wholly owned entities.

During the ~~aggregate repurchase price exceeds~~three and nine months ended September 30, 2020, we repaid $1.3 million and $3.8 million of principal related to the ~~agreed upon advance rate multiplied by the market value~~senior secured term loan, respectively. The outstanding principal balance as of ~~the assets by more than $250. The Company has agreed to provide a limited guarantee of the obligations of its indirect wholly-owned subsidiaries under the JPMorgan Facility.~~

September 30, 2020 and December 31, 2019 was $493.8 million and $497.5 million, respectively. As of September 30, ~~2017,~~2020, the ~~Company~~senior secured term loan had ~~$840,360~~a carrying value of ~~borrowings outstanding under the JPMorgan Facility secured by certain~~$484.2 million net of ~~the Company's commercial mortgage~~deferred financing costs of $7.6 million and ~~subordinate loans.~~

~~DB Repurchase Facility~~

~~On September 29, 2016, the Company, through indirect wholly-owned subsidiaries, entered into the DB Repurchase Facility which provides for maximum total borrowings~~an unamortized discount of $565,491 comprised of the $450,000 and £45,000 repurchase facility as well as a $55,200 asset specific financing in connection with financing first mortgage loans secured by real estate. The DB Repurchase Facility matures in March 2018 with two one-year extension options available at the Company's option, subject to certain conditions. Amounts borrowed under the DB Repurchase Facility bear interest at spreads ranging from 2.10% to 3.00% over one-month LIBOR. Margin calls may occur any time at specified aggregate margin deficit thresholds. The Company has agreed to provide a guarantee of the obligations of its indirect wholly-owned subsidiaries under this facility.

$2.0 million. As of ~~September 30, 2017,~~December 31, 2019, the ~~Company~~senior secured term loan had ~~$265,658 (inclusive of £45,000) borrowings outstanding under the DB Repurchase Facility secured by certain of the Company's commercial mortgage loans.~~

~~Goldman Loan~~

~~On January 26, 2015, the Company, through an indirect wholly-owned subsidiary, entered into the Goldman Loan. The Goldman Loan provides for~~ a purchase price of $34,180 (as of September 30, 2017) and a repurchase date of the earliest of: (1) April 30, 2019, (2) an early repurchase date as a result of repayment or sale of the purchased loan, or (3) an accelerated repurchase date as a result of certain events of default. Subject to the terms and conditions thereof, the Goldman Loan provides for the purchase and sale of certain participation interests in a mortgage loan secured by single-family and condominium properties. Amounts borrowed under the Goldman Loan bear interest at a spread of 3.5% plus one-month LIBOR. In addition, the Goldman Loan provides that margin calls may occur during the continuance of certain credit events if the marketcarrying value of ~~the mortgaged properties drop below~~$488.0 million net of deferred financing costs of $7.3 million and an ~~agreed upon percentage. The Goldman Loan contains affirmative and negative covenants and provisions regarding events~~unamortized discount of ~~default that are normal and customary for similar repurchase agreements.~~$2.3 million.

~~As of September 30, 2017, the Company had $34,180 of borrowings outstanding under the Goldman Loan secured by one commercial mortgage loan held by the Company.~~

~~UBS Facility~~

In September 2013, the Company, through an indirect wholly-owned subsidiary, entered into the UBS Facility, which provided that the Company may borrow up to $133,899 in order to finance the acquisition of CMBS. The UBS Facility matured in September 2017 and the Company repaid the outstanding borrowings in full.

~~DB Facility~~

In April 2014, the Company, through an indirect wholly-owned subsidiary, entered into the DB Facility, which currently provides that the Company may borrow up to $300,000 in order to finance the acquisition of CMBS. The DB Facility matures in April 2018. Advances under the DB Facility accrue interest at a per annum pricing rate based on the rate implied by the fixed rate bid under a fixed for floating interest rate swap for the receipt of payments indexed to three-month U.S. dollar LIBOR, plus a financing spread ranging from 2.09% to 2.39% based on the rating of the collateral pledged.

Covenants

The ~~Company posts margin in cash based on~~senior secured term loan includes the ~~fair value~~following financial covenants: (i) our ratio of ~~the underlying collateral. The margin posted is classified as restricted cash on the Company's condensed consolidated balance sheets.~~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.

Additionally, the undrawn amount is subject to a 1.8% non-use fee. The DB Facility contains customary terms and conditions for facilities of this type and financial covenants to be met by the Company, including minimum shareholder's equity of 50% of the gross capital proceeds of its initial public offering and any subsequent public or private offerings.

~~As of September 30, 2017, the Company had $149,317 of borrowings outstanding under the DB Facility secured by CMBS held by the Company.~~

~~The Company was~~We were in compliance with the ~~financial~~ covenants under ~~each of its borrowing agreements~~the senior secured term loan at September 30, ~~2017~~2020 and December 31, ~~2016~~.2019.

Interest Rate Swap

In connection with the senior secured term loan, we previously 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%. During the second quarter of 2020 we terminated the interest rate swap and recognized a realized loss of $53.9 million.

Interest Rate Cap

During the second quarter of 2020, we entered into a three-year interest rate cap to cap LIBOR at 0.75%. This effectively limits the maximum all-in coupon on our senior secured term loan to 3.50%. In connection with the interest rate cap, we incurred up-front fees of $1.1 million, which we recorded as a deferred financing cost on our condensed consolidated balance

sheet and interest expense will be recognized over the duration of the interest rate cap in our condensed consolidated statement of operations.

Note 89 – Convertible Senior Notes, Net

~~On March 17,~~In 2 separate offerings during 2014, ~~the Company~~we issued ~~$143,750~~an aggregate principal amount of $254.8 million of 5.50% Convertible Senior Notes due 2019 (the ~~"March 2019~~"2019 Notes"), for which ~~the Company~~we received ~~net proceeds,~~$248.6 million, after deducting the underwriting discount and ~~estimated~~ offering ~~expense payable by the Company, of approximately $139,037. At~~ ~~September 30, 2017, the March~~expenses. The 2019 Notes ~~had a carrying value~~were exchanged or converted for shares of ~~$142,251~~our common stock and ~~an unamortized discount of $1,499.~~cash as follows:

(i) On August ~~18, 2014,~~2, 2018, we entered into privately negotiated exchange agreements with a limited number of holders of the ~~Company~~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 our 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 ~~$111,000~~paid-in-capital in our 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 2 separate offerings during 2017, we issued an aggregate principal amount of 5.50% Convertible Senior Notes due 2019 (the "August 2019 Notes" and together with the March 2019 Notes, the "2019 Notes"), for which the Company received net proceeds, after deducting the underwriting discount and estimated offering expense payable by the Company, of approximately $109,615. At ~~September 30, 2017, the August 2019 Notes had a carrying value of $109,187 and an unamortized discount of $1,813.~~

~~On August 21, 2017, the Company issued $230,000 aggregate principal amount~~$345.0 million of 4.75% Convertible Senior Notes due 2022 (the ~~"August 2022~~"2022 Notes" ~~and together with the 2019 Notes, the "Notes"~~), for which ~~the Company~~we received ~~net proceeds,~~$337.5 million, after deducting the underwriting discount and ~~estimated~~ offering ~~expense payable by the Company, of approximately $224,825.~~ expenses.At September 30, ~~2017,~~2020, the ~~August~~ 2022 Notes had a carrying value of ~~$220,473~~$339.7 million and an unamortized discount of ~~$9,527.~~$5.3 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 September 30, 2020, the 2023 Notes had a carrying value of $224.9 million and an unamortized discount of $5.1 million.

The following table summarizes the terms of the ~~Notes.~~Notes ($ in thousands):

Principal Amount Coupon Rate
Effective Rate ⁽¹⁾
Conversion Rate ⁽²⁾
Maturity Date Remaining Period of Amortization
March 2019 Notes $143,750 5.50% 6.25% 57.3034 3/15/2019 1.46 years
August 2019 Notes $111,000 5.50% 6.50% 57.3034 3/15/2019 1.46 years
August 2022 Notes $230,000 4.75% 5.72% 50.2260 8/23/2022 4.90 years


	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	1.90
2023 Notes	230,000		5.38	%	6.16	%	48.7187	10/15/2023	3.04
Total	$	575,000

———————


~~(1)~~	Effective rate includes the effect of the adjustment for the conversion option (see footnote (2) below), the value of which reduced the initial liability and was recorded in additional paid-in-capital.

~~(2)~~

~~The Company has~~

(1)Effective rate includes the effect of the adjustment for the conversion option (See footnote (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 $1,000 principal amount of the Notes converted, and includes adjustments relating to cash dividend payments made by the Company 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.

The ~~Company~~conversion rate represents the number of shares of common stock issuable per 1 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.~~maturity except in limited circumstances. The closing price of ~~the Company's~~our common

stock on September ~~29, 2017~~30, 2020 of ~~$18.11~~$9.01 was ~~greater than the per share conversion price of the 2019 Notes and~~ less than the per share conversion price of the ~~August 2022~~ Notes. ~~The Company has the intent and ability to settle the Notes in cash and, as a result, the Notes did not have any impact on the Company's diluted earnings per share.~~

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) isare 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 ~~the Company~~us at such time. ~~The Company~~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, ~~the Company~~we attributed approximately ~~$18,859~~$15.4 million of the proceeds to the equity component of the Notes ($~~11,445~~11.0 million to the ~~2019~~2022 Notes and ~~$7,414~~$4.4 million to the ~~August 2022~~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~~our condensed consolidated balance sheet

as of September 30, ~~2017.~~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 ~~$4,717~~$7.2 million and ~~$11,722~~$21.6 million for the three and nine months ended September 30, ~~2017, respectively. The aggregate contractual interest expense was approximately $3,503~~2020, respectively, as compared to $7.2 million and ~~$10,508~~$21.9 million for the three and nine months ended September 30, ~~2016,~~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, ~~the Company~~we reported additional non-cash interest expense of approximately ~~$1,213~~$1.5 million and ~~$3,025~~$4.5 million for the three and nine months ended September 30, ~~2017, respectively. With respect~~2020, respectively, as compared to ~~the~~

amortization of the discount on the liability component of the Notes as well as the amortization of deferred financing costs, the Company reported additional non-cash interest expense of approximately $895$1.5 million and ~~$2,654~~$4.6 million for the three and nine months ended September 30, ~~2016,~~2019, respectively.

~~Note 9 – Participations Sold~~

Participations sold represent the interests in loans the Company originated and subsequently partially sold. The Company presents the participations sold as both assets and non-recourse liabilities because the participation does not qualify as a sale according to ASC 860, ~~Transfers and Servicing. The income earned on the participation sold is recorded as interest income and an identical amount is recorded as interest expense on the Company's condensed consolidated statements of operations.~~

During January 2015, the Company closed a £34,519 (or $51,996) floating-rate mezzanine loan secured by a portfolio of 44 senior housing facilities located throughout the United Kingdom. During February 2015, the Company closed an additional £20,000 (or $30,672) and participated that balance to an investment fund affiliated with Apollo. During December 2016, the Company qualified for sale accounting with respect to the previous participation sold that was converted to a discrete financial instrument, and therefore deconsolidated the participation sold.

During May 2014, the Company closed a $155,000 floating-rate whole loan secured by the first mortgage and equity interests in an entity that owns a resort hotel in Aruba. During June 2014, the Company syndicated a $90,000 senior participation in the loan and retained a $65,000 junior participation in the loan. During August 2014, both the $90,000 senior participation and the Company's $65,000 junior participation were contributed to a CMBS securitization. In exchange for contributing its $65,000 junior participation, the Company received a CMBS secured solely by the $65,000 junior participation and classified it as CMBS (Held-to-Maturity) on its condensed consolidated financial statements. During May 2017, the loan and associated CMBS (Held-to-Maturity) were fully repaid and the related Securities, held-to-maturity and participation sold line items were removed from the Company's condensed consolidated balance sheet.

Note 10 – ~~Derivative Instruments~~Derivatives

~~The Company uses~~We use forward currency contracts to economically hedge interest and principal payments due under ~~its~~our loans denominated in currencies other than ~~U.S. dollars.~~USD.

~~The Company has~~We have entered into a series of forward contracts to sell an amount of foreign currency ~~(British pound ("GBP"))~~(GBP and EUR) for an agreed upon amount of ~~U.S. dollars~~USD at various dates through ~~April 2018.~~December 2024. These forward contracts were executed to economically fix the ~~U.S. dollar~~USD amounts of foreign denominated cash flows expected to be received by ~~the Company~~us related to foreign denominated loan investments.

The following table summarizes our non-designated foreign exchange ("Fx") forwards and our interest rate cap as of September 30, 2020:

September 30, 2020

Number of Contracts

Aggregate Notional Amount (in thousands)

Notional Currency

Maturity

Weighted-Average Years to Maturity

Fx contracts - GBP

106

422,585

GBP

October 2020 - December 2024

2.16

Fx contracts - EUR

238,817

EUR

November 2020 - August 2024

2.79

Interest rate cap

500,000

USD

June 2023

2.71

The following table summarizes ~~the Company's non-designated foreign exchange (“Fx”) forwards as of September 30, 2017:~~

Type of Derivative September 30, 2017
Number of Contracts Aggregate Notional Amount Notional Currency Maturity
Fx Contracts - GBP 13 197,401 GBP October 2017- April 2018

~~The following table summarizes the Company's~~our non-designated Fx forwards and our interest rate swap as of December 31, ~~2016:~~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

168,879

EUR

February 2020 - August 2024

3.22

Interest rate swap

500,000

USD

May 2026

6.37

Type of Derivative December 31, 2016
Number of Contracts Aggregate Notional Amount Notional Currency Maturity
Fx Contracts - GBP 11 148,310 GBP January 2017- December 2017

~~The Company has~~We have not designated any of ~~its~~our derivative instruments as hedges as defined in ASC 815 - Derivatives and Hedging and, therefore, changes in the fair value of ~~the Company's~~our derivative instruments are recorded directly in earnings. The following table summarizes the amounts recognized on ~~the~~our condensed consolidated statements of operations related to ~~the Company’s derivative instruments~~our derivatives for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~.2019 ($ in thousands):

Three months ended September 30, Nine months ended September 30,
Location of Loss Recognized in Income 2017 2016 2017 2016
Forward currency contract Gain (loss) on derivative instruments - unrealized $ (7,308 ) $ (10,304 ) $ (17,629 ) $ 1,812
Forward currency contract Gain (loss) on derivative instruments - realized (179 ) 15,112
(290 ) 21,100
Interest rate caps ⁽¹⁾
Gain (loss) on derivative instruments - unrealized 6
7
3
(81 )
Sub-total $ (7,481 ) $ 4,815
$ (17,916 ) $ 22,831

Forward currency contract Income (loss) from unconsolidated joint venture —
—
(587 ) —
Total $ (7,481 ) $ 4,815
$ (18,503 ) $ 22,831


		Amount of gain (loss) recognized in income
		Three months ended September 30,						Nine months ended September 30,
	Location of Gain (Loss) Recognized in Income	2020		2019		2020		2019
Forward currency contracts	Unrealized gain (loss) on derivative instruments	$	(35,076)	$	16,227	$	18,356	$	12,029
Forward currency contracts	Realized gain on derivative instruments	539		7,926		14,603		16,590
Total		$	(34,537)	$	24,153	$	32,959	$	28,619

In connection with our senior secured term loan, in May 2019, we entered into an interest rate swap to fix LIBOR at 2.12% or an all-in interest rate of 4.87%. We used our interest rate swap to manage exposure to variable cash flows on our borrowings under our senior secured term loan. Our interest rate swap allowed us to receive a variable rate cash flow based on LIBOR and pay a fixed rate cash flow, mitigating the impact of this exposure. However during the second quarter of 2020, we terminated our interest rate swap due to a significant decrease in LIBOR and recognized a realized loss on the accompanying condensed consolidated statement of operations.

In June 2020, we entered into an interest rate cap for approximately $1.1 million. We use our interest rate cap to manage exposure to variable cash flows on our borrowings under our senior secured term loan by effectively limiting LIBOR from exceeding 0.75%. This effectively limits the maximum all-in coupon on our senior secured term loan to 3.50%. Unrealized gains or losses related to the interest rate swap and cap were recorded net under interest expense in our condensed consolidated statement of operations.


		Amount of loss recognized in income
		Three months ended September 30,						Nine months ended September 30,
	Location of Loss Recognized in Income	2020		2019		2020		2019
Interest rate cap⁽¹⁾	Unrealized gain (loss) on interest rate cap	$	(564)	$	0	$	174	$	0
Interest rate swap⁽²⁾	Unrealized gain (loss) on interest rate swap	0		(10,307)		14,470		(23,420)
Interest rate swap⁽²⁾	Realized loss on interest rate swap	0		0		(53,851)		0
Total		$	(564)	$	(10,307)	$	(39,207)	$	(23,420)

———————

(1)With a notional amount of ~~$41,507~~$500.0 million and ~~$46,798~~$0 at September 30, ~~2017~~2020, and ~~2016,~~2019, respectively.

(2)With a notional amount of $0 and $500.0 million at September 30, 2020, and 2019, respectively.

The following ~~table summarizes~~tables summarize the gross asset and liability amounts related to ~~the Company's derivative instruments~~our derivatives at September 30, ~~2017~~2020 and December 31, ~~2016.~~2019 ($ in thousands)


	September 30, 2020										December 31, 2019
	Gross Amount of Recognized Assets		Gross Amounts Offset in our Condensed Consolidated Balance Sheet		Net Amounts of Assets Presented in our Condensed Consolidated Balance Sheet		Gross Amount of Recognized Assets		Gross Amounts Offset in our Condensed Consolidated Balance Sheet		Net Amounts of Assets Presented in our Condensed Consolidated Balance Sheet
Forward currency contracts	$	20,788	$	(7,307)	$	13,481	$	0	$	0	$	0
Interest rate cap	173		0		173		0		0		0
Total	$	20,961	$	(7,307)	$	13,654	$	0	$	0	$	0

September 30, 2017 December 31, 2016
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 Gross
Amount of
Recognized
Assets Gross
Amounts
Offset in the
Consolidated Balance Sheet Net Amounts
of Assets
Presented in
the Consolidated Balance Sheet
Interest rate caps $ —
$ 1
$ 1
$ 23
$ —
$ 23
Forward currency contract (11,747 ) —
(11,747 ) 5,883
—
5,883
Total derivative instruments $ (11,747 ) $ 1
$ (11,746 ) $ 5,906
$ —
$ 5,906


	September 30, 2020										December 31, 2019
	Gross Amount of Recognized Liability		Gross Amounts Offset in our Condensed Consolidated Balance Sheet		Net Amounts of Liability Presented in our Condensed Consolidated Balance Sheet		Gross Amount of Recognized Liabilities		Gross Amounts Offset in our Condensed Consolidated Balance Sheet		Net Amounts of Liabilities Presented in our Condensed Consolidated Balance Sheet
Interest rate swap	$	0	$	0	$	0	$	14,470	$	0	$	14,470
Forward currency contracts	0		0		0		12,687		(7,811)		4,876
Total derivative liabilities	$	0	$	0	$	0	$	27,157	$	(7,811)	$	19,346

Note 11 – Accounts Payable, Accrued Expenses and Other Liabilities

The following table details the components of our accounts payable, accrued expense and other liabilities ($ in thousands):


	September 30, 2020		December 31, 2019
Accrued dividends payable	$	53,689	$	74,771
Collateral deposited under derivative agreements	12,780		2,930
Accrued interest payable	13,013		16,089
Accounts payable and other liabilities	6,145		6,922
General CECL Allowance on unfunded commitments⁽¹⁾	3,595		0
Total	$	89,222	$	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 September 30, 2020.

Note 1112 – Related Party Transactions

~~AMTG Merger~~

~~As fully described in "Note 17- Business Combination", in August 2016, the Company acquired AMTG, an entity managed by an affiliate of Apollo.~~

Management Agreement

In connection with ~~the Company’s~~our initial public offering in September 2009, ~~the Company~~we entered into a management agreement (the ~~“Management Agreement”~~"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 ~~the Company’s~~our day-to-day operations, subject to the direction and oversight of ~~the Company’s~~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 ~~the Company’s~~our stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears.

The current term of the Management Agreement ~~expires~~will expire on September 29, ~~2018~~2021, 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 ~~the Company’s~~our independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to ~~the Company~~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 ~~the Company’s~~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~~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 ~~the Company’s~~our independent

directors in February ~~2017,~~2020, which included a discussion of the Manager’s performance and the level of the management fees thereunder, ~~the Company~~we determined not to seek termination of the Management Agreement.

~~For the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2017, the Company~~We incurred approximately ~~$8,309~~$9.9 million and ~~$23,484, respectively,~~$30.2 million in base management fees under the Management ~~Agreement. For~~Agreement for the three and nine months ended September 30, ~~2016,~~2020, respectively, as compared to $10.4 million and $30.3 million for the ~~Company incurred approximately $5,903~~three and ~~$16,374, respectively, in base management fees under the Management Agreement.~~ nine months ended September 30, 2019, respectively.

In addition to the base management fee, ~~the Company is~~we are also responsible for reimbursing the Manager for certain expenses paid by the Manager on our behalf ~~of the Company~~ or for certain services provided by the Manager to ~~the Company.~~us. For the three and nine months ended September 30, ~~2017, the Company~~2020 we paid expenses totaling ~~$37~~$0.6 million and ~~$231~~$1.7 million, respectively, related to reimbursements for certain expenses paid by the Manager on our behalf ~~of the Company~~ under the Management ~~Agreement. For the three~~Agreement as compared to $0.5 million and ~~nine months ended September 30, 2016, the Company paid expenses totaling $517 and $1,359,~~$2.0 million, respectively ~~related to reimbursements for certain expenses paid by the Manager on behalf of the Company under the Management Agreement.~~ Expenses incurred by the Manager and reimbursed by ~~the Company~~us are reflected in the respective condensed consolidated statement of operations expense category or ~~the~~our condensed consolidated balance sheet based on the nature of the item.

Included in payable to related party on ~~the~~our condensed consolidated balance sheet at September 30, ~~2017~~2020 and December 31, ~~2016~~2019 are approximately ~~$8,309~~$9.9 million and ~~$7,015~~,$10.4 million, respectively, for base management fees incurred but not yet paid under the Management Agreement.

~~Unconsolidated Joint Venture~~

In September 2014, the Company, through a wholly owned subsidiary, acquired a 59% ownership interest in Champ LP following which a wholly-owned subsidiary of Champ LP then acquired a 35% ownership interest in BKB. The Company acquired its ownership interest in Champ LP for an initial purchase price paid at closing of approximately €30,724 (or $39,477). The Company committed to invest up to approximately €38,000 (or $50,000).

In January 2015, the Company funded an additional investment of €3,331 (or $3,929) related to its investment in Champ LP. In February 2015, the Company sold approximately 48% of its ownership interest in Champ LP at cost to an account managed by Apollo for approximately €16,314 (or $20,794). In June 2016, the Company transferred €427 of its unfunded commitment to Apollo, reducing its unfunded commitment to Champ LP to €2,802 (or $2,985).

In May 2017, the Company sold its remaining ownership interest in Champ LP, to unaffiliated third parties for €21,792 or $24,498, resulting in a loss of $3,305. As of September 30, 2017, the Company had no interest in Champ LP.

Loans receivable

In ~~June, 2017, the Company increased its outstanding loan commitment through the acquisition of an additional $25,000 of interests~~January 2020, we sold £62.2 million ($81.3 million assuming conversion into U.S. dollars) in ~~an existing pre-development~~a mezzanine loan ~~from~~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, ~~increasing~~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.

In the ~~Company's total outstanding loan commitment~~second quarter of 2020, we sold our interests in three construction loans to ~~$100,000. Furthermore, in September 2017 the Company funded an additional $25,000 to acquire a portion~~entities managed by affiliates of the ~~same pre-development mezzanine loan from a fund managed by~~Manager. Refer to "Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net" for additional information related to these sales.

Term Loan

In May 2019, Apollo Global Funding, LLC, an affiliate of the Manager, ~~increasing~~served as one of the ~~Company's total outstanding loan commitment to $125,000. The pre-development mezzanine loan is~~five arrangers for the ~~construction~~issuance of ~~a residential condominium building in New York, New York~~our senior secured term loan and ~~is part~~received $0.6 million of ~~a $300,000 mezzanine loan.~~arrangement fees.

Note 1213 – Share-Based Payments

On September 23, 2009, ~~the Company’s~~our board of directors approved the Apollo Commercial Real Estate Finance, Inc., 2009 Equity Incentive Plan ~~(as~~("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 ~~from time to time,~~and restated the ~~“LTIP”).~~ 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 ~~7.5%~~ ~~of the issued and outstanding~~7,000,000 shares of ~~the Company’s~~our common ~~stock (on a fully diluted basis).~~stock. The ~~LTIP is~~LTIPs are administered by the compensation committee of ~~the Company’s~~our board of directors (the ~~“Compensation Committee”~~"Compensation Committee") and all grants under the ~~LTIP~~LTIPs must be approved by the Compensation Committee.

~~The Company~~We recognized stock-based compensation expense of ~~$2,635~~$4.2 million and ~~$9,887, respectively, for the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2017, related to restricted stock and RSU vesting. The Company recognized stock-based compensation expense of $1,828 and $5,434, respectively,~~$12.7 million for the three and nine months ended September 30, ~~2016,~~2020, respectively, related to restricted ~~common~~ stock and RSU ~~vesting.~~ vesting, as compared to $3.9 million and $12.1 million for the three and nine months ended September 30, 2019, respectively.

The following table summarizes the ~~activity related to~~grants, vesting and forfeitures of restricted common stock and RSUs during the nine months ended September 30, ~~2017~~:2020:


	Type	Restricted Stock		RSUs		Grant Date Fair Value ($ in thousands)
Outstanding at December 31, 2019			25,356		2,007,355
	Granted	82,235		54,867		906
	Vested	(25,356)		(264)		N/A
	Forfeiture	0		(13,587)		N/A
Outstanding at September 30, 2020			82,235		2,048,371

Type Date Restricted Stock RSUs Estimated Fair Value
on Grant Date Initial Vesting Final Vesting
Outstanding at December 31, 2016 150,110
1,703,775

Canceled upon delivery January 2017 —
(332,349 ) n/a
n/a n/a
Vested January 2017 (5,161 ) —
n/a
n/a n/a
Forfeiture March 2017 —
(1,971 ) n/a
n/a n/a
Vested April 2017 (5,164 ) n/a
n/a n/a
Grant April 2017 14,674
—
$ 275
April 2018 April 2020
Canceled upon delivery May 2017 —
(1,971 ) n/a
n/a n/a
Vested July 2017 (4,004 ) n/a
n/a n/a
Canceled upon delivery July 2017 (544 ) n/a
n/a n/a
Grant August 2017 13,026
$ 233
August 2018 August 2018
Grant August 2017 790
$ 14
August 2018 August 2021
Forfeiture September 2017 (8,273 ) n/a
n/a n/a

Outstanding at September 30, 2017 163,481
1,359,457

Below is a summary of restricted stock and RSU vesting dates as of September 30, ~~2017~~.2020:


Vesting Year	Restricted Stock	RSU	Total Awards
2020	0	956,738	956,738
2021	82,235	699,903	782,138
2022	0	373,441	373,441
2023	0	18,289	18,289
Total	82,235	2,048,371	2,130,606

Vesting Date Restricted Stock Vesting RSU Vesting Total Awards
October 2017 3,997
—
3,997
December 2017 53,923
603,677
657,600
January 2018 2,749
—
2,749
April 2018 7,645
—
7,645
June 2018 —
544
544
July 2018 1,420
—
1,420
October 2018 1,424
—
1,424
December 2018 41,670
477,173
518,843
January 2019 1,419
—
1,419
April 2019 6,314
—
6,314
December 2019 25,000
277,273
302,273
April 2020 4,894
—
4,894
August 2020 —
264
264
Total 163,481
1,359,457
1,522,939

At September 30, ~~2017, the Company~~2020, we had unrecognized compensation expense of approximately ~~$1,932~~$0.3 million and ~~$16,629,~~$22.9 million, respectively, related to the vesting of restricted stock awards and RSUs noted in the table above.

RSU Deliveries

During the nine months ended September 30, ~~2017, the Company~~2020 and 2019, we delivered ~~200,859~~503,411 and 433,585 shares of common stock for ~~334,864~~868,421 and 730,980 vested ~~RSUs. The Company allows~~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~~paid in capital on ~~the~~our condensed consolidated statement of changes in stockholders' equity. The adjustment was ~~$2,336~~$6.5 million and $5.0 million for the nine months ended September 30, ~~2017~~,2020 and 2019, respectively. The adjustment is ~~included as~~ a reduction of capital ~~increase~~ related to ~~the Company's~~our equity incentive plan and is presented net of increases of capital related to our equity incentive plan in ~~the~~our condensed consolidated statement of changes in ~~stockholders’~~stockholders' equity.

Note 1314 – Stockholders’ Equity

~~The Company's~~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 September 30, ~~2017, 105,451,235~~2020, 143,288,347 shares of common stock were issued and outstanding, and ~~there were 8,000,000~~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 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") ~~issued and~~

outstanding.

~~On August 2, 2017,~~ Holders of the ~~Company redeemed all 3,450,000 shares of 8.625%~~ Series ~~A Cumulative Redeemable Perpetual~~C Preferred Stock ~~("Series A Preferred Stock") at~~received the redemption price of $25.00 plus accumulated but unpaid dividends to the redemption date of ~~$0.1079~~$0.2223 per share.

Dividends. The following table details our dividend activity:

~~Dividends.~~ ~~During~~ ~~2017, the Company declared the following dividends on its common stock:~~


	Three months ended			Nine months ended
Dividend declared per share of:	September 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
Common Stock	$0.35	$0.46	$1.10	$1.38
Series B Preferred Stock	0.50	0.50	1.50	1.50
Series C Preferred Stock	N/A	N/A	N/A	0.7223



~~Declaration Date~~	~~Record Date~~	~~Payment Date~~	~~Per Share~~
~~March 14, 2017~~	~~March 31, 2017~~	~~April 17, 2017~~	~~$0.4600~~
~~June 15, 2017~~	~~June 30, 2017~~	~~July 17, 2017~~	~~$0.4600~~
~~September 14, 2017~~	~~September 29, 2017~~	~~October 16, 2017~~	~~$0.4600~~

~~During 2017, the Company declared the following dividends on its Series A Preferred Stock:~~



~~Declaration Date~~	~~Record Date~~	~~Payment Date~~	~~Per Share~~
~~March 14, 2017~~	~~March 31, 2017~~	~~April 17, 2017~~	~~$0.5391~~
~~June 15, 2017~~	~~June 30, 2017~~	~~July 17, 2017~~	~~$0.5391~~
~~July 3, 2017~~	~~August 2, 2017~~	~~August 2, 2017~~	~~$0.1079~~

~~During 2017, the Company declared the following dividends on its Series B Preferred Stock:~~



~~Declaration Date~~	~~Record Date~~	~~Payment Date~~	~~Per Share~~
~~March 14, 2017~~	~~March 31, 2017~~	~~April 17, 2017~~	~~$0.5000~~
~~June 15, 2017~~	~~June 30, 2017~~	~~July 17, 2017~~	~~$0.5000~~
~~September 14, 2017~~	~~September 29, 2017~~	~~October 16, 2017~~	~~$0.5000~~

~~During 2017, the Company declared the following dividends on its Series C Preferred Stock:~~



~~Declaration Date~~	~~Record Date~~	~~Payment Date~~	~~Per Share~~
~~March 14, 2017~~	~~March 31, 2017~~	~~April 28, 2017~~	~~$0.5000~~
~~June 15, 2017~~	~~June 30, 2017~~	~~July 31, 2017~~	~~$0.5000~~
~~September 14, 2017~~	~~September 29, 2017~~	~~October 31, 2017~~	~~$0.5000~~

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 our 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 ~~2017, the Company~~2019, we completed a follow-on public offering of ~~13,800,000~~17,250,000 shares of ~~its~~our common stock, including shares issued pursuant to the underwriters' option to purchase additional shares, at a price of ~~$18.05~~$18.27 per share. The aggregate net proceeds from the offering ~~including proceeds from the sale of the additional shares,~~ were ~~approximately $248,900~~$314.8 million after deducting ~~estimated~~ offering expenses.

~~During the fourth quarter of 2016, the Company completed a follow-on public offering of 10,500,000 shares of its~~Common Stock Repurchases. The following table details our common stock ~~at a price of $16.97 per share. The aggregate net proceeds from~~repurchase activity during the ~~offering, including proceeds from the sale of the additional shares, were approximately $177,796 after deducting estimated offering expenses.~~nine months ended September 30, 2020:

~~AMTG Merger.~~ ~~In addition, in 2016 the Company issued common and preferred equity in connection with the AMTG Merger as described in "Note 17 - Business Combination."~~


	Three months ended
	March 31, 2020	June 30, 2020	September 30, 2020	Total
Shares Repurchased	300,000	5,495,976	5,038,619	10,834,595
Weighted Average Price	$8.12	$7.96	$9.01	$	8.45

Note 1415 – Commitments and Contingencies

Legal Proceedings. From time to time, ~~the Company~~we may be involved in various claims and legal actions arising in the ordinary course of business.

~~After the announcement of the execution of the AMTG Merger Agreement, two putative class~~ On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57th Investment LLC commenced an action ~~lawsuits challenging the proposed First Merger (as defined~~captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No 653251/2018) in the AMTG Merger Agreement), captioned Aivasian v. Apollo Residential Mortgage, Inc., et al., No. 24-C-16-001532 and Wiener v. Apollo Residential Mortgage, Inc., et al., No. 24-C-16-001837, were filed in the Circuit Court for Baltimore City, (the “Court”). A putative class and derivative lawsuit was later filed in the Court captioned Crago v. Apollo Residential Mortgage, Inc., No. 24-C-16-002610. Following a hearing on May 6, 2016, the Court entered orders among other things, consolidating the three actions under the caption In Re Apollo Residential Mortgage, Inc. Shareholder Litigation, Case No.: 24-C-16-002610.New York Supreme Court. The ~~plaintiffs have designated the Crago~~ complaint ~~as the operative complaint. The operative complaint includes both direct and derivative claims,~~ names as defendants ~~AMTG,~~(i) ACREFI Mortgage Lending, LLC, a subsidiary of the ~~board~~Company, (ii) the Company, and (iii) certain funds managed by Apollo, which are co-lenders on a mezzanine loan against the development of ~~directors of AMTG (the “AMTG Board”), ARI, Arrow Merger Sub Inc., Apollo and Athene Holding Ltd. and alleges, among other things,~~a residential condominium building in Manhattan, New York. The plaintiffs allege that the ~~members~~defendants tortiously interfered with the contractual equity put right in the plaintiffs’ joint venture agreement with the developers of the ~~AMTG Board breached their fiduciary duties to the AMTG stockholders~~project, and that the ~~other corporate~~ defendants aided and abetted ~~such~~breaches of fiduciary ~~breaches. The operative complaint further alleges, among other things, that~~duty by the proposed First Merger involves inadequate consideration, was the result of an inadequate and conflicted sales process, and includes unreasonable deal protection devices that purportedly preclude competing offers. It also alleges that the transactions with Athene Holding Ltd. are unfair and that the registration statement on Form S-4 filed with the SEC on April 6, 2016 contains materially misleading disclosures and omits certain material information. The operative complaint seeks, among other things, certificationdevelopers of the ~~proposed class, declaratory relief, preliminary~~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 permanent injunctive relief, including enjoining or rescinding the First Merger, unspecified damages, and an award of other unspecified attorneys’ and other fees and costs. On May 6, 2016, counsel for the plaintiffs filed with the Court ~~a stipulation seeking the appointment of interim co-lead counsel, which stipulation was approved by the Court on June 9, 2016. Defendants’ motions to dismiss have been fully briefed,~~

~~and oral argument was held on December 8, 2016. On August 14, 2017, the Court issued an opinion~~entered judgment dismissing the ~~operative~~ complaint in its entirety ~~with prejudice. The time to~~on November 8, 2019. Plaintiffs filed a timely notice of appeal on December 6, 2019 and, as of September 28, 2020, the ~~order dismissing~~parties have now fully briefed the ~~lawsuit has expired,~~appeal. We are awaiting scheduling of oral argument. We believe the claims are without merit and ~~no appeals~~do not believe this will have ~~been filed.~~a material adverse effect on our condensed consolidated financial statements.

On January 4, 2017, the United States Department of Justice served a Request for Information and Documents (the “Request”) on the Company, in connection with a preliminary investigation into certain aspects of the Company's former residential real estate portfolio, which the Company acquired in connection with the AMTG Merger and subsequently sold in 2016. The Request seeks a range of information in connection with the residential real estate portfolio, including, among other things, information concerning policies, procedures, and practices related to advertising, marketing, identifying, or acquiring residential properties for sale or rent, and various data for all rental and sales contracts executed since January 1, 2012. The Company is cooperating with the Department of Justice and fully complying with the Request.

Loan Commitments. As described in "Note 54 - Commercial Mortgage, Subordinate Loans ~~Held for Investment",~~and Other Lending Assets, Net" at September 30, ~~2017, the Company~~2020, we had ~~$80,164~~$1.4 billion of unfunded commitments related to ~~its~~our commercial mortgage ~~loan portfolio~~ and subordinate loans. 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 depend on the 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 ~~portfolio.~~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 4.1 years 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 September 30, 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 1516 – Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value of ~~the Company’s~~our financial instruments not carried at fair value on ~~the~~our condensed consolidated balance sheet at September 30, ~~2017~~2020 and December 31, ~~2016~~2019 ($ in thousands):

September 30, 2017 December 31, 2016

Carrying
Value

Estimated
Fair Value

Carrying
Value

Estimated
Fair Value
Cash and cash equivalents $ 140,229
$ 140,229
$ 200,996
$ 200,996
Restricted cash 76
76
62,457
62,457
Securities, held-to-maturity —
—
146,352
146,352
Commercial mortgage loans 2,218,222
2,235,084
1,641,856
1,648,896
Subordinate loans 1,340,378
1,323,249
1,051,236
1,060,882
Borrowings under repurchase agreements (1,289,515 ) (1,288,982 ) (1,146,566 ) (1,146,807 )
2019 Notes (251,438 ) (277,041 ) (249,994 ) (268,124 )
August 2022 Notes (220,473 ) (234,025 ) —
—
Participations sold —
—
(84,979 ) (85,072 )


	September 30, 2020						December 31, 2019
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Cash and cash equivalents	$	438,234	$	438,234	$	452,282	$	452,282
Commercial mortgage loans, net	5,427,945		5,337,301		5,326,967		5,380,693
Subordinate loans and other lending assets, net⁽¹⁾	1,009,092		982,961		1,048,126		1,050,961
Secured debt arrangements, net	(3,465,337)		(3,465,337)		(3,078,366)		(3,078,366)
Senior secured term loan, net	(484,191)		(471,531)		(487,961)		(499,988)
2022 Notes	(339,695)		(326,867)		(337,755)		(348,060)
2023 Notes	(224,916)		(206,126)		(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 ~~the Company~~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, ~~restricted cash and~~ 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 1617 – Net Income (Loss) per Share

ASC 260 ~~Earnings~~"Earnings per ~~share~~,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) ~~income~~ per share of common stock ~~using the two-class method~~ for the three and nine months ended September 30, ~~2017~~2020 and 2019 ($ in thousands except per share data):


	For the three months ended September 30,						For the nine months ended September 30,
	2020		2019		2020		2019
Basic Earnings
Net income (loss)	$	49,338	$	29,089	$	(18,303)	$	158,271
Less: Preferred dividends	(3,385)		(3,385)		(10,155)		(15,139)
Net income (loss) available to common stockholders	$	45,953	$	25,704	$	(28,458)	$	143,132
Less: Dividends on participating securities	(717)		(847)		(2,238)		(2,547)
Basic Earnings	$	45,236	$	24,857	$	(30,696)	$	140,585

Diluted Earnings
Net income (loss) available to common stockholders	$	45,953	$	25,704	$	(28,458)	$	143,132
Less: Dividends on participating securities	(717)		0		(2,238)		0
Add: Interest expense on Notes	0		0		0		0
Diluted Earnings	$	45,236	$	25,704	$	(30,696)	$	143,132



Number of Shares:
Basic weighted-average shares of common stock outstanding	146,612,313		153,531,678		150,679,773		144,638,237
Diluted weighted-average shares of common stock outstanding	146,612,313		153,531,678		150,679,773		144,638,237

Earnings Per Share Attributable to Common Stockholders
Basic	$	0.31	$	0.16	$	(0.20)	$	0.97
Diluted	$	0.31	$	0.16	$	(0.20)	$	0.97

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 and nine months ended September 30, ~~2016~~:

For the three
months ended
September 30, For the nine
months ended
September 30,
2017 2016 2017 2016
Numerator:
Net income $ 68,356
$ 69,893
$ 151,714
$ 98,849
Preferred dividends (11,148 ) (9,310 ) (29,768 ) (20,985 )
Net income available to common stockholders 57,208
60,583
121,946
77,864
Dividends declared on common stock (48,507 ) (37,180 ) (139,155 ) (99,182 )
Dividends on participating securities (625 ) (413 ) (1,884 ) (1,298 )
Net income (loss) attributable to common stockholders $ 8,076
$ 22,990
$ (19,093 ) $ (22,616 )
Denominator:
Basic weighted average shares of common stock outstanding 105,446,704
71,919,549
97,546,437
68,913,362
Diluted weighted average shares of common stock outstanding 106,812,721
72,861,611
98,919,689
69,865,603
Basic and diluted net income per weighted average share of common stock
Distributable Earnings $ 0.46
$ 0.52
$ 1.43
$ 1.44
Undistributed income (loss) $ 0.08
$ 0.31
$ (0.20 ) $ (0.33 )
Basic and diluted net income per share of common stock $ 0.54
$ 0.83
$ 1.23
$ 1.11
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 and nine months ended September 30, 2019, 28,533,271 and 29,041,856 weighted-average potentially issuable shares with respect to the Notes, respectively, were excluded from the calculation of diluted net income per share because the effect was anti-dilutive. Refer to "Note 9 - Convertible Senior Notes, Net" for further discussion.

For the three and nine months ended September 30, ~~2017, 1,366,016~~2020, 2,051,311 and ~~1,373,252~~2,028,573 weighted-average unvested RSUs, respectively, were excluded from the calculation of diluted net income per share because the effect was anti-dilutive. For the three and nine months ended September 30, ~~2016, 942,062~~2019, 1,839,631 and ~~952,241~~1,845,086 of weighted-average unvested RSUs, respectively, were excluded from the calculation of diluted net income per share because the effect was anti-dilutive.

~~Note 17 – Business Combination~~

On August 31, 2016, the Company, pursuant to the terms and conditions of the AMTG Merger Agreement, acquired AMTG for consideration of common stock and preferred stock, as applicable and cash. AMTG merged with and into the Company with the Company continuing as the surviving entity. As a result, all operations of AMTG and its former subsidiaries are consolidated with the operations of the Company. In connection with financing the AMTG Merger, on August 31, 2016, the Company entered into a Loan Agreement (the “Athene Loan Agreement”) with Athene USA Corporation, a subsidiary of Athene Holding Ltd., as lender (“Athene USA”), pursuant to which the Company borrowed $175,000 in order to fund a portion of the Company’s obligations under the AMTG Merger Agreement. The Athene Loan Agreement was repaid in full and terminated on September 1, 2016. On August 31, 2016, pursuant to an Asset Purchase and Sale Agreement, dated February 26, 2016 (as amended, the “Asset Purchase Agreement”) by and among Athene Annuity & Life Assurance Company and Athene Annuity and Life Company (collectively, “Athene Annuity”) and the Company, the Company sold primarily non-agency residential mortgage backed securities previously held by AMTG to Athene Annuity for cash consideration of approximately $1,100,000. Proceeds from the sale were used to repay approximately $804,000 in associated financing, $175,000 to satisfy the Athene Loan Agreement and for general corporate purposes. All of the assets acquired from AMTG were sold during 2016.

The AMTG Merger was accounted for as a business combination in accordance with ASC 805, Business Combinations. The transactions pursuant to the Athene Loan Agreement and the Asset Purchase Agreement were contemporaneous with and contingent on the AMTG Merger, therefore the Company recorded the transaction net. The Company was designated as the accounting acquirer. The total purchase price has been allocated based upon management’s estimates of fair value. The difference between the fair value of net assets of AMTG and the consideration was recorded as a bargain purchase gain.

~~The bargain purchase gain was computed as follows:~~

Consideration Paid: $ (in thousands)

Cash $ 220,159

Common stock issued 218,397

Preferred stock assumed 172,500

Total consideration paid $ 611,056

Assets acquired:

Cash and cash equivalents 399,402

Restricted cash 10,552

Investments 1,491,484

Other assets 34,822

Liabilities assumed:

Borrowings under repurchase agreements (1,254,518 )

Other liabilities (30,665 )

Net assets acquired 651,077

Bargain purchase gain $ 40,021

The Company incurred $11,350 of transaction-related expenses related to the AMTG Merger during 2016. Transaction-related expenses are comprised primarily of transaction fees and AMTG Merger costs, including legal, finance, consulting, professional fees and other third-party costs.

~~The following table provides the pro forma consolidated operational data as if the AMTG Merger had occurred on January 1, 2016:~~

Three Months Ended Nine Months Ended
(in thousands, except per share data) September 30, 2016 September 30, 2016
Total revenue $ 89,665
$ 280,230
Net income attributable to common shareholders 15,615
40,161

Common shares outstanding at September 30, 2016 80,826,566
80,826,566
Net income per common share, basic and diluted $ 0.19
$ 0.50

The pro forma consolidated operational data is based on assumptions and estimates considered appropriate by our management; however, these pro forma results are not necessarily indicative of the results of operations that would have been obtained had the AMTG Merger occurred at the beginning of the period presented, nor do they purport to represent the consolidated results of operations for future periods. The pro forma consolidated operational data does not include the impact of any synergies that may be achieved from the AMTG Merger or any strategies that management may consider in order to continue to efficiently manage operations.

Note 18 – Subsequent Events

~~In October 2017, the Company received approximately $48,357 in proceeds from sales and principal pay downs from four CMBS.~~

Subsequent to the ~~end~~quarter ended September 30, 2020, the following events took place:

Investment activity: We funded approximately $33.0 million for previously closed loans.

Loan Repayments. We received approximately $1.3 million from loan repayments.

In addition, the remaining collateral of for-sale residential condominium units located in Bethesda, MD, was sold for net proceeds approximately equal to the carrying value of the ~~third quarter, the Company committed capital to $294,134~~loan.

Loan Sales: We sold, at par, a $25.0 million subordinate position of ~~first mortgage loans, all~~a residential-for-sale: construction loan with a total commitment of ~~which were funded.~~$110.0 million.

~~The Company funded approximately $2,475 of previously closed loans.~~

~~The Company received approximately $166,240 from loan repayments, including $35,530 of first mortgage loans and $130,710 from subordinate loans.~~

~~In October 2017, the Company concurrently~~Unconsolidated Joint Venture: We entered into a ~~common stock purchase agreement~~joint venture which owns the underlying properties that secure our $180.0 million first mortgage predevelopment loan located in Miami, FL. The entity in which we own an interest, and which owns the underlying properties was deemed to be a ~~preferred stock repurchase agreement with QH RE Asset Company, LLC (“QHREAC”). Pursuant to~~VIE and we determined that we are not the ~~agreements, (i) QHREAC purchased 1,670,000 shares~~primary beneficiary of the Company’s common stock, par value $0.01 per share, for cash at an aggregate purchase price of $30,795 ($18.44 per share), and (ii) the Company repurchased from QHREAC 1,229,607 shares of the Company’s Series B Preferred Stock, par value $0.01 per share, for an aggregate purchase price of $30,795 ( approximately $25.04 per share, made up of $25 liquidation value per share, plus $0.04 per share of accumulated and unpaid dividends through, but not including, the closing date of the transaction).that VIE.

In October 2017, the Company upsized its JPMorgan Facility increasing the maximum borrowing capacity amount to $1,393,000, comprised of a $1,250,000 repurchase facility and a $143,000 asset specific financing.

~~ITEM~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~(in thousands—except share and per share data)~~

FORWARD-LOOKING INFORMATION

~~The Company makes~~

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”~~"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”~~"Exchange Act"). For these statements, ~~the Company claims~~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 ~~the Company’s~~our control. These forward-looking statements include information about possible or assumed future results of ~~the Company’s~~our business, financial condition, liquidity, results of operations, plans and objectives. When ~~the Company uses~~we use the words ~~“believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may”~~"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 ~~the Company’s~~our industry, interest rates, real estate values, the debt securities markets or the general ~~economy or~~economy; the demand for commercial real estate loans; ~~the Company’s~~our business and investment strategy; ~~the Company’s~~our operating results; actions and initiatives of the U.S. government and governments outside of the United States, ~~and~~ 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; ~~the Company’s~~our ability to obtain and maintain financing arrangements, including ~~repurchase agreement financing~~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 ~~the Company participates;~~we participate; changes in the value of ~~the Company’s~~our assets; the scope of ~~the Company’s~~our target assets; interest rate mismatches between ~~the Company’s~~our target assets and any borrowings used to fund such assets; changes in interest rates and the market value of ~~the Company’s~~our target assets; changes in prepayment rates on ~~the Company’s~~our target assets; effects of hedging instruments on ~~the Company’s~~our target assets; rates of default or decreased recovery rates on ~~the Company’s~~our target assets; the degree to which hedging strategies may or may not protect ~~the Company~~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; ~~the Company’s~~our continued maintenance of ~~its~~our qualification as a REIT for U.S. federal income tax purposes; ~~the Company’s~~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 ~~the Company’s~~our ability to make distributions to ~~its~~our stockholders in the future; ~~and the Company’s~~our present and potential future ~~competition.~~competition; and unexpected costs or unexpected liabilities, including those related to litigation.

The forward-looking statements are based on ~~the Company’s~~our beliefs, assumptions and expectations of ~~its~~our future performance, taking into account all information currently available to ~~it.~~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 ~~the Company.~~us. See ~~“Item 1A -~~"Item 1A. Risk ~~Factors”~~Factors" of ~~the Company’s Annual~~this Quarterly Report on Form ~~10-K for the year ended December 31, 2016.~~10-Q and our Annual Report. These and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that ~~the Company files~~we file with the SEC, could cause ~~its~~our actual results to differ materially from those included in any forward-looking statements ~~the Company makes.~~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, ~~the Company is~~we are not obligated to, and ~~does~~do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

~~The Company is~~We are a Maryland corporation ~~that has~~and have elected to be taxed as a REIT for U.S. federal income tax purposes. ~~The Company~~We primarily ~~originates, acquires, invests~~originate, acquire, invest in and ~~manages~~manage performing commercial first mortgage loans, subordinate financings, ~~CMBS~~ and other commercial real estate-related debt investments. These asset classes are referred to as ~~the Company’s~~our target assets.

~~The Company is~~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~~value-oriented investment approach in private equity, credit and real estate with assets under management of approximately ~~$242~~$413.6 billion as of ~~September~~June 30, ~~2017.~~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. ~~The Company benefits~~We benefit from Apollo’s global infrastructure and operating platform, through which ~~the Company is~~we are able to source, evaluate and manage potential investments in ~~the Company’s~~our target assets.

Current Market ~~Overview~~Conditions

~~Based on~~During the ~~current market dynamics, including significant upcoming commercial real estate debt maturities, we believe~~first quarter of 2020, there ~~remain compelling opportunities for~~was a global outbreak of COVID-19, which was declared by the ~~Company~~World Health Organization as a pandemic. In response to invest capital in its target assets at attractive risk adjusted returns. The Company will continue to focus on underlying real estate value, and transactions that benefit from the Company’s ability to execute complex and sophisticated transactions.

Although the Company does not participate in the conduit lending market, the Company believes that an active CMBS market can be viewed as an indicator of the active commercial real estate lending markets. New-issue CMBS issuance continued in 2017 with total issuance inCOVID-19, the United States ~~of approximately $67 billion. During the nine months ended September 30, 2017, despite the robust issuance, current volumes of CMBS issuance~~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 ~~moderate relative to~~in the ~~peak~~midst of the ~~market, which saw more than $229 billion~~COVID-19 pandemic we are not in ~~CMBS issuance in 2007, creating significant opportunities for non-CMBS lenders such~~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 ~~Company.~~

~~On February 3, 2017, President Trump signed an executive order for a broad review~~value of ~~federal regulation~~our assets, business, financial condition, results of operations and cash flows, and our ability to operate successfully. Some of the U.S. financial system by the Secretary of the Treasury, in consultation with the heads of the member agencies of the Financial Stability Oversight Council, a panel comprising top U.S. financial regulators,factors that impacted us to be reported within 120 days of the day of the order. While the outcome is uncertain, there have been several indications that the new administration will seek to deregulate the U.S. financial industry, including by altering the Dodd-Frank Act, whichdate and may ~~among other things, decrease the restrictions on banks and other financial institutions and allow them to compete with us for investment opportunities that were previously not available to them.~~

The Company believes the challenges faced by conduit lenders and the general uncertainty around value and pricing could create attractive risk adjusted investment opportunities for the Company. As a result, the Company expects to continue to affect us are outlined in "Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q. Please see ~~opportunities to originate mezzanine~~"Liquidity and ~~first mortgage financings in transactions which benefit from~~Capital Resources" below for additional discussion surrounding the ~~Company’s ability to source, structure~~ongoing impact we expect COVID-19 will have on our liquidity and ~~execute complex transactions.~~

capital resources.

Critical Accounting Policies

A summary of ~~the Company’s~~our critical accounting policies is set forth in ~~its~~our Annual Report ~~on Form 10-K for the year ended~~ ~~December 31, 2016~~under ~~“Item 7 –~~"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 ~~the Company's~~our critical accounting policies described in ~~the Company's~~our Annual Report ~~on Form 10-K filed with~~other than the ~~SEC on February 28, 2017.~~adoption of the CECL Standard, as described in "Note 2 - Summary of Significant Accounting Policies."

~~Financial Condition and~~ Results of Operations

All ~~non-U.S. dollar~~non-USD denominated assets and liabilities are translated to ~~U.S. dollars~~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.

~~Investments~~Loan Portfolio Overview

The following table sets forth certain information regarding ~~the Company’s investments at~~our commercial real estate debt portfolio as of September 30, ~~2017:~~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	$	5,427,945	4.7	%	5.2	%	$	3,478,083	2.2	%	$	1,949,862
Subordinate loans and other lending assets, net	1,009,092		10.5	%	11.4	%	—		—		1,009,092
Total/Weighted-Average	$	6,437,037	5.6	%	6.2	%	$	3,478,083	2.2	%	$	2,958,954

Description Amortized
Cost Weighted Average Coupon (1) Weighted Average All-in Yield (1)
(2) Debt Cost of Funds Equity at
cost
First mortgages $ 2,218,222
6.5 % 7.3 % $ 1,140,198
3.6 % $ 1,078,024
Subordinate loans 1,340,378
11.8
13.1
—
—
1,340,378
Total/Weighted Average $ 3,558,600
8.5 % 9.5 % $ 1,140,198
3.6 % $ 2,418,402

-————————


~~(1)~~	~~Weighted-Average Coupon and Weighted Average All-in-Yield reflects one-month LIBOR at September 30, 2017, which was 1.23%.~~


~~(2)~~	~~Weighted-Average All-in-Yield includes the amortization of deferred origination fees, loan origination costs and accrual of both extension and exit fees.~~

(1) Weighted-Average Coupon and Weighted-Average All-in Yield are based on the applicable benchmark rates as of September 30, 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 $12.7 million.

(4) Represents loan portfolio at amortized cost less secured debt outstanding.

The ~~Company's~~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 September 30, 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	$317	$—		09/2024	Manhattan, NY
2	Urban Retail	3	12/2019	320	—		12/2023	London, UK
3	Hotel	3	10/2019	261	50		08/2024	Various
4	Healthcare	3	10/2019	220	29		10/2024	Various
5	Office	3	02/2020	216	—		02/2025	London, UK


6	Industrial	3	01/2019	197	7		02/2024	Brooklyn, NY
7	Office	3	06/2019	204	29		11/2026	Berlin, Germany
8	Office	3	10/2018	197	3		01/2022	Manhattan, NY
9	Urban Predevelopment ⁽¹⁾	5	01/2016	115	—		09/2021	Miami, FL
10	Office	3	09/2019	179	—		09/2023	London, UK
11	Office	3	01/2020	184	103		02/2025	Long Island City, NY
12	Office	3	11/2017	151	—		01/2023	Chicago, IL
13	Urban Predevelopment⁽¹⁾	5	03/2017	128	—		12/2020	Brooklyn, NY
14	Hotel	3	04/2018	152	—		04/2023	Honolulu, HI
15	Hotel	3	09/2015	145	—		06/2024	Manhattan, NY
16	Hotel	3	05/2018	140	—		06/2023	Miami, FL
17	Hotel	3	08/2019	139	—		08/2024	Puglia, Italy
18	Office	3	01/2018	135	56		01/2022	Renton, WA
19	Retail center⁽¹⁾	5	11/2014	105	—		09/2021	Cincinnati, OH
20	Office	3	10/2018	135	51	Y	10/2023	Manhattan, NY
21	Residential-for-sale: construction	3	12/2019	135	15	Y	01/2023	Boston, MA
22	Hotel	3	03/2017	105	—		03/2022	Atlanta, GA
23	Hotel	3	11/2018	100	—		12/2023	Vail, CO
24	Hotel	3	12/2017	91	—		12/2022	Manhattan, NY
25	Office	3	03/2018	92	—		04/2023	Chicago, IL
26	Residential-for-sale: inventory	3	12/2019	73	—		07/2021	Manhattan, NY
27	Office	3	04/2019	97	62	Y	09/2025	Culver City, CA
28	Office	3	12/2017	87	37		07/2022	London, UK
29	Mixed Use	3	12/2019	75	1		12/2024	London, UK
30	Residential-for-sale: construction	3	12/2018	71	107	Y	12/2023	Manhattan, NY
31	Residential-for-sale: construction	3	10/2015	69	—		08/2021	Manhattan, NY
32	Multifamily	3	04/2014	66	—		07/2023	Various
33	Hotel	3	08/2019	67	—		09/2022	Manhattan, NY
34	Hotel	3	04/2018	64	—		05/2023	Scottsdale, AZ
35	Urban Predevelopment	3	12/2016	52	—		06/2022	Los Angeles, CA
36	Hotel	3	09/2019	60	—		10/2024	Miami, FL
37	Residential-for-sale: construction	3	01/2018	68	12	Y	01/2023	Manhattan, NY
38	Hotel	3	12/2019	59	—		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, OH
42	Hotel	3	12/2015	42	—		08/2024	St. Thomas, USVI
43	Residential-for-sale: construction	3	12/2018	65	38	Y	01/2024	Hallandale Beach, FL
44	Hotel⁽¹⁾	5	02/2018	29	—		03/2023	Pittsburgh, PA
45	Office	3	12/2019	34	3		12/2022	Edinburgh, Scotland
46	Residential-for-sale: inventory	3	05/2018	24	—		03/2021	Manhattan, NY
47	Residential-for-sale: inventory	3	06/2018	13	—		07/2021	Manhattan, NY
48	Residential-for-sale: inventory⁽¹⁾	5	02/2014	3	—		04/2021	Bethesda, MD
49	Mixed Use	3	12/2019	11	789	Y	06/2025	London, UK
	General CECL Allowance			(20)
	Sub total / Weighted-Average Subordinate Loans and Other Lending Assets	3.1		$5,428	$1,393		3.0 Years

Subordinate Loan and Other Lending Asset Portfolio

Property Type

Risk Rating

Origination Date

Amortized Cost

Unfunded Commitment

Construction Loan

Fully-extended Maturity

Location

Residential-for-sale: construction ⁽²⁾

06/2015

$224

—

12/2020

Manhattan, NY

Residential-for-sale: construction

12/2017

108

06/2022

Manhattan, NY


3	Office	3	01/2019	100	—		12/2025	Manhattan, NY
4	Healthcare⁽³⁾	3	01/2019	76	—		01/2024	Various
5	Residential-for-sale: construction ⁽²⁾	3	11/2017	85	—	Y	12/2020	Manhattan, NY
6	Residential-for-sale: construction	3	12/2017	72	—	Y	04/2023	Los Angeles, CA
7	Healthcare⁽⁴⁾	3	07/2019	51	—		06/2024	Various
8	Mixed Use	3	01/2017	42	—		02/2027	Cleveland, OH
9	Residential-for-sale: inventory	3	10/2016	36	—		10/2020	Manhattan, NY
10	Mixed Use	3	02/2019	38	—	Y	12/2022	London, UK
11	Industrial	2	05/2013	32	—		05/2023	Various
12	Mixed Use	3	12/2018	29	22	Y	12/2023	Brooklyn, NY
13	Hotel	3	06/2015	24	—		07/2025	Phoenix, AZ
14	Hotel	3	06/2018	20	—		06/2023	Las Vegas, NV
15	Multifamily	3	05/2018	19	—		05/2028	Cleveland, OH
16	Healthcare⁽³⁾⁽⁴⁾	3	02/2019	17	—		01/2034	Various
17	Office	3	07/2013	14	—		07/2022	Manhattan, NY
18	Hotel⁽¹⁾	5	06/2015	18	—		12/2022	Washington, DC
19	Hotel⁽¹⁾	5	05/2017	9	—		06/2027	Anaheim, CA
20	Office	3	08/2017	7	—		09/2024	Troy, MI
21	Mixed Use	3	07/2012	7	—		08/2022	Chapel Hill, NC
	General CECL Allowance			(19)
	Sub total / Weighted-Average Subordinate Loans and Other Lending Assets	3.0		$1,009	$33		2.5 Years

	Total / Weighted-Average Loan Portfolio	3.1		$6,437	$1,426		2.9 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)Loan and Single Asset, Single Borrower CMBS are secured by the same properties.

(4)Single Asset, Single Borrower CMBS.

Our average asset and debt balances for the nine months ended September 30, ~~2017, were:~~2020 were ($ in thousands):


	Average month-end balances for the nine months ended September 30, 2020
Description	Assets		Related debt
Commercial mortgage loans, net	$	5,635,603	$	3,399,455
Subordinate loans and other lending assets, net	1,048,555		—

Average month-end balances for the nine months ended September 30, 2017
Description Assets Related debt
First mortgages $ 2,027,620
$ 1,173,235
Subordinate loans ⁽¹⁾
1,209,787
—
CMBS 305,470
233,884
Portfolio Management

~~———————~~

~~(1) Subordinate loans also include CMBS (Held-to-Maturity).~~Due to the impact of COVID-19, some of our borrowers have experienced consequences which are preventing the execution of their business plans and in some cases temporary closures. As a result, we have worked with borrowers to execute loan modifications which are typically coupled with additional equity contributions from borrowers. Loan modifications to date have included repurposing of reserves, temporary deferrals of interest or principal, and partial deferral of coupon interest as payment-in-kind interest. None of these modifications are troubled debt restructurings.

Investment Activity

During the ~~nine-months~~nine months ended September 30, ~~2017, the Company~~2020, we committed ~~$910,566~~$562.0 million of capital to loans ($~~866,300~~457.4 million of which was funded ~~at closing)~~during the nine months ended September 30, 2020). In addition, during the ~~nine-months~~nine months ended September 30, ~~2017 the Company funded approximately $190,737 for previously closed loans and~~2020, we received ~~$238,541~~$543.5 million in repayments ~~from loans.~~and sales and funded $309.8 million for loans closed prior to 2020.

Net Income (Loss) Available to Common Stockholders

For the three months ended September 30, ~~2017~~2020 and ~~September 30, 2016, respectively, the Company’s~~2019 our net income available to common stockholders was ~~$57,208,~~$46.0 million, or ~~$0.54~~$0.31 per diluted share of common stock, and ~~$60,583,~~$25.7 million, or ~~$0.83~~$0.16 per ~~share.~~diluted share of common

stock, respectively. For the nine months ended September 30, ~~2017~~2020 and ~~September 30, 2016, respectively, the Company’s~~2019, our net income (loss) available to common stockholders was ~~$121,946,~~$(28.5) million, or ~~$1.23~~$(0.20) per diluted share of common stock, and ~~$77,864,~~$143.1 million, or ~~$1.11~~$0.97 per ~~share.~~diluted share of common stock, respectively.

Operating Results

The following table sets forth information regarding our consolidated results of operations and certain key operating ~~metrics:~~metrics ($ in thousands):

Three months ended September 30, 2017 vs. 2016 Nine months ended September 30, 2017 vs. 2016
2017 2016 $ 2017 2016 $
Net interest income:
Interest income from securities $ 2,625
$ 8,029
$ (5,404 ) $ 9,247
$ 23,685
$ (14,438 )
Interest income from securities, held to maturity —
2,875
(2,875 ) 4,132
8,597
(4,465 )
Interest income from commercial mortgage loans 41,203
27,460
13,743
112,690
72,727
39,963
Interest income from subordinate loans 47,268
32,207
15,061
121,298
89,649
31,649
Interest expense (19,855 ) (17,256 ) (2,599 ) (56,089 ) (47,620 ) (8,469 )
Net interest income 71,241
53,315
17,926
191,278
147,038
44,240
Operating expenses:
General and administrative expenses (4,629 ) (8,352 ) 3,723
(15,587 ) (21,456 ) 5,869
Management fees to related party (8,309 ) (5,903 ) (2,406 ) (23,484 ) (16,374 ) (7,110 )
Total operating expenses (12,938 ) (14,255 ) 1,317
(39,071 ) (37,830 ) (1,241 )
Income (loss) from unconsolidated joint venture —
80
(80 ) (2,847 ) 207
(3,054 )
Other income 359
309
50
710
334
376
Provision for loan losses and impairments —
—
—
(5,000 ) (15,000 ) 10,000
Realized loss on sale of assets (4,076 ) (225 ) (3,851 ) (5,118 ) (225 ) (4,893 )
Unrealized gain (loss) on securities 13,488
(9,798 ) 23,286
11,830
(36,601 ) 48,431
Foreign currency gain (loss) 7,763
(4,369 ) 12,132
17,848
(21,926 ) 39,774
Bargain purchase gain —
40,021
(40,021 ) —
40,021
(40,021 )
Gain (loss) on derivative instruments (7,481 ) 4,815
(12,296 ) (17,916 ) 22,831
(40,747 )
Net income $ 68,356
$ 69,893
$ (1,537 ) $ 151,714
$ 98,849
$ 52,865


	Three months ended September 30,						2020 vs 2019		Nine months ended September 30,				2020 vs. 2019
	2020		2019				2020		2019
Net interest income:
Interest income from commercial mortgage loans	$	74,522	$	81,136	$	(6,614)	$	232,018	$	236,880	$	(4,862)
Interest income from subordinate loans and other lending assets	28,857		43,421		(14,564)		95,491		125,303		(29,812)
Interest expense	(34,824)		(39,341)		4,517		(113,527)		(109,147)		(4,380)
Net interest income	68,555		85,216		(16,661)		213,982		253,036		(39,054)
Operating expenses:
General and administrative expenses	(6,624)		(5,839)		(785)		(19,580)		(18,564)		(1,016)
Management fees to related party	(9,927)		(10,434)		507		(30,152)		(30,306)		154
Total operating expenses	(16,551)		(16,273)		(278)		(49,732)		(48,870)		(862)
Other income	128		429		(301)		1,479		1,431		48
Realized loss on investments	(1,037)		—		(1,037)		(17,442)		(12,513)		(4,929)
Reversal of (provision for) loan losses - Specific CECL Allowance	550		(35,000)		35,550		(139,950)		(20,000)		(119,950)
Reversal of (provision for) loan losses - General CECL Allowance	5,792		—		5,792		(12,004)		—		(12,004)
Foreign currency translation gain (loss)	27,002		(19,129)		46,131		(8,388)		(20,012)		11,624
Gain (loss) on foreign currency forwards	(34,537)		24,153		(58,690)		32,959		28,619		4,340
Loss on interest rate hedging instruments	(564)		(10,307)		9,743		(39,207)		(23,420)		(15,787)
Net income (loss)	$	49,338	$	29,089	$	20,249	$	(18,303)	$	158,271	$	(176,574)

Net ~~interest income~~Interest Income

Net interest income ~~increased~~decreased by ~~$17,926~~$16.7 million and ~~$44,240~~$39.1 million during the three and nine months ended September 30, ~~2017,~~2020, respectively, as compared to the same periods in ~~2016.~~2019. The ~~increase~~decrease was primarily due to ~~an increase~~(i) a 2.02% and 1.73% decrease in ~~the principal balance of the Company's loan portfolio, by $1,222,797 as of September 30, 2017 compared to September 30, 2016 and an increase in~~average one-month LIBOR, of 0.70% from 0.53% as of September 30, 2016 to 1.23% as of September 30, 2017 partially offset by (i) an increase in interest expense due to an increase in the Company's debt balance of $490,861 as of September 30, 2017 compared to September 30, 2016 and (ii) a decrease in the principal balance of the Company's securities by $327,150 as of September 30, 2017 compared to September 30, 2016.

~~For~~respectively, for the three and nine months ended September 30, ~~2017,~~2020 compared to the ~~Company received pre-payment penalties~~same periods in September 30, 2019 and (ii) loans with an aggregate principal balance of ~~$3,590~~$602.2 million being on cost recovery or non-accrual status as of September 30, 2020 compared to $196.4 million as of September 30, 2019. This decrease was offset by (i) a $0.5 billion increase in loan principal balance as of September 30, 2020 compared to the same date in 2019 and ~~$3,998, respectively. For~~(ii) in the money LIBOR floors on several of our loans.

We recognized PIK interest of $12.5 million and $37.3 million for the three and nine months ended September 30, ~~2016, the Company received pre-payment penalties of $4,000~~2020, respectively, and ~~$5,225, respectively. The Company records pre-payment penalty income under interest income.~~

~~For~~$13.7 million and $42.8 million for the three and nine months ended September 30, ~~2017, the Company~~2019, respectively.

We recognized ~~PIK interest of $5,309~~$0 and ~~$19,323, respectively. For~~$0.2 million in pre-payment penalties and accelerated fees for the three and nine months ended September 30, ~~2016,~~2020, respectively, and $0.3 million and $4.0 million for the ~~Company recognized PIK interest of $5,808~~three and ~~$15,902,~~nine months ended September 30,

2019, respectively.

Operating Expenses

General and administrative expenses

~~Excluding $4,925 in expenses related to the AMTG merger, general~~General and administrative expenses increased by ~~$1,202~~$0.8 million for the three months ended September 30, ~~2017~~2020 compared to the same period in ~~2016.~~2019. The increase was primarily driven by ana $0.5 million increase ~~of $807 of~~in general operating expenses and $0.3 million increase in non-cash restricted stock and RSU amortization related to shares of stock awarded under the ~~Company's long-term incentive plans and a $395 increase in general operating expenses.~~LTIPs.

~~Excluding $11,350 in expenses related to the AMTG merger, general~~General and administrative expenses increased by ~~$5,481~~$1.0 million for the nine months ended September 30, ~~2017~~2020 compared to the same period in ~~2016.~~2019. The increase was primarily ~~driven by $4,453 of~~due to a $0.6 million increase in non-cash restricted stock and RSU amortization related to shares of common stock awarded under the ~~Company's long-term incentive plans~~LTIPs and ~~a $1,028~~$0.4 million increase in general operating expenses.

Management fees to related party

Management fee expense ~~increased~~decreased by ~~$2,406 and $7,110~~$0.5 million during the three ~~and nine~~ months ended September 30, ~~2017, respectively~~2020 as compared to the same periods in ~~2016.~~2019. The ~~increase~~decrease is primarily attributable to ~~an increase~~a decrease in ~~the Company’s~~our stockholders’ equity (as defined in the Management Agreement) as a result of our common stock repurchase of 10,834,595 shares during the ~~Company’s issuance~~nine months ended September 30, 2020 (as described in "Note 14 - Stockholders' Equity").

Management fees decreased by $0.2 million during the nine months ended September 30, 2020 as compared to the same period in 2019. The decrease is primarily attributable to the decrease in our stockholders' equity as noted above and was partially offset by an increase in our management fee as a result of ~~common and preferred equity~~a decrease in ~~connection with the AMTG Merger in 2016, and the Company’s follow-on common equity offerings in December 2016 and June 2017.~~ our quarterly dividend during 2020.

Management fees and the relationship between ~~the Company~~us and the Manager under the Management Agreement are discussed further in the accompanying condensed consolidated financial statements, in ~~“Note 11—~~"Note 12 - Related Party Transactions.”"

~~Income (loss) from unconsolidated joint venture~~Reversal of (provision for) loan losses - General CECL Allowance

~~Income (loss) from unconsolidated joint ventures consists of activity related to our ownership interest in Champ LP, as described in Note 6 to~~The General CECL Allowance decreased by $5.8 million during the ~~unaudited condensed consolidated financial statements -~~ ~~Unconsolidated Joint Ventures~~. In May 2017, the Company sold its remaining ownership interest in Champ LP, to unaffiliated third parties, resulting in a loss of $3,305, which is the primary driver for the increase in the loss from unconsolidated joint venturesthree months ended September 30, 2020 and increased by $12.0 million during the nine months ended September 2017 compared to the same period in 2016. The realized loss included currency translation losses, which were previously included in accumulated other comprehensive loss on the Company's condensed consolidated statement of changes in stockholders' equity.

~~Provision for loan losses and impairments~~

~~During~~30, 2020. For the three ~~and~~months ended September 30, 2020, the decrease is primarily related to an improvement in our view of estimated future market conditions since prior quarter end; for the nine months ended September 30, ~~2017,~~2020, the ~~Company recorded $0~~increase is primarily related to a more negative view of estimated future macroeconomic conditions in the backdrop of the global COVID-19 pandemic and ~~$5,000~~an increase in our view of the remaining expected term of our loan portfolio. Refer to "Note 2 - Summary of Significant Accounting Policies" and "Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net" for ~~provision for~~additional information related to our General CECL Allowance.

Reversal of (provision for) loan losses ~~and impairment, respectively. The $5,000, recognized in the second quarter of 2017, related to an investment in a fully-built, for-sale residential condominium units located in Bethesda, MD.~~ - Specific CECL Allowance

During the three ~~and nine~~ months ended September 30, ~~2016, the Company~~2020, we recorded a ~~loan loss provision~~net reversal of ~~$10,000 on~~$0.6 million of Specific CECL Allowances predominately due to a ~~multifamily commercial mortgage loan and $5,000 on~~reversal of a ~~multifamily subordinate loan secured by a multifamily property located in Williston, ND.~~

~~Realized loss on sale of assets~~

~~Realized losses on~~previously recorded allowance. During the ~~sale of assets relate to the sale of CMBS. These losses were $4,076 and $5,118 for the three and~~ nine months ended September 30, ~~2017, respectively~~2020, we recorded Specific CECL Allowances on eight loans, totaling $156.9 million, two of which had existing loan loss provisions, partially offset by $16.9 million in reversals of previously recorded allowances. Refer to "Note 4 - Commercial Mortgage, Subordinate Loans and ~~there was $225 in losses~~Other Lending Assets, Net" for ~~the three and nine months ended September 30, 2016.~~

~~Unrealized gain (loss) on securities~~

~~Unrealized losses on securities relate~~additional information related to the change in fair value of the CMBS portfolio where the Company has elected the fair value option and were $13,488 and $11,830 for the three and nine months ended September 30, 2017, respectively and ($9,798) and ($36,601) for the three and nine months ended September 30, 2016, respectively.our Specific CECL Allowance.

Foreign currency gain ~~(loss)~~ and ~~gain~~ (loss) on derivative instruments

~~The Company uses~~We use forward currency contracts to economically hedge interest and principal payments due under ~~its~~our loans denominated in currencies other than U.S. dollars. The Company has in the past used and may in the future use interest rate swaps and caps to manage exposure to variable cash flows on portions of its borrowings under repurchase agreements. Interest rate swap and cap agreements allow the Company to receive a variable rate cash flow based on LIBOR and pay a fixed rate cash flow, mitigating the impact of this exposure. As a result of mitigating the impact of this exposure, whenUSD. When foreign currency ~~gains (losses)~~gain and ~~gain (losses)~~(loss) on derivative instruments are ~~looked at~~evaluated on a combined basis, the net impact for the three and nine months ended September 30, ~~2017~~2020 was ~~$282~~$(7.5) million and ~~($68),~~$24.6 million, respectively, and the net impact for the three and nine months ended September 30, ~~2016~~2019 was ~~$446~~$5.0 million and ~~$905,~~$8.6 million, respectively.

~~Dividends~~Loss on interest rate hedges

~~Dividends.~~ ~~For~~In connection with the senior secured term loan, we had previously 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%. During the second quarter of 2020 we terminated the interest rate swap and recognized a realized loss of $53.9 million. Subsequent to the termination of the

interest rate swap in the second quarter of 2020, we entered into a three-year interest rate cap to cap LIBOR at 0.75%. This effectively limits the maximum all-in coupon on our senior secured term loan to 3.50%. During the three and nine months ended September 30, ~~2017,~~2020, the ~~Company declared the~~interest rate cap had an unrealized loss of $0.6 million and an unrealized gain of $0.2 million, respectively.

Dividends

The following ~~dividends on its common stock:~~table details our dividend activity:



~~Declaration Date~~	~~Record Date~~	~~Payment Date~~	~~Amount~~
~~March 14, 2017~~	~~March 31, 2017~~	~~April 17, 2017~~	~~$0.4600~~
~~June 15, 2017~~	~~June 30, 2017~~	~~July 17, 2017~~	~~$0.4600~~
~~September 14, 2017~~	~~September 29, 2017~~	~~October 16, 2017~~	~~$0.4600~~

~~For the nine months ended September 30, 2017, the Company declared the following dividends on its Series A Preferred Stock:~~



~~Declaration Date~~	~~Record Date~~	~~Payment Date~~	~~Amount~~
~~March 14, 2017~~	~~March 31, 2017~~	~~April 17, 2017~~	~~$0.5391~~
~~June 15, 2017~~	~~June 30, 2017~~	~~July 17, 2017~~	~~$0.5391~~
~~September 14, 2017~~	~~August 2, 2017~~	~~August 2, 2017~~	~~$0.1079~~

~~For the nine months ended September 30, 2017, the Company declared the following dividends on its Series B Preferred Stock:~~



~~Declaration Date~~	~~Record Date~~	~~Payment Date~~	~~Amount~~
~~March 14, 2017~~	~~March 31, 2017~~	~~April 17, 2017~~	~~$0.5000~~
~~June 15, 2017~~	~~June 30, 2017~~	~~July 17, 2017~~	~~$0.5000~~
~~September 14, 2017~~	~~September 29, 2017~~	~~October 16, 2017~~	~~$0.5000~~

~~For the nine months ended September 30, 2017, the Company declared the following dividends on its Series C Preferred Stock:~~



~~Declaration Date~~	~~Record Date~~	~~Payment Date~~	~~Amount~~
~~March 14, 2017~~	~~March 31, 2017~~	~~April 28, 2017~~	~~$0.5000~~
~~June 15, 2017~~	~~June 30, 2017~~	~~July 31, 2017~~	~~$0.5000~~
~~September 14, 2017~~	~~September 29, 2017~~	~~October 31, 2017~~	~~$0.5000~~


	Three months ended			Nine months ended
Dividend declared per share of:	September 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
Common Stock	$0.35	$0.46	$1.10	$1.38
Series B Preferred Stock	0.50	0.50	1.50	1.50
Series C Preferred Stock	N/A	N/A	N/A	0.7223

Subsequent Events

Refer to "Note 18 - Subsequent Events" to the ~~unaudited~~accompanying condensed consolidated financial statements for disclosure regarding significant transactions that occurred subsequent to September 30, ~~2017.~~

2020.

Liquidity and Capital Resources

Liquidity is a measure of ~~the Company’s~~our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain ~~its~~our assets and operations, make distributions to ~~its~~our stockholders and other general business needs. ~~The Company’s~~As of September 30, 2020, we had $1.1 billion of corporate debt and $3.5 billion of asset specific financings. We have no corporate debt maturities until August 2022. As of September 30, 2020, we had $438 million of cash ~~is used~~on hand and $11.9 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 ~~purchase or originate target assets, repay principal~~increase our cash balances in order to maintain an adequate level of liquidity to meet future outflows. As the duration and ~~interest~~severity of COVID-19 remain unknown, so does the impact it will have on ~~borrowings, make distributions~~our borrowers, lenders, and the economy as a whole. We will continue to ~~stockholders and fund operations. The Company’s~~closely monitor developments related to COVID-19 as it relates to our liquidity position ~~is closely monitored~~ and ~~the Company believes it has~~financial obligations. At this time we believe we have sufficient ~~current~~ liquidity and access to additional liquidity to meet financial obligations for at least the next 12 months.

Debt-to-Equity Ratio

The ~~Company’s~~following table presents our debt-to-equity ratio:


	September 30, 2020	December 31, 2019
Debt to Equity Ratio ⁽¹⁾	1.7	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 ~~the Company’s~~our investments, net of any associated financing expense, principal repayments from ~~the Company’s~~our investments, net of associated financing repayments, proceeds from the sale of investments, and changes in working capital balances. See ~~“—Financial Condition and Results~~"Results of ~~Operations—Investments”~~Operations – Loan Portfolio Overview" above for a summary of interest rates ~~and weighted average lives~~ related to ~~the Company’s~~our investment portfolio at as of September 30, ~~2017~~. While there are no contractual paydowns related to the Company’s CMBS, periodic paydowns do occur. Repayments on the debt secured by the Company’s CMBS occur in conjunction with the paydowns on the collateral pledged.2020.

Borrowings Under Various Financing Arrangements

JPMorgan Facility

~~On March 31, 2017, the Company,~~In November 2019, through ~~two~~three indirect ~~wholly owned~~wholly-owned subsidiaries, ~~amended~~we entered into a Sixth Amended and ~~restated the~~Restated Master Repurchase Agreement with JPMorgan Chase Bank, National Association. The JPMorgan Facility ~~which currently provides~~allows for $1.3 billion of maximum ~~total~~ borrowings (with amounts borrowed in British pounds and Euros converted to USD for

purposes of ~~$1,118,000, comprised~~calculating availability based on the greater of the ~~$975,000 repurchase facility~~spot rate as of the initial financing under the corresponding mortgage loan and ~~a $143,000 asset specific financing,~~the then-current spot rate) and ~~a term expiring~~matures in ~~March 2019 plus a~~June 2022 and has two one-year ~~extension option~~extensions available at ~~the Company's~~our option, which are subject to certain conditions. ~~Amounts borrowed under the~~The JPMorgan Facility ~~bear interest at spreads ranging from 2.25%~~enables us to ~~3.50% over one-month LIBOR.~~elect to receive advances in USD, GBP, or EUR. Margin calls may occur any time ~~the~~at specified aggregate repurchase price exceeds the agreed upon advance rate multiplied by the market value of the assets by more than $250. The Company has agreed to provide a limited guarantee of the obligations of its indirect wholly-owned subsidiaries under the JPMorgan Facility.margin deficit thresholds.

As of September 30, ~~2017, the Company~~2020, we had ~~$840,360~~$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 ~~the Company's~~our commercial mortgage ~~and subordinate~~ loans.

DB ~~Repurchase~~ Facility

~~On September 29, 2016, the Company,~~In March 2020, through an indirect wholly-owned ~~subsidiaries,~~subsidiary, we entered into ~~the DB~~a Third Amended and Restated Master Repurchase ~~Facility~~Agreement with Deutsche Bank AG, Cayman Islands Branch, London Branch, which provides for ~~maximum total borrowings~~advances of ~~$565,491 comprised~~up to $1.0 billion for the sale and repurchase of ~~the $450,000 and £45,000 repurchase facility as well as a $55,200 asset specific financing in connection with financing~~eligible first mortgage loans secured by ~~real estate.~~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 ~~DB Repurchase Facility~~repurchase facility matures in March ~~2018 with~~2021, and has two one-year ~~extension options~~extensions available at ~~the Company's~~our option, subject to certain conditions. ~~Amounts borrowed under the DB Repurchase Facility bear interest at spreads ranging from 2.10% to 3.00% over one-month LIBOR.~~ Margin calls may occur any time at specified aggregate margin deficit thresholds. ~~The Company has agreed to provide a guarantee of the obligations of its indirect wholly-owned subsidiaries under this facility.~~

As of September 30, ~~2017, the Company~~2020, we had ~~$265,658 (inclusive of £45,000) borrowings outstanding under the DB Repurchase Facility secured by certain of the Company's commercial mortgage loans.~~

~~Goldman Loan~~

On January 26, 2015, the Company, through an indirect wholly-owned subsidiary, entered into the Goldman Loan. The Goldman Loan provides for a purchase price of $34,180 (as of September 30, 2017) and a repurchase date of the earliest of: (1) April 30, 2019, (2) an early repurchase date as a result of repayment or sale of the purchased loan, or (3) an accelerated repurchase date as a result of certain events of default. Subject to the terms and conditions thereof, the Goldman Loan provides for the purchase and sale of certain participation interests in a mortgage loan secured by single-family and condominium properties. Prior to an event of default, amounts borrowed under the Goldman Loan bear interest at a spread of 3.5% plus one-month LIBOR. In addition, the Goldman Loan provides that margin calls may occur during the continuance of certain credit events if the market value of the mortgaged properties drop below an agreed upon percentage. The Goldman Loan contains affirmative and negative covenants and provisions regarding events of default that are normal and customary for similar repurchase agreements.

~~As of September 30, 2017, the Company had $34,180 of borrowings outstanding under the Goldman Loan secured by one commercial mortgage loan held by the Company.~~

~~UBS Facility~~

~~DB Facility~~

~~The Company posts margin in cash based on the fair value of the underlying collateral. The margin posted is classified as restricted cash on the Company's condensed consolidated balance sheets.~~

~~As of September 30, 2017, the Company had $149,317~~$526.7 million of borrowings outstanding under the DB Facility secured by ~~CMBS held~~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 September 30, 2020, we had $362.1 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, which provides for advances for the ~~Company.~~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 September 30, 2020, we had $378.8 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. During the third quarter of 2020, the facility was repaid in connection with the sale of the underlying 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 September 30, 2020, we had $47.2 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 provided for a single asset financing. The facility matured and was repaid in June 2020 in connection with the repayment of the underlying 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 September 30, 2020, we had $157.1 million (€134.1 million assuming conversion into USD) of borrowings outstanding under the HSBC Facility - EUR secured by one commercial mortgage loan.

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.

As of September 30, 2020, we had $35.2 million of borrowings outstanding under the Barclays Facility - USD secured by one commercial mortgage loan.

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. In June 2020, all assets previously financed pursuant to this facility were refinanced under the Barclays Private Securitization.

Barclays Private Securitization

In June 2020, through a newly formed entity, we entered into a private securitization with Barclays Bank plc, of which Barclays Bank plc retained $813.6 million of senior notes. This Barclays Private Securitization finances the loans that were previously financed under the Barclays Facility - GBP/EUR. In addition, we pledged an additional commercial mortgage loan with an outstanding principal balance of £26.0 million and pledged additional collateral of a financed loan of €5.3 million as of June 30, 2020.

The ~~Company was~~securitization eliminates daily margining provisions and grants us significant discretion to modify certain terms of the underlying collateral including waiving certain loan-level covenant breaches and deferring or waiving of debt service payments for up to 18 months. The securitization includes LTV based covenants with significant headroom to existing levels that are also subject to a six-month holiday through December 2020. These deleveraging requirements are based on significant declines in ~~compliance~~the value of the collateral as determined by an annual third-party (engaged by us) appraisal process tied to the provisions of the underlying loan agreements. We believe this provides us with both cushion and predictability to avoid sudden unexpected outcomes and material repayment requirements. In addition to the pledge of the additional collateral noted above, we paid down the previous financing by €16.5 million (totaling $18.5 million in USD) and agreed to increase the financing spreads by 0.25%.


	Borrowings outstanding	Fully-Extended Maturity⁽¹⁾
Total/Weighted-Average GBP	$670,024	January 2024
Total/Weighted-Average EUR	143,568	August 2021⁽²⁾
Total/Weighted-Average Securitization	$813,592	March 2024

———————

(1)Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.

Debt Covenants

The guarantees related to our secured debt arrangements contain the following financial covenants ~~under each~~(i) tangible net worth must be greater than $1.25 billion plus 75% of ~~its borrowing agreements at~~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. Under these covenants, our General CECL Allowance is added back to our tangible net worth calculation.

Senior Secured Term Loan

In May 2019, we entered into the $500.0 million senior secured term loan. During the nine months ended September 30, ~~2017~~2020, we repaid $3.8 million of principal related to the senior secured term loan. The senior secured term loan bears interest at LIBOR plus 2.75% and ~~December 31, 2016.~~was issued at a price of 99.5%. The outstanding balance as of September 30, 2020 was $493.8 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 ~~2014, the Company~~two separate offerings during 2017, we issued ~~in two offerings with~~ an aggregate principal amount of $254,750, 5.50% Convertible Senior Notes due 2019, for which the Company received aggregate net proceeds, after deducting the underwriting discount and estimated offering expenses payable by the Company, of approximately $248,652.

~~On August 21, 2017, the Company issued $230,000 aggregate principal amount~~$345.0 million of 4.75% Convertible Senior Notes due 2022, for which ~~the Company~~we received ~~aggregate net proceeds,~~$337.5 million, after deducting the underwriting discount and ~~estimated~~ offering ~~expenses payable by~~expenses.At September 30, 2020, the ~~Company,~~2022 Notes had a carrying value of ~~approximately $224,825.~~$339.7 million and an unamortized discount of $5.3 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 September 30, 2020, the 2023 Notes had a carrying value of $224.9 million and an unamortized discount of $5.1 million.

Cash Generated from Equity Offerings

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. During the ~~fourth quarter of 2016, the Company completed a follow-on public offering of 10,500,000~~nine months ended September 30, 2020, we repurchased 10,834,595 shares of ~~its~~our common stock under this program at a weighted-average price of ~~$16.97~~$8.45 per share. ~~The net proceeds from the offering were approximately $177,796 after deducting estimated offering expenses payable by the Company.~~

During the third quarter of 2016, the Company consummated the AMTG Merger and issued 13,398,586 shares of its common stock and 6,900,000 shares of Series C Preferred Stock. As of December 31, 2016, the Company had liquidated all of the assets of AMTG and realized proceeds of approximately $421,000 (net of expenses).

Other Potential Sources of Financing

~~The Company’s~~Our primary sources of cash currently consist of cash available, which was ~~$140,229~~$438.2 million as of September 30, ~~2017~~,2020, principal and interest payments ~~the Company receives~~we receive on ~~its~~our portfolio of assets, and available borrowings under ~~its repurchase agreements. The Company expects its~~our secured debt arrangements. We expect our other sources of cash to consist of cash generated from operations and prepayments of principal received on ~~the Company’s~~our portfolio of assets. Such prepayments are difficult to estimate in advance. Depending on market conditions, ~~the Company~~we may utilize additional borrowings as a source of cash, which may also include additional ~~repurchase agreements~~secured debt arrangements as well as other borrowings ~~such as credit facilities,~~ or conduct additional public and private debt and equity offerings. As of September 30, 2020 we also held $1.0 billion of unencumbered assets, consisting of $42.9 million of senior mortgages and $1.0 billion of mezzanine loans.

~~The Company maintains~~We maintain policies relating to ~~its~~our borrowings and use of leverage. See ~~“—Leverage Policies”~~"Leverage Policies" below. In the future, ~~the Company~~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.

~~The Company~~We generally ~~intends~~intend to hold ~~its~~our target assets as long-term investments, although itwe may sell certain of ~~its~~our investments in order to manage ~~its~~our interest rate risk and liquidity needs, meet other operating objectives and adapt to market conditions.

To maintain ~~its~~our qualification as a REIT under the Internal Revenue Code, ~~of 1986, as amended, the Company~~we must distribute annually at least 90% of ~~its~~our REIT taxable ~~income.~~income, determined without regard to the deduction for dividends paid and excluding net capital gain. These distribution requirements limit ~~the Company’s~~our ability to retain earnings and ~~thereby~~ replenish or increase capital for operations.

Leverage Policies

~~The Company uses~~We use leverage for the sole purpose of financing ~~its~~our portfolio and not for the purpose of speculating on changes in interest rates. In addition to ~~its repurchase agreements, in the future the Company may~~our secured debt arrangements and senior secured term loan, we access additional sources of borrowings. ~~The Company’s~~Our charter and bylaws do not limit the amount of indebtedness ~~the Company~~we can incur; however, we are subject to and carefully monitor the ~~Company is limited~~limits placed on us by ~~certain financial covenants under its repurchase agreements. Consistent~~our credit providers and those that assign ratings on our Company.

At September 30, 2020, our debt-to-equity ratio was 1.7 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 ~~the Company’s strategy~~2.0 to 3.0 turns of ~~keeping~~ leverage ~~within a conservative range, the Company expects that its total borrowings~~and generally do not finance our subordinate loan portfolio given built-in inherent structural leverage. Consequently, depending on ~~loans will be in an amount that is approximately 35% of the value of its total loan portfolio.~~

our portfolio mix, our debt-to-equity ratio may exceed our previously disclosed thresholds.

Investment Guidelines

~~The Company's~~Our current investment guidelines, approved by ~~the Company's~~our board of directors, are comprised of the following:

•no investment will be made that would cause ~~the Company~~us to fail to qualify as a REIT for U.S. federal income tax purposes;

•no investment will be made that would cause ~~the Company~~us to register as an investment company under the ~~Investment Company Act of 1940;~~1940 Act;

•investments will be predominantly in ~~the Company’s~~our target assets;

•no more than 20% of ~~the Company’s~~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 ~~the Company’s~~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

~~The Company’s~~Our contractual obligations including expected interest payments as of September 30, ~~2017~~2020 are summarized as ~~follows:~~follows ($ in thousands):


	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⁾	$	575,514	$	924,928	$	904,842	$	1,248,750	$	—	$	3,654,034
Senior secured term loan⁽²⁾	19,465		19,317		19,170		37,938		477,267		573,157
Convertible senior notes	28,750		372,172		12,363		231,030		—		644,315
Unfunded loan commitments ⁽³⁾	573,344		429,516		302,134		66,328		—		1,371,322
Total	$	1,197,073	$	1,745,933	$	1,238,509	$	1,584,046	$	477,267	$	6,242,828

Less than 1
year ⁽³⁾

1 to 3
years ⁽³⁾

3 to 5
years ⁽³⁾
More than
5 years Total
JPMorgan Facility ⁽¹⁾
$ 194,500
$ 700,426
$ —
$ —
$ 894,926
DB Repurchase Facility ⁽¹⁾
10,174
214,400
—
—
224,574
Goldman Loan ⁽¹⁾
6,291
30,123
—
—
36,414
DB Facility 151,946
—
—
—
151,946
Convertible Senior Notes 22,858
285,100
250,727
—
558,685
Unfunded loan commitments ⁽²⁾
75,164
5,000
—
—
80,164
Total $ 460,933
$ 1,235,049
$ 250,727
$ —
$ 1,946,709

-————————

(1) Assumes ~~current LIBOR~~underlying assets are financed through the fully extended maturity date of ~~1.23% for interest payments due under~~ the ~~JPMorgan Facility, the DB Repurchase Facility and the Goldman Loan.~~secured debt arrangement.

(2) Based on the ~~Company's~~applicable benchmark rates as of September 30, 2020 on the floating rate debt for interest payments due.

(3) Based on fully extended maturity and 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 ~~the Company’s~~our operating results. Refer to "Note 15– Commitments and Contingencies" for further detail regarding unfunded loan commitments.

~~(3) Assumes underlying assets are financed through the fully extended maturity date of the facility.~~

Loan Commitments.At As of September 30, ~~2017, the Company~~2020, we had ~~$80,164~~$1.4 billion of unfunded loan commitments, comprised of $1.4 billion related to ~~its~~our commercial mortgage loan portfolio, and $32.9 million related to our subordinate loan portfolio.

Management Agreement. On September 23, 2009, ~~the Company~~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 ~~the Company’s~~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. ~~The Company does~~We do not reimburse ~~its~~the Manager or its affiliates for the salaries and other compensation of their personnel, except for the allocable share of the compensation of (1) ~~the Company’s~~our Chief Financial Officer based on the percentage of time spent on ~~the Company’s~~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 ~~the Company’s~~our affairs based on the percentage of time devoted by such personnel to ~~the Company’s~~our affairs. ~~The Company is~~We are also required to reimburse ~~its~~the Manager for operating expenses related to ~~the Company~~us incurred by ~~its~~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. ~~The Company’s~~Our reimbursement obligation is not subject to any dollar limitation.

The current term of the Management Agreement ~~currently runs through~~will expire on September 29, ~~2018.~~2021. Absent certain action by the independent directors of ~~the Company’s~~our board of directors, as described below, the Management Agreement will automatically renew on each anniversary for a ~~one year~~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 ~~the Company’s~~our independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to ~~the Company~~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 ~~the Company’s~~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 ~~Company’s~~ Management Agreement are not fixed and determinable. Following a meeting by ~~the Company’s~~our independent directors in February ~~2017,~~2020, which included a discussion of the Manager’s performance and the level of the management fees thereunder, ~~the Company~~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 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. Refer to "Note 10- Derivatives, Net" to the accompanying condensed consolidated financial statements for details regarding our forward currency contracts.

Interest Rate Swap and Cap. In connection with the senior secured term loan, we previously 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%. During the second quarter of 2020 we terminated our interest rate swap due to significant decrease in LIBOR and recognized a realized loss on the accompanying condensed consolidated statement of operations. Subsequently, in June 2020, we entered into an interest rate cap for approximately $1.1 million. We use our interest rate cap to manage exposure to variable cash flows on our borrowings under our senior secured term loan by effectively limiting LIBOR from exceeding 0.75%. Refer to "Note 10- Derivatives, Net" to the accompanying condensed consolidated financial statements for details regarding our interest rate cap.

Off-balance Sheet Arrangements

~~As disclosed in "Note 6 - Unconsolidated Joint Venture," the Company does~~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, ~~the Company has~~we have not guaranteed any obligations of unconsolidated entities or entered into any commitment to provide additional funding to any such entities.

Dividends

~~The Company intends~~We intend to continue to make regular quarterly distributions to holders of ~~its~~our common stock. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of ~~its~~our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that itwe pay tax at regular corporate rates to the extent that itwe annually ~~distributes~~distribute less than 100% of ~~its~~our net taxable income. ~~The Company~~We generally ~~intends~~intend over time to pay dividends to ~~its~~our stockholders in an amount equal to ~~its~~our net taxable income, if and to the extent authorized by ~~its~~our board of directors. Any distributions ~~the Company makes will be~~we make are at the discretion of ~~its~~our board of directors and ~~will~~ depend upon, among other things, ~~its~~our actual results of operations. These results and ~~the Company’s~~our ability to pay distributions ~~will be~~are affected by various factors, including the net interest and other income from ~~its~~our portfolio, ~~its~~our operating expenses and any other expenditures. If ~~the Company’s~~our cash available for distribution is less than ~~its~~our net taxable income, ~~the Company~~we could be required to sell assets or borrow funds to make cash distributions or ~~the Company~~we may make a portion of the required distribution in the form of a taxable stock distribution or

distribution of debt securities.

~~Prior to August 2, 2017, the Company had 3,450,000 shares~~As of Series A Preferred Stock outstanding, which entitled holders to receive dividends at the rate of 8.625% per annum of the $25.00 per share liquidation preference equivalent to $2.16 per annum, per share. The dividends on the Series A Preferred Stock were cumulative and payable quarterly in arrears.

On August 2, 2017, the Company redeemed all 3,450,000 shares of 8.625% Series A Cumulative Redeemable Perpetual Preferred Stock ("Series A Preferred Stock"). The Series A Preferred Stockholders received the redemption price of $25.00 plus accumulated but unpaid dividends to the redemption date of $0.1079 per share.

At September 30, ~~2017, the Company~~2020, we had ~~8,000,000~~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:~~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 ~~securities~~ of ~~the Company~~our securities at the election of the holders. ~~On or after September 21, 2020, the Company~~We may, at ~~its~~our option, redeem the shares at a redemption price of $25.00, plus any accrued unpaid distribution through the date of the redemption.

~~The Company has~~In June 2019, we redeemed all 6,900,000 shares of Series C Preferred Stock ~~outstanding, which entitles holders to receive dividends that are payable quarterly in arrears. The Series C Preferred Stock pay cumulative cash dividends at the rate~~outstanding. Holders of 8.00% per annum of the $25.00 per share liquidation preference (equivalent to $2.00 per annum per share) from, and including July 29, 2016 (the “Series C Initial Dividend Date”) and shall be payable (i) for the period from the Series C Initial Dividend Date to, but excluding, October 31, 2016, on October 31, 2016, and (ii) for each subsequent quarterly dividend period commencing on the last day of each of January, April, July and October and ending on, and including, the day before the first day of the next succeeding dividend period, quarterly in equal amounts in arrears on the last day of each April, July, October and January, commencing on January 31, 2017 at the then applicable annual rate. Except under certain limited circumstances, the Series C Preferred Stock ~~is generally not convertible into or exchangeable for any other property or any other securities of~~received the ~~Company at the election of the holders. On or after September 20, 2017, the Company may, at its option, redeem the shares at a~~ redemption price of $25.00 plus ~~any accrued~~accumulated but unpaid ~~distribution through~~dividends to the redemption date of ~~the redemption.~~$0.2223.

Non-GAAP Financial Measures

Operating Earnings

For the three and nine months ended September 30, ~~2017, the Company’s~~2020, our Operating Earnings were ~~$49,771,~~$52.9 million, or $0.36 per share, and $104.3 million, or $0.68 per share, respectively, as compared to $72.6 million, or $0.47 per share, and ~~$132,988,~~$197.6 million, or ~~$1.34~~$1.35 per share, ~~respectively. For~~respectively, for the ~~three and nine~~ ~~months ended September 30, 2016,~~same periods in the ~~Company’s Operating Earnings were $32,744, or $0.45 per share, and $96,002, or $1.38 per share, respectively.~~prior year. Operating Earnings is a non-GAAP financial measure that ~~is defined by the Company~~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 ~~convertible senior notes~~Notes to stockholders’ equity in accordance with GAAP, and (vi) provision for loan ~~losses and impairments.~~losses. Operating Earnings may also be adjusted to exclude certain other non-cash items, as determined by the Manager and approved by a majority of ~~the Company's~~our independent directors.

The table below summarizes the reconciliation from weighted-average basic and diluted shares under GAAP to the weighted-average diluted shares used for Operating Earnings ($ in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2020	2019	2020	2019
Weighted-Averages	Shares	Shares	Shares	Shares
Weighted-average basic and diluted shares - GAAP	146,612,313	153,531,678	150,679,773	144,638,237


Unvested RSUs	2,051,311	1,839,631	2,028,573	1,845,086
Weighted-average diluted shares - Operating Earnings	148,663,624	155,371,309	152,708,346	146,483,323

In order to evaluate the effective yield of the portfolio, ~~the Company uses~~we use Operating Earnings to reflect the net investment income of ~~the Company’s~~our portfolio as adjusted to include the net interest income or expense related to ~~the Company’s~~our derivative instruments. 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. Operating Earnings allows ~~the Company~~us to isolate the net interest income or expense associated with ~~the Company’s~~our swaps and caps in order to monitor and project ~~the Company’s~~our full cost of borrowings. ~~The Company~~

As discussed in “Note 10 - Derivatives” we terminated our interest rate swap, which we used to manage exposure to variable cash flows on our borrowings under our senior secured term loan, in the second quarter of 2020 and recorded a realized loss in our condensed consolidated statement of operations. As of September 30, 2020, there are no interest rate swaps on our condensed consolidated balance sheet. In addition, as discussed in “Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net,” we recorded a net realized loss on the sale of a residential-for-sale: inventory loan, three construction loans and, in connection with a troubled debt restructuring, on one hotel loan.

We believe it is useful to our investors to also ~~believes~~present Operating Earnings excluding realized loss on investments and realized loss on interest rate swap to reflect our operating results because our operating results are primarily comprised of earning interest income on our investments net of borrowing and administrative costs, which are our ongoing operations. We believe that ~~its~~our investors use Operating Earnings and Operating Earnings excluding realized loss on investments and realized loss on interest rate swap, or a comparable supplemental performance measure, to evaluate and compare the performance of ~~the Company~~our company and ~~its~~our peers and, as such, ~~the Company believes~~we believe that the disclosure of Operating Earnings and Operating Earnings excluding realized loss on investments and realized loss on interest rate swap is useful to ~~its~~our investors.

A significant limitation associated with Operating Earnings as a measure of ~~the Company’s~~our financial performance over any period is that it excludes unrealized gains (losses) from investments. In addition, ~~the Company’s~~our presentation of Operating Earnings may not be comparable to similarly-titled measures of other companies, ~~who may~~that use different calculations. As a result, Operating Earnings should not be considered as a substitute for ~~the Company’s~~our GAAP net income as a measure of ~~its~~our financial performance or any measure of ~~its~~our liquidity under GAAP.

Beginning with the quarter ended September 30, 2016, the Company slightly modified its definition of Operating Earnings to include realized gains/(losses) on currency swaps related to interest income on investments denominated in a currency other than U.S. dollars. The Company believes that including the effects of realized gains/(losses) on currency swaps related to interest income more accurately reflects the Company's investment income for a particular period and will allow investors to more easily compare its operating results over various periods. The effects of such unrealized gains/(losses) in prior periods were not material to the Company's financial results.

The table below summarizes the reconciliation from net income (loss) available to common stockholders to Operating ~~Earnings:~~Earnings and Operating Earnings excluding realized loss on investments and realized loss on interest rate swap ($ in thousands):


	Three months ended September 30,						Nine months ended September 30,
	2020		2019		2020		2019
Net income (loss) available to common stockholders	$	45,953	$	25,704	$	(28,458)	$	143,132
Adjustments:
Equity-based compensation expense	4,212		3,889		12,726		12,084
Unrealized (gain) loss on interest rate swap	—		10,307		(14,470)		23,420
(Gain) loss on currency forwards	34,537		(24,153)		(32,959)		(28,619)
Foreign currency (gain) loss, net	(27,002)		19,129		8,388		20,012
Unrealized (gain) loss on interest rate cap	564		—		(174)		—
Realized gains (losses) relating to interest income on foreign currency hedges, net	(90)		870		1,254		1,614
Realized gains relating to forward points on foreign currency hedges, net	244		1,076		3,733		3,552
Amortization of the convertible senior notes related to equity reclassification	777		732		2,296		2,362
Provision for (reversal of) loan losses	(6,342)		35,000		151,954		20,000
Total adjustments:	6,900		46,850		132,748		54,425
Operating Earnings	$	52,853	$	72,554	$	104,290	$	197,557

Realized loss on investments	1,037		—		17,442		12,513
Realized loss on interest rate swap	—		—		53,851		—
Operating Earnings excluding realized loss on investments and realized loss on interest rate swap	$	53,890	$	72,554	$	175,583	$	210,070
Diluted Operating Earnings per share of common stock	$	0.36	$	0.47	$	0.68	$	1.35
Diluted Operating Earnings excluding realized loss on investments and realized loss on interest rate swap	$	0.36	$	0.47	$	1.15	$	1.43
Basic weighted-average shares of common stock outstanding	146,612,313		153,531,678		150,679,773		144,638,237
Weighted-average diluted shares - Operating Earnings	148,663,624		155,371,309		152,708,346		146,483,323

For the three months ended
September 30, For the nine
months ended
September 30,
2017 2016 2017 2016
Net income available to common stockholders $ 57,208
$ 60,583
$ 121,946
$ 77,864
Adjustments:
     Equity-based compensation expense 2,635
1,828
9,887
5,434
     Unrealized (gain) loss on securities (13,488 ) 9,798
(11,830 ) 36,601
     Unrealized (gain) loss on derivative instruments
7,481
(4,815 ) 17,916
(22,831 )
     Foreign Currency (gain) loss, net (7,850 ) 4,861
(18,135 ) 22,417
     Amortization of the Notes related to equity reclassification 769
590
1,995
1,745
     Income (loss) from unconsolidated joint venture —
(80 ) 2,847
(207 )
Provision for loan losses and impairments —
—
5,000
15,000
     Series A preferred stock redemption charge 3,016
—
3,016
—
     Bargain Purchase Gain —
(40,021 ) —
(40,021 )
     Realized gain from unconsolidated joint venture
—
346
—
Total adjustments: (7,437 ) (27,839 ) 11,042
18,138
Operating Earnings $ 49,771
$ 32,744
$ 132,988
$ 96,002
Basic and diluted Operating Earnings per share of common stock $ 0.47
$ 0.45
$ 1.34
$ 1.38
Basic weighted average shares of common stock outstanding 105,446,704
71,919,549
97,546,437
68,913,362
Diluted weighted average shares of common stock outstanding 106,812,721
72,861,611
98,919,689
69,865,603
Book Value Per Share

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


	September 30, 2020		December 31, 2019
Stockholders' Equity	$	2,319,281	$	2,629,975
Series B Preferred Stock (Liquidation Preference)	(169,260)		(169,260)
Common Stockholders' Equity	$	2,150,021	$	2,460,715
Common Stock	143,288,347		153,537,296
Book value per share	$	15.00	$	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	0.15
Repurchase of common stock	0.45
Decrease in fair value on interest rate swap	(0.27)
Vesting and delivery of RSUs	(0.07)
Other	(0.01)
Book value per share at September 30, 2020 prior to CECL Allowances	$	16.28
Specific CECL Allowance	$	(0.98)
Book value per share at September 30, 2020 prior to General CECL Allowance	$	15.30
General CECL Allowance	$	(0.30)
Book value per share at September 30, 2020	$	15.00

We believe that presenting book value per share with sub-totals prior to the CECL Allowances is useful for investors for various reasons, including, among other things, analyzing our compliance with financial covenants related to tangible net worth and debt-to-equity under our secured debt arrangements and senior secured term loan permit us to add the General CECL Allowance to our GAAP stockholders' equity. Given that our lenders consider book value per share prior to the General CECL Allowance as an important metric related to our debt covenants, we believe disclosing book value per share prior to the General CECL Allowance is important to investors such that they have the same visibility.

~~ITEM~~Item 3. Quantitative and Qualitative Disclosures ~~about~~About Market Risk

~~The Company seeks~~We seek to manage ~~its~~our risks related to the credit quality of ~~its~~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 ~~its~~our capital stock. While risks are inherent in any business enterprise, ~~the Company seeks~~we seek to quantify and justify risks in light of available returns and to maintain capital levels consistent with the risks ~~the Company undertakes.~~we undertake.

Credit Risk

One of ~~the Company’s~~our strategic focuses is acquiring assets that ~~it believes~~we believe to be of high credit quality. ~~The Company believes~~We believe this strategy will generally keep ~~its~~our credit losses and financing costs low. However, ~~the Company is~~we are subject to varying degrees of credit risk in connection with ~~its~~our other target assets. ~~The Company seeks~~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 ~~the Company’s~~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 ~~the Company’s~~our control. ~~The Company is~~We are subject to interest rate risk in connection with ~~its~~our target assets and ~~its~~our related financing obligations.

To the extent consistent with maintaining ~~the Company’s~~our REIT qualification, ~~the Company seeks~~we seek to manage risk exposure to protect ~~its~~our portfolio of financial assets against the effects of major interest rate changes. ~~The Company~~We generally ~~seeks~~seek to manage this risk by:

•attempting to structure ~~its~~our financing agreements to have a range of different maturities, terms, amortizations and interest rate adjustment periods;

•using hedging instruments, interest rate ~~swaps~~swaps; and ~~interest rate caps; and~~

•to the extent available, using securitization financing to better match the maturity of ~~the Company’s~~our financing with the duration of ~~its~~our assets.

At ~~September 30, 2017, all of~~

The following table estimates the ~~Company’s borrowings outstanding under the Goldman Loan, the JPM Facility and the DB Repurchase Facility were floating-rate borrowings. At~~ ~~September 30, 2017, the Company also had floating rate assets with a face amount of $3,168,843 resulting in net variable rate exposure of $2,028,645. A 100 basis point increase in LIBOR would increase the quarterly~~hypothetical impact on our net interest income ~~related to this variable~~for the twelve-month period following September 30, 2020, assuming an immediate increase or decrease of 50 basis points in the applicable interest rate ~~exposure~~benchmark by ~~approximately $20,242 or $0.19~~currency ($ in thousands, except per ~~share.~~ 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⁾		Decrease to net interest income (per share) ⁽¹⁾⁽²⁾		Increase (Decrease) to net interest income ⁽¹⁾⁽²⁾		Increase to net interest income (per share) ⁽¹⁾⁽²⁾
USD	$	1,036,853	$	(10,867)	$	(0.08)	$	3,127	$	0.02
GBP	428,213		(58)		—		69		—
EUR	307,899		—		—		—		—
Total:	$	1,772,965	$	(10,925)	$	(0.08)	$	3,196	$	0.02

———————

(1)Any such hypothetical impact on interest rates on ~~the Company’s~~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, ~~the Company~~we may take actions to further mitigate ~~the Company’s~~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 ~~the Company’s~~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. ~~The Company does not anticipate facing~~In certain cases, we adapt to prepayment risk ~~on most of its portfolio of assets since most of the commercial loans held directly~~ by ~~the Company or securing the Company’s CMBS assets contain provisions preventing prepayment or imposing~~stating prepayment penalties in ~~the event of~~ loan ~~prepayments.~~agreements.

Market Risk

~~Market value risk.~~ The Company’s available-for-sale securities and securities at estimated fair value are reflected at their estimated fair value. The change in estimated fair value of securities available-for-sale is reflected in accumulated other comprehensive income while the change in estimated fair value of securities at estimated fair value is reflected as a component of net income. The estimated fair value of these securities fluctuates primarily due to changes in interest rates and other factors. Generally, in a rising interest rate environment, the estimated fair value of these securities would be expected to decrease;

conversely, in a decreasing interest rate environment, the estimated fair value of these securities would be expected to increase. As market volatility increases or liquidity decreases, the fair value of the Company’s assets may be adversely impacted.

~~Real estate 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; ~~and~~ retroactive changes to building or similar ~~codes.~~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 ~~the Company~~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 ~~the Company’s~~our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence ~~the Company’s~~our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. ~~The Company’s~~Our financial statements are prepared in accordance with GAAP and distributions are determined by ~~the Company's~~our board of directors consistent with ~~the Company's~~our obligation to distribute to ~~its~~our stockholders at least 90% of ~~its~~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 ~~the Company’s~~our REIT qualification. In each case, ~~the Company’s~~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 seek to mitigate this exposure through foreign currency forward contracts, which match the net principal and interest of our foreign currency loans and secured debt arrangements.

~~ITEM~~Item 4. Controls and ~~Procedures~~Procedures.

~~The Company’s~~

Our Chief Executive Officer and Chief Financial Officer, based on their evaluation of ~~the Company’s~~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, ~~the Company’s~~our disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to ~~the Company~~ARI that would potentially be subject to disclosure under the Exchange Act, and the rules and regulations promulgated thereunder.

During the period ended September 30, ~~2017~~,2020, there was no change in ~~the Company’s~~our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, ~~the Company’s~~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 ~~the Company~~ARI to disclose material information otherwise required to be set forth in ~~the Company’s~~our periodic reports.

PART II —- OTHER INFORMATION

~~ITEM~~Item 1. Legal Proceedings

From time to time, ~~the Company~~we may be involved in various claims and legal actions arising in the ordinary course of business. ~~After the announcement of the execution of the AMTG Merger Agreement, two putative class~~On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57th Investment LLC commenced an action ~~lawsuits challenging the proposed First Merger (as defined~~captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No 653251/2018) in the AMTG Merger Agreement), captioned Aivasian v. Apollo Residential Mortgage, Inc., et al., No. 24-C-16-001532 and Wiener v. Apollo Residential Mortgage, Inc., et al., No. 24-C-16-001837, were filed in the Circuit Court for Baltimore City. A putative class and derivative lawsuit was later filed in the Court captioned Crago v. Apollo Residential Mortgage, Inc., No. 24-C-16-002610. Following a hearing on May 6, 2016, the Court entered orders among other things, consolidating the three actions under the caption In Re Apollo Residential Mortgage, Inc. Shareholder Litigation, Case No.: 24-C-16-002610.New York Supreme Court. The ~~plaintiffs have designated the Crago~~ complaint ~~as the operative complaint. The operative complaint includes both direct and derivative claims,~~ names as defendants ~~AMTG,~~(i) ACREFI Mortgage Lending, LLC, a subsidiary of the ~~board~~Company, (ii) the Company, and (iii) certain funds managed by Apollo, which are co-lenders on a mezzanine loan against the development of ~~directors of AMTG, ARI, Arrow Merger Sub Inc., Apollo and Athene Holding Ltd. and alleges, among other things,~~a residential condominium building in Manhattan, New York. The plaintiffs allege that the ~~members~~defendants tortiously interfered with the contractual equity put right in the plaintiffs’ joint venture agreement with the developers of the ~~AMTG Board breached their fiduciary duties to the AMTG stockholders~~project, and that the ~~other corporate~~ defendants aided and abetted ~~such~~breaches of fiduciary ~~breaches. The operative complaint further alleges, among other things, that~~duty by the proposed First Merger involves inadequate consideration, was the result of an inadequate and conflicted sales process, and includes unreasonable deal protection devices that purportedly preclude competing offers. It also alleges that the transactions with Athene Holding Ltd. are unfair and that the registration statement on Form S-4 filed with the SEC on April 6, 2016 contains materially misleading disclosures and omits certain material information. The operative complaint seeks, among other things, certificationdevelopers of the ~~proposed class, declaratory relief, preliminary~~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 permanent injunctive relief, including enjoining or rescinding the First Merger, unspecified damages, and an award of other unspecified attorneys’ and other fees and costs. On May 6, 2016, counsel for the plaintiffs filed with the Court a stipulation seeking the appointment of interim co-lead counsel, which stipulation was approved by the Court on June 9, 2016. Defendants’ motions to dismiss have been fully briefed, and oral argument was held on December 8, 2016. On August 14, 2017, the Court issued an opinionentered judgment dismissing the ~~operative~~ complaint in its entirety ~~with prejudice. The time to~~on November 8, 2019. Plaintiffs filed a timely notice of appeal on December 6, 2019 and, as of September 28, 2020, the ~~order dismissing~~parties have now fully briefed the ~~lawsuit has expired,~~appeal. We are awaiting scheduling of oral argument. We believe the claims are without merit and ~~no appeals~~do not believe this will have ~~been filed.~~a material adverse effect on our condensed consolidated financial statements.

On January 4, 2017, the United States Department of Justice served a Request for Information and Documents on the Company, in connection with a preliminary investigation into certain aspects of the Company's former residential real estate portfolio, which the Company acquired in connection with the AMTG Merger and subsequently sold in 2016. The Request seeks a range of information in connection with the residential real estate portfolio, including, among other things, information concerning policies, procedures, and practices related to advertising, marketing, identifying, or acquiring residential properties for sale or rent, and various data for all rental and sales contracts executed since January 1, 2012. The Company is cooperating with the Department of Justice and fully complying with the Request.

~~ITEM~~Item 1A. Risk Factors

~~See~~For information regarding factors that could affect our results of operations, financial condition and liquidity, see the ~~Company’s~~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 ~~Form 10-K~~travel, school closures, bans on public events and on public gatherings, “shelter in place”, “stay at home” and "safer-at-home" rules, restrictions on types of business that may continue to operate, with exceptions, in certain cases, available for certain essential operations 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 ~~year ended December 31, 2016. There have been no material changes~~ mortgage loans and other real estate-related loans we make;

•our need to sell assets, including at a loss;

•to the ~~Company’s~~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

•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 ~~during~~set forth in our Annual Report should be interpreted as heightened risks as a result of the ~~three and nine months ended September 30, 2017.~~impact of the COVID-19 pandemic.

~~ITEM~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~None.~~Issuer Purchases of Equity Securities

The following table sets forth the Company's repurchases of common stock during the three months ended September 30, 2020 ($ in thousands, except per share data):


Period	Total Number of Shares Purchased⁽¹⁾	Weighted 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
July 2020	688,762	$	8.93	688,762	$	97,557
August 2020	1,529,015	9.21		1,529,015	83,443
September 2020	2,820,842	8.93		2,820,842	58,199
Total	5,038,619	$	9.01	5,038,619	$	58,199

———————

(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 replaced the previous program authorized in November 2013, which was terminated.

~~ITEM~~Item 3. Defaults Upon Senior Securities

None.

~~ITEM~~Item 4. Mine Safety Disclosures

Not ~~applicable.~~Applicable.

~~ITEM~~Item 5. Other Information

None.

~~ITEM~~Item 6. Exhibits



~~Exhibit No.~~3.1		~~Description~~

~~3.1~~	Articles of Amendment and Restatement of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 3.1 of the Registrant’s Form S-11, as amended (Registration No. 333-160533).

3.2		Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.’s 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on September 23, 2015 (File No.: 001-34452).

3.3		Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.’s 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on September 1, 2016 (File No.: 001-34452).

~~3.4~~	By-laws of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 3.2 of the Registrant’s Form S-4 (Registration No. 333-210632).

4.1		Specimen Stock Certificate of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 4.1 of the Registrant’s Form S-11, as amended (Registration No. 333-160533).

4.2		Specimen Stock Certificate of Apollo Commercial Real Estate Finance, Inc.’s 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on September 23, 2015.


4.3		Form of stock certificate evidencing the 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A filed on August 26, 2016 (File No.: 001-34452).

~~4.4~~	Indenture, dated as of March 17, 2014, between the ~~Company~~Registrant and Wells Fargo Bank, National Association, as Trustee, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on March 21, ~~2014(File No.: 001-34452).~~

~~4.5~~	First Supplemental Indenture, dated as of March 17, 2014, between the Company and Wells Fargo Bank, National Association, as Trustee (including the form of 5.50% Convertible Senior Note due 2019), incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on March 21, 2014 (File No.: 001-34452).

~~4.6~~4.4		Second Supplemental Indenture, dated as of August 21, 2017, between the ~~Company~~Registrant and Wells Fargo Bank, National Association, as Trustee (including the form of 4.75% Convertible Senior Note due 2022), incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on August 21, 2017 (File No.: 001-34452).

31.1*4.5		Third Supplemental Indenture, dated as of October 5, 2018 between the Registrant and Wells Fargo Bank, National Association, as Trustee (including the form of 5.375% Convertible Senior Note due 2023), incorporated by reference to Exhibit 4.2 of the Registrant's Form 8-K filed on October 5, 2018 (File No.: 001-34452).

31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley Act of 2002.



101.INS *		~~XBRL Instance Document~~

101.SCH*		~~XBRL Taxonomy Extension Schema~~

101.CAL*		~~XBRL Taxonomy Extension Calculation Linkbase~~

101.DEF*		~~XBRL Taxonomy Extension Definition Linkbase~~

101.LAB*		~~XBRL Taxonomy Extension Label Linkbase~~

101.PRE*		~~XBRL Taxonomy Extension Presentation Linkbase~~


*	~~Filed herewith~~.

~~EXHIBIT INDEX~~



~~Exhibit~~ ~~No.~~	~~Description~~

~~3.1~~	~~Articles of Amendment and Restatement of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 3.1 of the Registrant’s Form S-11, as amended (Registration No. 333-160533)~~.

~~3.2~~	Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.’s 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on September 23, 2015 (File No.: 001-34452).

~~3.3~~	Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.’s 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on September 1, 2016 (File No.: 001-34452).

~~3.4~~	~~By-laws of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 3.2 of the Registrant’s Form S-4 (Registration No. 333-210632).~~

~~4.1~~	~~Specimen Stock Certificate of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 4.1 of the Registrant’s Form S-11, as amended (Registration No. 333-160533).~~

~~4.2~~	Specimen Stock Certificate of Apollo Commercial Real Estate Finance, Inc.’s 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on September 23, 2015.

~~4.3~~	Form of stock certificate evidencing the 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A filed on August 26, 2016 (File No.: 001-34452).

~~4.4~~	Indenture, dated as of March 17, 2014, between the Company and Wells Fargo Bank, National Association, as Trustee, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on March 21, 2014 (File No.: 001-34452).

~~4.5~~	First Supplemental Indenture, dated as of March 17, 2014, between the Company and Wells Fargo Bank, National Association, as Trustee (including the form of 5.50% Convertible Senior Note due 2019), incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on March 21, 2014 (File No.: 001-34452).

~~4.6~~	Second Supplemental Indenture, dated as of August 21, 2017, between the Company and Wells Fargo Bank, National Association, as Trustee (including the form of 4.75% Convertible Senior Note due 2022), incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on March 21, 2014 (File No.: 001-34452).

31.1*	~~Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

31.2*	~~Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

32.1*	~~Certification of Principal Executive~~ Officer and Principal Financial Officer pursuant to Section 906 of 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley Act of 2002.

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)



Maryland						27-0467113
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification ~~Number)~~ No.)


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



			Page
Part I — Financial Information
~~ITEM~~Item 1. Financial Statements			4
~~ITEM~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3135
~~ITEM~~Item 3. Quantitative and Qualitative Disclosures about Market Risk			4350
~~ITEM~~Item 4. Controls and Procedures			4452
Part II — Other Information
~~ITEM~~Item 1. Legal Proceedings			4552
~~ITEM~~Item 1A. Risk Factors			4552
~~ITEM~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4554
~~ITEM~~Item 3. Defaults Upon Senior Securities			4554
~~ITEM~~Item 4. Mine Safety Disclosures			4554
~~ITEM~~Item 5. Other Information			4554
~~ITEM~~Item 6. Exhibits			4554



x☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



¨☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



	September 30, 2017			December 31, 2016
Assets:
Cash	$	140,229		$	200,996
Restricted cash	76			62,457
Securities, at estimated fair value	191,902			331,076
Securities, held-to-maturity	—			146,352
Commercial mortgage loans, held for investment, net	2,218,222			1,641,856
Subordinate loans, held for investment, net	1,340,378			1,051,236
Investment in unconsolidated joint venture	—			22,103
Derivative assets, net	—			5,906
Interest receivable	27,895			19,281
Other assets, net	14,240			1,714
Total Assets	$	3,932,942		$	3,482,977
Liabilities and Stockholders’ Equity
Liabilities:
Borrowings under repurchase agreements (net of deferred financing costs of $10,884 and $6,763 in 2017 and 2016, respectively)	$	1,278,631		$	1,139,803
Convertible senior notes, net	471,911			249,994
Participations sold	—			84,979
Derivative liabilities, net	11,746			—
Accounts payable, accrued expenses and other liabilities	8,852			17,681
Payable to related party	8,309			7,015
Dividends payable	55,916			51,278
Total Liabilities	1,835,365			1,550,750
Commitments and Contingencies (see Note 14)
Stockholders’ Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized:
Series A preferred stock, 0 and 3,450,000 shares issued and outstanding ($0 and $86,250 aggregate liquidation preference) in 2017 and 2016, respectively	—			35
Series B preferred stock, 8,000,000 shares issued and outstanding ($200,000 aggregate liquidation preference) in 2017 and 2016	80			80
Series C preferred stock, 6,900,000 shares issued and outstanding ($172,500 aggregate liquidation preference) in 2017 and 2016	69			69
Common stock, $0.01 par value, 450,000,000 shares authorized, 105,451,235 and 91,422,676 shares issued and outstanding in 2017 and 2016, respectively	1,055			914
Additional paid-in-capital	2,163,539			1,983,010
Accumulated deficit	(67,166		)	(48,070		)
Accumulated other comprehensive loss	—			(3,811		)
Total Stockholders’ Equity	2,097,577			1,932,227
Total Liabilities and Stockholders’ Equity	$	3,932,942		$	3,482,977



	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Net interest income:
Interest income from securities	$	2,625		$	8,029		$	9,247		$	23,685
Interest income from securities, held to maturity	—			2,875			4,132			8,597
Interest income from commercial mortgage loans	41,203			27,460			112,690			72,727
Interest income from subordinate loans	47,268			32,207			121,298			89,649
Interest expense	(19,855		)	(17,256		)	(56,089		)	(47,620		)
Net interest income	71,241			53,315			191,278			147,038
Operating expenses:
General and administrative expenses (includes $2,635 and $9,887 of equity based compensation in 2017 and $1,828 and $5,434 of equity compensation in 2016, respectively)	(4,629		)	(8,352		)	(15,587		)	(21,456		)
Management fees to related party	(8,309		)	(5,903		)	(23,484		)	(16,374		)
Total operating expenses	(12,938		)	(14,255		)	(39,071		)	(37,830		)
Income (loss) from unconsolidated joint venture	—			80			(2,847		)	207
Other income	359			309			710			334
Provision for loan losses and impairments	—			—			(5,000		)	(15,000		)
Realized loss on sale of assets	(4,076		)	(225		)	(5,118		)	(225		)
Unrealized gain (loss) on securities	13,488			(9,798		)	11,830			(36,601		)
Foreign currency gain (loss)	7,763			(4,369		)	17,848			(21,926		)
Bargain purchase gain	—			40,021			—			40,021
Gain (loss) on derivative instruments (includes unrealized gains (losses) of ($7,302) and ($17,626) in 2017 and ($10,297) and $1,731 in 2016, respectively)	(7,481		)	4,815			(17,916		)	22,831
Net income	68,356			69,893			151,714			98,849
Preferred dividends	$	(11,148	)	$	(9,310	)	$	(29,768	)	$	(20,985	)
Net income available to common stockholders	57,208			60,583			121,946			77,864
Basic and diluted net income per share of common stock	$	0.54		$	0.83		$	1.23		$	1.11
Basic weighted average shares of common stock outstanding	105,446,704			71,919,549			97,546,437			68,913,362
Diluted weighted average shares of common stock outstanding	106,812,721			72,861,611			98,919,689			69,865,603
Dividend declared per share of common stock	$	0.46		$	0.46		$	1.38		$	1.38



	Preferred Stock					Common Stock			Additional Paid In Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss
	Shares		Par			Shares	Par		Additional Paid In Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Total
Balance at January 1, 2017	18,350,000		$	184		91,422,676	$	914	$	1,983,010		$	(48,070	)	$	(3,811	)	$	1,932,227
Capital increase related to Equity Incentive Plan	—		—			200,859	3		7,551			—			—			7,554
Issuance of common stock	—		—			13,800,000	138		248,883			—			—			249,021
Redemption of preferred stock	(3,450,000	)	(35		)	—	—		(86,215		)	—			—			(86,250		)
Preferred stock redemption charge	—		—			—	—		3,016			—			—			3,016
Issuance of restricted common stock	—		—			27,700	—		—			—			—			—
Offering costs	—		—			—	—		(120		)	—			—			(120		)
Issuance of convertible senior notes	—		—			—	—		7,414			—			—			7,414
Net income	—		—			—	—		—			151,714			—			151,714
Change in other comprehensive loss	—		—			—	—		—			—			3,811			3,811
Dividends on common stock	—		—			—	—		—			(141,042		)	—			(141,042		)
Dividends on preferred stock	—		—			—	—		—			(29,768		)	—			(29,768		)
Balance at September 30, 2017	14,900,000		$	149		105,451,235	$	1,055	$	2,163,539		$	(67,166	)	$	—		$	2,097,577



	Nine months ended September 30, 2017			Nine months ended September 30, 2016
Cash flows provided by operating activities:
Net income	$	151,714		$	98,849
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of discount/premium and PIK interest	(15,491		)	(7,443		)
Amortization of deferred financing costs	4,464			3,199
Equity-based compensation	7,551			2,808
Unrealized (gain) loss on securities	(11,830		)	36,601
Provision for loan losses and impairment	5,000			15,000
Income (loss) from unconsolidated joint venture	2,259			(207		)
Foreign currency (gain) loss	(16,940		)	21,122
Realized (gain) loss on derivative instruments	289			(21,100		)
Unrealized (gain) loss on derivative instruments	17,564			(1,731		)
Realized loss on sale of securities	5,118			225
Bargain purchase gain	—			(40,021		)
Changes in operating assets and liabilities:
Accrued interest receivable, less purchased interest	(27,910		)	(17,638		)
Other assets	(983		)	(121		)
Accounts payable, accrued expenses and other liabilities	(8,623		)	(10,410		)
Payable to related party	1,295			606
Net cash provided by operating activities	113,477			79,739
Cash flows provided by (used in) investing activities:
Funding of commercial mortgage loans	(581,567		)	(548,171		)
Funding of subordinate loans	(475,503		)	(51,921		)
Payments received on commercial mortgage loans	17,062			118,120
Payments received on subordinate loans	221,478			81,524
Origination and exit fees received on commercial mortgage loans and subordinate loans	13,047			7,509
Funding of unconsolidated joint venture	(726		)	(362		)
Funding of other assets	(1,379		)	—
Proceeds (payments) on settlements of derivative instruments	(201		)	21,100
Decrease (Increase) in collateral held related to derivative contracts	(14,262		)	13,110
Proceeds from sale of securities	128,945			86,451
Proceeds from sale of investment in unconsolidated joint venture	24,498			—
Payments received on securities	13,306			22,424
Payments received on securities, held-to-maturity	146,530			5,970
Payments received on other assets	—			107
Proceeds from sale of AMTG assets, net	—			1,474,111
ARI Investment in AMTG, net of cash acquired	—			189,795
Net cash provided by (used in) investing activities	(508,772		)	1,419,767
Cash flows provided by (used in) financing activities:
Proceeds from issuance of common stock	249,021			—
Redemption of Series A preferred stock	(86,250		)	—
Payment of offering costs	(359		)	(45		)
Proceeds from repurchase agreement borrowings	866,548			448,177
Repayments of repurchase agreement borrowings	(727,691		)	(352,914		)
Repayments of AMTG repurchase agreement borrowings	—			(1,254,517		)
Proceeds from issuance of convertible senior notes	227,700			—
Repayments of participations sold	(85,081		)	(3,770		)
Payment of deferred financing costs	(8,585		)	(3,741		)
Dividends on common stock	(136,404		)	(94,625		)
Dividends on preferred stock	(26,752		)	(18,646		)
Net cash provided by (used in) financing activities	272,147			(1,280,081		)
Net increase (decrease) in cash, cash equivalents, and restricted cash	(123,148		)	219,425
Cash, cash equivalents, and restricted cash, beginning of period	263,453			97,542
Cash, cash equivalents, and restricted cash, end of period	$	140,305		$	316,967
Supplemental disclosure of cash flow information:
Interest paid	$	44,303		$	47,093
Supplemental disclosure of non-cash investing and financing activities:
Dividend declared, not yet paid	$	55,916		$	46,028
Deferred financing costs, not yet paid	$	—		$	—
Offering costs payable	$	41		$	220
Fair value of assets acquired from AMTG	$	—		$	1,936
Fair value of liabilities assumed from AMTG	$	—		$	(1,285	)
Fair value of common stock issued to AMTG	$	—		$	218
Fair value of preferred stock issued to AMTG	$	—		$	173



	Fair Value as of September 30, 2017										Fair Value as of December 31, 2016
	Level I		Level II			Level III		Total			Level I		Level II		Level III		Total
CMBS (Fair Value Option)	$	—	$	—		$	191,902	$	191,902		$	—	$	331,076	$	—	$	331,076
Derivative instruments, net	—		(11,746		)	—		(11,746		)	—		5,906		—		5,906
Total	$	—	$	(11,746	)	$	191,902	$	180,156		$	—	$	336,982	$	—	$	336,982



	CMBS
Fair value at December 31, 2016	$	—
Transfers into Level III ⁽¹⁾	254,484
Net realized loss on investments	(4,076		)
Net increase in unrealized gain on investments	13,488
Sales and repayments of investments	(71,073		)
Amortization of purchase discount, net	(921		)
Fair value at September 30, 2017	$	191,902



Security Description	Face Amount		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
CMBS (Fair Value Option)	$	222,522	$	217,242	$	247	$	(25,587	)	$	191,902



	September 30, 2017		December 31, 2016
Credit Ratings *	BB-D		B+-NR
Coupon	5.9	%	5.9	%
Yield	4.2	%	6.0	%
Weighted Average Life	2.0 years		2.5 years



Vintage	September 30, 2017		December 31, 2016
2005	—	%	2.0	%
2006	21.2		12.1
2007	57.0		73.5
2008	21.8		12.4
Total	100.0	%	100.0	%



	Principal Balance		Deferred Fees/Other Items ⁽¹⁾		Provision for Loan Loss ⁽²⁾		Carrying Value
December 31, 2016	2,720,344		(12,252	)	(15,000	)	2,693,092
Loan fundings	1,057,070		—		—		1,057,070
Loan repayments	(238,541	)	—		—		(238,541	)
Unrealized gain on foreign currency translation	20,974		—		—		20,974
Provision for loan loss ⁽²⁾	—		—		(1,981	)	(1,981	)
Deferred fees and other items ⁽¹⁾	—		(13,047	)	—		(13,047	)
PIK interest, amortization of fees and other items ⁽¹⁾	19,321		21,712		—		41,033
September 30, 2017	3,579,168		(3,587	)	(16,981	)	3,558,600



	September 30, 2017								December 31, 2016
Lender	Maximum Amount of Borrowings		Borrowings Outstanding			Maturity⁽¹⁾	Weighted Average Rate⁽²⁾		Maximum Amount of Borrowings		Borrowings Outstanding			Maturity ⁽¹⁾	Weighted Average Rate ⁽²⁾
JPMorgan Facility ⁽³⁾	$	1,118,000	$	840,360		March 2020	L+2.27%		$	943,000	$	657,452		January 2019	L+2.25%
DB Repurchase Facility ⁽⁴⁾	565,491		265,658			March 2020	L+2.35%		300,000		137,355			September 2019	L+2.66%
Goldman Loan	34,180		34,180			April 2019	L+3.50%		N/A		40,657			April 2019	L+3.50%
Sub-total	1,717,671		1,140,198				L+2.32%				835,464				L+2.38%

UBS Facility	N/A		N/A			N/A	N/A		N/A		133,899			September 2018	2.79	%
DB Facility ⁽⁵⁾	300,000		149,317			April 2018	3.48	%	N/A		177,203			April 2018	3.63	%
Sub-total	300,000		149,317				3.48	%			311,102				3.27	%

Less: deferred financing costs	N/A		(10,884		)		N/A		N/A		(6,763		)		N/A
Total / Weighted Average	$	2,017,671	$	1,278,631			3.55	%			$	1,139,803			3.18	%



	Less than 1 year⁽¹⁾		1 to 3 years⁽¹⁾		3 to 5 years		More than 5 years		Total
JPMorgan Facility	$	166,273	$	674,087	$	—	$	—	$	840,360
DB Repurchase Facility	—		265,658		—		—		265,658
Goldman Loan	—		34,180		—		—		34,180
DB Facility	149,317		—		—		—		149,317
Total	$	315,590	$	973,925	$	—	$	—	$	1,289,515



Type of Derivative	September 30, 2017
	Number of Contracts	Aggregate Notional Amount	Notional Currency	Maturity
Fx Contracts - GBP	13	197,401	GBP	October 2017- April 2018



	September 30, 2017								December 31, 2016
	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			Gross Amount of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets Presented in the Consolidated Balance Sheet
Interest rate caps	$	—		$	1	$	1		$	23	$	—	$	23
Forward currency contract	(11,747		)	—		(11,747		)	5,883		—		5,883
Total derivative instruments	$	(11,747	)	$	1	$	(11,746	)	$	5,906	$	—	$	5,906



Vesting Date	Restricted Stock Vesting	RSU Vesting	Total Awards
October 2017	3,997	—	3,997
December 2017	53,923	603,677	657,600
January 2018	2,749	—	2,749
April 2018	7,645	—	7,645
June 2018	—	544	544
July 2018	1,420	—	1,420
October 2018	1,424	—	1,424
December 2018	41,670	477,173	518,843
January 2019	1,419	—	1,419
April 2019	6,314	—	6,314
December 2019	25,000	277,273	302,273
April 2020	4,894	—	4,894
August 2020	—	264	264
Total	163,481	1,359,457	1,522,939



	For the three months ended September 30,						For the nine months ended September 30,
	2017			2016			2017			2016
Numerator:
Net income	$	68,356		$	69,893		$	151,714		$	98,849
Preferred dividends	(11,148		)	(9,310		)	(29,768		)	(20,985		)
Net income available to common stockholders	57,208			60,583			121,946			77,864
Dividends declared on common stock	(48,507		)	(37,180		)	(139,155		)	(99,182		)
Dividends on participating securities	(625		)	(413		)	(1,884		)	(1,298		)
Net income (loss) attributable to common stockholders	$	8,076		$	22,990		$	(19,093	)	$	(22,616	)
Denominator:
Basic weighted average shares of common stock outstanding	105,446,704			71,919,549			97,546,437			68,913,362
Diluted weighted average shares of common stock outstanding	106,812,721			72,861,611			98,919,689			69,865,603
Basic and diluted net income per weighted average share of common stock
Distributable Earnings	$	0.46		$	0.52		$	1.43		$	1.44
Undistributed income (loss)	$	0.08		$	0.31		$	(0.20	)	$	(0.33	)
Basic and diluted net income per share of common stock	$	0.54		$	0.83		$	1.23		$	1.11



Consideration Paid:		$ (in thousands)
	Cash	$	220,159
	Common stock issued	218,397
	Preferred stock assumed	172,500
	Total consideration paid	$	611,056

Assets acquired:
	Cash and cash equivalents	399,402
	Restricted cash	10,552
	Investments	1,491,484
	Other assets	34,822

Liabilities assumed:
	Borrowings under repurchase agreements	(1,254,518		)
	Other liabilities	(30,665		)

	Net assets acquired	651,077

	Bargain purchase gain	$	40,021



	Three Months Ended		Nine Months Ended
(in thousands, except per share data)	September 30, 2016		September 30, 2016
Total revenue	$	89,665	$	280,230
Net income attributable to common shareholders	15,615		40,161

Common shares outstanding at September 30, 2016	80,826,566		80,826,566
Net income per common share, basic and diluted	$	0.19	$	0.50



Description	Amortized Cost		Weighted Average Coupon (1)		Weighted Average All-in Yield (1) (2)		Debt		Cost of Funds		Equity at cost
First mortgages	$	2,218,222	6.5	%	7.3	%	$	1,140,198	3.6	%	$	1,078,024
Subordinate loans	1,340,378		11.8		13.1		—		—		1,340,378
Total/Weighted Average	$	3,558,600	8.5	%	9.5	%	$	1,140,198	3.6	%	$	2,418,402



	Three months ended September 30,						2017 vs. 2016			Nine months ended September 30,						2017 vs. 2016
	2017			2016			$			2017			2016			$
Net interest income:
Interest income from securities	$	2,625		$	8,029		$	(5,404	)	$	9,247		$	23,685		$	(14,438	)
Interest income from securities, held to maturity	—			2,875			(2,875		)	4,132			8,597			(4,465		)
Interest income from commercial mortgage loans	41,203			27,460			13,743			112,690			72,727			39,963
Interest income from subordinate loans	47,268			32,207			15,061			121,298			89,649			31,649
Interest expense	(19,855		)	(17,256		)	(2,599		)	(56,089		)	(47,620		)	(8,469		)
Net interest income	71,241			53,315			17,926			191,278			147,038			44,240
Operating expenses:
General and administrative expenses	(4,629		)	(8,352		)	3,723			(15,587		)	(21,456		)	5,869
Management fees to related party	(8,309		)	(5,903		)	(2,406		)	(23,484		)	(16,374		)	(7,110		)
Total operating expenses	(12,938		)	(14,255		)	1,317			(39,071		)	(37,830		)	(1,241		)
Income (loss) from unconsolidated joint venture	—			80			(80		)	(2,847		)	207			(3,054		)
Other income	359			309			50			710			334			376
Provision for loan losses and impairments	—			—			—			(5,000		)	(15,000		)	10,000
Realized loss on sale of assets	(4,076		)	(225		)	(3,851		)	(5,118		)	(225		)	(4,893		)
Unrealized gain (loss) on securities	13,488			(9,798		)	23,286			11,830			(36,601		)	48,431
Foreign currency gain (loss)	7,763			(4,369		)	12,132			17,848			(21,926		)	39,774
Bargain purchase gain	—			40,021			(40,021		)	—			40,021			(40,021		)
Gain (loss) on derivative instruments	(7,481		)	4,815			(12,296		)	(17,916		)	22,831			(40,747		)
Net income	$	68,356		$	69,893		$	(1,537	)	$	151,714		$	98,849		$	52,865



	Less than 1 year ⁽³⁾		1 to 3 years ⁽³⁾		3 to 5 years ⁽³⁾		More than 5 years		Total
JPMorgan Facility ⁽¹⁾	$	194,500	$	700,426	$	—	$	—	$	894,926
DB Repurchase Facility ⁽¹⁾	10,174		214,400		—		—		224,574
Goldman Loan ⁽¹⁾	6,291		30,123		—		—		36,414
DB Facility	151,946		—		—		—		151,946
Convertible Senior Notes	22,858		285,100		250,727		—		558,685
Unfunded loan commitments ⁽²⁾	75,164		5,000		—		—		80,164
Total	$	460,933	$	1,235,049	$	250,727	$	—	$	1,946,709