PART I
Item 1. Consolidated Financial Statements.Statements and Notes (unaudited)
1
BENEFIT STREET PARTNERS REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
| March 31, 2021 | December 31, 2020 | ||||||||||
| ASSETS | (Unaudited) | ||||||||||
| Cash and cash equivalents | $ | 99,099 | $ | 82,071 | |||||||
| Restricted cash | 11,808 | 10,070 | |||||||||
| Commercial mortgage loans, held for investment, net of allowance of $18,600 and $20,886 as of March 31, 2021 and December 31, 2020, respectively | 3,010,098 | 2,693,848 | |||||||||
| Commercial mortgage loans, held for sale, measured at fair value | 93,117 | 67,649 | |||||||||
| Real estate securities, available for sale, measured at fair value, amortized cost of $19,079 and $179,392 as of March 31, 2021 and December 31, 2020, respectively | 18,865 | 171,136 | |||||||||
| Derivative instruments, measured at fair value | 1,863 | 25 | |||||||||
| Other real estate investments, measured at fair value | 2,528 | 2,522 | |||||||||
Receivable for loan repayment (1) | 215,991 | 98,551 | |||||||||
| Accrued interest receivable | 16,475 | 15,295 | |||||||||
| Prepaid expenses and other assets | 5,676 | 8,538 | |||||||||
| Intangible lease asset, net of amortization | 13,340 | 13,546 | |||||||||
| Real estate owned, net of depreciation | 26,310 | 26,510 | |||||||||
| Real estate owned, held for sale | 37,523 | 0 | |||||||||
| Total assets | $ | 3,552,693 | $ | 3,189,761 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Collateralized loan obligations | $ | 2,075,611 | $ | 1,625,498 | |||||||
| Repurchase agreements - commercial mortgage loans | 152,925 | 276,340 | |||||||||
| Repurchase agreements - real estate securities | 88,272 | 186,828 | |||||||||
| Mortgage note payable | 29,167 | 29,167 | |||||||||
| Other financing and loan participation - commercial mortgage loans | 34,017 | 31,379 | |||||||||
| Unsecured debt | 100,000 | 0 | |||||||||
| Derivative instruments, measured at fair value | 1,105 | 403 | |||||||||
| Interest payable | 1,446 | 2,110 | |||||||||
| Distributions payable | 14,585 | 15,688 | |||||||||
| Accounts payable and accrued expenses | 6,361 | 5,125 | |||||||||
| Due to affiliates | 10,477 | 9,525 | |||||||||
| Total liabilities | $ | 2,513,966 | $ | 2,182,063 | |||||||
| Commitment and contingencies (See Note 10) | 0 | 0 | |||||||||
| Redeemable convertible preferred stock Series A, $0.01 par value, 60,000 authorized and 25,566 and 40,515 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively | $ | 127,581 | $ | 202,292 | |||||||
| Redeemable convertible preferred stock Series C, $0.01 par value, 20,000 authorized and 1,400 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively | 6,964 | 6,962 | |||||||||
| Redeemable convertible preferred stock Series D, $0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of March 31, 2021 and NaN issued or outstanding as of December 31, 2020, respectively | 89,722 | 0 | |||||||||
| Equity: | |||||||||||
| Preferred stock, $0.01 par value, 50,000,000 authorized and NaN issued or outstanding as of March 31, 2021 and December 31, 2020, respectively | 0 | 0 | |||||||||
| Common stock, $0.01 par value, 949,999,000 shares authorized, 44,135,659 and 44,510,051 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively | 443 | 446 | |||||||||
| Additional paid-in capital | 906,200 | 912,725 | |||||||||
| Accumulated other comprehensive income (loss) | (214) | (8,256) | |||||||||
| Accumulated deficit | (91,969) | (106,471) | |||||||||
| Total stockholders' equity | $ | 814,460 | $ | 798,444 | |||||||
| Total liabilities, redeemable convertible preferred stock and stockholders' equity | $ | 3,552,693 | $ | 3,189,761 | |||||||
| September 30, 2017 | December 31, 2016 | ||||||
| ASSETS | (Unaudited) | ||||||
| Cash and cash equivalents | $ | 72,262 | $ | 118,048 | |||
| Restricted cash | 7,754 | 5,021 | |||||
| Commercial mortgage loans, held for investment, net of allowance of $1,959 and $2,181 | 1,285,106 | 1,046,556 | |||||
| Commercial mortgage loans, held-for-sale | 31,180 | 21,179 | |||||
| Commercial mortgage loans, held-for-sale, measured at fair value | 60,950 | — | |||||
| Real estate securities, available-for-sale, at fair value | — | 49,049 | |||||
| Derivative instruments, at fair value | 960 | — | |||||
Receivable for loan repayment (1) | 53,077 | 401 | |||||
| Accrued interest receivable | 6,603 | 5,955 | |||||
| Prepaid expenses and other assets | 3,210 | 1,916 | |||||
| Total assets | $ | 1,521,102 | $ | 1,248,125 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Collateralized loan obligations | $ | 515,500 | $ | 278,450 | |||
| Repurchase agreements - commercial mortgage loans | 319,385 | 257,664 | |||||
| Other financing - commercial mortgage loans | 29,956 | — | |||||
| Repurchase agreements - real estate securities | 39,035 | 66,639 | |||||
| Derivative instruments, at fair value | 1,003 | — | |||||
| Interest payable | 1,302 | 897 | |||||
| Distributions payable | 3,766 | 5,591 | |||||
| Accounts payable and accrued expenses | 3,110 | 1,170 | |||||
| Due to affiliates | 4,583 | 4,064 | |||||
| Total liabilities | $ | 917,640 | $ | 614,475 | |||
| Commitment and Contingencies (See Note 8) | |||||||
| Preferred stock, $0.01 par value, 50,000,000 authorized, none issued and outstanding as of September 30, 2017 and December 31, 2016 | — | — | |||||
| Common stock, $0.01 par value, 949,999,000 shares authorized, 31,641,275 and 31,884,631 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively | 316 | 319 | |||||
| Additional paid-in capital | 700,362 | 704,500 | |||||
| Accumulated other comprehensive income (loss) | — | (500 | ) | ||||
| Accumulated deficit | (97,216 | ) | (70,669 | ) | |||
| Total stockholders' equity | 603,462 | 633,650 | |||||
| Total liabilities and stockholders' equity | $ | 1,521,102 | $ | 1,248,125 | |||
(1) Includes $37.5$216.0 million and $98.6 million of cash held by servicer related to CLO loan payoffsthe CLOs as of September 30, 2017March 31, 2021 and December 31, 2020, respectively.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
BENEFIT STREET PARTNERS REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for share and per share data)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Income: | |||||||||||
| Interest income | $ | 42,237 | $ | 47,854 | |||||||
| Less: Interest expense | 11,369 | 24,492 | |||||||||
| Net interest income | 30,868 | 23,362 | |||||||||
| Revenue from real estate owned | 716 | 1,629 | |||||||||
| Total Income | $ | 31,584 | $ | 24,991 | |||||||
| Expenses: | |||||||||||
| Asset management and subordinated performance fee | 5,416 | 3,912 | |||||||||
| Acquisition expenses | 153 | 142 | |||||||||
| Administrative services expenses | 3,474 | 4,112 | |||||||||
| Professional fees | 1,997 | 2,784 | |||||||||
| Real estate owned operating expenses | 0 | 1,645 | |||||||||
| Depreciation and amortization | 406 | 588 | |||||||||
| Other expenses | 495 | 1,587 | |||||||||
| Total expenses | $ | 11,941 | $ | 14,770 | |||||||
| Other (income)/loss: | |||||||||||
| Provision/(benefit) for credit losses | (2,331) | 14,597 | |||||||||
| Impairment losses on real estate owned assets | 0 | 398 | |||||||||
| Realized (gain)/loss on sale of real estate securities | 1,060 | 438 | |||||||||
| Realized (gain)/loss on sale of commercial mortgage loan, held for sale, measured at fair value | (6,630) | (9,404) | |||||||||
| Unrealized (gain)/loss on commercial mortgage loans, held for sale, measured at fair value | (479) | 1,934 | |||||||||
| Unrealized (gain)/loss on other real estate investments, measured at fair value | (6) | 61 | |||||||||
| Unrealized (gain)/loss on derivatives | (2,109) | 4,836 | |||||||||
| Realized (gain)/loss on derivatives | (1,978) | 6,669 | |||||||||
| Total other (income)/loss | $ | (12,473) | $ | 19,529 | |||||||
| Income/(loss) before taxes | 32,116 | (9,308) | |||||||||
| Provision/(benefit) for income tax | 1,970 | (1,908) | |||||||||
| Net income/(loss) | $ | 30,146 | $ | (7,400) | |||||||
| Net income/(loss) applicable to common stock | $ | 23,408 | $ | (11,915) | |||||||
| Basic earnings per share | $ | 0.53 | $ | (0.27) | |||||||
| Diluted earnings per share | $ | 0.53 | $ | (0.27) | |||||||
| Basic weighted average shares outstanding | 44,290,177 | 44,263,334 | |||||||||
| Diluted weighted average shares outstanding | 44,306,065 | 44,274,852 | |||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Interest income: | |||||||||||||||
| Interest income | $ | 22,195 | $ | 20,250 | $ | 61,917 | $ | 60,763 | |||||||
| Less: Interest expense | 8,845 | 7,317 | 21,990 | 17,478 | |||||||||||
| Net interest income | 13,350 | 12,933 | 39,927 | 43,285 | |||||||||||
| Expenses: | |||||||||||||||
| Asset management and subordinated performance fee | 2,299 | 1,066 | 6,952 | 7,091 | |||||||||||
| Acquisition fees and acquisition expenses | 1,685 | 255 | 4,175 | 635 | |||||||||||
| Administrative services expenses | 1,480 | 2,480 | 3,285 | 3,835 | |||||||||||
| Professional fees | 1,348 | 2,154 | 3,320 | 4,226 | |||||||||||
| Other expenses | 1,411 | 686 | 2,773 | 2,092 | |||||||||||
| Total expenses | 8,223 | 6,641 | 20,505 | 17,879 | |||||||||||
| Other (income)/loss: | |||||||||||||||
| Loan loss (recovery)/provision | (641 | ) | (113 | ) | (222 | ) | 721 | ||||||||
| Realized (gain) loss on commercial mortgage loans held-for-sale | (378 | ) | — | 1,587 | — | ||||||||||
| Realized (gain) loss on sale of real estate securities | — | 1,032 | (172 | ) | 1,032 | ||||||||||
| Unrealized (gain) loss on commercial mortgage loans held-for-sale | 27 | — | (220 | ) | — | ||||||||||
| Unrealized (gain) loss on derivatives | (583 | ) | — | (583 | ) | — | |||||||||
| Realized (gain) loss on derivatives | 18 | — | 18 | — | |||||||||||
| Total other (income)/loss | $ | (1,557 | ) | $ | 919 | $ | 408 | $ | 1,753 | ||||||
| Income (loss) before taxes | 6,684 | 5,373 | 19,014 | 23,653 | |||||||||||
| Income tax expense (benefit) | (291 | ) | — | (291 | ) | — | |||||||||
| Net income | $ | 6,975 | $ | 5,373 | $ | 19,305 | $ | 23,653 | |||||||
| Basic net income per share | $ | 0.22 | $ | 0.17 | $ | 0.61 | $ | 0.75 | |||||||
| Diluted net income per share | $ | 0.22 | $ | 0.17 | $ | 0.61 | $ | 0.75 | |||||||
| Basic weighted average shares outstanding | 31,741,679 | 31,516,876 | 31,778,169 | 31,622,796 | |||||||||||
| Diluted weighted average shares outstanding | 31,756,503 | 31,523,911 | 31,790,267 | 31,629,070 | |||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
BENEFIT STREET PARTNERS REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Net income/(loss) | $ | 30,146 | $ | (7,400) | |||||||
| Unrealized gain/(loss) on available for sale securities | 8,042 | (67,607) | |||||||||
| Comprehensive income/(loss) attributable to Benefit Street Partners Realty Trust, Inc. | $ | 38,188 | $ | (75,007) | |||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net income | $ | 6,975 | $ | 5,373 | $ | 19,305 | $ | 23,653 | ||||||||
| Unrealized gain/(loss) on available-for-sale securities | (448 | ) | 2,608 | 500 | 35 | |||||||||||
| Comprehensive income attributable to Benefit Street Partners Realty Trust, Inc. | $ | 6,527 | $ | 7,981 | $ | 19,805 | $ | 23,688 | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
BENEFIT STREET PARTNERS REALTY TRUST, INC.
CONSOLIDATED STATEMENTSTATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except for share data)
(Unaudited)
| Common Stock | |||||||||||||||||||||||||||||||||||
| Number of Shares | Par Value | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders' Equity | ||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 44,510,051 | $ | 446 | $ | 912,725 | $ | (8,256) | $ | (106,471) | $ | 798,444 | ||||||||||||||||||||||||
| Issuance of common stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Common stock repurchases | (521,796) | (5) | (9,142) | — | — | (9,147) | |||||||||||||||||||||||||||||
| Common stock issued through distribution reinvestment plan | 147,404 | 2 | 2,583 | — | — | 2,585 | |||||||||||||||||||||||||||||
| Share-based compensation | — | — | 55 | — | — | 55 | |||||||||||||||||||||||||||||
| Offering costs | — | — | (21) | — | — | (21) | |||||||||||||||||||||||||||||
| Net income | — | — | — | — | 30,146 | 30,146 | |||||||||||||||||||||||||||||
| Distributions declared | — | — | — | — | (15,644) | (15,644) | |||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | 8,042 | — | 8,042 | |||||||||||||||||||||||||||||
| Balance, March 31, 2021 | 44,135,659 | $ | 443 | $ | 906,200 | $ | (214) | $ | (91,969) | $ | 814,460 | ||||||||||||||||||||||||
| Balance, December 31, 2019 | 43,916,815 | $ | 441 | $ | 903,310 | $ | (978) | $ | (85,968) | $ | 816,805 | ||||||||||||||||||||||||
| Issuance of common stock | 650,034 | 7 | 10,855 | — | — | 10,862 | |||||||||||||||||||||||||||||
| Common stock repurchases | (361,829) | (4) | (6,711) | — | — | (6,715) | |||||||||||||||||||||||||||||
| Common stock issued through distribution reinvestment plan | 191,326 | 1 | 3,548 | — | — | 3,549 | |||||||||||||||||||||||||||||
| Share-based compensation | — | — | 39 | — | — | 39 | |||||||||||||||||||||||||||||
| Offering costs | — | — | (136) | — | — | (136) | |||||||||||||||||||||||||||||
| Net income/(loss) | — | — | — | — | (7,400) | (7,400) | |||||||||||||||||||||||||||||
| Distributions declared | — | — | — | — | (20,371) | (20,371) | |||||||||||||||||||||||||||||
| Cumulative-effect adjustment upon adoption of ASU 2016-13 (Note 2) | — | — | — | — | (7,761) | (7,761) | |||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | (67,607) | — | (67,607) | |||||||||||||||||||||||||||||
| Balance, March 31, 2020 | 44,396,346 | $ | 445 | $ | 910,905 | $ | (68,585) | $ | (121,500) | $ | 721,265 | ||||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||
| Number of Shares | Par Value | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Stockholders' Equity | ||||||||||||||||||
| Balance, December 31, 2016 | 31,884,631 | $ | 319 | $ | 704,500 | $ | (500 | ) | $ | (70,669 | ) | $ | 633,650 | ||||||||||
| Common stock repurchases | (1,072,708 | ) | (11 | ) | (20,536 | ) | — | — | (20,547 | ) | |||||||||||||
| Common stock issued through distribution reinvestment plan | 823,368 | 8 | 16,342 | — | — | 16,350 | |||||||||||||||||
| Share-based compensation | 5,984 | — | 56 | — | — | 56 | |||||||||||||||||
| Net income | — | — | — | — | 19,305 | 19,305 | |||||||||||||||||
| Distributions declared | — | — | — | — | (45,852 | ) | (45,852 | ) | |||||||||||||||
| Other comprehensive income | — | — | — | 500 | — | 500 | |||||||||||||||||
| Balance, September 30, 2017 | 31,641,275 | $ | 316 | $ | 700,362 | $ | — | $ | (97,216 | ) | $ | 603,462 | |||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
BENEFIT STREET PARTNERS REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income/(loss) | $ | 30,146 | $ | (7,400) | |||||||
| Adjustments to reconcile net income/(loss) to net cash (used in)/provided by operating activities: | |||||||||||
| Premium amortization and (discount accretion), net | $ | (1,169) | $ | (1,710) | |||||||
| Accretion of deferred commitment fees | (1,488) | (1,233) | |||||||||
| Amortization of deferred financing costs | 1,335 | 5,684 | |||||||||
| Share-based compensation | 55 | 39 | |||||||||
| Realized (gain)/loss from sale of real estate securities | 1,060 | 438 | |||||||||
| Unrealized (gain)/loss from commercial mortgage loans held for sale | (479) | 1,934 | |||||||||
| Unrealized (gain)/loss from derivative instruments | (2,109) | 4,836 | |||||||||
| Unrealized losses from other real estate investments | (6) | 61 | |||||||||
| Depreciation and amortization | 406 | 588 | |||||||||
| Recognition of deferred rent revenue | 0 | (89) | |||||||||
| Provision/(benefit) for credit losses | (2,331) | 14,597 | |||||||||
| Impairment losses on real estate owned assets | 0 | 398 | |||||||||
| Origination of commercial mortgage loans, held for sale | (166,360) | (119,349) | |||||||||
| Proceeds from sale of commercial mortgage loans, held for sale | 141,372 | 138,164 | |||||||||
| Changes in assets and liabilities: | |||||||||||
| Accrued interest receivable | 308 | 1,664 | |||||||||
| Prepaid expenses and other assets | 1,850 | (6,300) | |||||||||
| Accounts payable and accrued expenses | 1,570 | (2,068) | |||||||||
| Due to affiliates | 952 | 9,249 | |||||||||
| Interest payable | (664) | (2,072) | |||||||||
| Net cash (used in)/provided by operating activities | $ | 4,448 | $ | 37,431 | |||||||
| Cash flows from investing activities: | |||||||||||
| Origination and purchase of commercial mortgage loans, held for investment | $ | (520,849) | $ | (287,644) | |||||||
| Principal repayments received on commercial mortgage loans, held for investment | 52,800 | 426,742 | |||||||||
| Purchase of other real estate investments | 0 | (624) | |||||||||
| Purchase of real estate securities | 0 | (134,818) | |||||||||
| Principal repayments received on real estate securities | 0 | 643 | |||||||||
| Proceeds from sale/repayment of real estate securities | 159,254 | 0 | |||||||||
| Purchase of derivative instruments | 973 | (689) | |||||||||
| Net cash (used in)/provided by investing activities | $ | (307,822) | $ | 3,610 | |||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuances of common stock | $ | 0 | $ | 10,726 | |||||||
| Proceeds from issuances of redeemable convertible preferred stock | 15,000 | 70 | |||||||||
| Common stock repurchases | (9,147) | (6,716) | |||||||||
| Borrowings under collateralized loan obligation | 573,125 | 0 | |||||||||
| Repayments of collateralized loan obligation | (119,425) | (68,894) | |||||||||
| Borrowings on repurchase agreements - commercial mortgage loans | 168,655 | 65,413 | |||||||||
| Repayments of repurchase agreements - commercial mortgage loans | (292,070) | (83,432) | |||||||||
| Borrowings on repurchase agreements - real estate securities | 168,550 | 340,116 | |||||||||
6
| Nine Months Ended September 30, | |||||||
| 2017 | 2016 | ||||||
| Cash flows from operating activities: | |||||||
| Net income | $ | 19,305 | $ | 23,653 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Premium amortization and (discount accretion), net | (1,617 | ) | (1,761 | ) | |||
| Accretion of deferred commitment fees | (1,887 | ) | (1,169 | ) | |||
| Amortization of deferred financing costs | 3,735 | 2,989 | |||||
| Share-based compensation | 56 | 27 | |||||
| Change in unrealized losses on commercial mortgage loans held-for-sale | (220 | ) | — | ||||
| Change in unrealized losses on real estate securities | — | 1,032 | |||||
| Change in unrealized losses on derivative instruments | (583 | ) | — | ||||
| Realized loss on sale of commercial mortgage loans | 1,587 | — | |||||
| Loan loss (recovery)/provision | (222 | ) | 721 | ||||
| Deferred income taxes | (291 | ) | — | ||||
| Changes in assets and liabilities: | |||||||
| Accrued interest receivable | 1,240 | 1,213 | |||||
| Prepaid expenses and other assets | (4,717 | ) | 49 | ||||
| Accounts payable and accrued expenses | 3,084 | 1,415 | |||||
| Due to affiliates | 519 | (1,529 | ) | ||||
| Interest payable | 405 | 913 | |||||
| Net cash provided by operating activities | $ | 20,394 | $ | 27,553 | |||
| Cash flows from investing activities: | |||||||
| Origination and purchase of commercial mortgage loans, held for investment | $ | (565,094 | ) | $ | (42,236 | ) | |
| Origination of commercial mortgage loans, held-for-sale, measured at fair value | (60,950 | ) | — | ||||
| Receivable for loan repayment | (52,676 | ) | — | ||||
| Proceeds from sale of real estate securities | 34,888 | — | |||||
| Principal repayments received on real estate securities | 15,000 | 2,218 | |||||
| Purchase of derivative instruments | (383 | ) | — | ||||
| Proceeds from sale of commercial mortgage loans, held for sale | 88,352 | 69,957 | |||||
| Principal repayments received on commercial mortgage loans, held for investment | 228,814 | 48,906 | |||||
| Net cash (used in)/provided by investing activities | $ | (312,049 | ) | $ | 78,845 | ||
| Cash flows from financing activities: | |||||||
| Common stock repurchases | $ | (20,546 | ) | $ | (19,026 | ) | |
| Borrowings under collateralized loan obligations | 339,500 | — | |||||
| Repayments of collateralized loan obligations | (97,470 | ) | — | ||||
| Borrowings on repurchase agreements - commercial mortgage loans | 368,745 | 104,626 | |||||
| Repayments of repurchase agreements - commercial mortgage loans | (307,024 | ) | (68,997 | ) | |||
| Borrowings on repurchase agreements - real estate securities | 343,151 | 1,019,598 | |||||
| Repayments of repurchase agreements - real estate securities | (370,754 | ) | (1,064,111 | ) | |||
| Borrowings on other financing - commercial mortgage loans | 36,200 | — | |||||
| Repayments on other financing - commercial mortgage loans | (5,274 | ) | — | ||||
| Increase (decrease) in restricted cash related to financing activities | (2,733 | ) | 366 | ||||
| Payments of deferred financing costs | (6,598 | ) | (2,836 | ) | |||
| Distributions paid | (31,328 | ) | (29,952 | ) | |||
BENEFIT STREET PARTNERS REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
(Unaudited)
| Repayments of repurchase agreements - real estate securities | (267,106) | (237,596) | |||||||||
| Proceeds from other financing and loan participation - commercial mortgage loans | 2,638 | 15,190 | |||||||||
| Proceeds from unsecured debt | 100,000 | 0 | |||||||||
| Borrowing on mortgage note payable | 0 | 11,000 | |||||||||
| Payments of deferred financing costs | (3,944) | (75) | |||||||||
| Distributions paid | (14,136) | (16,776) | |||||||||
| Net cash (used in)/provided by financing activities: | $ | 322,140 | $ | 29,026 | |||||||
| Net change in cash, cash equivalents and restricted cash | 18,766 | 70,067 | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 92,141 | 109,122 | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 110,907 | $ | 179,189 | |||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Taxes paid | $ | 0 | $ | 0 | |||||||
| Interest paid | 10,698 | 20,880 | |||||||||
| Supplemental disclosures of non - cash flow information: | |||||||||||
| Distribution payable | $ | 14,585 | $ | 6,956 | |||||||
| Common stock issued through distribution reinvestment plan | 2,585 | 3,548 | |||||||||
| Commercial mortgage loans transferred from held for sale to held for investment | 0 | 9,619 | |||||||||
| Real estate owned received in foreclosure | 37,523 | 14,000 | |||||||||
| Reconciliation of cash, cash equivalents and restricted cash at end of period: | |||||||||||
| Cash and cash equivalents | $ | 99,099 | $ | 88,960 | |||||||
| Restricted cash | 11,808 | 90,229 | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 110,907 | $ | 179,189 | |||||||
| Nine Months Ended September 30, | |||||||
| 2017 | 2016 | ||||||
| Net cash (used in) provided by financing activities | $ | 245,869 | $ | (60,332 | ) | ||
| Net change in cash and cash equivalents | $ | (45,786 | ) | $ | 46,066 | ||
| Cash and cash equivalents, beginning of period | 118,048 | 14,807 | |||||
| Cash and cash equivalents, end of period | $ | 72,262 | $ | 60,873 | |||
| Nine Months Ended September 30, | |||||||
| 2017 | 2016 | ||||||
| Supplemental disclosures of cash flow information: | |||||||
| Interest paid | $ | 17,850 | $ | 13,576 | |||
| Supplemental disclosures of non-cash flow information: | |||||||
| Distributions payable | $ | 3,766 | $ | — | |||
| Common stock issued through distribution reinvestment plan | 16,349 | 19,099 | |||||
| Loans transferred to commercial real estate loans, held-for-sale, transferred at fair value | 31,207 | — | |||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Organization and Business Operations
Benefit Street Partners Realty Trust, Inc. (the "Company"), formerly known as Realty Finance Trust, Inc., is a real estate finance company that primarily originates, acquires and manages a diversified portfolio of commercial real estate debt investments secured by properties located within and outside the United States. The Company was incorporated in Maryland on November 15, 2012 and commenced business operations on May 14, 2013.
The Company made a tax election to be treated as a real estate investment trust ("REIT"(a "REIT") for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2013. The Company believes that it has qualified as a REIT and intends to continue to meet the requirements for qualification and taxation as a REIT. In addition, the Company, through certain of its subsidiariesa subsidiary which areis treated as a taxable REIT subsidiaries (each a “TRS”subsidiary (a "TRS"), is indirectly subject to U.S.U.S federal, state and local income taxes. Substantially allThe majority of the Company's business is conducted through Benefit Street Partners Realty Operating Partnership, L.P. (the “OP”), a Delaware limited partnership. The Company is the sole general partner and directly or indirectly holds all of the units of limited partner interests in the OP.
The Company has no direct employees. Benefit Street Partners L.L.C. serves as the Company's advisor (the "Advisor") pursuant to an advisory agreement executed on September 29, 2016Amended and Restated Advisory Agreement, dated January 19, 2018 (the “Advisory Agreement”"Advisory Agreement"). The Advisor is a wholly owned subsidiary of Franklin Resources, Inc. which, together with its various subsidiaries, operates as Franklin Templeton. The Advisor, an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”), is a credit-focused alternative asset management firm. Established in 2008, the Advisor's credit platform manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies including high yield, levered loans, private / opportunistic debt, liquid credit, structured credit and commercial real estate debt. These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass the platform. The Advisor is in partnership with Providence Equity Partners L.L.C., a global private equity firm. The Advisor manages the Company's affairs on a day-to-day basis. The Advisor receives compensation and fees for services related to the investment and management of the Company's assets and the operations of the Company. Prior to September 29, 2016, Realty Finance Advisor, LLC ("Former Advisor") was the Company's advisor. The Former Advisor was controlled by AR Global Investments, LLC ("AR Global").
The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. The Company also originates conduit loans which the Company intends to sell through its TRS into commercial mortgage-backed securities ("CMBS") securitization transactions at a profit.
The Company may also investinvests in commercial real estate securities. Real estate securities may include CMBS, senior unsecured debt of publicly traded REITs, debt or equity securities of other publicly traded real estate companies and collateralized debt obligations ("CDOs").
Note 2 - Summary of Significant Accounting Policies
Basis of Accounting
The accompanyingCompany's unaudited consolidated financial statements and related footnotes are unaudited and have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”("GAAP") for interim financial statements and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X, as appropriate. Accordingly, the consolidated financial statements may not include all of the information and notes required by GAAP for annual consolidated financial statements.
These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of, and for the year ended December 31, 2020, which are included in the Company's Annual Report on Form 10-K filed with the SEC on March 11, 2021.
Use of Estimates
GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the reported periods. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially. In the opinion of management, the interim data includes all adjustments, of a normal and recurring nature, necessary for a fair statement of the results for the periods presented. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the entire year or any subsequent interim periods.
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members, as well as whether the entity is a variable interest entity ("VIE") for which the Company is the primary beneficiary.
The Company has determined the OP is a VIE of which the Company is the primary beneficiary. Substantially all of the Company's assets and liabilities are held by the OP.
The Company consolidates all entities that it controls through either majority ownership or voting rights. In addition, the Company consolidates all VIEs of which the Company is considered the primary beneficiary. VIEs are entities in which equity investors (i) do not have the characteristics of a controlling financial interest and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE.
The accompanying consolidated financial statements include the accounts of collateralized loan obligations ("CLOs") issued and securitized by wholly owned subsidiaries of the Company. The Company has determined the CLOs are VIEs of which the Company's subsidiary is the primary beneficiary. The assets and liabilities of the CLOs are consolidated in the accompanying consolidated balance sheetsheets in accordance with ASCFinancial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation.Consolidation.
Cash and Cash Equivalents
Cash consists of amounts deposited with high quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Company up to an insurance limit. Cash equivalents include short-term, liquid investments in money market funds with original maturities of 90 days or less when purchased.
Restricted Cash
Restricted cash primarily consists of cash pledged as margin on repurchase agreements and derivative transactions. The Advisor receives an acquisition feeduration of 1.0%this restricted cash generally matches the duration of the principal amount funded by the Company to originaterelated repurchase agreements or acquire commercial mortgage loans (or anticipated net equity funded by the Company in the case of acquisition of real estate securities) and receives reimbursement for insourced acquisition expenses of 0.5%; provided, however, that if and when the aggregate purchase price for all investments acquired after the date of the Advisory Agreement reaches $600,000,000, the Company’s obligation to pay acquisition fees to the Advisor shall terminate. There is no such limitation on the acquisition expense reimbursements. In September 2017, the Company's aggregate purchase price for all investments acquired reached $600,000,000, and concurrently terminated the 1.0% acquisition fee payments to the Advisor for all investments subsequent to the limit being reached.derivative transaction.
Commercial Mortgage Loans
interest method. The accretion of guaranteed loan exitcommitment fees is recognized in interest income in the Company's consolidated statements of operation.operations.
9
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Held for Sale - Commercial mortgage loans that are intended to be sold in the foreseeable future are reported as held-for-saleheld for sale and are transferred at fair value and recorded at the lower of cost or fair value with changes recorded through the statements of operations. Unamortized loan origination costs for commercial mortgage loans held-for-saleheld for sale that are carried at the lower of cost or fair value are capitalized as part of the carrying value of the loans and recognized upon the sale of such loans. Amortization of origination costs ceases upon transfer of commercial mortgage loans to held-for-sale.held for sale.
Real estate owned
Real estate owned (“REO”) assets represent real estate acquired by the Company did not account for anythrough foreclosure, deed in lieu of its commercial mortgage loans underforeclosure, or purchase. REO assets are carried at their estimated fair value at acquisition and are presented net of accumulated depreciation and impairment charges. The Company allocates the purchase price of acquired real estate assets based on the fair value option.of the acquired assets such as land, building, furniture, fixtures and equipment. Asset acquisitions in which monetary consideration is given generally include the transaction costs of the asset acquisition. Acquiring assets in groups requires not only ascertaining the cost of the asset (or net asset) group but also allocating that cost to the individual assets (or individual assets and liabilities) that make up the group. The cost of a group of assets acquired in an asset acquisition shall be allocated to the individual assets acquired or liabilities assumed based on their relative fair values and shall not give rise to goodwill.
Real estate owned assets that are probable to be sold within one year are reported as held for sale. Real estate owned assets classified as held for sale shall be measured at the lower of its carrying amount or fair value less cost to sell. Real estate owned assets shall not be depreciated or amortized while it is classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale shall continue to be accrued. Upon the disposition of a real estate owned asset, the Company calculates realized gains and losses as net proceeds received less the carrying value of the real estate owned asset. Net proceeds received are net of direct selling costs associated with the disposition of the real estate owned asset.
Leases
Operating right of use assets "ROU" represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at commencement date based on the present value of fixed lease payments over the lease term. Leases will be classified as either a finance or operating lease, with such classification affecting the pattern and classification of expense recognition in the consolidated statements of operations. For leases greater than 12 months, the Company determines, at the inception of the contract, if the arrangement meets the classification criteria for an operating or finance lease. For leases that have extension options, which can be exercised at the Company's discretion, management uses judgment to determine if it is reasonably certain that such extension options will be elected. If the extension options are reasonably certain to occur, the Company includes the extended term's lease payments in the calculation of the respective lease liability. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The incremental borrowing rate used to discount the lease liability is determined at commencement of the lease, or upon modification of the lease, as the interest rate a lessee would have to pay to borrow on a fully collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The Company's incremental borrowing rate considers information at both the corporate and property level and analysis of current market conditions for obtaining new financings. All leases as of March 31, 2021 were operating leases.
Separately, on October 15, 2019, the Company acquired certain real estate assets which had an existing in-place lease asset. This in-place lease asset is recorded as an Intangible lease asset on the consolidated balance sheets and amortized using the straight-line method over the contractual life of the lease.
10
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Credit Losses
In June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments-Credit Losses, which amends the credit impairment model for financial instruments. The Company adopted ASU 2016-13 on January 1, 2020.
Following our adoption of ASU 2016-13, our previous incurred loss model was replaced with a lifetime current expected credit loss (“CECL”) model for financial instruments carried at amortized cost and off-balance sheet credit exposures, such as loans, loan commitments, held-to-maturity (“HTM”) debt securities, financial guarantees, net investments in leases, reinsurance and trade receivables, which will generally result in earlier recognition of allowance for losses. For available for sale (“AFS”) debt securities, unrealized credit losses are recognized as allowances rather than reductions in amortized cost basis and elimination of the other than temporary impairment concept will result in more frequent estimation of credit losses. The accounting model for purchased credit impaired loans and debt securities has been simplified, including elimination of some of the asymmetrical treatment between credit losses and credit recoveries, to be consistent with the CECL model for originated and purchased non-credit impaired assets. The adopted model for ASC 326 as it applies to HTM and AFS securities, encompassing the beneficial interest model for securities that are not of high credit quality, has been clarified to include the effective interest method as a basis for the projection of cash collections method in connection with the newly adopted impairment models for HTM and AFS debt securities under ASC 326 when securities are not of high credit quality.
The allowance for credit losses required under ASU 2016-13 is deducted from the respective loans’ amortized cost basis on the Company’s consolidated balance sheets. The allowance for credit losses attributed to unfunded loan losses reflects management's estimate of loan losses inherentcommitments is included in Accounts payable and accrued expenses on the loan portfolioconsolidated balance sheets. The guidance also required a cumulative-effect adjustment to retained earnings as of the balance sheet date. The reserve is increased through the loan loss provision on the Company's consolidated statements of operations and is decreased by charge-offs when losses are confirmed through the receipt of assets, such as cash in a pre-foreclosure sale or upon ownership controlbeginning of the underlying collateral in full satisfactionreporting period of adoption.
The following discussion highlights changes to the loan upon foreclosure or when significant collection efforts have ceased. The Company usesCompany’s accounting policies as a uniform processresult of this adoption.
Allowance for determining its allowance for loan losses. credit losses
The allowance for credit losses for the Company’s financial instruments carried at amortized cost and off-balance sheet credit exposures, such as loans held for investment and unfunded loan commitments represents a lifetime estimate of expected credit losses. Factors considered by the Company when determining the allowance for credit losses includesreserve include loan-specific characteristics such as loan-to-value (“LTV”) ratio, vintage year, loan term, property type, occupancy and geographic location, financial performance of the borrower, expected payments of principal and interest, as well as internal or external information relating to past events, current conditions and reasonable and supportable forecasts.
The allowance for credit losses is measured on a general, formula-based componentcollective (pool) basis when similar risk characteristics exist for multiple financial instruments. If similar risk characteristics do not exist, the Company measures the allowance for credit losses on an individual instrument basis. The determination of whether a particular financial instrument should be included in a pool can change over time. If a financial asset’s risk characteristics change, the Company evaluates whether it is appropriate to continue to keep the financial instrument in its existing pool or evaluate it individually.
In measuring the allowance for credit losses for financial instruments including our unfunded loan commitments that share similar risk characteristics, the Company primarily applies a probability of default (“PD”)/loss given default (“LGD”) model for instruments that are collectively assessed, whereby the allowance for credit losses is calculated as the product of PD, LGD and exposure at default (“EAD”). The Company’s model principally utilizes historical loss rates derived from a commercial mortgage backed securities database with historical losses from 1998 to 2020 provided by a reputable third party, forecasting the loss parameters using a scenario-based statistical approach over a reasonable and supportable forecast period of twelve months, followed by an asset-specific component.
For financial instruments where the portfolioborrower is experiencing financial difficulty based on the Company’s assessment at the reporting date and (ii) the amountrepayment is expected to be provided substantially through the operation or sale of the loss can be reasonably estimated. The Company estimates loss rates based on historical realized losses experienced in the industry, given the factcollateral, the Company has not experienced any losses, and takes into account currentmay elect to use as a practical expedient the fair value of the collateral and economic conditions affectingat the probability and severity of lossesreporting date when establishingdetermining the allowance for loancredit losses. The
11
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
In developing the allowance for credit losses for its loans held for investment, the Company performs a comprehensive analysis of its loan portfolio and assigns risk ratings to loans that incorporate management's current judgments about their credit quality based on all known and relevant internal and external factors that may affect collectability. The Company considers, among other things, payment status, lien position, borrower financial resources and investmentcollectability, using similar factors as those in collateral, collateral type, project economics and geographic location as well as national and regional economic factors.developing the allowance for credit losses. This methodology results in loans being segmented by risk classification into risk rating categories that are associated with estimated probabilities of default and principal loss. RatingsRisk rating categories range from "1" to "5" with "1" representing the lowest risk of loss and "5" representing the highest risk of loss.loss with the ratings updated quarterly. At the time of origination or purchase, loans held for investment are ranked as a “2” and will move accordingly going forward based on the ratings which are defined as follows:
1.Very Low Risk- Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable.
2.Low Risk- Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.
3.Average Risk- Performing investments requiring closer monitoring. Trends and risk factors show some deterioration.
4.High Risk/Delinquent/Potential for Loss- Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative.
5.Impaired/Defaulted/Loss Likely- Underperforming investment with expected loss of interest and some principal.
The asset-specific reserve component relatesCompany also considers qualitative and environmental factors, including, but not limited to, reserveseconomic and business conditions, nature and volume of the loan portfolio, lending terms, volume and severity of past due loans, concentration of credit and changes in the level of such concentrations in its determination of the allowance for credit losses.
Changes in the allowance for credit losses for the Company’s financial instruments are recorded in Provision/(benefit) for credit losses on individual impaired loans. the consolidated statements of operations with a corresponding offset to the financial instrument’s amortized cost recorded on the consolidated balance sheets, or as a component of Accounts payable and accrued expenses for unfunded loan commitments.
The Company considershas elected to not measure an allowance for credit losses for accrued interest receivable as it is timely, following three months time, reversed against interest income when a loan, real estate security or preferred equity investment is placed on nonaccrual status. The Company did not record reversals of accrued interest receivable during the three months ended March 31, 2021. Loans are charged off against the Provision/(benefit) for credit losses when all or a portion of the principal amount is determined to be uncollectible.
Past due and nonaccrual status
Loans are placed on nonaccrual status and considered non-performing when full payment of principal and interest is unpaid for 90 days or more or where reasonable doubt exists as to timely collection, unless the loan is both well secured and in the process of collection. Interest received on nonaccrual status loans are accounted for under the cost-recovery method, until qualifying for return to accrual. Upon restructuring the nonaccrual loan, the Company may return a loan to be impairedaccrual status when based upon current informationrepayment of principal and events,interest is reasonably assured.
Troubled Debt Restructuring (“TDR”)
The Company classifies an individual financial instrument as a TDR when it believes that it is probablehas a reasonable expectation that the Companyfinancial instrument’s contractual terms will be unablemodified in a manner that grants concession to collectthe borrower who is experiencing financial difficulty. Concessions could include term extensions, payment deferrals, interest rate reductions, principal forgiveness, forbearance, or other actions designed to maximize the Company’s collection on the financial instrument. The Company determines the allowance for credit losses for financial instruments that are TDRs individually.
Real Estate Securities
On the acquisition date, all amounts due under the contractual terms of the loan agreement. This assessment is made on an individual loan basis each quarter basedCompany’s commercial real estate securities were classified as available for sale and carried at fair value, and subsequently any unrealized gains or losses are recognized as a component of accumulated other comprehensive income or loss. The Company may elect the fair value option for its real estate securities, and as a result, any unrealized gains or losses on such factorsreal estate securities will be recorded in the Company’s consolidated statements of operations. No such election has been made to date. Related discounts, premiums and acquisition expenses on investments are amortized over the life of the investment using the effective interest method. Amortization is reflected as payment status, lien position,an adjustment to interest income in the Company’s consolidated statements of operations. The Company uses the specific identification method in determining the cost relief for real estate securities sold. Realized gains and losses from the sale of real estate securities are included in the Company’s consolidated statements of operations.
12
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
AFS real estate securities which have experienced a decline in the fair value below their amortized cost basis (i.e., impairment) are evaluated each reporting period to determine whether the decline in fair value is due to credit-related factors. Any impairment that is not credit-related is recognized in accumulated other comprehensive income, while credit-related impairment is recognized as an allowance on the consolidated balance sheets with a corresponding adjustment on the consolidated statements of operations. If the Company intends to sell an impaired real estate security or more likely than not will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount is recognized in the consolidated statements of operations with a corresponding adjustment to the security’s amortized cost basis.
The Company analyzes the AFS security portfolio on a periodic basis for credit losses at the individual security level using the same criteria described above for those amortized cost financial assets subject to an allowance for credit losses including but not limited to; performance of the underlying assets in the security, borrower financial resources and investment in collateral, collateral type, credit ratings, project economics and geographicalgeographic location as well as national and regional economic factors. A reserve
The non-credit loss component of the unrealized loss within the Company’s AFS portfolio is established forrecognized as an impairedadjustment to the individual security’s asset balance with an offsetting entry to accumulated other comprehensive income in the consolidated balance sheets.
Repurchase Agreements
Commercial mortgage loans and real estate securities sold under repurchase agreements have been treated as collateralized financing transactions because the Company maintains effective control over the transferred securities. Commercial mortgage loans and real estate securities financed through a repurchase agreement remain on the Company’s consolidated balance sheets as an asset and cash received from the purchaser is recorded as a liability. Interest paid in accordance with repurchase agreements is recorded in interest expense on the Company's consolidated statements of operations.
Deferred Financing Costs
The deferred financing costs related to the Company's various Master Repurchase Agreements as well as certain prepaid subscription costs are included in Prepaid expenses and other assets on the consolidated balance sheets. Deferred financing cost on the Company's collateralized loan obligations ("CLO") are netted against the Company's CLO payable in the Collateralized loan obligations on the consolidated balance sheets. Deferred financing costs are amortized over the terms of the respective financing agreement using the effective interest method and included in interest expense on the Company's consolidated statements of operations. Unamortized deferred financing costs are generally expensed when the present valueassociated debt is refinanced or repaid before maturity.
Share Repurchase Program
The Company has a Share Repurchase Program (the "SRP") that enables stockholders to sell their shares to the Company, subject to certain conditions. Refer to Note 9 - Stock Transactions for a description of payments expectedthe SRP. When a stockholder requests a redemption and the redemption is approved by the board of directors, the Company will reclassify such obligation from equity to be received, observable market prices ora liability based on the estimated fairsettlement value of the collateral (for loans thatobligation. Shares repurchased under the SRP will have the status of authorized but unissued shares.
Offering and Related Costs
Since 2018, the Company has from time to time offered, and may in the future offer, shares of the Company’s common stock or one or more series of its preferred stock (“Preferred Stock”), including its Series A convertible preferred stock (“Series A Preferred Stock”), Series C convertible preferred stock (the “Series C Preferred Stock,”) and Series D convertible preferred stock (the “Series D Preferred Stock,” and together with the Series A Preferred Stock and Series C Preferred Stock, the “Preferred Stock”) in private placements exempt from the registration requirements of the Securities Act of 1933, as amended. In connection with these offerings, the Company incurs various offering costs. These offering costs include but are dependentnot limited to legal, accounting, printing, mailing and filing fees, and diligence expenses of broker-dealers. Offering costs for the common stock are recorded in the Company’s stockholders’ equity, while the offering costs for the Preferred Stock are included within Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, respectively, on the collateral for repayment) is lower than the carrying value of that loan.
Company’s consolidated balance sheets.
13
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Distribution Reinvestment Plan
Income Taxes
The Company designates non-performing loanshas conducted its operations to qualify as a REIT for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2013. As a REIT, if the Company meets certain organizational and operational requirements and distributes at such time as (i) loan payments become 90-days past due; (ii)least 90% of its "REIT taxable income" (determined before the loan hasdeduction of dividends paid and excluding net capital gains) to its stockholders in a maturity default; or (iii) inyear, it will not be subject to U.S. federal income tax to the opinionextent of the Company,income that it is probabledistributes. However, even if the Company willqualifies for taxation as a REIT, it may be unablesubject to collectcertain state and local taxes on income in addition to U.S. federal income and excise taxes on its undistributed income. The Company, through its TRS, is indirectly subject to U.S. federal, state and local income taxes. The Company’s TRS is not consolidated for U.S. federal income tax purposes, but is instead taxed as a C corporation. For financial reporting purposes, the TRS is consolidated and a provision for current and deferred taxes is established for the portion of earnings recognized by the Company with respect to its interest in its TRS. Total income tax provision/(benefit) for the three months ended March 31, 2021 and March 31, 2020 was $2.0 million and $(1.9) million, respectively.
The Company uses a more-likely-than-not threshold for recognition and derecognition of tax positions taken or to be taken in a tax return. The Company has assessed its tax positions for all open tax years beginning with December 31, 2017 and concluded that there were no uncertainties to be recognized. The Company’s accounting policy with respect to interest and penalties related to tax uncertainties is to classify these amounts due accordingas provision for income taxes.
The Company utilizes the TRS to reduce the contractual termsimpact of the loan. Income recognition will be suspended whenprohibited transaction tax and to avoid penalty for the holding of assets not qualifying as real estate assets for purposes of the REIT asset tests. Any income associated with a loanTRS is designated non-performingfully taxable because the TRS is subject to federal and resumed only when the suspended loan becomes contractually current and performance is demonstrated to have resumed. A loan will be written off when it is no longer realizable and legally discharged.state income taxes as a domestic C corporation based upon its net income.
Derivatives and Hedging Activities
In the normal course of business, the Company is exposed to the effect of interest rate changes and may undertake a strategy to limit these risks through the use of derivatives. The Company uses derivatives primarily to economically hedge against interest rates, CMBS spreads and macro market risk in order to minimize volatility. The Company may use a variety of derivative instruments that are considered conventional, such asincluding but not limited to: Treasury note futures and credit derivatives on various indices including CMBX and CDX.
The Company recognizes all derivatives on the consolidated balance sheets at fair value. The Company does not designate derivatives as hedges to qualify for hedge accounting for financial reporting purposes and therefore any net payments under, or fluctuations in the fair value of these derivatives have been recognized currently in gain/(loss)unrealized (gain)/loss on derivative instruments in the accompanying consolidated statements of operations. The Company records derivative asset and liability positions on a gross basis with any collateral posted with or received from counterparties recorded separately within Restricted cash on the Company’s consolidated balance sheets. Certain derivatives that the Company has entered into are subject to master netting agreements with its counterparties, allowing for netting of the same transaction, in the same currency, on the same date.
Per Share Data
The Company’s Preferred Stock is considered a participating security and the Company calculates basic earnings per share using the two-class method. The Company’s dilutive earnings per share calculation is computed using the more dilutive result of the treasury stock method, assuming the participating security is a potential common share, or the two-class method, assuming the participating security is not converted. The Company calculates basic earnings per share by dividing net income attributableapplicable to the Companycommon stock for the period by the weighted-average number of shares of common stock outstanding for that period. Diluted earnings per share reflects the potential dilution that could occur from shares issuableoutstanding if potential shares of common stock with a dilutive effect have been issued in connection with the restricted stock plan and if convertibleor upon conversion of the outstanding shares were exercised,of the Company’s Preferred Stock, except when doing so would be anti-dilutive.
14
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Reportable Segments
The Company has determined that it has three4 reportable segments based on how the chief operating decision maker reviews and manages the business. The three4 reporting segments are as follows:
•The real estate debt business which is focused on originating, acquiring and asset managing commercial real estate debt investments, including first mortgage loans, subordinate mortgages, mezzanine loans and participations in such loans.
•The real estate securities business which is focused on investing in and asset managing commercial real estate securities primarily consisting of CMBS and may include unsecured REIT debt, CDO notes and other securities.
•The commercial conduit operated business throughin the Company's TRS, which is focused on originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market at a profit.market.
•The real estate owned business represents real estate acquired by the Company through foreclosure, deed in lieu of foreclosure, or purchase.
See Note 1315 - Segment Reporting for further information regarding the Company's segments.
The Company’s outstanding Preferred Stock is classified outside of permanent equity in the consolidated balance sheets. Subject to certain conditions, the outstanding Preferred Stock is redeemable at the option of the holders of the Preferred Stock, outside of the control of the Company.
Series A Preferred Stock
The Series A Preferred Stock ranks senior to the Company’s common stock, par value $0.01 per share (“Common Stock”), and on parity with all other outstanding classes of preferred stock of the Company (including the Series C and Series D Preferred Stock) with respect to priority in dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of the Company. The liquidation preference of each share of Series A Preferred Stock is the greater of (i) $5,000 plus accrued and unpaid dividends, and (ii) the amount that would be received upon a conversion of the Series A Preferred Stock into Common Stock.
Dividends are on the Series A Preferred Stock, which are typically declared and paid quarterly, accrue at a rate equal to the greater of (i) an annual amount equal to 4.0% of the liquidation preference per share (subject to a 1.0% increase in the event of the ratings for the Series A Preferred Stock decreases below a certain threshold) and (ii) the dividends that would have been paid had such share of Series A Preferred Stock been converted into a share of Common Stock on the first day of such quarter, subject to proration in the event the share of Series A Preferred Stock is not outstanding for the full quarter. Dividends are paid in arrears. Dividends will accumulate and be cumulative from the most recent date to which dividends had been paid.
Immediately prior to a “Liquidity Event,” each outstanding share of Series A Preferred Stock shall convert into 299.2 shares of Common Stock, subject to anti-dilution adjustments described in the Articles Supplementary (the “Conversion Rate”). A “Liquidity Event” is defined as (i) the listing of the Common Stock on a national securities exchange or quotation on an electronic inter-dealer quotation system; (ii) a merger or business combination involving the Company pursuant to which outstanding shares Common Stock are exchanged for securities of another company which are listed on a national securities exchange or quoted on an electronic inter-dealer quotation system; or (iii) any other transaction or series of transaction that results in all shares of Common Stock being transferred or exchange for cash or securities which are listed on a national securities exchange or quoted on an electronic inter-dealer quotation system.
If there has not been a Liquidity Event by June 25, 2024 (six years from the initial issuance of the Series A Preferred Stock), each holder of Series A Preferred Stock shall have the right to require the Company to redeem its Series A Preferred Stock for cash at the liquidation preference, or such holder may convert all, but not less than all, of the Series A Preferred Stock held by such holder into Common Stock at the Conversion Rate.
In March 2016, the Financial Accounting Standards Board ("FASB"event of the sale of all or substantially all of the business or assets of the Company (by sale, merger, consolidation or otherwise) or the acquisition by any person of more than 50% of the total economic interests or voting power of all securities of the Company (a “Company Change of Control”) issued guidance which requires an entity, other than a Liquidity Event, each holder of Series A Preferred Stock will have the right, prior to determine whetherconsummation of such transaction, to convert its Series A Preferred Stock into Common Stock at the natureConversion Rate. In addition, in the event of its promisea change of control of the Advisor (as defined in the Articles Supplementary) or a Company Change of Control that is not a Liquidity Event and that is related to provide goods or servicesthe removal of the Advisor, both the Company and the holder shall have the right, prior to a customer is performed in a principal or agent capacity andconsummation of the transaction, to recognize revenue in a gross or net manner based on its principal/agent designation. This guidance is effectiverequire the redemption of the Series A Preferred Stock for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance.
liquidation preference.
15
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Holders of the Series A Preferred Stock (voting as a single class with holders of Common Stock and other classes of voting Preferred Stock) are entitled to vote on each matter submitted to a vote of the stockholders of the Company upon which the holders of Common Stock are entitled to vote. The number of votes applicable to a share of outstanding Series A Preferred Stock will be equal to the number of shares of Common Stock a share of Series A Preferred Stock could have been converted into as of the record date set for purposes of such stockholder vote (rounded down to the nearest whole number of shares of Common Stock). In addition, the affirmative vote of the holders of two-thirds of the outstanding shares of Series A Preferred Stock is required to approve the issuance of any equity securities senior to the Series A Preferred Stock and to take certain actions materially adverse to the holders of the Series A Preferred Stock.
Series C Preferred Stock
The Series C Preferred Stock is on parity with the Series A Preferred Stock with respect to preference on liquidation and dividend rights. Except as set forth below, the terms of the Series C Preferred Stock are substantially the same as the terms of the Series A Preferred Stock:
•The Series C Preferred Stock is not rated and its dividend rate is not impacted by changes in ratings.
•The are no anti-dilution adjustments to the Conversion Price based on share issuances at below GAAP book value.
•The Series C Preferred Stock will not immediately convert upon a Liquidation Event; the mandatory conversion will occur on the one-year anniversary of the Liquidity Event. The Company has the option to accelerate the mandatory conversion date to a date no earlier than six months after the Liquidity Event upon 10 days’ notice to the holders.
•A Company Change of Control that is also a Liquidity Event will trigger the Change of Control redemption right.
•The optional conversion and redemption provisions are effective on and after on October 18, 2025 (rather than June 25, 2024).
•With respect to voting rights on issuance of any equity securities senior to the Series C Preferred Stock and certain other actions materially adverse to the holders of the Series C Preferred Stock, the Series C Preferred Stock holders will vote as a single class with other parity Preferred Stock (except the Series A Preferred Stock).
Series D Preferred Stock
The Series D Preferred Stock is on parity with the Series A Preferred Stock and Series C Preferred Stock with respect to preference on liquidation and dividend rights. The terms of the Series D Preferred Stock are substantially the same as the terms of the Series A Preferred Stock, except that the Series D Preferred Stock will not immediately convert upon a Liquidation Event; the mandatory conversion will occur on the one-year anniversary of the Liquidity Event. The holders have the option to accelerate the mandatory conversion date to a date no earlier than six months after the Liquidity Event.
The complete terms of the Company’s Preferred Stock are set forth in the Articles Supplementary applicable to each class, which have been filed as exhibits to the Company’s periodic reports filed pursuant to the Securities Exchange Act of 1934, as amended.
Accounting Pronouncements Not Yet Adopted
On March 12, 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company has not adopted any of the optional expedients or exceptions through March 31, 2021, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.
16
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3 - Commercial Mortgage Loans
The following table is a summary of the Company's commercial mortgage loans, held-for-investment,held for investment, carrying values by class (in thousands):
| September 30, 2017 | December 31, 2016 | ||||||
| Senior loans | $ | 1,254,879 | $ | 901,907 | |||
| Mezzanine loans | 32,186 | 136,830 | |||||
| Subordinated loans | — | 10,000 | |||||
| Total gross carrying value of loans | 1,287,065 | 1,048,737 | |||||
| Less: Allowance for loan losses | 1,959 | 2,181 | |||||
| Total commercial mortgage loans, held for investment, net | $ | 1,285,106 | $ | 1,046,556 | |||
| March 31, 2021 | December 31, 2020 | ||||||||||
| Senior loans | $ | 3,009,785 | $ | 2,698,823 | |||||||
| Mezzanine loans | 18,913 | 15,911 | |||||||||
| Total gross carrying value of loans | 3,028,698 | 2,714,734 | |||||||||
Less: Allowance for credit losses (1) | 18,600 | 20,886 | |||||||||
| Total commercial mortgage loans, held for investment, net | $ | 3,010,098 | $ | 2,693,848 | |||||||
| Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | ||||||
| Beginning of period | $ | 2,181 | $ | 888 | |||
| Provision for loan losses | (222 | ) | 721 | ||||
| Charge-offs | — | — | |||||
| Recoveries | — | — | |||||
| Ending allowance for loan losses | $ | 1,959 | $ | 1,609 | |||
As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company's total commercial mortgage loan portfolio, excluding commercial mortgage loans accounted for under the fair value option, was comprised of 73146 and 71130 loans, respectively.
Allowance for Credit Losses
The following table presents the activity in the Company's allowance for credit losses, excluding the unfunded loan commitments, as of March 31, 2021 (dollars in thousands):
| Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MultiFamily | Retail | Office | Industrial | Mixed Use | Hospitality | Self-Storage | Manufactured Housing | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning Balance | $ | 3,095 | $ | 404 | $ | 1,575 | $ | 3,795 | $ | 132 | $ | 11,646 | $ | 117 | $ | 122 | $ | 20,886 | ||||||||||||||||||||||||||||||||||||||
| Current Period: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision/(benefit) for credit losses | 2,078 | (2) | (374) | (3,187) | 253 | (773) | 23 | (15) | (1,997) | |||||||||||||||||||||||||||||||||||||||||||||||
| Write offs | (289) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (289) | |||||||||||||||||||||||||||||||||||||||||||||||
| Ending Balance | $ | 4,884 | $ | 402 | $ | 1,201 | $ | 608 | $ | 385 | $ | 10,873 | $ | 140 | $ | 107 | $ | 18,600 | ||||||||||||||||||||||||||||||||||||||
The Company recorded a decrease in its provision for credit losses during the three months ended March 31, 2021 of $2.0 million. The primary driver for the improvement in the reserve balance is the positive economic outlook since the end of the prior year.
The following table presents the activity in the Company's allowance for credit losses, for the unfunded loan commitments, as of March 31, 2021 (dollars in thousands):
| Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MultiFamily | Retail | Office | Industrial | Mixed Use | Hospitality | Self-Storage | Manufactured Housing | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning Balance | $ | 85 | $ | 0 | $ | 47 | $ | 418 | $ | 14 | $ | 101 | $ | 0 | $ | 0 | $ | 665 | ||||||||||||||||||||||||||||||||||||||
| Current Period: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision/(benefit) for credit losses | 68 | 0 | (9) | (317) | (2) | (74) | 0 | 0 | (334) | |||||||||||||||||||||||||||||||||||||||||||||||
| Ending Balance | $ | 153 | $ | 0 | $ | 38 | $ | 101 | $ | 12 | $ | 27 | $ | 0 | $ | 0 | $ | 331 | ||||||||||||||||||||||||||||||||||||||
17
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables represent the composition by loan type and region of the Company's commercial mortgage loans, held for investment portfolio (dollars in thousands):
| March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||||
| Loan Type | Par Value | Percentage | Par Value | Percentage | ||||||||||||||||||||||
| Multifamily | $ | 1,515,787 | 49.9 | % | $ | 1,202,694 | 44.2 | % | ||||||||||||||||||
| Office | 547,100 | 18.0 | % | 517,464 | 19.0 | % | ||||||||||||||||||||
| Hospitality | 426,040 | 14.0 | % | 403,908 | 14.8 | % | ||||||||||||||||||||
| Industrial | 200,427 | 6.6 | % | 243,404 | 8.9 | % | ||||||||||||||||||||
| Mixed Use | 94,280 | 3.1 | % | 102,756 | 3.8 | % | ||||||||||||||||||||
| Self-Storage | 86,423 | 2.8 | % | 86,424 | 3.2 | % | ||||||||||||||||||||
| Retail | 78,550 | 2.6 | % | 78,550 | 2.9 | % | ||||||||||||||||||||
| Manufactured Housing | 72,539 | 2.5 | % | 71,263 | 2.6 | % | ||||||||||||||||||||
| Land | 16,400 | 0.5 | % | 16,400 | 0.6 | % | ||||||||||||||||||||
| Total | $ | 3,037,546 | 100.0 | % | $ | 2,722,863 | 100.0 | % | ||||||||||||||||||
| September 30, 2017 | December 31, 2016 | |||||||||||||
| Loan Type | Par Value | Percentage | Par Value | Percentage | ||||||||||
| Office | $ | 433,110 | 32.7 | % | $ | 340,944 | 31.6 | % | ||||||
| Multifamily | 441,431 | 33.4 | % | 329,203 | 30.6 | % | ||||||||
| Hospitality | 126,673 | 9.6 | % | 143,582 | 13.3 | % | ||||||||
| Retail | 223,315 | 16.9 | % | 154,684 | 14.4 | % | ||||||||
| Mixed Use | 45,235 | 3.4 | % | 56,136 | 5.2 | % | ||||||||
| Industrial | 53,208 | 4.0 | % | 52,688 | 4.9 | % | ||||||||
Total (1) | $ | 1,322,972 | 100.0 | % | $ | 1,077,237 | 100.0 | % | ||||||
| (1) Excludes $60.95 million in commercial mortgage loans held-for-sale, measured at fair value in the Company's TRS segment | ||||||||||||||
| March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||||
| Loan Region | Par Value | Percentage | Par Value | Percentage | ||||||||||||||||||||||
| Southwest | $ | 810,556 | 26.7 | % | $ | 515,392 | 18.9 | % | ||||||||||||||||||
| Southeast | 811,205 | 26.7 | % | 796,908 | 29.3 | % | ||||||||||||||||||||
| Mideast | 484,199 | 15.9 | % | 473,514 | 17.4 | % | ||||||||||||||||||||
| Far West | 422,785 | 13.9 | % | 415,173 | 15.2 | % | ||||||||||||||||||||
| Great Lakes | 186,423 | 6.1 | % | 199,203 | 7.3 | % | ||||||||||||||||||||
| Various | 104,200 | 3.4 | % | 136,855 | 5.0 | % | ||||||||||||||||||||
| Plains | 100,261 | 3.3 | % | 116,143 | 4.3 | % | ||||||||||||||||||||
| New England | 69,166 | 2.4 | % | 69,675 | 2.6 | % | ||||||||||||||||||||
| Rocky Mountain | 48,751 | 1.6 | % | 0 | 0 | % | ||||||||||||||||||||
| Total | $ | 3,037,546 | 100.0 | % | $ | 2,722,863 | 100.0 | % | ||||||||||||||||||
As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company's total commercial mortgage loans, held for sale, measured at fair value were comprised of 410 and 03 loans, respectively. As of March 31, 2021 and December 31, 2020, the contractual principal outstanding of commercial mortgage loans, held for sale, measured at fair value was $92.6 million and $67.6 million, respectively. As of March 31, 2021 and December 31, 2020, none of the Company's commercial mortgage loans, held for sale, measured at fair value were in default or greater than ninety days past due.
18
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
| September 30, 2017 | December 31, 2016 | |||||||||||||
| Loan Type | Par Value | Percentage | Par Value | Percentage | ||||||||||
| Industrial | $ | 11,600 | 19.1 | % | $ | — | — | % | ||||||
| Mixed Use | 14,150 | 23.2 | % | — | — | % | ||||||||
| Multifamily | 7,200 | 11.8 | % | — | — | % | ||||||||
| Retail | 28,000 | 45.9 | % | — | — | % | ||||||||
| Total | $ | 60,950 | 100.0 | % | $ | — | — | % | ||||||
| March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||||
| Loan Type | Par Value | Percentage | Par Value | Percentage | ||||||||||||||||||||||
| Office | $ | 30,500 | 32.9 | % | $ | 0 | 0 | % | ||||||||||||||||||
| Mixed Use | 18,598 | 20.1 | % | 0 | 0 | % | ||||||||||||||||||||
| Multifamily | 18,100 | 19.5 | % | 100 | 0.1 | % | ||||||||||||||||||||
| Retail | 13,970 | 15.1 | % | 0 | 0 | % | ||||||||||||||||||||
| Industrial | 9,024 | 9.7 | % | 67,550 | 99.9 | % | ||||||||||||||||||||
| Manufactured Housing | 2,446 | 2.7 | % | 0 | 0 | % | ||||||||||||||||||||
| Hospitality | 0 | 0 | % | 0 | 0 | % | ||||||||||||||||||||
| Total | $ | 92,638 | 100.0 | % | $ | 67,650 | 100.0 | % | ||||||||||||||||||
| March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||||
| Loan Region | Par Value | Percentage | Par Value | Percentage | ||||||||||||||||||||||
| Southeast | $ | 39,256 | 42.4 | % | $ | 0 | 0 | % | ||||||||||||||||||
| Far West | 18,000 | 19.4 | % | 58,500 | 86.5 | % | ||||||||||||||||||||
| Mideast | 15,973 | 17.2 | % | 0 | 0 | % | ||||||||||||||||||||
| Great Lakes | 11,749 | 12.7 | % | 9,150 | 13.5 | % | ||||||||||||||||||||
| Various | 7,660 | 8.3 | % | 0 | 0 | % | ||||||||||||||||||||
| Total | $ | 92,638 | 100.0 | % | $ | 67,650 | 100.0 | % | ||||||||||||||||||
Loan Credit Quality and Vintage
The following tables present the amortized cost of our commercial mortgage loans, held for investment as of March 31, 2021 and March 31, 2020, by loan type, the Company’s internal risk rating and year of origination. The risk ratings are updated as of March 31, 2021.
| As of March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Total | |||||||||||||||||||||||||||||||||||||||||||
| Multifamily: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 420,073 | $ | 585,941 | $ | 291,648 | $ | 174,105 | $ | 0 | $ | 0 | $ | 3,488 | $ | 1,475,255 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 0 | 0 | 36,115 | 0 | 0 | 0 | 36,115 | ||||||||||||||||||||||||||||||||||||||||||
| Total Multifamily Loans | $ | 420,073 | $ | 585,941 | $ | 291,648 | $ | 210,220 | $ | 0 | $ | 0 | $ | 3,488 | $ | 1,511,370 | ||||||||||||||||||||||||||||||||||
| Retail: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 0 | $ | 13,299 | $ | 22,751 | $ | 16,400 | $ | 0 | $ | 0 | $ | 0 | $ | 52,450 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 0 | 12,876 | 29,432 | 0 | 0 | 0 | 42,308 | ||||||||||||||||||||||||||||||||||||||||||
| Total Retail Loans | $ | 0 | $ | 13,299 | $ | 35,627 | $ | 45,832 | $ | 0 | $ | 0 | $ | 0 | $ | 94,758 | ||||||||||||||||||||||||||||||||||
| Office: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 48,466 | $ | 248,628 | $ | 160,784 | $ | 60,375 | $ | 26,724 | $ | 0 | $ | 0 | $ | 544,977 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||
| Total Office Loans | $ | 48,466 | $ | 248,628 | $ | 160,784 | $ | 60,375 | $ | 26,724 | $ | 0 | $ | 0 | $ | 544,977 | ||||||||||||||||||||||||||||||||||
19
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
| Industrial: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 0 | $ | 123,139 | $ | 76,490 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 199,629 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||
| Total Industrial Loans | $ | 0 | $ | 123,139 | $ | 76,490 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 199,629 | ||||||||||||||||||||||||||||||||||
| Mixed Use: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 0 | $ | 30,265 | $ | 0 | $ | 63,815 | $ | 0 | $ | 0 | $ | 0 | $ | 94,080 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||
| Total Mixed Use Loans | $ | 0 | $ | 30,265 | $ | 0 | $ | 63,815 | $ | 0 | $ | 0 | $ | 0 | $ | 94,080 | ||||||||||||||||||||||||||||||||||
| Hospitality: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 22,887 | $ | 26,889 | $ | 10,552 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 60,328 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 0 | 160,965 | 113,423 | 90,655 | 0 | 0 | 365,043 | ||||||||||||||||||||||||||||||||||||||||||
| Total Hospitality Loans | $ | 22,887 | $ | 26,889 | $ | 171,517 | $ | 113,423 | $ | 90,655 | $ | 0 | $ | 0 | $ | 425,371 | ||||||||||||||||||||||||||||||||||
| Self-Storage: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 0 | $ | 41,324 | $ | 0 | $ | 44,921 | $ | 0 | $ | 0 | $ | 0 | $ | 86,245 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||
| Total Self-Storage Loans | $ | 0 | $ | 41,324 | $ | 0 | $ | 44,921 | $ | 0 | $ | 0 | $ | 0 | $ | 86,245 | ||||||||||||||||||||||||||||||||||
| Manufactured Housing: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 0 | $ | 25,915 | $ | 46,353 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 72,268 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||
| Total Manufactured Housing Loans | $ | 0 | $ | 25,915 | $ | 46,353 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 72,268 | ||||||||||||||||||||||||||||||||||
| Total | $ | 491,426 | $ | 1,095,400 | $ | 782,419 | $ | 538,586 | $ | 117,379 | $ | 0 | $ | 3,488 | $ | 3,028,698 | ||||||||||||||||||||||||||||||||||
| As of March 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | Prior | Total | |||||||||||||||||||||||||||||||||||||||||||
| Multifamily: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 177,191 | $ | 456,036 | $ | 617,533 | $ | 34,875 | $ | 0 | $ | 0 | $ | 3,489 | $ | 1,289,124 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 0 | 65,805 | 37,812 | 0 | 0 | 0 | 103,617 | ||||||||||||||||||||||||||||||||||||||||||
| Total Multifamily Loans | $ | 177,191 | $ | 456,036 | $ | 683,338 | $ | 72,687 | $ | 0 | $ | 0 | $ | 3,489 | $ | 1,392,741 | ||||||||||||||||||||||||||||||||||
| Retail: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 0 | $ | 54,618 | $ | 16,319 | $ | 0 | $ | 0 | $ | 0 | $ | 9,450 | $ | 80,387 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 3,501 | 43,907 | 0 | 0 | 0 | 0 | 47,408 | ||||||||||||||||||||||||||||||||||||||||||
| Total Retail Loans | $ | 0 | $ | 58,119 | $ | 60,226 | $ | 0 | $ | 0 | $ | 0 | $ | 9,450 | $ | 127,795 | ||||||||||||||||||||||||||||||||||
20
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
| Office: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 49,163 | $ | 173,988 | $ | 97,936 | $ | 41,645 | $ | 0 | $ | 10,700 | $ | 0 | $ | 373,432 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 0 | 45,259 | 10,506 | 0 | 0 | 0 | 55,765 | ||||||||||||||||||||||||||||||||||||||||||
| Total Office Loans | $ | 49,163 | $ | 173,988 | $ | 143,195 | $ | 52,151 | $ | 0 | $ | 10,700 | $ | 0 | $ | 429,197 | ||||||||||||||||||||||||||||||||||
| Industrial: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 25,241 | $ | 84,576 | $ | 0 | $ | 0 | $ | 0 | $ | 33,655 | $ | 0 | $ | 143,472 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||
| Total Industrial Loans | $ | 25,241 | $ | 84,576 | $ | 0 | $ | 0 | $ | 0 | $ | 33,655 | $ | 0 | $ | 143,472 | ||||||||||||||||||||||||||||||||||
| Mixed Use: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 0 | $ | 0 | $ | 52,097 | $ | 12,953 | $ | 0 | $ | 0 | $ | 0 | $ | 65,050 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||
| Total Mixed Use Loans | $ | 0 | $ | 0 | $ | 52,097 | $ | 12,953 | $ | 0 | $ | 0 | $ | 0 | $ | 65,050 | ||||||||||||||||||||||||||||||||||
| Hospitality: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 0 | $ | 8,735 | $ | 20,962 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 29,697 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 161,948 | 114,190 | 90,940 | 0 | 0 | 0 | 367,078 | ||||||||||||||||||||||||||||||||||||||||||
| Total Hospitality Loans | $ | 0 | $ | 170,683 | $ | 135,152 | $ | 90,940 | $ | 0 | $ | 0 | $ | 0 | $ | 396,775 | ||||||||||||||||||||||||||||||||||
| Self-Storage: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 0 | $ | 0 | $ | 62,937 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 62,937 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||
| Total Self-Storage Loans | $ | 0 | $ | 0 | $ | 62,937 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 62,937 | ||||||||||||||||||||||||||||||||||
| Manufactured Housing: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-2 internal grade | $ | 0 | $ | 44,714 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 44,714 | ||||||||||||||||||||||||||||||||||
| 3-4 internal grade | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||
| Total Manufactured Housing Loans | $ | 0 | $ | 44,714 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 44,714 | ||||||||||||||||||||||||||||||||||
| Total | $ | 251,595 | $ | 988,116 | $ | 1,136,945 | $ | 228,731 | $ | 0 | $ | 44,355 | $ | 12,939 | $ | 2,662,681 | ||||||||||||||||||||||||||||||||||
21
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Past Due Status
The following table presents an aging summary of the loans amortized cost basis at March 31, 2021 (dollars in thousands):
| Multifamily | Retail | Office | Industrial | Mixed Use | Hospitality | Self-Storage | Manufactured Housing | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| Status: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | $ | 1,511,370 | $ | 94,758 | $ | 544,977 | $ | 199,629 | $ | 94,080 | $ | 368,296 | $ | 86,245 | $ | 72,268 | $ | 2,971,623 | ||||||||||||||||||||||||||||||||||||||
| 1-29 days past due | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days past due | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days past due | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||
| 90-119 days past due | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||
120+ days past due (1) | 0 | 0 | 0 | 0 | 0 | 57,075 | 0 | 0 | 57,075 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 1,511,370 | $ | 94,758 | $ | 544,977 | $ | 199,629 | $ | 94,080 | $ | 425,371 | $ | 86,245 | $ | 72,268 | $ | 3,028,698 | ||||||||||||||||||||||||||||||||||||||
(1) For the three months ended March 31, 2021, there was no interest income recognized on this loan.
As of March 31, 2021 and December 31, 2020, the Company had 1 loan with a total cost basis of $57.1 million and 2 loans with a total cost basis of $94.9 million, respectively, on non-accrual status for which there was no related allowance for credit losses.
Credit Characteristics
As part of the Company's process for monitoring the credit quality of its commercial mortgage loans, excluding those held-for-sale,held for sale, measured at fair value, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its loans. The loans are ratedscored on a 5-point scale of 1 to 5 as follows:
| Investment Rating | Summary Description | |||||||
| 1 | Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable. | |||||||
| 2 | Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable. | |||||||
| 3 | Performing investments requiring closer monitoring. Trends and risk factors show some deterioration. | |||||||
| 4 | Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative. | |||||||
| 5 | Underperforming investment with expected loss of interest and some principal. | |||||||
All commercial mortgage loans, excluding loans classified as commercial mortgage loans, held-for-sale,held for sale, measured at fair value within the consolidated balance sheets, are assigned an initial risk rating of 2.0. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the weighted average risk rating of the loans was 2.2 and 2.1, respectively. As of September 30, 2017 and December2.2.
The following table represents the allocation by risk rating for the Company's commercial mortgage loans, held for investment (dollars in thousands):
| March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||
| Risk Rating | Number of Loans | Par Value | Risk Rating | Number of Loans | Par Value | |||||||||||||||||||||||||||
| 1 | 0 | $ | 0 | 1 | 0 | $ | 0 | |||||||||||||||||||||||||
| 2 | 122 | 2,593,571 | 2 | 104 | 2,232,045 | |||||||||||||||||||||||||||
| 3 | 22 | 383,400 | 3 | 22 | 384,040 | |||||||||||||||||||||||||||
| 4 | 2 | 60,575 | 4 | 4 | 106,778 | |||||||||||||||||||||||||||
| 5 | 0 | 0 | 5 | 0 | 0 | |||||||||||||||||||||||||||
| 146 | $ | 3,037,546 | 130 | $ | 2,722,863 | |||||||||||||||||||||||||||
22
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2016, the Company did not have any loans that were past due on their payments, in non-accrual status or impaired.2021
(Unaudited)
For the ninethree months ended September 30, 2017March 31, 2021 and September 30, 2016,year ended December 31, 2020, the activity in the Company's commercial mortgage loans, held-for-investmentheld for investment portfolio was as follows (in(dollars in thousands):
| Three Months Ended March 31, | Year Ended December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| Balance at Beginning of Year | $ | 2,693,848 | $ | 2,762,042 | |||||||
| Cumulative-effect adjustment upon adoption of ASU 2016-13 | — | (7,211) | |||||||||
| Acquisitions and originations | 522,735 | 1,287,720 | |||||||||
| Principal repayments | (170,529) | (1,223,490) | |||||||||
| Discount accretion/premium amortization | 1,167 | 6,146 | |||||||||
| Loans transferred from/(to) commercial real estate loans, held for sale | 0 | (76,979) | |||||||||
| Net fees capitalized into carrying value of loans | (1,886) | (6,562) | |||||||||
| (Provision)/benefit for credit losses | 1,997 | (13,181) | |||||||||
| Charge-off from allowance | 289 | 427 | |||||||||
| Transfer to real estate owned | (37,523) | (35,064) | |||||||||
| Balance at End of Period | $ | 3,010,098 | $ | 2,693,848 | |||||||
| Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | ||||||
| Balance at Beginning of Year | $ | 1,046,556 | $ | 1,124,201 | |||
| Acquisitions and originations | 566,490 | 42,236 | |||||
| Dispositions | (68,514 | ) | — | ||||
| Principal repayments | (228,814 | ) | (48,127 | ) | |||
| Discount accretion and premium amortization* | 1,604 | 1,704 | |||||
| Loans transferred to commercial real estate loans, held-for-sale, at fair value | (31,207 | ) | — | ||||
| Fees capitalized into carrying value of loans | (1,231 | ) | — | ||||
| Provision for loan losses | 222 | (721 | ) | ||||
| Balance at End of Period | $ | 1,285,106 | $ | 1,119,293 | |||
Note 4 - Real Estate Securities
The following is a summary of the Company's real estate securities, CMBS (in(dollars in thousands):
| March 31, 2021 | ||||||||||||||||||||||||||
| Type | Interest Rate | Maturity | Par Value | Fair Value | ||||||||||||||||||||||
| CMBS 1 | 2.4% | 2/15/2036 | $19,000 | $18,865 | ||||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||||||||
| Type | Interest Rate | Maturity | Par Value | Fair Value | ||||||||||||||||||||||
| CMBS 1 | 3.0% | 5/15/2022 | $13,250 | $12,657 | ||||||||||||||||||||||
| CMBS 2 | 2.2% | 6/26/2025 | 10,800 | 10,335 | ||||||||||||||||||||||
| CMBS 3 | 2.5% | 2/15/2036 | 40,000 | 38,292 | ||||||||||||||||||||||
| CMBS 4 | 1.9% | 6/15/2037 | 8,000 | 7,892 | ||||||||||||||||||||||
| CMBS 5 | 2.1% | 9/15/2037 | 24,000 | 23,297 | ||||||||||||||||||||||
| CMBS 6 | 2.3% | 6/15/2034 | 12,000 | 11,580 | ||||||||||||||||||||||
| CMBS 7 | 1.5% | 12/15/2036 | 20,000 | 18,975 | ||||||||||||||||||||||
| CMBS 8 | 1.8% | 12/15/2036 | 25,000 | 23,268 | ||||||||||||||||||||||
| CMBS 9 | 2.3% | 3/15/2035 | 25,665 | 24,840 | ||||||||||||||||||||||
23
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
| Weighted Average | ||||||||||||||||
| Number of Investments | Interest Rate | Maturity | Par Value | Fair Value | ||||||||||||
| September 30, 2017 | — | — | % | n/a | $ | — | $ | — | ||||||||
| December 31, 2016 | 6 | 5.8 | % | February 2020 | 50,000 | 49,049 | ||||||||||
The Company classified its CMBS investments as available-for-saleavailable for sale as of September 30, 2017March 31, 2021 and December 31, 2016.2020. These investments are reported at fair value in the consolidated balance sheets with changes in fair value recorded in "accumulatedaccumulated other comprehensive income or loss"income/(loss). The weighted average contractual maturity for CLO investments included within the CMBS portfolio as of March 31, 2021 and December 31, 2020 was 15 and 14 years. The weighted average contractual maturity for single asset single borrower "SASB" investments as of March 31, 2021 and December 31, 2020 was none and 14 years.
The following table shows the amortized cost, allowance for expected credit losses, unrealized gains/lossesgain/(loss) and fair value of the Company's CMBS investments as of September 30, 2017 and December 31, 2016 (inby investment type (dollars in thousands):
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
| September 30, 2017 | $ | — | $ | — | $ | — | $ | — | ||||||||
| December 31, 2016 | 49,548 | — | (499 | ) | 49,049 | |||||||||||
| Amortized Cost | Credit Loss Allowance | Unrealized Gain | Unrealized Loss | Fair Value | ||||||||||||||||||||||||||||
| March 31, 2021 | ||||||||||||||||||||||||||||||||
| CLOs | $ | 19,079 | $ | 0 | $ | 0 | $ | (214) | $ | 18,865 | ||||||||||||||||||||||
| SASB | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Total | $ | 19,079 | $ | 0 | $ | 0 | $ | (214) | $ | 18,865 | ||||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||||||||||||||
| CLOs | $ | 123,444 | $ | 0 | $ | 0 | $ | (4,888) | $ | 118,556 | ||||||||||||||||||||||
| SASB | 55,948 | 0 | 0 | (3,368) | 52,580 | |||||||||||||||||||||||||||
| Total | $ | 179,392 | $ | 0 | $ | 0 | $ | (8,256) | $ | 171,136 | ||||||||||||||||||||||
As of September 30, 2017,March 31, 2021 the Company held no1 CMBS positions. As of December 31, 2016, the Company held 6 CMBS positionsposition with an aggregate carrying valueamortized cost basis of $49.5$19.1 million and an unrealized loss of $0.5$0.2 million, of which 2 positions had a total unrealized loss of $0.2 millionwas for a period greater than 12twelve months. As of December 31, 2020, the Company held 9 CMBS positions with an amortized cost basis of $179.4 million and an unrealized loss of $8.3 million, of which 7 positions had an unrealized loss for a period greater than twelve months.
The following table provides information on the unrealized losses and fair value on the Company's real estate securities, CMBS, available for sale that were in an unrealized loss position, and for which an allowance for credit losses has not been recorded as of March 31, 2021 and December 31, 2020 (amounts in thousands):
| Fair Value | Unrealized Loss | ||||||||||||||||||||||||||||
| Securities with an unrealized loss less than 12 months | Securities with an unrealized loss greater than 12 months | Securities with an unrealized loss less than 12 months | Securities with an unrealized loss greater than 12 months | ||||||||||||||||||||||||||
| March 31, 2021 | |||||||||||||||||||||||||||||
| CLOs | $ | 0 | $ | 18,865 | $ | 0 | $ | (214) | |||||||||||||||||||||
| SASB | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| Total | $ | 0 | $ | 18,865 | $ | 0 | $ | (214) | |||||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||||||||
| CLOs | $ | 63,131 | $ | 55,425 | $ | (2,824) | $ | (2,065) | |||||||||||||||||||||
| SASB | 0 | 52,580 | 0 | (3,367) | |||||||||||||||||||||||||
| Total | $ | 63,131 | $ | 108,005 | $ | (2,824) | $ | (5,432) | |||||||||||||||||||||
As of March 31, 2021 and December 31, 2020, there were 1 and 7 securities, respectively with unrealized losses for a period greater than twelve months reflected in the table above. After evaluating the securities, the Company has recognizedconcluded that the unrealized losses reflected above were noncredit-related and would be recovered from the securities’ estimated future cash flows. The Company considered a gainnumber of $0.2 millionfactors in reaching this conclusion, including that the Company did not intend to sell the securities, it was not considered more likely than not that we would be forced to sell the securities prior to recovering our amortized cost, the portfolio is made up of investment grade securities of recent originations and higher tranches, and that there were no material credit events that would have caused us to otherwise conclude that the Company would not recover our cost. The allowance for credit losses is calculated using a discounted cash flow approach and is measured as the nine months ended September 30, 2017 and recognizeddifference between the original cash flows expected to be collected to the revised cash flows expected to be collected discounted using the effective interest rate, limited by the amount that the fair value is less than the amortized cost basis. Significant judgment is used in projecting cash flows. As a result, actual income and/or credit losses could be materially different from what is currently projected and/or reported.
24
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The following table provides information on the amounts of gain/(loss) on the Company's real estate securities, CMBS, available for sale (dollars in thousands):
| Three Months Ended March 31, | ||||||||||||||
| 2021 | 2020 | |||||||||||||
| Unrealized gain/(loss) on available for sale securities | $ | 1,665 | $ | (67,607) | ||||||||||
| Reclassification of net (gain)/loss on available for sale securities included in net income/(loss) | 6,377 | 0 | ||||||||||||
| Unrealized gain/(loss) on available for sale securities, net of reclassification adjustment | $ | 8,042 | $ | (67,607) | ||||||||||
The amounts reclassified for net (gain)/loss of approximately $1 millionon available for the three and nine months ended September 30, 2016, recorded withinsale securities are included in the realized (gain)/loss on sale of real estate securities in the Company's consolidated statements of operations. The Company's unrealized gain/(loss) on available for sale securities is net of tax. Due to the Company's designation as a REIT, there was no tax impact on unrealized gain/(loss) on available for sale securities.
Note 5 - Real Estate Owned
The following table summarizes the Company's real estate owned assets as of March 31, 2021 (dollars in thousands):
| Acquisition Date | Property Type | Primary Location(s) | Land | Building and Improvements | Furniture, Fixtures and Equipment | Accumulated Depreciation | Real Estate Owned, net | |||||||||||||||||||||||||||||||||||||
October 2019 (1) | Office | Jeffersonville, IN | $ | 1,887 | $ | 21,989 | $ | 3,565 | $ | (1,131) | $ | 26,310 | ||||||||||||||||||||||||||||||||
January 2021 (2) | Multifamily | Kansas City, MO | 4,300 | 28,697 | 4,526 | — | 37,523 | |||||||||||||||||||||||||||||||||||||
| $ | 6,187 | $ | 50,686 | $ | 8,091 | $ | (1,131) | $ | 63,833 | |||||||||||||||||||||||||||||||||||
(1) Refer to Note 2 for the useful life of the above assets.
(2) Represents assets acquired by the Company did not have any realized gains or losses duringby completing a foreclosure transaction and is designated as held for sale within the Company's consolidated balance sheets.
The following table summarizes the Company's real estate owned assets as of December 31, 2020 (dollars in thousands):
| Acquisition Date | Property Type | Primary Location(s) | Land | Building and Improvements | Furniture, Fixtures and Equipment | Accumulated Depreciation | Real Estate Owned, net | |||||||||||||||||||||||||||||||||||||
October 2019 (1) | Office | Jeffersonville, IN | $ | 1,887 | $ | 21,989 | $ | 3,565 | $ | (931) | $ | 26,510 | ||||||||||||||||||||||||||||||||
| $ | 1,887 | $ | 21,989 | $ | 3,565 | $ | (931) | $ | 26,510 | |||||||||||||||||||||||||||||||||||
(1) Refer to Note 2 for the useful life of the above assets.
Depreciation expense for the three months ended September 30, 2017.March 31, 2021 and 2020 totaled $0.2 million and $0.3 million, respectively.
Long-Lived Asset Classified as Held for Sale
owned business segment as held for sale. The property is located in Kansas City, MO and is currently being marketed and sale is probable to occur within one year.
25
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Note 6 - Leases
Intangible Lease Asset
The following table summarizes the Company's intangible lease asset recognized in the consolidated balance sheets as of March 31, 2021 (dollars in thousands):
| Acquisition Date | Property Type | Primary Location(s) | Intangible Lease Asset, Gross | Accumulated Amortization | Intangible Lease Asset, Net of Amortization | |||||||||||||||||||||||||||
| October 2019 | Office | Jeffersonville, IN | $ | 14,509 | $ | (1,169) | $ | 13,340 | ||||||||||||||||||||||||
| $ | 14,509 | $ | (1,169) | $ | 13,340 | |||||||||||||||||||||||||||
The following table summarizes the Company's intangible lease asset recognized in the consolidated balance sheets as of December 31, 2020 (dollars in thousands):
| Acquisition Date | Property Type | Primary Location(s) | Intangible Lease Asset, Gross | Accumulated Amortization | Intangible Lease Asset, Net of Amortization | |||||||||||||||||||||||||||
| October 2019 | Office | Jeffersonville, IN | $ | 14,509 | $ | (963) | $ | 13,546 | ||||||||||||||||||||||||
| $ | 14,509 | $ | (963) | $ | 13,546 | |||||||||||||||||||||||||||
Rental Income
On October 15, 2019, the Company purchased an office building that was subject to an existing triple net lease. The minimum rental amount due under the lease is subject to annual increases of 1.5%. The initial term of the lease expires in 2037 and contains renewal options for four consecutive five-year terms. The remaining lease term is 16.1 years. Rental income for this operating lease for each of the three months ended March 31, 2021 and March 31, 2020 totaled $0.7 million and is included in Revenue from real estate owned in the consolidated statements of operations.
The following table summarizes the Company's schedule of future minimum rents to be received under the lease (dollars in thousands):
| Minimum Rents | March 31, 2021 | |||||||
| 2021 (April - December) | $ | 1,932 | ||||||
| 2022 | 2,607 | |||||||
| 2023 | 2,646 | |||||||
| 2024 | 2,686 | |||||||
| 2025 | 2,726 | |||||||
| 2026 and beyond | 34,168 | |||||||
| Total minimum rent | $ | 46,765 | ||||||
AmortizationExpense
Intangible lease assets are amortized using the straight-line method over the contractual life of the lease, of a period up to 20 years. The weighted average life of intangible assets as of March 31, 2021 is approximately 16.1 years. Amortization expense for the three months ended March 31, 2021 and 2020 totaled $0.2 million.
The following table summarizes the Company's expected amortization for intangible assets over the next five years, assuming no further acquisitions or dispositions (dollars in thousands):
| Amortization Expense | March 31, 2021 | |||||||
| 2021 (April - December) | $ | (619) | ||||||
| 2022 | (825) | |||||||
| 2023 | (825) | |||||||
| 2024 | (825) | |||||||
| 2025 | (825) | |||||||
26
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Unrealized gains (losses) available-for-sale securities | $ | (448 | ) | $ | 1,449 | $ | 19 | $ | (1,124 | ) | ||||||
| Reclassification of net (gains) losses on available-for-sale securities included in net income (loss) | — | 1,159 | 481 | 1,159 | ||||||||||||
| Unrealized gains (losses) available-for-sale securities, net of reclassification adjustment | $ | (448 | ) | $ | 2,608 | $ | 500 | $ | 35 | |||||||
| The amounts reclassified for net (gain) loss on available-for-sale securities are included in the realized (gain) loss on sale of real estate securities in the Company's consolidated statements of operations. | ||||||||||||||||
Note 57 - Debt
Repurchase Agreements - Commercial Mortgage Loans
The Company has entered into repurchase facilities with JPMorgan Chase Bank, National Association (the "JPM Repo Facility"), Goldman Sachs Bank USA (the "GS Repo Facility"), U.S.U.S Bank National Association (the "USB Repo Facility"), Barclays Bank PLC (the "Barclays Revolver Facility" and the "Barclays Repo Facility"), Wells Fargo Bank, National Association (the "WF Repo Facility"), and Credit Suisse AG (the "CS Repo Facility" and together with JPM Repo Facility, GS Repo Facility, USB Repo Facility, WF Repo Facility, Barclays Revolver Facility, and Barclays Repo Facility, the "Repo Facilities").
The JPM Repo Facility has a maturity dateFacilities are financing sources through which the Company may pledge one or more mortgage loans to the financing entity in exchange for funds typically at an advance rate of June 12, 2019 plus abetween 65% to 80% of the principal amount of the mortgage loan being pledged.
The details of the Company's Repo Facilities at March 31, 2021 and December 31, 2020 are as follows (dollars in thousands):
| As of March 31, 2021 | ||||||||||||||||||||||||||||||||
| Repurchase Facility | Committed Financing | Amount Outstanding | Interest Expense (1) | Ending Weighted Average Interest Rate | Maturity | |||||||||||||||||||||||||||
| JPM Repo Facility | $ | 300,000 | $ | 111,108 | $ | 989 | 2.41 | % | 10/6/2022 | |||||||||||||||||||||||
| USB Repo Facility | 100,000 | 0 | 93 | N/A | 6/15/2021 | |||||||||||||||||||||||||||
| CS Repo Facility | 200,000 | 10,000 | 980 | 4.50 | % | 8/19/2021 | ||||||||||||||||||||||||||
WF Repo Facility (2) | 175,000 | 0 | 504 | N/A | 11/21/2021 | |||||||||||||||||||||||||||
Barclays Revolver Facility (3) | 100,000 | 0 | 34 | N/A | 9/20/2021 | |||||||||||||||||||||||||||
Barclays Repo Facility (4) | 300,000 | 31,817 | 486 | 1.96 | % | 3/15/2022 | ||||||||||||||||||||||||||
| Total | $ | 1,175,000 | $ | 152,925 | $ | 3,086 | ||||||||||||||||||||||||||
(1) For the three months ended March 31, 2021. Includes amortization of deferred financing costs.
(2) There are 2 more one-year extension options available at the Company's discretion.
(3) There is 1 one-year extension option and provides up to $300.0 million in advances. The GS Repo Facility has aavailable at the Company's discretion.
(4) Includes 1 one-year extensions at the Company's option.
27
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
| As of December 31, 2020 | ||||||||||||||||||||||||||||||||
| Repurchase Facility | Committed Financing | Amount Outstanding | Interest Expense (1) | Ending Weighted Average Interest Rate | Maturity | |||||||||||||||||||||||||||
JPM Repo Facility (2) | $ | 300,000 | $ | 113,884 | $ | 5,020 | 2.54 | % | 10/6/2022 | |||||||||||||||||||||||
USB Repo Facility (3) | 100,000 | 5,775 | 599 | 2.40 | % | 6/15/2021 | ||||||||||||||||||||||||||
CS Repo Facility (4) | 200,000 | 106,971 | 3,539 | 2.84 | % | 8/19/2021 | ||||||||||||||||||||||||||
WF Repo Facility (5) | 175,000 | 27,150 | 1,041 | 2.50 | % | 11/21/2021 | ||||||||||||||||||||||||||
Barclays Revolver Facility (6) | 100,000 | 0 | 387 | N/A | 9/20/2021 | |||||||||||||||||||||||||||
Barclays Repo Facility (7) | 300,000 | 22,560 | 1,046 | 2.51 | % | 3/15/2022 | ||||||||||||||||||||||||||
| Total | $ | 1,175,000 | $ | 276,340 | $ | 11,632 | ||||||||||||||||||||||||||
(1) For the year ended December 31, 2020. Includes amortization of deferred financing costs.
(2) On October 6, 2020 the maturity date of December 27, 2018, with a one-yearwas amended to October 6, 2022.
(3) On June 9, 2020, the Company exercised the extension at the Company’s option which may be exercised upon the satisfaction of certain conditions, and provides upextended the term maturity to $250.0 million in advances. The USB Repo Facility matures on JulyJune 15, 2021.
(4) On August 28, 2020, with two one-year extensions at the option of an indirect wholly-owned subsidiary of the Company which may be exercised the extension option upon the satisfaction of certain conditions, and provides upextended the term maturity to $100.0August 19, 2021. Additionally, in 2020 the committed financing amount was downsized from $300 million in advances. The CS Repo Facility matures on August 30, 2018 and provides up to $250.0 million in advances. Prior to the end of each calendar quarter,$200 million.
(5) On November 17, 2020, the Company may request anexercised the extension of the termination date for an additional 364 days from the end of such calendar quarter subject tooption upon the satisfaction of certain conditions, and approvals. extended the term maturity to November 21, 2021. There are 2 more one-year extension options available at the Company's discretion.
(6) There is 1 one-year extension option available at the Company's discretion.
(7) Includes 2 one-year extensions at the Company's option.
The Company expects to use the advances from the Repo Facilities are all subject to various adjustments.
The Repo Facilities generally provide that in the event of a decrease in the value of the Company's collateral, the lenders can demand additional collateral. Should the value of the Company’s collateral decrease as a result of deteriorating credit quality, resulting margin calls may cause an adverse change in the Company’s liquidity position. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company is in compliance with all debt covenants.
Mortgage Note Payable
On October 15, 2019, the Company obtained a commercial mortgage loan for $29.2 million related to the real estate owned portfolio. As of March 31, 2021 the loan accrued interest at an annual rate of 3.85% and matures on November 6, 2034. The Company incurred $0.3 million of interest expense for the ninethree months ended September 30, 2017, including amortizationMarch 31, 2021.
Unsecured Debt
Pursuant to a lending and security agreement with Security Benefit Life Insurance Company ("SBL"), which was entered into in February 2020 and amended in March and August 2020, the Company may borrow up to $100.0 million at a rate of deferred financing cost.one-month LIBOR + 4.5%. The facility has a maturity of February 10, 2023 and is secured by a pledge of equity interests in certain of the Company’s subsidiaries. The Company incurred $0.4 million of interest expense on the lending agreement with SBL for the three months ended March 31, 2021. As of March 31, 2021, there was an outstanding balance of $100.0 million.
28
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Repurchase Agreements - Real Estate Securities
The Company has entered into various Master Repurchase Agreements (the "MRAs") that allow the Company to sell real estate securities while providing a fixed repurchase price for the same real estate securities in the future. The repurchase contracts on each security under an MRA generally mature in 30 to 9030-90 days and terms are adjusted for current market rates as necessary. As of September 30, 2017, the Company pledged Tranche C of RFT 2015-FL1 under its MRAs. As of December 31, 2016, the Company pledged Tranche C of RFT 2015-FL1 and its real estate securities available for sale under its MRAs.
Below is a summary of the Company's MRAs as of September 30, 2017March 31, 2021 and December 31, 2016 (in2020 (dollars in thousands):
| Weighted Average | |||||||||||||||||||||||||||||
| Counterparty | Amount Outstanding | Accrued Interest | Collateral Pledged (1) | Interest Rate | Days to Maturity | ||||||||||||||||||||||||
| As of March 31, 2021 | |||||||||||||||||||||||||||||
| JP Morgan Securities LLC | $ | 16,609 | $ | 89 | $ | 23,430 | 1.73 | % | 7 | ||||||||||||||||||||
| Wells Fargo Securities, LLC | 0 | 0 | 0 | N/A | N/A | ||||||||||||||||||||||||
| Goldman Sachs International | 0 | 37 | 0 | N/A | N/A | ||||||||||||||||||||||||
| Barclays Capital Inc. | 71,663 | 246 | 91,060 | 1.35 | % | 45 | |||||||||||||||||||||||
| Credit Suisse AG | 0 | 0 | 0 | N/A | N/A | ||||||||||||||||||||||||
| Citigroup Global Markets, Inc. | 0 | 81 | 0 | N/A | N/A | ||||||||||||||||||||||||
| Total/Weighted Average | $ | 88,272 | $ | 453 | $ | 114,490 | 1.43 | % | 37 | ||||||||||||||||||||
| As of December 31, 2020 | |||||||||||||||||||||||||||||
| JP Morgan Securities LLC | $ | 33,791 | $ | 1,668 | $ | 43,612 | 1.75 | % | 31 | ||||||||||||||||||||
| Wells Fargo Securities, LLC | 0 | 1,057 | 0 | N/A | N/A | ||||||||||||||||||||||||
| Goldman Sachs International | 22,440 | 455 | 30,794 | 1.68 | % | 16 | |||||||||||||||||||||||
| Barclays Capital Inc. | 76,809 | 2,102 | 97,244 | 1.71 | % | 33 | |||||||||||||||||||||||
| Credit Suisse AG | 0 | 905 | 0 | N/A | N/A | ||||||||||||||||||||||||
| Citigroup Global Markets, Inc. | 53,788 | 2,532 | 71,723 | 1.70 | % | 29 | |||||||||||||||||||||||
| Total/Weighted Average | $ | 186,828 | $ | 8,719 | $ | 243,373 | 1.71 | % | 33 | ||||||||||||||||||||
| Weighted Average | |||||||||||||||||
| Counterparty | Amount Outstanding | Accrued Interest | Fair Value Collateral Pledged (*) | Interest Rate | Days to Maturity | ||||||||||||
| As of September 30, 2017 | |||||||||||||||||
| J.P. Morgan Securities LLC | $ | 39,035 | $ | 74 | $ | 55,764 | 2.97 | % | 6 | ||||||||
| Total/Weighted Average | $ | 39,035 | $ | 74 | $ | 55,764 | 2.97 | % | 6 | ||||||||
| As of December 31, 2016 | |||||||||||||||||
| J.P. Morgan Securities LLC | $ | 59,122 | $ | 96 | $ | 92,658 | 2.55 | % | 6 | ||||||||
| Citigroup Global Markets, Inc. | 3,879 | 1 | 4,850 | 2.11 | % | 26 | |||||||||||
| Wells Fargo Securities, LLC | 3,638 | 4 | 4,850 | 2.05 | % | 13 | |||||||||||
| Total/Weighted Average | $ | 66,639 | $ | 101 | $ | 102,358 | 2.50 | % | 8 | ||||||||
Collateralized Loan ObligationObligations
As of March 31, 2021 and December 31, 2020 the notes issued by BSPRT 2018-FL3 Issuer, Ltd. and BSPRT 2018-FL3 Co-Issuer, LLC, wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 26 and 27 mortgage assets having a principal balance of $406.4 million and $417.9 million, respectively (the "2018-FL3 Mortgage Assets"). The sale of the 2018-FL3 Mortgage Assets to BSPRT 2018-FL3 Issuer, Ltd. is governed by a Mortgage Asset Purchase Agreement dated as of April 5, 2018, between the Company and BSPRT 2018-FL3 Issuer, Ltd.
As of March 31, 2021 and December 31, 2020 the notes issued by BSPRT 2018-FL4 Issuer, Ltd. and BSPRT 2018-FL4 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 57 and 59 mortgage assets having a principal balance of $827.9 million and $852.1 million, respectively (the "2018-FL4 Mortgage Assets"). The sale of the 2018-FL4 Mortgage Assets to BSPRT 2018-FL4 Issuer is governed by a Mortgage Asset Purchase Agreement dated as of October 12, 2018, between the Company and BSPRT 2018-FL4 Issuer.
As of March 31, 2021 and December 31, 2020, the notes issued by BSPRT 2019-FL5 Issuer, Ltd. and BSPRT 2019-FL5 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 59 and 54 mortgage assets having a principal balance of $788.9 million and $799.8 million respectively (the "2019-FL5 Mortgage Assets"). The sale of the 2019-FL5 Mortgage Assets to BSPRT 2019-FL5 Issuer is governed by a Mortgage Asset Purchase Agreement dated as of May 30, 2019, between the Company and BSPRT 2019-FL5 Issuer.
29
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
On October 19, 2015, RFT 2015-FL1March 25, 2021, BSPRT 2021-FL6 Issuer, Ltd. (the “2015 Issuer”“Issuer”) and RFT 2015-FL1BSPRT 2021-FL6 Co-Issuer, LLC (the “2015 Co-Issuer”“Co-Issuer”), both wholly owned indirect subsidiaries of the Company entered into an indenture with the OP, as advancing agent and U.S. Bank National Association, as note administrator and U.S. Bank National Association as trustee, which governs the issuance of approximately $350.2$645.8 million principal balance secured floating rate notes (the “Notes”)., of which $573.1 million were purchased by third party investors and $72.6 million were purchased by a wholly owned subsidiary of the OP. In addition, concurrently with the issuance of the Notes, the 2015 Issuer also issued 78,188,49454,250 Preferred Shares, par value of $0.001 per share and with an aggregate liquidation preference and notional amount equal to $1,000 per share (the “Preferred Shares”), which were not offered as part of closing the indenture. For U.S. federal income tax purposes, the 2015 Issuer and 2015 Co-Issuer are disregarded entities.
The Company, retained approximately $56.0 million of the total $76.0 million of Class C and all ofthrough its wholly-owned subsidiaries, holds the preferred equity tranches of the above CLOs of approximately $311.2 million and $256.9 million as of March 31, 2021 and December 31, 2020, respectively. The following table represents the terms of the notes issued by 2018-FL3 Issuer, 2018-FL4 Issuer, 2019-FL5 Issuer and 2021-FL6 Issuer (the "CLOs), respectively, as of March 31, 2021 (dollars in thousands):
| CLO Facility | Tranche | Par Value Issued | Par Value Outstanding (1) | Interest Rate | Maturity Date | |||||||||||||||||||||||||||
| 2018-FL3 Issuer | Tranche A | $ | 286,700 | $ | 83,069 | 1M LIBOR + 105 | 10/15/2034 | |||||||||||||||||||||||||
| 2018-FL3 Issuer | Tranche A-S | 77,775 | 77,775 | 1M LIBOR + 135 | 10/15/2034 | |||||||||||||||||||||||||||
| 2018-FL3 Issuer | Tranche B | 41,175 | 41,175 | 1M LIBOR + 165 | 10/15/2034 | |||||||||||||||||||||||||||
| 2018-FL3 Issuer | Tranche C | 39,650 | 39,650 | 1M LIBOR + 255 | 10/15/2034 | |||||||||||||||||||||||||||
| 2018-FL3 Issuer | Tranche D | 42,700 | 42,700 | 1M LIBOR + 345 | 10/15/2034 | |||||||||||||||||||||||||||
| 2018-FL4 Issuer | Tranche A | 416,827 | 375,911 | 1M LIBOR + 105 | 9/15/2035 | |||||||||||||||||||||||||||
| 2018-FL4 Issuer | Tranche A-S | 73,813 | 73,813 | 1M LIBOR + 130 | 9/15/2035 | |||||||||||||||||||||||||||
| 2018-FL4 Issuer | Tranche B | 56,446 | 56,446 | 1M LIBOR + 160 | 9/15/2035 | |||||||||||||||||||||||||||
| 2018-FL4 Issuer | Tranche C | 68,385 | 68,385 | 1M LIBOR + 210 | 9/15/2035 | |||||||||||||||||||||||||||
| 2018-FL4 Issuer | Tranche D | 57,531 | 57,531 | 1M LIBOR + 275 | 9/15/2035 | |||||||||||||||||||||||||||
| 2019-FL5 Issuer | Tranche A | 407,025 | 407,025 | 1M LIBOR + 115 | 5/15/2029 | |||||||||||||||||||||||||||
| 2019-FL5 Issuer | Tranche A-S | 76,950 | 76,950 | 1M LIBOR + 148 | 5/15/2029 | |||||||||||||||||||||||||||
| 2019-FL5 Issuer | Tranche B | 50,000 | 50,000 | 1M LIBOR + 140 | 5/15/2029 | |||||||||||||||||||||||||||
| 2019-FL5 Issuer | Tranche C | 61,374 | 61,372 | 1M LIBOR + 200 | 5/15/2029 | |||||||||||||||||||||||||||
| 2019-FL5 Issuer | Tranche D | 48,600 | 5,000 | 1M LIBOR + 240 | 5/15/2029 | |||||||||||||||||||||||||||
| 2019-FL5 Issuer | Tranche E | 20,250 | 3,000 | 1M LIBOR + 285 | 5/15/2029 | |||||||||||||||||||||||||||
| 2021-FL6 Issuer | Tranche A | 367,500 | 367,500 | 1M LIBOR + 110 | 3/15/2036 | |||||||||||||||||||||||||||
| 2021-FL6 Issuer | Tranche A-S | 86,625 | 86,625 | 1M LIBOR + 130 | 3/15/2036 | |||||||||||||||||||||||||||
| 2021-FL6 Issuer | Tranche B | 33,250 | 33,250 | 1M LIBOR + 160 | 3/15/2036 | |||||||||||||||||||||||||||
| 2021-FL6 Issuer | Tranche C | 41,125 | 41,125 | 1M LIBOR + 205 | 3/15/2036 | |||||||||||||||||||||||||||
| 2021-FL6 Issuer | Tranche D | 44,625 | 44,625 | 1M LIBOR + 300 | 3/15/2036 | |||||||||||||||||||||||||||
| 2021-FL6 Issuer | Tranche E | 11,375 | 0 | 1M LIBOR + 350 | 3/15/2036 | |||||||||||||||||||||||||||
| $ | 2,409,701 | $ | 2,092,927 | |||||||||||||||||||||||||||||
(1) Excludes $339.7 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligation line in the Issuer. The retained Class C and its related interest income and the preferred equity are eliminated in the Company's consolidated financial statements. The Company, as the holder of preferred equity in the 2015 Issuer, will absorb the first losses of the CLO, which may have a negative impact to the Company's result of operations. The issuance of the CLO also results in an increase in interest expense within the Consolidated Statements of Operations.
March 31, 2021.
30
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The following table represents the terms of the notes issued by 2018-FL3 Issuer, 2018-FL4 Issuer and 2019-FL5 Issuer, as of December 31, 2020 (dollars in thousands):
| CLO Facility | Tranche | Par Value Issued | Par Value Outstanding (1) | Interest Rate | Maturity Date | |||||||||||||||||||||||||||
| 2018-FL3 Issuer | Tranche A | $ | 286,700 | $ | 161,745 | 1M LIBOR + 105 | 10/15/2034 | |||||||||||||||||||||||||
| 2018-FL3 Issuer | Tranche A-S | 77,775 | 77,775 | 1M LIBOR + 135 | 10/15/2034 | |||||||||||||||||||||||||||
| 2018-FL3 Issuer | Tranche B | 41,175 | 41,175 | 1M LIBOR + 165 | 10/15/2034 | |||||||||||||||||||||||||||
| 2018-FL3 Issuer | Tranche C | 39,650 | 39,650 | 1M LIBOR + 255 | 10/15/2034 | |||||||||||||||||||||||||||
| 2018-FL3 Issuer | Tranche D | 42,700 | 42,700 | 1M LIBOR + 345 | 10/15/2034 | |||||||||||||||||||||||||||
| 2018-FL4 Issuer | Tranche A | 416,827 | 416,659 | 1M LIBOR + 105 | 9/15/2035 | |||||||||||||||||||||||||||
| 2018-FL4 Issuer | Tranche A-S | 73,813 | 73,813 | 1M LIBOR + 130 | 9/15/2035 | |||||||||||||||||||||||||||
| 2018-FL4 Issuer | Tranche B | 56,446 | 56,446 | 1M LIBOR + 160 | 9/15/2035 | |||||||||||||||||||||||||||
| 2018-FL4 Issuer | Tranche C | 68,385 | 68,385 | 1M LIBOR + 210 | 9/15/2035 | |||||||||||||||||||||||||||
| 2018-FL4 Issuer | Tranche D | 57,531 | 57,531 | 1M LIBOR + 275 | 9/15/2035 | |||||||||||||||||||||||||||
| 2019-FL5 Issuer | Tranche A | 407,025 | 407,025 | 1M LIBOR + 115 | 5/15/2029 | |||||||||||||||||||||||||||
| 2019-FL5 Issuer | Tranche A-S | 76,950 | 76,950 | 1M LIBOR + 148 | 5/15/2029 | |||||||||||||||||||||||||||
| 2019-FL5 Issuer | Tranche B | 50,000 | 50,000 | 1M LIBOR + 140 | 5/15/2029 | |||||||||||||||||||||||||||
| 2019-FL5 Issuer | Tranche C | 61,374 | 61,373 | 1M LIBOR + 200 | 5/15/2029 | |||||||||||||||||||||||||||
| 2019-FL5 Issuer | Tranche D | 48,600 | 5,000 | 1M LIBOR + 240 | 5/15/2029 | |||||||||||||||||||||||||||
| 2019-FL5 Issuer | Tranche E | 20,250 | 3,000 | 1M LIBOR + 285 | 5/15/2029 | |||||||||||||||||||||||||||
| $ | 1,825,201 | $ | 1,639,227 | |||||||||||||||||||||||||||||
(1) Excludes $267.1 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligation line in the consolidated balance sheets as of December 31, 2020.
31
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| 2015 Facility ($000s) | Par Value Issued | Par Value Outstanding (*) | Interest Rate | Maturity Date | ||||||||
| As of September 30, 2017 | ||||||||||||
| Tranche A | $ | 231,345 | $ | 124,690 | 1M LIBOR + 175 | 8/1/2030 | ||||||
| Tranche B | 42,841 | 42,841 | 1M LIBOR + 388 | 8/1/2030 | ||||||||
| Tranche C | 76,044 | 20,000 | 1M LIBOR + 525 | 8/1/2030 | ||||||||
| $ | 350,230 | $ | 187,531 | |||||||||
| As of December 31, 2016 | ||||||||||||
| Tranche A | $ | 231,345 | $ | 222,195 | 1M LIBOR + 175 | 8/1/2030 | ||||||
| Tranche B | 42,841 | 42,841 | 1M LIBOR + 388 | 8/1/2030 | ||||||||
| Tranche C | 76,044 | 20,000 | 1M LIBOR + 525 | 8/1/2030 | ||||||||
| $ | 350,230 | $ | 285,036 | |||||||||
| 2017 Facility ($000s) | Par Value Issued | Par Value Outstanding | Interest Rate | Maturity Date | ||||||||
| As of September 30, 2017 | ||||||||||||
| Tranche A | $ | 223,600 | $ | 223,600 | 1M LIBOR + 135 | 7/1/2027 | ||||||
| Tranche B | 48,000 | 48,000 | 1M LIBOR + 240 | 7/1/2027 | ||||||||
| Tranche C | 67,900 | 67,900 | 1M LIBOR + 425 | 7/1/2027 | ||||||||
| $ | 339,500 | $ | 339,500 | |||||||||
The below table reflects the total assets and liabilities of the Company's twooutstanding CLOs. The CLOs are considered VIEs and are consolidated into the Company's consolidated financial statements as of September 30, 2017March 31, 2021 and December 31, 20162020 as the Company is the primary beneficiary of the VIEs.VIE. The Company is the primary beneficiary of the CLOs because (i) the Company has the power to direct the activities that most significantly affect the VIEs'VIE’s economic performance and (ii) the right to receive benefits from the VIEs or the obligation to absorb losses of the VIEs that could be significant to the VIEs.VIE. The VIE's are non-recourse to the Company.
| Assets (dollars in thousands) | March 31, 2021 | December 31, 2020 | ||||||||||||
Cash (1) | $ | 216,615 | $ | 99,025 | ||||||||||
Commercial mortgage loans, held for investment, net (2) | 2,505,938 | 2,044,956 | ||||||||||||
| Accrued interest receivable | 6,700 | 5,626 | ||||||||||||
| Total Assets | $ | 2,729,253 | $ | 2,149,607 | ||||||||||
| Liabilities | ||||||||||||||
Notes payable (3)(4) | $ | 2,415,354 | $ | 1,892,616 | ||||||||||
| Accrued interest payable | 1,266 | 1,240 | ||||||||||||
| Total Liabilities | $ | 2,416,620 | $ | 1,893,856 | ||||||||||
| Assets ($000s) | September 30, 2017 | December 31, 2016 | ||||||
Cash (1) | $ | 37,615 | $ | 5 | ||||
Commercial mortgage loans, held for investment, net of allowance of $1,431 and $1,017 (2) | 699,928 | 417,057 | ||||||
| Accrued interest receivable | 1,899 | 1,101 | ||||||
| Total assets | $ | 739,442 | $ | 418,163 | ||||
| Liabilities | ||||||||
Notes payable (3)(4) | $ | 571,303 | $ | 334,246 | ||||
| Interest payable | 980 | 564 | ||||||
| Total liabilities | $ | 572,283 | $ | 334,810 | ||||
(1) Includes $37.5$216.0 million and $98.6 million of cash held by the servicer related to CLO loan payoffs as of September 30, 2017.March 31, 2021 and December 31, 2020, respectively.
(2) The balance is presented net of allowance for loan losscredit losses of $1.4$16.5 million and $1.0$19.4 million as of September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively.
(3) Includes $55.8$339.7 million and $55.8$267.1 million of Tranche C of Company issued CLO notes, held by the Company, which eliminatesare eliminated within the Collateralcollateralized loan obligationsobligation line of the consolidated balance sheets as of September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively.
(4) The balance is presented net of deferred financing cost and discount of $11.5$17.3 million and $6.8$13.7 million as of September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively.
Note 68 - Net IncomeEarnings Per Share
| Three months ended March 31, | |||||||||||
| Numerator | 2021 | 2020 | |||||||||
| Net income/(loss) | $ | 30,146 | $ | (7,400) | |||||||
| Less: Preferred stock dividends | 3,511 | 4,515 | |||||||||
| Less: Undistributed earnings allocated to preferred stock | 3,227 | 0 | |||||||||
| Net income/(loss) attributable to common stockholders (for basic and diluted earnings per share) | 23,408 | (11,915) | |||||||||
| Denominator | |||||||||||
| Weighted-average common shares outstanding for basic earnings per share | 44,290,177 | 44,263,334 | |||||||||
| Effect of dilutive shares: | |||||||||||
| Unvested restricted shares | 15,888 | 11,518 | |||||||||
| Weighted-average common shares outstanding for diluted earnings per share | 44,306,065 | 44,274,852 | |||||||||
| Basic earnings per share | $ | 0.53 | $ | (0.27) | |||||||
| Diluted earnings per share | $ | 0.53 | $ | (0.27) | |||||||
32
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net income (in thousands) | $ | 6,975 | $ | 5,373 | $ | 19,305 | $ | 23,653 | |||||||
| Basic weighted average shares outstanding | 31,741,679 | 31,516,876 | 31,778,169 | 31,622,796 | |||||||||||
| Unvested restricted shares | 14,824 | 7,035 | 12,098 | 6,274 | |||||||||||
| Diluted weighted average shares outstanding | 31,756,503 | 31,523,911 | 31,790,267 | 31,629,070 | |||||||||||
| Basic net income per share | $ | 0.22 | $ | 0.17 | $ | 0.61 | $ | 0.75 | |||||||
| Diluted net income per share | $ | 0.22 | $ | 0.17 | $ | 0.61 | $ | 0.75 | |||||||
BENEFIT STREET PARTNERS REALTY TRUST, INC.
March 31, 2021
(Unaudited)
Note 79 - Common Stock Transactions
As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company had 31,641,27544,135,659 and 31,884,63144,510,051 shares of common stock outstanding, respectively, including shares issued pursuant to the Dividend Reinvestment Plan ("DRIP"Company's distribution reinvestment plan (the "DRIP"), share repurchases and unvested restricted shares.
As of March 31, 2021 and December 31, 2020, the Company had 25,566 and 40,515 shares of Series A Preferred Stock outstanding, respectively and 1,400 shares of Series C Preferred Stock outstanding. Additionally, as of March 31, 2021 the Company had 17,950 shares of Series D Preferred Stock outstanding.
On December 30, 2014,March 15, 2021, the Company filed withand SBL entered into an agreement pursuant to which SBL agreed to (i) exchange the Maryland State Department of Assessments and Taxation articles supplementary to its charter that reclassified 1,000 authorized but unissued14,949 shares of the Company’s common stock asSeries A Preferred Stock it held for an equal amount of Series D Preferred Stock and (ii) purchase from the Company an additional 3,000 newly issued shares of convertible stockSeries D Preferred Stock for $15.0 million (with the proceeds reduced by the accrued and setunpaid dividends on the terms of such convertible shares.exchanged Series A Preferred Stock). The Company then issued 1,000 convertible shares totransaction settled on March 18, 2021.
The following tables present the Former Advisoractivity in the Company's Series A Preferred Stock for $1.00 per share. the three months ended March 31, 2021 and March 31, 2020, respectively (dollars in thousands, except share amounts):
| Shares | Amount | |||||||||||||
| Balance, December 31, 2020 | 40,515 | $ | 202,292 | |||||||||||
| Exchanged for Series D Preferred Stock | (14,950) | (74,748) | ||||||||||||
| Dividends paid in Preferred Stock | 1 | 2 | ||||||||||||
| Offering Costs | — | 13 | ||||||||||||
| Amortization of offering costs | — | 22 | ||||||||||||
| Ending Balance, March 31, 2021 | 25,566 | $ | 127,581 | |||||||||||
| Shares | Amount | |||||||||||||
| Balance, December 31, 2019 | 40,500 | $ | 202,144 | |||||||||||
| Issuance of Preferred Stock | 14 | 70 | ||||||||||||
| Dividends paid in Preferred Stock | 0 | 2 | ||||||||||||
| Offering Costs | — | (5) | ||||||||||||
| Amortization of offering costs | — | 24 | ||||||||||||
| Ending Balance, March 31, 2020 | 40,514 | $ | 202,235 | |||||||||||
The convertible shares automatically converted to shares of common stock uponfollowing tables present the first occurrence of certain triggering events, includingactivity in the termination ofCompany's Series C Preferred Stock for the Advisory Agreement with the Former Advisorthree months ended March 31, 2021 and theMarch 31, 2020 (dollars in thousands, except share amounts):
| Shares | Amount | |||||||||||||
| Balance, December 31, 2020 | 1,400 | $ | 6,962 | |||||||||||
| Issuance of Preferred Stock | 0 | 0 | ||||||||||||
| Dividends paid in Preferred Stock | 0 | 0 | ||||||||||||
| Offering Costs | — | 0 | ||||||||||||
| Amortization of offering costs | — | 2 | ||||||||||||
| Ending Balance, March 31, 2021 | 1,400 | $ | 6,964 | |||||||||||
| Shares | Amount | |||||||||||||
| Balance, December 31, 2019 | 1,400 | $ | 6,966 | |||||||||||
| Issuance of Preferred Stock | 0 | 0 | ||||||||||||
| Dividends paid in Preferred Stock | 0 | 0 | ||||||||||||
| Offering Costs | — | (5) | ||||||||||||
| Amortization of offering costs | — | 1 | ||||||||||||
| Ending Balance, March 31, 2020 | 1,400 | $ | 6,962 | |||||||||||
33
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the activity in the Company's Series D Preferred Stock for the three months ended March 31, 2021 (dollars in thousands, except share amounts):
| Shares | Amount | |||||||||||||
| Balance, December 31, 2020 | 0 | $ | 0 | |||||||||||
| Issuance of Preferred Stock | 17,950 | 89,748 | ||||||||||||
| Dividends paid in Preferred Stock | 0 | 0 | ||||||||||||
| Offering Costs | — | (26) | ||||||||||||
| Amortization of offering costs | — | 0 | ||||||||||||
| Ending Balance, March 31, 2021 | 17,950 | $ | 89,722 | |||||||||||
As of certain stockholder total return thresholds. Subsequent to September 30, 2016,March 31, 2020 the Company determined that as a result of the termination of the advisory agreement between the Former Advisor and the Company a triggering event had occurred. Based on the Company’s determination of the enterprise value of the Company on the date of the triggering event, the total distributions paid to the Company’s stockholders through the date of the triggering event, and the sum of the Company's stockholders’ invested capital as of the date of the triggering event, that the convertible shares converted into a number of common shares equal to zero. As a result, the convertible shares that were issued to the Former Advisordid not have been extinguished and no common shares were issued in connection with the conversion and the par value of the shares was transferred to Additional Paid In Capital upon extinguishment.any Series D Preferred Stock outstanding.
Distributions
In order to maintain its election to qualify as a REIT, the Company must currently distribute, at a minimum, an amount equal to 90% of its taxable income, without regard to the deduction for distributions paid and excluding net capital gains. The Company must distribute 100% of its taxable income (including net capital gains) to avoid paying corporate U.S. federal income taxes.
In April 2020, the Company’s board of directors unanimously approved a transition in the timing of the dividend payments to holders of the Company’s common stock from a monthly payment with daily accruals to a quarterly payment and accrual basis. The first quarterly dividend was the second quarter 2020 dividend payable in July 2020. Similarly, the Company began paying accrued and unpaid dividends on Preferred Stock on a quarterly basis.
The monthly distributions for the first quarter of 2020 were paid at a daily rate equivalent to $1.44 per annum, per share of common stock. Starting with the second quarter 2020 distribution, the 2020 quarterly distributions were paid at a quarterly rate of $0.275 per share of common stock (equivalent to $1.10 per annum). Distribution payments are dependent on the availability of funds. The board of directors may reduce the amount of distributions paid or suspend distribution payments at any time, and therefore, distribution payments are not assured. Dividends on the Company’s Preferred Stock, to the extent not declared by the board of directors quarterly, will accrue, and dividends may not be paid on the Company's common stock to the extent there are accrued and unpaid dividends on the Preferred Stock. The amount of dividends paid on the Company’s Preferred Stock are generally in an amount equal to the dividends a holder of Preferred Stock would have received if the Preferred Stock had been converted into common stock in accordance with its terms.
The Company distributed $47.6$12.2 million of common stock dividends during the ninethree months ended September 30, 2017,March 31, 2021, comprised of $31.3$9.7 million in cash and $16.3$2.6 million in shares of common stock issued under the DRIP. The DRIP was temporarily suspended for the March 2020 dividend due to COVID-19 related valuation volatility, but was reactivated for the second quarter 2020 dividend. The Company distributed $49.0$15.8 million of common stock dividends during the ninethree months ended September 30, 2016,March 31, 2020, comprised of $30.0$12.2 million in cash and $19.1$3.6 million in shares of common stock issued under the DRIP.
As of March 31, 2021 and December 31, 2020, the Company had declared but unpaid common stock distributions of $12.1 million and $12.2 million, respectively. Additionally, as of March 31, 2021 and December 31, 2020, the Company had declared but unpaid Series A Preferred Stock distributions of $2.1 million and $3.3 million, respectively and $0.1 million and $0.1 million of Series C Preferred stock, respectively. Additionally, as of March 31, 2021 the Company had declared but unpaid common stock distributions of $0.2 million of Series D Preferred Stock. These amounts are included in Distributions payable on the Company’s consolidated balance sheets.
Share Repurchase Program
The Company's board of directors unanimously approved an amended and restated share repurchase program (the “SRP”), which became effective on February 28, 2016. The SRP enables stockholders to sell their shares to the Company. Subject to certain conditions, stockholders that purchased shares of the Company's common stock or received their shares from us (directly or indirectly) through one or more non-cash transactions and have held their shares for a period of at least one year may request that the Company repurchase their shares of common stock so long as the repurchase otherwise complies with the provisions of Maryland law. Repurchase requests made following the death or qualifying disability of a stockholder will not be subject to any minimum holding period.
34
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The repurchase price per share for requests will beSRP repurchases is equal to the lesser of (i) the Company’s most recent estimated per-share NAV, as approved by the Company’s board of directors from time to time, and (ii) the Company’s book value per share, computed in accordance with GAAP, multiplied by a percentage equal to (i) 92.5%, if the person seeking repurchase has held his or her shares for a period greater than one year and less than two years; (ii) 95%, if the person seeking repurchase has held his or her shares for a period greater than two years and less than three years; (iii) 97.5%, if the person seeking repurchase has held his or her shares for a period greater than three years and less than four years; or (iv) 100%, if the person seeking repurchase has held his or her shares for a period greater than four years or in the case of requests for death or qualifying disability.
The Company’s most recent estimated per-share NAV as of March 31, 2021, as determined by the board of directors, is $19.02 and the$17.88. The Company’s GAAP book value per share as of September 30, 2017March 31, 2021 is $19.07. These amendments will begin to apply to repurchases made pursuant to the SRP for the fiscal semester ended December 31, 2017.
$18.45.
Repurchase requests related to death or a qualifying disability must satisfy certain conditions, each of which are assessed by and at the sole discretion of the Company, including the following conditions. In the case of death, the shareholder must be a natural person (or a revocable grantor trust) and the Company must receive a written notice from the estate of the shareholder, the recipient of the shares through bequest or inheritance, or the trustee in the case of a revocable grantor trust. In the case of a “qualifying disability”, the shareholder must be a natural person (or a revocable grantor trust) and the Company must receive a written notice from the shareholder, or the trustee in the case of a revocable grantor trust, that the condition was not pre-existing on the date the shares were acquired. In order for a disability to be considered a “qualifying disability”, the shareholder must receive and provide evidence (the shareholder application and the notice of final determination) of disability based upon a physical or mental condition or impairment made by a government agency responsible for reviewing and determining disability retirement benefits (e.g. the Social Security Administration).
Repurchases pursuant to the SRP, when requested, generally will be made semiannually (each six-month period ending June 30 or December 31, a “fiscal semester”). Repurchases for any fiscal semester will be limited to a maximum of 2.5% of the weighted average number of shares of common stock outstanding during the previous fiscal year, with a maximum for any fiscal year of 5.0% of the weighted average number of shares of common stock outstanding during the previous fiscal year. Funding for repurchases pursuant to the SRP for any given fiscal semester will be limited to proceeds received during that same fiscal semester through the issuance of common stock pursuant to any DRIP in effect from time to time, provided that the Company's board of directors has the power, in its sole discretion, to determine the amount of shares repurchased during any fiscal semester as well as the amount of funds to be used for that purpose. Any repurchase requests received during such fiscal semester will be paid at the price, computed as described above on the last day of such fiscal semester. Due to these limitations, the Company cannot guarantee that the Company will be able to accommodate all repurchase requests made during any fiscal semester or fiscal year. However, a stockholder may withdraw its request at any time or ask that the Company honors the request when funds are available. Pending repurchase requests will be honored on a pro rata basis. The Company will generally pay repurchase proceeds, less any applicable tax or other withholding required by law, by the 31st day following the end of the fiscal semester during which the repurchase request was made.
The following table reflects the number of shares repurchased under the SRP cumulatively through September 30, 2017:March 31, 2021:
| Number of Requests | Number of Shares Repurchased | Average Price per Share | |||||||||||||||
| Cumulative as of December 31, 2020 | 8,094 | 4,121,735 | $ | 19.88 | |||||||||||||
January 1 - January 31, 2021(1) | 1,351 | 521,796 | 17.53 | ||||||||||||||
| February 1 - February 28, 2021 | 0 | 0 | N/A | ||||||||||||||
March 1 - March 31, 2021(1) | 0 | 0 | N/A | ||||||||||||||
| Cumulative as of March 31, 2021 | 9,445 | 4,643,531 | $ | 19.62 | |||||||||||||
(1) Reflects shares repurchased pursuant to repurchase requests submitted for the second semester of 2020, including 15,772 shares which for administrative reasons were processed in March 2021. Pursuant to the terms of the SRP, the Company is only authorized to repurchase up to the amount of proceeds reinvested through our DRIP during the applicable semester. As a result, redemption requests in the amount of 1,885,340 shares were not fulfilled for the second semester of 2020.
35
| Number of Requests | Number of Shares Repurchased | Average Price per Share | ||||||||
| Cumulative as of December 31, 2016 | 985 | 918,683 | $ | 23.94 | ||||||
| January 1 - March 31, 2017 | 502 | 496,678 | 19.04 | |||||||
| April 1 - June 30, 2017 | 2 | 327 | 20.08 | |||||||
| July 1 - September 30, 2017 | 636 | 575,703 | 19.24 | |||||||
| Cumulative as of September 30, 2017 | 2,125 | 1,991,391 | $ | 21.37 | ||||||
BENEFIT STREET PARTNERS REALTY TRUST, INC.
March 31, 2021
(Unaudited)
Note 810 - Commitments and Contingencies
Unfunded Commitments forUnder Commercial Mortgage Loans
As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company had the below unfunded commitments to the Company's borrowers.borrowers (dollars in thousands):
| Funding Expiration | March 31, 2021 | December 31, 2020 | ||||||||||||
| 2021 | $ | 45,331 | $ | 59,692 | ||||||||||
| 2022 | 83,246 | 91,420 | ||||||||||||
| 2023 | 70,951 | 69,880 | ||||||||||||
| 2024 | 54,770 | 7,700 | ||||||||||||
| 2025 and beyond | 15,355 | 0 | ||||||||||||
| $ | 269,653 | $ | 228,692 | |||||||||||
| Funding Expiration | September 30, 2017 | December 31, 2016 | ||||||
| 2016 | $ | — | $ | — | ||||
| 2017 | 4,766 | 7,794 | ||||||
| 2018 | 44,180 | 62,368 | ||||||
| 2019 | 27,705 | 9,072 | ||||||
| 2020 | 19,856 | — | ||||||
| Total | $ | 96,507 | $ | 79,234 | ||||
The borrowers are required to meet or maintain certain metrics in order to qualify for the unfunded commitment amounts.
Litigation and Regulatory Matters
Note 911 - Related Party Transactions and Arrangements
Pursuant to the Advisory Agreement, with the Advisor on September 29, 2016.
•The Company inreimburses the caseAdvisor’s costs of acquisitions of real estate securities) and receives reimbursement for insourced acquisition expenses of 0.5%; provided, however, that if and when the aggregate purchase price for all investments acquired after the date ofproviding services pursuant to the Advisory Agreement, reaches $600,000,000,except the salaries and benefits paid by the Advisor to the Company’s obligation to pay acquisition fees to the Advisor shall terminate. In no event will the total of all acquisition fees and acquisition expenses exceed 4.5% of the principal amount funded with respect to the Company's total portfolio including subsequent funding to investments in the Company's portfolio. In September 2017, the Company's aggregate purchase price for all investments acquired reached $600,000,000, and concurrently terminated the 1.0% acquisition fee payments to the Advisor for all investments subsequent to the limit being reached.executive officers.
•The Company pays the Advisor, or its affiliates, a monthly asset management fee equal to one-twelfth of 1.5% of stockholder’sstockholders' equity as calculated pursuant to the Advisory Agreement.
•The Company will pay the Advisor an annual subordinated performance fee calculated on the basis of total return to stockholders, payable monthly in arrears, such that for any year in which total return on stockholders’ capital exceeds 6.0% per annum, theour Advisor will be entitled to 15.0% of the excess total return; provided that in no event will the annual subordinated performance fee payable to theour Advisor exceed 10.0% of the aggregate total return for such year.
•The Company will reimbursereimburses the Advisor for insourced expenses incurred by the Advisor on the Company‘s behalf related to administrative services such as accounting, legalselecting, evaluating, originating and other servicesacquiring investments in accordance withan amount up to 0.5% of the advisory agreement.
to acquire real estate securities investments.
36
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The table below depicts related party feesshows the costs incurred due to arrangements with our Advisor and reimbursements in connection with the operations of the Company forits affiliates during the three and nine months ended September 30, 2017March 31, 2021 and 20162020 and the associated payable as of September 30, 2017March 31, 2021 and December 31, 2016 (in2020 (dollars in thousands):
| Three Months Ended March 31, | Payable as of | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | March 31, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||
Acquisition expenses (1) | $ | 153 | $ | 142 | $ | 0 | $ | 0 | |||||||||||||||||||||||||||
| Administrative services expenses | 3,474 | 4,112 | 3,474 | 2,940 | |||||||||||||||||||||||||||||||
| Asset management and subordinated performance fee | 5,416 | 3,912 | 6,411 | 4,773 | |||||||||||||||||||||||||||||||
Other related party expenses (2)(3) | 29 | 582 | 592 | 1,812 | |||||||||||||||||||||||||||||||
| Total related party fees and reimbursements | $ | 9,072 | $ | 8,748 | $ | 10,477 | $ | 9,525 | |||||||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | Payable as of | |||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | September 30, 2017 | December 31, 2016 | ||||||||||||||||||||
Total compensation and reimbursement for services provided by the Former Advisor, its affiliates, entities under common control with the Former Advisor and the Former Dealer Manager | $ | — | $ | — | $ | — | $ | — | $ | 480 | $ | 480 | |||||||||||||
| Acquisition fees and expenses | 3,014 | 255 | 8,968 | 635 | 212 | — | |||||||||||||||||||
| Administrative services expenses | 1,480 | — | 2,480 | 3,285 | 3,835 | 1,480 | 1,000 | ||||||||||||||||||
| Advisory and investment banking fee | — | — | — | 6 | — | — | |||||||||||||||||||
| Asset management and subordinated performance fee | 2,299 | 1,066 | 6,952 | 7,091 | 2,299 | 2,439 | |||||||||||||||||||
| Other related party expenses | 87 | 6 | 183 | 56 | 112 | 145 | |||||||||||||||||||
| Total related party fees and reimbursements | $ | 6,880 | $ | 3,807 | $ | 19,388 | $ | 11,623 | $ | 4,583 | $ | 4,064 | |||||||||||||
(2) These are related to reimbursable costs incurred related to the increase in loan origination activities and are included in Other expenses in the Company's consolidated statements of operations.
(3) As of March 31, 2021 and December 31, 2020 the related party payables include $0.6 million and $1.8 million of payments made by the Advisor to third party vendors on behalf of the Company.
The payables as of September 30, 2017March 31, 2021 and December 31, 20162020 in the table above are included in "DueDue to affiliates" inaffiliates on the Company's consolidated balance sheets.
Pursuant to the limitations outlined below,a lending and security agreement with SBL, which was entered into in February 2020 and amended in March and August 2020, the Company reimbursedmay borrow up to $100.0 million at a rate of one-month LIBOR + 4.5%. The facility has a maturity of February 10, 2023 and is secured by a pledge of equity interests in certain of the Former Advisor's cost of providing administrative services and personnel costs in connectionCompany’s subsidiaries. The Company incurred $0.4 million interest expense on the lending agreement with other services provided, in addition to paying an asset management fee;
SBL also holds 17,950 shares of the Company,Company's outstanding shares of Series D Preferred Stock of which, is included14,950 shares were acquired in "Administrative services expenses"exchange for an equivalent number of shares of Series A Preferred Stock in the consolidated statementsMarch 2021. SBL also acquired an additional 3,000 shares of operations. For the three and nine months ended September 30, 2016, the Company incurred $2.5 million and $3.8 million of administrative costs in connection with the operations of the Company, which is included in "Administrative services expenses" in the consolidated statements of operations.
Note 1012 - Fair Value of Financial Instruments
GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring financial instruments at fair values. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:
•Level I - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
•Level II - Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
•Level III - Unobservable inputs that reflect the entity’sentity's own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
37
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The determination of where an asset or liability falls in the above hierarchy requires significant judgment and factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter.
The Company has implemented valuation control processes to validate the fair value of the Company's financial instruments measured at fair value including those derived from pricing models. These control processes are designed to assure that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, the control processes are designed to assure that the valuation approach utilized is appropriate and consistently applied and the assumptions are reasonable.
Financial Instruments Measured at Fair Value on a Recurring Basis
CMBS, recorded in real estate securities, available for sale, measured at fair value on the consolidated balance sheets are valued utilizing both observable and unobservable market inputs. These factors include projected future cash flows, ratings, subordination levels, vintage, remaining lives, credit issues, and recent trades of similar real estate securities and the spreads used in the prior valuation. Depending upon the significance of the fair value inputs used in determining these fair
II classification.
Commercial mortgage loans, held-for-sale,held for sale, measured at fair value in the Company's TRS are initially recorded at transaction proceeds, which are considered to be the best initial estimate of fair value. The Company engaged the services of a third party independent valuation firm to determine fair value of certain investments held by the Company. Fair value is determined using a discounted cash flow model that primarily considers changes in interest rates and credit spreads, weighted average life and current performance of the underlying collateral. This model uses market data from recent securitizationsCommercial mortgage loans, held for sale, measured at fair value that have similar collateralare originated in the last month of the reporting period are held and marked to the Company’s loan portfolio and other information available from market participants. All results of the model are evaluated by the Company’s senior investment professionals.transaction proceeds. The Company alsoclassified the commercial mortgage loans, held for sale, measured at fair value as Level III.
Other real estate investments, measured at fair value on the consolidated balance sheets are valued using unobservable inputs. The Company engaged the services of a third party independent valuation firm to determine fair value of certain investments, including preferred equity investments, held by the Company. Future profitFair value is determined using a discounted cash flow model that primarily considers changes in interest rates and loss fromcredit spreads, weighted average life and current performance of the securitization is not recognized, but overall spread moves are captured in the loan valuation, theunderlying collateral. The Company classified the commercial mortgage loans held-for-sale,other real estate investments, measured at fair value as Level III.
The fair value for Treasury note futures is derived using market prices. Treasury note futures trade on the Chicago Mercantile Exchange (“CME”). The deliverable instruments are a variety of recently issued 10-year U.S. Treasury notes. The future contracts are liquid and are centrally cleared through the CME. Treasury note futures are generally categorized in Level I of the fair value hierarchy.
The fair value for a credit default swap contract isswaps and interest rate swaps contracts are derived using a pricing modelmodels that isare widely accepted by marketplace participants. Credit default swaps and interest rate swaps are traded in the OTC market. The pricing model takesmodels take into account multiple inputs including specific contract terms, interest rate yield curves, interest rates, credit curves, recovery rates, andand/or current credit spreads obtained from swap counterparties and other market participants. Most inputs into the modelmodels are not subjective as they are observable in the marketplace or set per the contract. Valuation is primarily determined by the difference between the contract spread and the current market spread. The contract spread (or rate) is generally fixed and the market spread is determined by the credit risk of the underlying debt or reference entity. If the underlying indices are liquid and the OTC market for the current spread is active, credit default swaps and interest rate swaps are categorized in Level II of the fair value hierarchy. If the underlying indices are illiquid and the OTC market for the current spread is not active, credit default swaps are categorized in Level III of the fair value hierarchy. The credit default swaps and interest rate swaps are generally categorized in Level II of the fair value hierarchy.
A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets or liabilities. The Company's policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the beginning of the reporting period. There were no material transfers between levels within the fair value hierarchy for the period ended March 31, 2021 and December 31, 2020.
38
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The following table presents information about the Company’sCompany's financial instruments carried at fair value on a recurring basis in the consolidated balance sheets by its level in the fair value hierarchy as of September 30, 2017March 31, 2021 and December 31, 2016:2020 (dollars in thousands):
| ($ in thousands) | Total | Level I | Level II | Level III | ||||||||||||
| September 30, 2017 | ||||||||||||||||
| Assets, at fair value | ||||||||||||||||
| Real estate securities | $ | — | $ | — | $ | — | $ | — | ||||||||
Commercial mortgage loans, held-for-sale (1) | 60,950 | — | — | 60,950 | ||||||||||||
| Treasury note futures | 754 | 754 | — | — | ||||||||||||
| Credit derivatives | 206 | — | 206 | — | ||||||||||||
| Total assets, at fair value | $ | 61,910 | $ | 754 | $ | 206 | — | $ | 60,950 | |||||||
| Liabilities, at fair value | ||||||||||||||||
| Credit derivatives | $ | 1,003 | $ | — | $ | 1,003 | $ | — | ||||||||
| Total liabilities, at fair value | $ | 1,003 | $ | — | $ | 1,003 | $ | — | ||||||||
| December 31, 2016 | ||||||||||||||||
| Assets, at fair value | ||||||||||||||||
| Real estate securities | $ | 49,049 | $ | — | $ | — | $ | 49,049 | ||||||||
Commercial mortgage loans, held-for-sale (1) | — | — | — | — | ||||||||||||
| Treasury note futures | — | — | — | — | ||||||||||||
| Credit derivatives | — | — | — | — | ||||||||||||
| Total assets, at fair value | $ | 49,049 | $ | — | $ | — | $ | 49,049 | ||||||||
| (1) Loans held in the Company's TRS, reported within "Commercial mortgage loans, held-for-sale, measured at fair value" on the consolidated balance sheets. | ||||||||||||||||
| Total | Level I | Level II | Level III | ||||||||||||||||||||
| March 31, 2021 | |||||||||||||||||||||||
| Assets, at fair value | |||||||||||||||||||||||
| Real estate securities, available for sale, measured at fair value | $ | 18,865 | $ | 0 | $ | 18,865 | $ | 0 | |||||||||||||||
| Commercial mortgage loans, held for sale, measured at fair value | 93,117 | 0 | 0 | 93,117 | |||||||||||||||||||
| Other real estate investments, measured at fair value | 2,528 | 0 | 0 | 2,528 | |||||||||||||||||||
| Interest rate swaps | 889 | 0 | 889 | 0 | |||||||||||||||||||
| Treasury note futures | 974 | 974 | 0 | 0 | |||||||||||||||||||
| Total assets, at fair value | $ | 116,373 | $ | 974 | $ | 19,754 | $ | 95,645 | |||||||||||||||
| Liabilities, at fair value | |||||||||||||||||||||||
| Credit default swaps | $ | 1,105 | $ | 0 | $ | 1,105 | $ | 0 | |||||||||||||||
| Total liabilities, at fair value | $ | 1,105 | $ | 0 | $ | 1,105 | $ | 0 | |||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||
| Assets, at fair value | |||||||||||||||||||||||
| Real estate securities, available for sale, measured at fair value | $ | 171,136 | $ | 0 | $ | 171,136 | $ | 0 | |||||||||||||||
| Commercial mortgage loans, held for sale, measured at fair value | 67,649 | 0 | 0 | 67,649 | |||||||||||||||||||
| Other real estate investments, measured at fair value | 2,522 | 0 | 0 | 2,522 | |||||||||||||||||||
| Interest rate swaps | 25 | 0 | 25 | 0 | |||||||||||||||||||
| Total assets, at fair value | $ | 241,332 | $ | 0 | $ | 171,161 | $ | 70,171 | |||||||||||||||
| Liabilities, at fair value | |||||||||||||||||||||||
| Credit default swaps | $ | 297 | $ | 0 | $ | 297 | $ | 0 | |||||||||||||||
| Treasury note futures | 106 | 106 | 0 | 0 | |||||||||||||||||||
| Total liabilities, at fair value | $ | 403 | $ | 106 | $ | 297 | $ | 0 | |||||||||||||||
39
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Asset Category | Fair Value | Valuation Methodologies | Unobservable Inputs (1) | Weighted Average (2) | Range | ||||||||||||||||||||||||
| March 31, 2021 | |||||||||||||||||||||||||||||
| Commercial mortgage loans, held for sale, measured at fair value | $ | 93,117 | Discounted Cash Flow | Yield | 3.8% | 3.2% - 17.6% | |||||||||||||||||||||||
| Other real estate investments, measured at fair value | 2,528 | Discounted Cash Flow | Yield | 13.2% | 12.2% - 14.2% | ||||||||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||||||||
| Commercial mortgage loans, held for sale, measured at fair value | $ | 67,649 | Discounted Cash Flow | Yield | 16.6% | 15.6% - 17.6% | |||||||||||||||||||||||
| Other real estate investments, measured at fair value | 2,522 | Discounted Cash Flow | Yield | 13.2% | 12.2% - 14.2% | ||||||||||||||||||||||||
| September 30, 2017 | Asset Category | Fair Value September 30, 2017 (in thousands) | Valuation Methodologies | Unobservable Inputs (1) | Weighted Average (2) | Range | |
| Commercial mortgage loans, held-for-sale, measured at fair value | $60,950 | Discounted Cash Flow | Yield | 4.39 | % | 4.21%-4.87% | |
(1) In determining certain of these inputs, the Company evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. The Company has determined that market participants would take these inputs into account when valuing the investments.
(2) Inputs were weighted based on the fair value of the investments included in the range.
Increases or decreases in any of the above unobservable inputs in isolation would result in a lower or higher fair value measurement for such assets.
40
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents additional information about the Company’s financial instruments which are measured at fair value on a recurring basis as of September 30, 2017March 31, 2021 and December 31, 20162020 for which the Company has used Level III inputs to determine fair value (in(dollars in thousands):
| March 31, 2021 | ||||||||||||||
| Commercial Mortgage Loans, held for sale, measured at fair value | Other Real Estate Investments, measured at fair value | |||||||||||||
| Beginning balance, January 1, 2021 | $ | 67,649 | $ | 2,522 | ||||||||||
Transfers into Level III (2) | 0 | 0 | ||||||||||||
| Total realized and unrealized gain/(loss) included in earnings: | ||||||||||||||
| Realized gain/(loss) on sale of commercial mortgage loan, held for sale | 6,630 | 0 | ||||||||||||
| Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments | 479 | 6 | ||||||||||||
| Net accretion | 0 | 0 | ||||||||||||
| Purchases | 166,360 | 0 | ||||||||||||
| Sales / paydowns | (148,001) | 0 | ||||||||||||
Transfers out of Level III (2) | 0 | 0 | ||||||||||||
| Ending Balance, March 31, 2021 | $ | 93,117 | $ | 2,528 | ||||||||||
| December 31, 2020 | ||||||||||||||
| Commercial Mortgage Loans, held for sale, measured at fair value | Other Real Estate Investments, measured at fair value | |||||||||||||
| Beginning balance, January 1, 2020 | $ | 112,562 | $ | 2,557 | ||||||||||
Transfers into Level III (2) | 23,625 | 0 | ||||||||||||
| Total realized and unrealized gain/(loss) included in earnings: | ||||||||||||||
| Realized gain/(loss) on sale of commercial mortgage loan, held for sale | 15,931 | 0 | ||||||||||||
| Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments | (75) | (32) | ||||||||||||
| Net accretion | 0 | (3) | ||||||||||||
Purchases(1) | 267,552 | 0 | ||||||||||||
Sales / paydowns (1) | (328,321) | 0 | ||||||||||||
Transfers out of Level III (2) | (23,625) | 0 | ||||||||||||
| Ending Balance, December 31, 2020 | $ | 67,649 | $ | 2,522 | ||||||||||
| September 30, 2017 | ||||||||
| Commercial Mortgage Loans, held-for-sale, measured at fair value | Real Estate Securities | |||||||
| Beginning balance, January 1, 2017 | $ | — | $ | 49,049 | ||||
| Transfers into Level III | — | |||||||
| Total realized and unrealized gains (losses) included in earnings: | ||||||||
| Realized gain (loss) on sale of real estate securities | — | 172 | ||||||
| Impairment losses on real estate securities | — | |||||||
| Net accretion | — | 167 | ||||||
Unrealized gains (losses) included in OCI (1) | — | 500 | ||||||
| Purchases | 60,950 | — | ||||||
| Sales / paydown | — | (49,888 | ) | |||||
| Cash repayments/receipts | — | — | ||||||
| Transfers out of Level III | — | — | ||||||
| Ending balance, September 30, 2017 | $ | 60,950 | $ | — | ||||
| December 31, 2016 | ||||||||
| Commercial Mortgage Loans, held-for-sale, measured at fair value | Real Estate Securities | |||||||
| Beginning balance, January 1, 2016 | $ | — | $ | — | ||||
| Transfers into Level III | — | 57,639 | ||||||
| Total realized and unrealized gains (losses) included in earnings: | ||||||||
| Realized gain (loss) on sale of real estate securities | — | (874 | ) | |||||
| Impairment losses on real estate securities | — | (310 | ) | |||||
| Net accretion | — | — | ||||||
| Unrealized gains (losses) included in OCI | — | 1,719 | ||||||
| Purchases | — | — | ||||||
| Sales/paydown | — | (9,125 | ) | |||||
| Cash repayments/receipts | — | — | ||||||
| Transfers out of Level III | — | — | ||||||
| Ending balance, December 31, 2016 | $ | — | $ | 49,049 | ||||
(1) - Unrealized gains included Excluded from Purchases and Sales/paydowns are $679.1 million and $682.0 million, respectively, of loans that collateralize a CMBS investment required to be consolidated in Other comprehensive income ("OCI") are attributable to assets held atconnection with the Company's retention of the B tranche during the year ended December 31, 2016.2020. Upon disposition of the B tranche during the year ended December 31, 2020, the Company recognized a gain of $2.8 million that is recorded in Realized gain/loss on sale of real estate securities on the consolidated statements of operations.
(2) Transfers in and transfers out include transfers between Commercial mortgage loans, held-for-sale and Commercial mortgage loans, held for investment.
41
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Total | Level I | Level II | Level III | ||||||||||||
| September 30, 2017 | |||||||||||||||
Commercial mortgage loans, held-for-sale (1) | $ | 33,451 | $ | — | $ | — | $ | 33,451 | |||||||
| December 31, 2016 | |||||||||||||||
Commercial mortgage loans, held-for-sale (1) | 21,179 | — | — | 21,179 | |||||||||||
| ($ in thousands) | Asset Category | Fair Value September 30, 2017 | Valuation Methodologies | Unobservable Inputs (1) | Weighted Average (2) | Range | |||
| September 30, 2017 | Commercial mortgage loans, held-for-sale | $ | 33,451 | Discounted Cash Flow | Yield | 10.18 | % | 10% - 13% | |
| December 31, 2016 | Commercial mortgage loans, held-for-sale | $ | 21,179 | Discounted Cash Flow | Yield | 10.80 | % | 10.5% - 11% | |
The fair value of cash and cash equivalents and restricted cash are measured using observable quoted market prices, or Level I inputs and their carrying value approximates their fair value. The fair value of borrowings under repurchase agreements approximate their carrying value on the consolidated balance sheets due to their short-term nature, and are measured using Level II inputs.
Financial Instruments Not Measured at Fair Value
The fair values of the Company's commercial mortgage loans, held-for-investmentheld for investment and collateralized loan obligations, which are not reported at fair value on the consolidated balance sheets are reported below as of September 30, 2017March 31, 2021 and December 31, 2016 (in2020 (dollars in thousands):
| Level | Carrying Amount (1) | Fair Value | |||||||||||||||||||||
| March 31, 2021 | |||||||||||||||||||||||
Commercial mortgage loans, held for investment (1) | Asset | III | $ | 3,028,698 | $ | 3,050,417 | |||||||||||||||||
| Collateralized loan obligations | Liability | III | 2,075,611 | 2,090,873 | |||||||||||||||||||
| Mortgage note payable | Liability | III | 29,167 | 29,167 | |||||||||||||||||||
| Other financing and loan participation - commercial mortgage loans | Liability | III | 34,017 | 34,017 | |||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||
Commercial mortgage loans, held for investment (1) | Asset | III | $ | 2,714,734 | $ | 2,724,039 | |||||||||||||||||
| Collateralized loan obligation | Liability | III | 1,625,498 | 1,606,478 | |||||||||||||||||||
| Mortgage note payable | Liability | III | 29,167 | 29,167 | |||||||||||||||||||
| Other financing and loan participation - commercial mortgage loans | Liability | III | 31,379 | 31,379 | |||||||||||||||||||
| Level | Carrying Amount | Fair Value | |||||||||
| September 30, 2017 | |||||||||||
Commercial mortgage loans, held-for-investment (1) | Asset | III | $ | 1,287,065 | $ | 1,281,114 | |||||
| Collateralized loan obligation | Liability | II | 515,500 | 583,046 | |||||||
| December 31, 2016 | |||||||||||
Commercial mortgage loans, held-for-investment (1) | Asset | III | 1,048,737 | 1,029,756 | |||||||
| Collateralized loan obligation | Liability | II | 278,450 | 282,001 | |||||||
The fair value of the commercial mortgage loans, held for investment is estimated using a discounted cash flow analysis, based on the Advisor's experience with similar types of investments. The Company received broker quotes for each trancheestimates the fair value of the CLOs issued in 2015collateralized loan obligations using external broker quotes. The fair value of the other financing and 2017.
loan participation-commercial mortgage loans is generally estimated using a discounted cash flow analysis. At March 31, 2021, the Mortgage note payable was initially recorded at transaction proceeds, which are considered to be the best initial estimate of fair value.
42
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1113 - Derivative Instruments
The Company uses derivative instruments primarily to economically manage the fair value variability of fixed rate assets caused by interest rate fluctuations and overall portfolio market risk.
As of September 30, 2017,March 31, 2021, the net premiums received on derivative instrument assets were $0.6$3.0 million.
The following derivative instruments were outstanding as of September 30, 2017 ($March 31, 2021 and December 31, 2020 (dollars in thousands):
| Fair Value | |||||||||||||||
| Contract type | Notional | Assets (1) | Liabilities (1) | Net | |||||||||||
| Credit derivatives | $ | 66,000 | $ | 206 | $ | 1,003 | $ | (797 | ) | ||||||
| Treasury note futures | 69,676 | 754 | — | 754 | |||||||||||
| Total | $ | 135,676 | $ | 960 | $ | 1,003 | $ | (43 | ) | ||||||
| (1) Shown as derivative instruments, at fair value, in the accompanying consolidated balance sheets. | |||||||||||||||
| Fair Value | ||||||||||||||||||||
| Contract type | Notional | Assets | Liabilities | |||||||||||||||||
| March 31, 2021 | ||||||||||||||||||||
| Credit default swaps | $ | 92,000 | $ | 0 | $ | 1,105 | ||||||||||||||
| Interest rate swaps | 40,453 | 889 | 0 | |||||||||||||||||
| Treasury note futures | 53,000 | 974 | 0 | |||||||||||||||||
| Total | $ | 185,453 | $ | 1,863 | $ | 1,105 | ||||||||||||||
| December 31, 2020 | ||||||||||||||||||||
| Credit default swaps | $ | 46,000 | $ | 0 | $ | 297 | ||||||||||||||
| Interest rate swaps | 32,517 | 25 | 0 | |||||||||||||||||
| Treasury note futures | 43,500 | 0 | 106 | |||||||||||||||||
| Total | $ | 122,017 | $ | 25 | $ | 403 | ||||||||||||||
The following tablestable indicates the net realized and unrealized gains and losses on derivatives, by primary underlying risk exposure, as included in loss on derivative instruments in the consolidated statements of operations for the three and nine months ended September 30, 2017. The Company did not have any net realizedMarch 31, 2021 and unrealized gain or loss on derivatives during the three and nine months ended September 30, 2016.March 31, 2020:
| Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||
| Contract type | Unrealized (Gain)/Loss | Realized (Gain)/Loss | ||||||||||||||||||||||||
| Credit default swaps | $ | (163) | $ | 455 | ||||||||||||||||||||||
| Interest rate swaps | (865) | (921) | ||||||||||||||||||||||||
| Treasury note futures | (1,081) | (1,512) | ||||||||||||||||||||||||
| Total | $ | (2,109) | $ | (1,978) | ||||||||||||||||||||||
| Three Months Ended March 31, 2020 | ||||||||||||||||||||||||||
| Contract type | Unrealized (Gain)/Loss | Realized (Gain)/Loss | ||||||||||||||||||||||||
| Credit default swaps | $ | (1,752) | $ | 61 | ||||||||||||||||||||||
| Interest rate swaps | 4,340 | 2,946 | ||||||||||||||||||||||||
| Treasury note futures | 2,248 | 3,627 | ||||||||||||||||||||||||
| Options | 0 | 35 | ||||||||||||||||||||||||
| Total | $ | 4,836 | $ | 6,669 | ||||||||||||||||||||||
43
| Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | ||||||||||||||||||||||
Unrealized Gain (Loss) | Realized Gain (Loss) | Total | Unrealized Gain (Loss) | Realized Gain (Loss) | Total | ||||||||||||||||||
| Contract type | |||||||||||||||||||||||
| Credit derivatives | $ | (171 | ) | $ | (18 | ) | $ | (189 | ) | $ | (171 | ) | $ | (18 | ) | $ | (189 | ) | |||||
| Treasury note futures | 754 | — | 754 | 754 | — | 754 | |||||||||||||||||
| Total | $ | 583 | $ | (18 | ) | $ | 565 | $ | 583 | $ | (18 | ) | $ | 565 | |||||||||
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1214 - Offsetting Assets and Liabilities
The Company's consolidated balance sheets usesused a gross presentation of derivatives and repurchase agreements and collateral pledged. Master netting agreements that the Company has entered into with its derivative and repurchase agreement counterparties allow for netting of the same transaction, in the same currency, on the same date. Assets, liabilities, and collateral subject to master netting agreements as of September 30, 2017 and December 31, 2016 are disclosed in the tables above. The Company does not present its derivative and repurchase agreements net on the consolidated balance sheets as it has elected gross presentation.
The table below provides a gross presentation, the effects of offsetting and a net presentation of the Company's derivative instruments and repurchase agreements and derivatives within the scope of ASC 210-20, Balance Sheet—Offsetting, as of September 30, 2017March 31, 2021 and December 31, 2016, (in2020 (dollars in thousands):
| Gross Amounts Not Offset on the Balance Sheet | ||||||||||||||||||||||||||||||||||||||
| Assets | Gross Amounts of Recognized Assets | Gross Amounts Offset on the Balance Sheet | Net Amount of Assets Presented on the Balance Sheet | Financial Instruments | Cash Collateral (1) | Net Amount | ||||||||||||||||||||||||||||||||
| March 31, 2021 | ||||||||||||||||||||||||||||||||||||||
| Derivative instruments, at fair value | $ | 1,863 | $ | 0 | $ | 1,863 | $ | 0 | $ | 0 | $ | 1,863 | ||||||||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||||||||||||||||||||
| Derivative instruments, at fair value | $ | 25 | $ | 0 | $ | 25 | $ | 0 | $ | 0 | $ | 25 | ||||||||||||||||||||||||||
| Gross Amounts Not Offset on the Balance Sheet | |||||||||||||||||||||||||||||
| Gross Amounts of Recognized Assets | Gross Amounts Offset in the Balance Sheet | Net Amount of Assets Presented in the Balance Sheet | Financial Instruments | Cash Collateral Received | Net Amount | ||||||||||||||||||||||||
| September 30, 2017 | |||||||||||||||||||||||||||||
| Derivatives | $ | 960 | $ | — | $ | 960 | $ | — | $ | — | $ | 960 | |||||||||||||||||
| Total | $ | 960 | $ | — | $ | 960 | $ | — | $ | — | $ | 960 | |||||||||||||||||
| Gross Amounts Not Offset on the Balance Sheet | |||||||||||||||||||||||||||||
| Gross Amounts of Recognized Liabilities | Gross Amounts Offset on the Balance Sheet | Net Amount of Liabilities Presented on the Balance Sheet | Financial Instruments as Collateral Pledged (*) | Cash Collateral Pledged | Net Amount | ||||||||||||||||||||||||
| September 30, 2017 | |||||||||||||||||||||||||||||
| Repurchase agreements, commercial mortgage loans | $ | 319,385 | $ | — | $ | 319,385 | $ | 553,364 | $ | 5,005 | $ | — | |||||||||||||||||
| Repurchase agreements - real estate securities | 39,035 | — | 39,035 | 55,764 | 389 | — | |||||||||||||||||||||||
| Derivatives | 1,003 | — | 1,003 | — | 1,436 | — | |||||||||||||||||||||||
| Total | $ | 359,423 | — | $ | — | $ | 359,423 | $ | 609,128 | — | $ | 6,830 | — | $ | — | ||||||||||||||
| Gross Amounts Not Offset on the Balance Sheet | |||||||||||||||||||||||||||||
| December 31, 2016 | Gross Amounts of Recognized Liabilities | Gross Amounts Offset on the Balance Sheet | Net Amount of Liabilities Presented on the Balance Sheet | Financial Instruments as Collateral Pledged (*) | Cash Collateral Pledged | Net Amount | |||||||||||||||||||||||
| Repurchase agreements, commercial mortgage loans | $ | 257,664 | $ | — | $ | 257,664 | $ | 399,914 | $ | 5,000 | $ | — | |||||||||||||||||
| Real estate securities | 66,639 | — | 66,639 | 102,358 | 21 | — | |||||||||||||||||||||||
| Total | $ | 324,303 | — | $ | — | — | $ | 324,303 | — | $ | 502,272 | — | $ | 5,021 | — | $ | — | ||||||||||||
| Gross Amounts Not Offset on the Balance Sheet | ||||||||||||||||||||||||||||||||||||||
| Liabilities | Gross Amounts of Recognized Liabilities | Gross Amounts Offset on the Balance Sheet | Net Amount of Liabilities Presented on the Balance Sheet | Financial Instruments | Cash Collateral (1) | Net Amount | ||||||||||||||||||||||||||||||||
| March 31, 2021 | ||||||||||||||||||||||||||||||||||||||
| Repurchase agreements - commercial mortgage loans | $ | 152,925 | $ | 0 | $ | 152,925 | $ | 315,991 | $ | 5,016 | $ | 0 | ||||||||||||||||||||||||||
| Repurchase agreements - real estate securities | 88,272 | 0 | 88,272 | 114,490 | 0 | 0 | ||||||||||||||||||||||||||||||||
| Derivative instruments, at fair value | 1,105 | 0 | 1,105 | 0 | 6,058 | 0 | ||||||||||||||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||||||||||||||||||||
| Repurchase agreements - commercial mortgage loans | $ | 276,340 | $ | 0 | $ | 276,340 | $ | 496,030 | $ | 5,016 | $ | 0 | ||||||||||||||||||||||||||
| Repurchase agreements - real estate securities | 186,828 | 0 | 186,828 | 245,956 | 1,146 | 0 | ||||||||||||||||||||||||||||||||
| Derivative instruments, at fair value | 403 | 0 | 403 | 0 | 3,435 | 0 | ||||||||||||||||||||||||||||||||
44
BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2016, respectively.2021
Note 1315 - Segment Reporting
The Company has determined that it has three reportable segments based on howconducts its business through the chief operating decision maker reviews and manages the business. The threefollowing reporting segments are as follows:segments:
•The real estate debt business which is focusedfocuses on originating, acquiring and asset managing commercial real estate debt investments, including first mortgage loans, subordinate mortgages, mezzanine loans and participations in such loans.
•The real estate securities business focuses on investing in and asset managing commercial real estate securities primarily consisting of CMBS and may include unsecured REIT debt, CDO notes and other securities.
•The commercial real estate conduit business operated through the Company's TRS, which is focused on generating superior risk-adjusted returns by originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market at a profit.
•The real estate owned business represents real estate acquired by the Company performed a recastthrough foreclosure, deed in lieu of its results of operations for the TRS, a new line of business, and determined there to be no material changes.foreclosure, or purchase.
The following table represents the Company's operations by segment for the three months ended September 30, 2017March 31, 2021 and 2016 (inMarch 31, 2020 (dollars in thousands):
| Three Months Ended September 30, 2017 | Total | Real Estate Debt | Real Estate Securities | TRS | ||||||||||||
| Interest income | $ | 22,195 | $ | 21,795 | $ | 269 | $ | 131 | ||||||||
| Interest expense | 8,845 | 8,386 | 409 | 50 | ||||||||||||
| Net income (loss) | 6,975 | 7,588 | (22 | ) | (591 | ) | ||||||||||
| Three Months Ended September 30, 2016 | ||||||||||||||||
| Interest income | 20,250 | 18,682 | 1,568 | — | ||||||||||||
| Interest expense | 7,317 | 6,642 | 675 | — | ||||||||||||
| Net income | 5,373 | 5,265 | 108 | — | ||||||||||||
| Nine Months Ended September 30, 2017 | Total | Real Estate Debt | Real Estate Securities | TRS | ||||||||||||
| Interest income | $ | 61,917 | $ | 60,435 | $ | 1,351 | $ | 131 | ||||||||
| Interest expense | 21,990 | 20,686 | 1,254 | 50 | ||||||||||||
| Net income | 19,305 | 19,627 | 269 | (591 | ) | |||||||||||
| Nine Months Ended September 30, 2016 | ||||||||||||||||
| Interest income | 60,763 | 55,973 | 4,790 | — | ||||||||||||
| Interest expense | 17,478 | 15,443 | 2,035 | — | ||||||||||||
| Net income | 23,653 | 22,775 | 878 | — | ||||||||||||
| As of September 30, 2017 | Total | Real Estate Debt | Real Estate Securities | Conduit | ||||||||||||
| Total Assets | $ | 1,521,102 | $ | 1,437,630 | $ | 389 | $ | 83,083 | ||||||||
| As of December 31, 2016 | ||||||||||||||||
| Total Assets | 1,248,125 | 1,198,806 | 49,319 | — | ||||||||||||
| Three months ended March 31, 2021 | Total | Real Estate Debt and Other Real Estate Investments | Real Estate Securities | TRS | Real Estate Owned | |||||||||||||||||||||||||||
| Interest income | $ | 42,237 | $ | 40,757 | $ | 424 | $ | 1,056 | $ | 0 | ||||||||||||||||||||||
| Revenue from real estate owned | 716 | 0 | 0 | 0 | 716 | |||||||||||||||||||||||||||
| Interest expense | 11,369 | 10,574 | 182 | 332 | 281 | |||||||||||||||||||||||||||
| Net income/(loss) | 30,146 | 23,033 | (454) | 7,538 | 29 | |||||||||||||||||||||||||||
| Total assets as of March 31, 2021 | 3,552,693 | 3,346,477 | 19,259 | 106,782 | 80,175 | |||||||||||||||||||||||||||
| Three Months Ended March 31, 2020 | ||||||||||||||||||||||||||||||||
| Interest income | $ | 47,854 | $ | 43,369 | $ | 3,295 | $ | 1,190 | $ | 0 | ||||||||||||||||||||||
| Revenue from real estate owned | 1,629 | 0 | 0 | 0 | 1,629 | |||||||||||||||||||||||||||
| Interest expense | 24,492 | 21,708 | 1,807 | 693 | 284 | |||||||||||||||||||||||||||
| Net income/(loss) | (7,400) | (1,183) | 1,050 | (5,982) | (1,285) | |||||||||||||||||||||||||||
| Total assets as of December 31, 2020 | 3,189,761 | 2,866,790 | 175,088 | 105,364 | 42,519 | |||||||||||||||||||||||||||
For the purposes of the table above, any expenses not associated with a specific segment have been allocated to the business segments using a percentage derived by using the sum of commercial mortgage loans net and real estate securities, at fair valueoriginated during the year as the denominator and commercial mortgage loans, held for investment, net of allowance and real estate securities,commercial mortgage loans, held for sale, measured at fair value as the numerators.numerator.
Note 1416 - Subsequent Events
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Benefit Street Partners Realty Trust, Inc. Thethe notes thereto and other financial information included elsewhere in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 20162020 filed with the U.S. Securities and Exchange Commission (the "SEC") on March 29, 2017.10, 2021.
As used herein, the terms "we," "our" and "us" refer to Benefit Street Partners Realty Trust, Inc., a Maryland corporation, and, as required by context, to Benefit Street Partners Realty Operating Partnership, L.P., a Delaware limited partnership, which we refer to as the "OP," and to its subsidiaries. We are externally managed by Benefit Street Partners L.L.C. (our "Advisor").
The forward-looking statements contained in this Quarterly Report on Form 10-Q may include, but are not limited to, statements as to:
•our business and investment strategy;
•our ability to make investments in a timely manner or on acceptable terms;
•the impact of the COVID-19 pandemic;
•current credit market conditions and our ability to obtain long-term financing for our investments in a timely manner and on terms that are consistent with what we project when we invest;
•the effect of general market, real estate market, economic and political conditions, including the recent economic slowdown and dislocation in the global credit markets;
•our ability to make scheduled payments on our debt obligations;
•our ability to generate sufficient cash flows to make distributions to our stockholders;
•our ability to generate sufficient debt and equity capital to fund additional investments, including through our ability to execute securitization transactions;investments;
•our ability to refinance our existing financing arrangements;
•the degree and nature of our competition;
•the availability of qualified personnel;
•we may be deemed to be an investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and thus subject to regulation under the Investment Company Act;
•our ability to maintain our qualification as a real estate investment trust ("REIT"); and
•other factors set forth under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 20162020 and in Item 1A of Part II of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2017.10-Q.
In addition, words such as "anticipate," "believe," "expect" and "intend" indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason.
Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the continuing adverse effect of the current pandemic of the novel coronavirus, or COVID-19, on the financial condition, operating results and cash flows of the Company, its borrowers, the real estate market, the global economy and the financial markets. The extent to which the COVID-19 pandemic continues to impact us and our borrowers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, including any resurgences, the speed and effectiveness of vaccine and treatment developments and the direct and indirect economic effects of the pandemic and containment measures, among others.
Our investors should not place undue reliance on these forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.
Overview
We were incorporated in Maryland on November 15, 2012 and conducthave conducted our operations to qualify as a REIT for U.S. federal income tax purposes beginning with theour taxable year ended December 31, 2013. In addition, theThe Company, through certain subsidiariesa subsidiary which areis treated as taxable REIT subsidiaries (each a “TRS”),TRS, is indirectly subject to U.S. federal, state and local income taxes. On May 14, 2013, weWe commenced business operations after raising in excess of $2.0 million of equity, the amount required for us to release equity proceeds from escrow.May 2013. We are in business toprimarily originate, acquire and manage a diversified portfolio of commercial real estate debt investments secured by properties located both within and outside of the United States. We may also invest in commercial real estate securities. Commercial real estate debt investments may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. Commercial real estate securities may include commercial mortgage-backed securities ("CMBS") , senior unsecured debtSubstantially all of publicly traded REITs, debtour business is conducted through the OP, a Delaware limited partnership. We are the sole general partner and directly or equity securitiesindirectly hold all of other publicly traded real estate companies and CDOs. the units of limited partner interests in the OP.
46
The Company also originates conduit loans which the Company intends to sell through its TRS into CMBS securitization transactions at a profit.
The Advisor, an SEC-registered investment adviser, is a credit-focused alternative asset management firm. The Advisor manages assetsfunds for institutions and high-net-worth investors across a broad range ofvarious credit funds and complementary credit strategies including high yield, levered loans, private/private / opportunistic debt, liquid credit, structured credit and commercial real estate debt. These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass the Advisor’s robust platform. On February 1, 2019, Franklin Resources, Inc. and Templeton International, Inc. (collectively, “Franklin Templeton”) acquired the Advisor (the “Transaction”). The Advisor is affiliated with Providence Equity Partners L.L.C.Transaction did not impact the terms of the Advisory Agreement and the Transaction did not result in any changes to the executive officers of the Company.
The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. The Company also originates conduit loans which the Company intends to sell through its TRS into CMBS securitization transactions at a profit. The Company also owns real estate, which represents real estate acquired by the Company through foreclosure, deed in lieu of foreclosure, or purchase.
The Company also invests in commercial real estate securities. Real estate securities may include CMBS, senior unsecured debt of publicly traded REITs, debt or equity securities of other publicly traded real estate companies and CDOs.
Estimated Per Share NAV
On November 9, 2017,2, 2020, our board of directors, upon the recommendation of the Audit Committee of the board, unanimously approved and established anthe estimated per share net asset value (“NAV”("NAV") per share of $19.02.the Company’s common stock proposed by the Advisor of$17.88. The estimated per share NAV iswas based upon the estimated value of ourthe Company’s assets less ourthe Company’s liabilities as of September 30, 20172020 (the “Valuation Date”). ThisThe valuation was performed in accordance with the provisions of Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Investment Program Association in April 2013. We believe that there have been no material changes between2013, including the Valuation Date and the dateuse of this filing that would impact the estimated per share NAV.
These valuation firmfirms estimated the value of our loan portfolio by applyingusing customary valuation methods, including a discounted cash flow analysis with respect to eachour loan portfolio, available market pricing information with respect to determineour securities portfolio, and real estate appraisals with respect to our real estate owned portfolio. Based on these methodologies these firms determined a range of estimated valuations. To estimate the Company’s NAV, the Advisor adjusted the loan portfolio valuation prepared by the valuation advisor by addingadded the amounts of cash and other tangible assets reflected on our balance sheet (as computed in accordance with GAAP) and subtractingsubtracted our liabilities as reflected on our balance sheet (computed in accordance with GAAP). Based in part on these valuation ranges,this the Advisor estimated that the Company’s NAV as of September 30, 2017 ranged from $18.562020 is $17.88 which is the midpoint of the valuation range of $17.14 to $19.49, with a midpoint estimated NAV of $19.02 (the “Midpoint Valuation”). $18.62.
The Advisor recommended our board of directors approve the Midpoint Valuation as our estimated per share NAV.NAV of $17.88. As with any methodology used to estimate value, the methodologies employed to estimate the NAV were based upon a number of estimates and assumptions that may not be accurate or complete. If different judgments, assumptions or opinions were used, a different estimate would likely result.
We believe that the method used to determine the estimated per share NAV of the Company’s common stock is the methodology most commonly used by public, non-listed REITs to estimate per share NAV. The estimated per share NAV does not represent the per share amount a third party would pay to acquire us, or the price at which our common stock would trade in the event we were listed on a national securities exchange. For example, the estimated per share NAV of the Company’s common stock does not reflect a liquidity discount for the fact that the shares are not currently traded on a national securities exchange and other costs that may be incurred in connection with a liquidity event. Our estimated per share NAV does not reflect the conversion of any of our Series A convertible preferred stock ("Series A Preferred Stock"), Series C convertible preferred stock (“Series C Preferred Stock”) or Series D convertible preferred stock (“Series D Preferred Stock” and with the Series A Preferred Stock and Series C Preferred Stock, the “Preferred Stock”).
The estimated per share NAV was determined at a moment in time and as of the Valuation Date and the values of our assets and liabilities will change over time as a result of changes relating to the individual loans in our portfolio as well as changes and developments in the real estate and capital markets generally, including changes in interest rates. StockholdersFor example, material adverse developments in the real estate or credit markets related to the COVID-19 pandemic after September 30, 2020 would have a significant impact on our estimated per share NAV. Therefore, stockholders should not rely on the estimated per share NAV in making a decision to buy or sell shares of our common stock.
Significant Accounting Policies and Use of Estimates
A summary of our significant accounting policies is set forth in Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included in this Quarterly Report on Form 10-Q. A full disclosure of our significant accounting polices is disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.2020.
Portfolio
As of September 30, 2017March 31, 2021 and December 31, 2016,2020, our portfolio consisted of 73146 and 71130 commercial mortgage loans, respectively, excluding commercial mortgage loans accounted for under the fair value option, and 0 and 6 investments in CMBS, respectively.option. The commercial mortgage loans, held for investment as of March 31, 2021 and December 31, 2020 had a total carrying value, net of allowance for loancredit losses, of $1,285.1$3,010.1 million and $1,046.6 million.$2,693.8 million, respectively. As of September 30, 2017March 31, 2021 and December 31, 2016, the Company's2020, our total commercial mortgage loans, held for sale, measured at fair value comprised of 410 loans with total fair value of $93.1 million and 03 loans with total fair value of $67.6 million, respectively. As of September 30, 2017March 31, 2021 and December 31, 2016, the Company's2020, our real estate securities, available for sale, at fair value were comprised of one CMBS investment with total CMBS investments had a fair value of $0.0$18.9 million and $49.0nine CMBS investments with total fair value of $171.1 million, respectively. For our commercial mortgage loans, excluding commercial mortgage loans accounted for under the fair value option, we currently estimate loss rates based on historical realized losses experienced in the industry and take into account current collateral and economic conditions affecting the probability or severityAs of losses when establishing the allowance for loan losses. We recorded a general allowance for loan losses as of September 30, 2017March 31, 2021 and December 31, 2016 in2020, our other real estate investments, measured at fair value, were comprised of one investment with a total fair value of $2.5 million. As of March 31, 2021, our real estate owned portfolio comprised of two investments with a carrying value of $63.8 million. As of December 31, 2020, our real estate owned portfolio was comprised of one investment with a carrying value of $26.5 million.
As of March 31, 2021, we had one loan with unpaid contractual principal balance for a total carrying value of $57.1 million that had interest past due for greater than 90 days. We did not take any asset specific reserves for this loan. As of December 31, 2020, we had two loans with unpaid contractual principal balance and carrying value of $94.9 million, one with interest past due for greater than 90 days and the amountother with interest past due greater than 30 days.
As of $2.0 million and $2.2 million, respectively. There were no impaired or specifically reserved loans in the portfolio as of September 30, 2017March 31, 2021 and December 31, 2016.
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The following charts summarize our commercial mortgage loans, excluding commercial mortgage loans, held-for-sale, measured at fair value and CMBS as a percentage of par value,held for investment, by the collateral type, geographical region and coupon rate type, collateral type and geographical region as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
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50
An investments region classification is defined according to the below map below based on the location of investments'investments secured property.
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The following charts showshow the par value by contractual maturity year for the commercial mortgage loans held-for-investmentheld for investments in our portfolio excluding loans held in our TRS segment as of September 30, 2017March 31, 2021 and December 31, 2016.2020:
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The following table shows selected data from our commercial mortgage loans, portfolio, excluding commercial mortgage loans accountedheld for under the fair value optioninvestment in our portfolio as of September 30, 2017 (inMarch 31, 2021 (dollars in thousands):
| Loan Type | Property Type | Par Value | Interest Rate (1) | Effective Yield | Loan to Value (2) | ||||||||||||
| Senior Debt 1 | Office | $5,000 | 1 month LIBOR + 11.80% | 12.0% | 60.0% | ||||||||||||
| Senior Debt 2 | Office | 26,724 | 1 month LIBOR + 4.15% | 5.4% | 69.5% | ||||||||||||
| Senior Debt 3 | Hospitality | 10,400 | 1 month LIBOR + 6.25% | 6.5% | 61.6% | ||||||||||||
| Senior Debt 4 | Hospitality | 5,885 | 1 month LIBOR + 3.50% | 4.5% | 77.0% | ||||||||||||
| Senior Debt 5 | Hospitality | 57,075 | 1 month LIBOR + 5.19% | 6.2% | 51.8% | ||||||||||||
| Senior Debt 6 | Multifamily | 81,697 | 1 month LIBOR + 4.50% | 5.5% | 22.4% | ||||||||||||
| Senior Debt 7 | Hospitality | 9,450 | 1 month LIBOR + 7.00% | 7.5% | 60.7% | ||||||||||||
| Senior Debt 8 | Hospitality | 22,150 | 1 month LIBOR + 6.00% | 6.5% | 48.1% | ||||||||||||
| Senior Debt 9 | Office | 22,985 | 1 month LIBOR + 5.15% | 6.6% | 56.4% | ||||||||||||
| Senior Debt 10 | Multifamily | 37,987 | 1 month LIBOR + 3.00% | 3.8% | 63.7% | ||||||||||||
| Senior Debt 11 | Hospitality | 28,272 | 1 month LIBOR + 4.00% | 5.3% | 68.0% | ||||||||||||
| Senior Debt 12 | Hospitality | 22,700 | 1 month LIBOR + 4.40% | 5.0% | 72.7% | ||||||||||||
| Senior Debt 13 | Multifamily | 36,115 | 1 month LIBOR + 3.00% | 4.5% | 83.6% | ||||||||||||
| Senior Debt 14 | Self-Storage | 3,851 | 1 month LIBOR + 4.05% | 5.0% | 45.5% | ||||||||||||
| Senior Debt 15 | Self-Storage | 6,496 | 1 month LIBOR + 4.05% | 5.1% | 55.8% | ||||||||||||
| Senior Debt 16 | Self-Storage | 7,606 | 1 month LIBOR + 4.05% | 5.1% | 57.6% | ||||||||||||
| Senior Debt 17 | Self-Storage | 2,400 | 1 month LIBOR + 4.05% | 5.0% | 37.6% | ||||||||||||
| Senior Debt 18 | Self-Storage | 6,310 | 1 month LIBOR + 5.05% | 5.2% | 59.1% | ||||||||||||
| Senior Debt 19 | Hospitality | 22,355 | 1 month LIBOR + 3.50% | 4.8% | 68.8% | ||||||||||||
| Senior Debt 20 | Mixed Use | 63,815 | 1 month LIBOR + 4.87% | 5.3% | 49.0% | ||||||||||||
| Senior Debt 21 | Office | 21,100 | 1 month LIBOR + 3.75% | 5.8% | 70.0% | ||||||||||||
| Senior Debt 22 | Self-Storage | 6,299 | 1 month LIBOR + 6.00% | 7.8% | 58.9% | ||||||||||||
| Senior Debt 23 | Office | 16,290 | 1 month LIBOR + 3.40% | 5.3% | 67.5% | ||||||||||||
| Senior Debt 24 | Retail | 29,500 | 6.25% | 6.3% | 68.5% | ||||||||||||
| Senior Debt 25 | Self-Storage | 11,966 | 1 month LIBOR + 5.50% | 7.3% | 68.1% | ||||||||||||
| Senior Debt 26 | Multifamily | 23,828 | 1 month LIBOR + 3.40% | 5.0% | 80.5% | ||||||||||||
| Senior Debt 27 | Multifamily | 29,773 | 1 month LIBOR + 3.35% | 5.3% | 73.0% | ||||||||||||
| Senior Debt 28 | Land | 16,400 | 1 month LIBOR + 6.00% | 8.3% | 45.7% | ||||||||||||
| Senior Debt 29 | Hospitality | 8,523 | 1 month LIBOR + 4.80% | 6.8% | 62.5% | ||||||||||||
| Senior Debt 30 | Multifamily | 18,382 | 1 month LIBOR + 5.70% | 7.5% | 70.7% | ||||||||||||
| Senior Debt 31 | Office | 7,193 | 1 month LIBOR + 3.90% | 6.0% | 67.6% | ||||||||||||
| Senior Debt 32 | Manufactured Housing | 10,175 | 1 month LIBOR + 4.40% | 6.5% | 60.3% | ||||||||||||
| Senior Debt 33 | Hospitality | 14,000 | 1 month LIBOR + 4.47% | 6.7% | 44.8% | ||||||||||||
| Senior Debt 34 | Retail | 14,250 | 1 month LIBOR + 3.95% | 6.5% | 61.2% | ||||||||||||
| Senior Debt 35 | Hospitality | 21,000 | 1 month LIBOR + 4.14% | 6.6% | 56.0% | ||||||||||||
| Senior Debt 36 | Multifamily | 25,404 | 1 month LIBOR + 3.10% | 5.4% | 73.1% | ||||||||||||
| Senior Debt 37 | Multifamily | 38,802 | 1 month LIBOR + 3.10% | 5.4% | 73.4% | ||||||||||||
| Senior Debt 38 | Office | 42,631 | 1 month LIBOR + 3.50% | 5.8% | 71.0% | ||||||||||||
| Senior Debt 39 | Retail | 8,500 | 1 month LIBOR + 7.50% | 7.6% | 51.6% | ||||||||||||
| Senior Debt 40 | Hospitality | 10,580 | 1 month LIBOR + 4.50% | 6.8% | 68.7% | ||||||||||||
| Senior Debt 41 | Multifamily | 18,100 | 1 month LIBOR + 3.40% | 5.4% | 76.4% | ||||||||||||
| Senior Debt 42 | Hospitality | 19,900 | 1 month LIBOR + 4.15% | 6.5% | 61.8% | ||||||||||||
| Senior Debt 43 | Multifamily | 18,759 | 1 month LIBOR + 3.10% | 5.5% | 67.4% | ||||||||||||
| Senior Debt 44 | Office | 34,400 | 1 month LIBOR + 4.01% | 6.3% | 68.2% | ||||||||||||
| Senior Debt 45 | Hospitality | 20,930 | 1 month LIBOR + 3.75% | 6.1% | 62.6% | ||||||||||||
| Senior Debt 46 | Hospitality | 15,500 | 1 month LIBOR + 4.00% | 6.5% | 56.4% | ||||||||||||
| Senior Debt 47 | Hospitality | 4,988 | 1 month LIBOR + 4.25% | 6.5% | 47.7% | ||||||||||||
| Senior Debt 48 | Hospitality | 12,750 | 1 month LIBOR + 4.45% | 6.9% | 62.9% | ||||||||||||
| Senior Debt 49 | Hospitality | 10,706 | 1 month LIBOR + 4.50% | 6.9% | 64.0% | ||||||||||||
| Senior Debt 50 | Retail | 9,400 | 1 month LIBOR + 4.20% | 6.3% | 77.1% | ||||||||||||
| Senior Debt 51 | Manufactured Housing | 12,200 | 1 month LIBOR + 3.65% | 5.9% | 48.4% | ||||||||||||
| Senior Debt 52 | Manufactured Housing | 24,100 | 1 month LIBOR + 3.65% | 5.9% | 53.8% | ||||||||||||
| Senior Debt 53 | Multifamily | 23,318 | 1 month LIBOR + 2.65% | 4.8% | 75.8% | ||||||||||||
| Senior Debt 54 | Office | 29,750 | 1 month LIBOR + 3.35% | 5.4% | 54.3% | ||||||||||||
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| Loan Type | Property Type | Par Value | Interest Rate (1) | Effective Yield | Loan to Value (2) |
| Senior 1 | Office | $31,250 | 1M LIBOR + 4.50% | 5.7% | 75.0% |
| Senior 2 | Retail | 9,450 | 1M LIBOR + 4.90% | 6.1% | 69.2% |
| Senior 3 | Hospitality | 4,423 | 1M LIBOR + 5.50% | 6.7% | 55.3% |
| Senior 4 | Retail | 11,800 | 1M LIBOR + 4.75% | 6.0% | 79.4% |
| Senior 5 | Office | 33,734 | 1M LIBOR + 4.65% | 5.9% | 80.0% |
| Senior 6 | Office | 42,481 | 1M LIBOR + 5.25% | 6.5% | 75.0% |
| Senior 7 | Office | 13,440 | 1M LIBOR + 5.00% | 6.2% | 75.0% |
| Senior 8 | Office | 30,450 | 1M LIBOR + 4.60% | 5.8% | 65.0% |
| Senior 9 | Retail | 11,684 | 1M LIBOR + 4.50% | 5.7% | 74.8% |
| Senior 10 | Multifamily | 14,775 | 1M LIBOR + 5.00% | 6.2% | 76.7% |
| Senior 11 | Retail | 10,745 | 1M LIBOR + 5.25% | 6.5% | 80.0% |
| Senior 12 | Hospitality | 16,800 | 1M LIBOR + 4.90% | 6.1% | 74.0% |
| Senior 13 | Multifamily | 26,410 | 1M LIBOR + 4.25% | 5.5% | 79.7% |
| Senior 14 | Multifamily | 14,917 | 1M LIBOR + 4.50% | 5.7% | 76.0% |
| Senior 15 | Retail | 14,600 | 1M LIBOR + 4.25% | 5.5% | 65.0% |
| Senior 16 | Retail | 27,249 | 1M LIBOR + 4.75% | 6.0% | 67.4% |
| Senior 17 | Office | 9,844 | 1M LIBOR + 4.65% | 5.9% | 70.8% |
| Senior 18 | Industrial | 19,553 | 1M LIBOR + 4.25% | 5.5% | 68.0% |
| Senior 19 | Multifamily | 18,941 | 1M LIBOR + 4.20% | 5.4% | 76.4% |
| Senior 20 | Hospitality | 10,350 | 1M LIBOR + 5.50% | 6.7% | 69.9% |
| Senior 21 | Hospitality | 15,375 | 1M LIBOR + 5.30% | 6.5% | 73.5% |
| Senior 22 | Mixed Use | 45,235 | 1M LIBOR + 5.50% | 6.7% | 72.6% |
| Senior 23 | Retail | 7,500 | 1M LIBOR + 5.00% | 6.2% | 59.0% |
| Senior 24 | Retail | 4,725 | 1M LIBOR + 5.50% | 6.7% | 72.0% |
| Senior 25 | Multifamily | 44,595 | 1M LIBOR + 4.25% | 5.5% | 77.0% |
| Senior 26 | Multifamily | 18,075 | 1M LIBOR + 4.50% | 5.7% | 75.0% |
| Senior 27 | Office | 14,040 | 1M LIBOR + 4.75% | 6.0% | 74.4% |
| Senior 28 | Multifamily | 24,387 | 1M LIBOR + 4.25% | 5.5% | 69.6% |
| Loan Type | Property Type | Par Value | Interest Rate (1) | Effective Yield | Loan to Value (2) | ||||||||||||
| Senior Debt 55 | Hospitality | 34,376 | 1 month LIBOR + 3.99% | 5.7% | 31.0% | ||||||||||||
| Senior Debt 56 | Multifamily | 12,941 | 1 month LIBOR + 2.65% | 4.5% | 71.6% | ||||||||||||
| Senior Debt 57 | Multifamily | 37,402 | 1 month LIBOR + 2.75% | 4.5% | 79.3% | ||||||||||||
| Senior Debt 58 | Industrial | 54,500 | 1 month LIBOR + 3.75% | 5.5% | 59.7% | ||||||||||||
| Senior Debt 59 | Office | 21,825 | 1 month LIBOR + 3.50% | 5.4% | 70.9% | ||||||||||||
| Senior Debt 60 | Hospitality | 7,100 | 1 month LIBOR + 4.00% | 5.8% | 70.3% | ||||||||||||
| Senior Debt 61 | Industrial | 22,230 | 1 month LIBOR + 3.55% | 5.3% | 69.7% | ||||||||||||
| Senior Debt 62 | Multifamily | 13,149 | 1 month LIBOR + 2.75% | 4.3% | 71.7% | ||||||||||||
| Senior Debt 63 | Multifamily | 27,087 | 1 month LIBOR + 3.15% | 5.0% | 71.6% | ||||||||||||
| Senior Debt 64 | Multifamily | 26,471 | 1 month LIBOR + 2.70% | 2.8% | 76.0% | ||||||||||||
| Senior Debt 65 | Multifamily | 7,455 | 1 month LIBOR + 3.95% | 5.0% | 75.3% | ||||||||||||
| Senior Debt 66 | Multifamily | 25,000 | 1 month LIBOR + 3.00% | 4.5% | 75.5% | ||||||||||||
| Senior Debt 67 | Office | 25,500 | 1 month LIBOR + 4.35% | 6.1% | 64.9% | ||||||||||||
| Senior Debt 68 | Multifamily | 14,403 | 1 month LIBOR + 3.10% | 4.5% | 63.7% | ||||||||||||
| Senior Debt 69 | Office | 53,083 | 1 month LIBOR + 3.70% | 5.0% | 65.7% | ||||||||||||
| Senior Debt 70 | Industrial | 25,350 | 1 month LIBOR + 3.50% | 5.2% | 58.1% | ||||||||||||
| Senior Debt 71 | Multifamily | 11,800 | 1 month LIBOR + 3.15% | 4.8% | 72.4% | ||||||||||||
| Senior Debt 72 | Office | 27,598 | 1 month LIBOR + 2.70% | 2.8% | 71.4% | ||||||||||||
| Senior Debt 73 | Multifamily | 75,100 | 1 month LIBOR + 4.35% | 6.0% | 64.7% | ||||||||||||
| Senior Debt 74 | Manufactured Housing | 1,379 | 5.50% | 5.5% | 62.8% | ||||||||||||
| Senior Debt 75 | Industrial | 14,650 | 1 month LIBOR + 6.00% | 6.8% | 59.9% | ||||||||||||
| Senior Debt 76 | Multifamily | 7,126 | 1 month LIBOR + 4.75% | 5.8% | 62.6% | ||||||||||||
| Senior Debt 77 | Multifamily | 6,900 | 1 month LIBOR + 4.90% | 5.7% | 53.2% | ||||||||||||
| Senior Debt 78 | Multifamily | 46,000 | 1 month LIBOR + 4.75% | 5.8% | 69.4% | ||||||||||||
| Senior Debt 79 | Multifamily | 5,550 | 1 month LIBOR + 6.87% | 7.9% | 75.0% | ||||||||||||
| Senior Debt 80 | Industrial | 16,956 | 1 month LIBOR + 6.25% | 7.0% | 61.0% | ||||||||||||
| Senior Debt 81 | Multifamily | 14,630 | 1 month LIBOR + 4.75% | 5.5% | 65.3% | ||||||||||||
| Senior Debt 82 | Multifamily | 23,400 | 1 month LIBOR + 4.65% | 5.4% | 52.7% | ||||||||||||
| Senior Debt 83 | Multifamily | 4,300 | 1 month LIBOR + 5.50% | 6.5% | 87.4% | ||||||||||||
| Senior Debt 84 | Manufactured Housing | 7,680 | 1 month LIBOR + 4.50% | 5.0% | 66.7% | ||||||||||||
| Senior Debt 85 | Mixed Use | 30,465 | 1 month LIBOR + 5.15% | 6.2% | 67.0% | ||||||||||||
| Senior Debt 86 | Multifamily | 3,140 | 1 month LIBOR + 6.25% | 6.8% | 73.5% | ||||||||||||
| Senior Debt 87 | Industrial | 27,939 | 1 month LIBOR + 4.60% | 5.1% | 20.7% | ||||||||||||
Senior Debt 88 (3) | Multifamily | — | 1 month LIBOR + 5.25% | 5.4% | —% | ||||||||||||
| Senior Debt 89 | Hospitality | 27,000 | 1 month LIBOR + 6.50% | 6.9% | 62.7% | ||||||||||||
| Senior Debt 90 | Multifamily | 2,465 | 1 month LIBOR + 5.75% | 6.5% | 66.6% | ||||||||||||
| Senior Debt 91 | Multifamily | 50,000 | 1 month LIBOR + 6.69% | 7.4% | 80.0% | ||||||||||||
| Senior Debt 92 | Self-Storage | 29,895 | 1 month LIBOR + 5.00% | 5.3% | 58.8% | ||||||||||||
| Senior Debt 93 | Multifamily | 12,605 | 1 month LIBOR + 4.75% | 5.3% | 70.0% | ||||||||||||
| Senior Debt 94 | Manufactured Housing | 3,400 | 1 month LIBOR + 5.00% | 5.3% | 58.6% | ||||||||||||
| Senior Debt 95 | Multifamily | 27,550 | 1 month LIBOR + 5.75% | 6.0% | 69.8% | ||||||||||||
| Senior Debt 96 | Multifamily | 76,000 | 1 month LIBOR + 4.10% | 4.4% | 67.9% | ||||||||||||
| Senior Debt 97 | Multifamily | 58,000 | 1 month LIBOR + 5.25% | 5.4% | 74.7% | ||||||||||||
| Senior Debt 98 | Manufactured Housing | 5,020 | 1 month LIBOR + 5.25% | 5.4% | 65.9% | ||||||||||||
| Senior Debt 99 | Office | 18,903 | 1 month LIBOR + 4.50% | 5.3% | 47.9% | ||||||||||||
| Senior Debt 100 | Office | 69,166 | 5.15% | 5.2% | 52.5% | ||||||||||||
| Senior Debt 101 | Office | 30,900 | 1 month LIBOR + 5.20% | 5.5% | 66.0% | ||||||||||||
| Senior Debt 102 | Multifamily | 10,945 | 1 month LIBOR + 7.04% | 7.3% | 63.3% | ||||||||||||
| Senior Debt 103 | Self-Storage | 11,600 | 1 month LIBOR + 4.76% | 5.0% | 66.6% | ||||||||||||
| Senior Debt 104 | Industrial | 24,552 | 1 month LIBOR + 4.35% | 4.6% | 69.8% | ||||||||||||
| Senior Debt 105 | Manufactured Housing | 5,000 | 1 month LIBOR + 5.90% | 6.5% | 58.8% | ||||||||||||
| Senior Debt 106 | Office | 12,750 | 1 month LIBOR + 5.00% | 5.3% | 67.8% | ||||||||||||
| Senior Debt 107 | Multifamily | 41,459 | 1 month LIBOR + 4.35% | 4.6% | 73.2% | ||||||||||||
| Senior Debt 108 | Multifamily | 36,479 | 1 month LIBOR + 4.45% | 4.7% | 66.5% | ||||||||||||
| Senior Debt 109 | Multifamily | 8,250 | 1 month LIBOR + 5.50% | 5.8% | 73.7% | ||||||||||||
| Senior Debt 110 | Retail | 11,962 | 1 month LIBOR + 4.87% | 5.1% | 75.0% | ||||||||||||
54
| Loan Type | Property Type | Par Value | Interest Rate (1) | Effective Yield | Loan to Value (2) |
| Senior 29 | Multifamily | 18,146 | 1M LIBOR + 3.85% | 5.1% | 76.8% |
| Senior 30 | Multifamily | 5,519 | 1M LIBOR + 3.95% | 5.2% | 77.5% |
| Senior 31 | Multifamily | 13,120 | 1M LIBOR + 3.95% | 5.2% | 78.2% |
| Senior 32 | Multifamily | 5,894 | 1M LIBOR + 4.05% | 5.3% | 80.0% |
| Senior 33 | Industrial | 33,655 | 1M LIBOR + 4.00% | 5.2% | 65.0% |
| Senior 34 | Office | 12,000 | 1M LIBOR + 4.75% | 6.0% | 54.1% |
| Senior 35 | Office | 35,000 | 1M LIBOR + 5.00% | 6.2% | 79.0% |
| Senior 36 | Office | 19,979 | 1M LIBOR + 4.55% | 5.8% | 70.0% |
| Senior 37 | Office | 29,006 | 1M LIBOR + 4.25% | 5.5% | 73.3% |
| Senior 38 | Office | 15,030 | 1M LIBOR + 5.35% | 6.6% | 47.1% |
| Senior 39 | Multifamily | 14,000 | 1M LIBOR + 5.00% | 6.2% | 56.3% |
| Senior 40 | Office | 16,300 | 1M LIBOR + 6.00% | 7.2% | 74.8% |
| Senior 41 | Retail | 13,700 | 1M LIBOR + 4.75% | 6.0% | 62.6% |
| Senior 42 | Retail | 28,500 | 1M LIBOR + 4.73% | 6.0% | 73.1% |
| Senior 43 | Retail | 12,700 | 1M LIBOR + 5.00% | 6.2% | 73.3% |
| Senior 44 | Multifamily | 23,150 | 1M LIBOR + 5.00% | 6.2% | 71.7% |
| Senior 45 | Multifamily | 45,103 | 1M LIBOR + 6.75% | 8.0% | 83.4% |
| Senior 46 | Retail | 15,750 | 1M LIBOR + 5.25% | 6.5% | 70.5% |
| Senior 47 | Retail | 25,000 | 1M LIBOR + 4.40% | 5.6% | 71.4% |
| Senior 48 | Multifamily | 13,944 | 1M LIBOR + 7.10% | 8.3% | 76.4% |
| Senior 49 | Hospitality | 12,600 | 1M LIBOR + 5.50% | 6.7% | 61.6% |
| Senior 50 | Hospitality | 11,750 | 1M LIBOR + 5.50% | 6.7% | 71.2% |
| Senior 51 | Retail | 20,450 | 1M LIBOR + 5.00% | 6.2% | 60.9% |
| Senior 52 | Multifamily | 26,000 | 1M LIBOR + 7.25% | 8.5% | 69.7% |
| Senior 53 | Hospitality | 14,900 | 1M LIBOR + 6.25% | 7.5% | 69.0% |
| Senior 54 | Office | 11,580 | 1M LIBOR + 4.45% | 5.7% | 65.0% |
| Senior 55 | Office | 9,750 | 1M LIBOR + 5.50% | 6.7% | 74.0% |
| Senior 56 | Multifamily | 39,700 | 1M LIBOR + 5.50% | 6.7% | 76.0% |
| Senior 57 | Multifamily | 25,500 | 1M LIBOR + 4.85% | 6.1% | 83.1% |
| Senior 58 | Retail | 7,500 | 1M LIBOR + 5.25% | 6.5% | 70.5% |
| Senior 59 | Office | 62,040 | 1M LIBOR + 4.50% | 5.7% | 69.2% |
| Senior 60 | Multifamily | 38,775 | 1M LIBOR + 4.50% | 5.7% | 73.8% |
| Senior 61 | Hospitality | 8,875 | 1M LIBOR + 6.20% | 7.4% | 67.7% |
| Senior 62 | Office | 25,120 | 1M LIBOR + 4.15% | 5.4% | 69.5% |
| Mezzanine 1 | Multifamily | 4,000 | 12.00% | 12.0% | 74.5% |
| Mezzanine 2 | Office | 7,000 | 12.00% | 12.0% | 78.3% |
| Mezzanine 3 | Retail | 1,963 | 13.00% | 13.0% | 85.0% |
| Mezzanine 4 | Multifamily | 3,480 | 9.50% | 9.5% | 84.5% |
| Mezzanine 5 | Office | 5,066 | 3M LIBOR + 10.00% | 11.2% | 79.5% |
| Mezzanine 6 | Office | 10,000 | 10.00% | 10.0% | 79.0% |
| Mezzanine 7 | Hospitality | 7,140 | 10.00% | 10.0% | 73.9% |
| Mezzanine 8 | Hospitality | 3,900 | 10.00% | 10.0% | 73.9% |
| Mezzanine 9 | Hospitality | 12,510 | 10.00% | 10.0% | 73.9% |
| Mezzanine 10 | Hospitality | 8,050 | 10.00% | 10.0% | 73.9% |
| Mezzanine 11 | Multifamily | 3,000 | 1M LIBOR + 13.00% | 14.2% | 69.7% |
| $1,322,973 | 5.9% | 72.5% | |||
| Loan Type | Property Type | Par Value | Interest Rate (1) | Effective Yield | Loan to Value (2) | ||||||||||||
| Senior Debt 111 | Manufactured Housing | 3,585 | 1 month LIBOR + 5.40% | 5.9% | 76.3% | ||||||||||||
| Senior Debt 112 | Multifamily | 5,730 | 1 month LIBOR + 5.00% | 5.3% | 73.5% | ||||||||||||
| Senior Debt 113 | Multifamily | 18,800 | 1 month LIBOR + 4.00% | 4.1% | 79.7% | ||||||||||||
| Senior Debt 114 | Industrial | 14,250 | 1 month LIBOR + 4.50% | 4.8% | 66.3% | ||||||||||||
| Senior Debt 115 | Office | 11,550 | 1 month LIBOR + 5.50% | 5.8% | 68.8% | ||||||||||||
| Senior Debt 116 | Multifamily | 11,820 | 1 month LIBOR + 4.55% | 4.8% | 73.0% | ||||||||||||
| Senior Debt 117 | Multifamily | 21,000 | 1 month LIBOR + 4.60% | 4.8% | 66.7% | ||||||||||||
| Senior Debt 118 | Office | 26,000 | 1 month LIBOR + 5.00% | 5.3% | 63.9% | ||||||||||||
| Senior Debt 119 | Multifamily | 54,500 | 1 month LIBOR + 3.80% | 4.1% | 77.0% | ||||||||||||
| Senior Debt 120 | Multifamily | 10,153 | 1 month LIBOR + 3.50% | 3.7% | 60.1% | ||||||||||||
| Senior Debt 121 | Multifamily | 21,000 | 1 month LIBOR + 4.95% | 5.1% | 84.2% | ||||||||||||
| Senior Debt 122 | Office | 43,751 | 1 month LIBOR + 3.94% | 4.1% | 53.9% | ||||||||||||
Senior Debt 123 (4) | Multifamily | — | 1 month LIBOR + 7.25% | 7.5% | —% | ||||||||||||
| Senior Debt 124 | Multifamily | 5,400 | 1 month LIBOR + 5.25% | 5.5% | 83.1% | ||||||||||||
| Senior Debt 125 | Hospitality | 23,000 | 1 month LIBOR + 5.79% | 6.0% | 57.2% | ||||||||||||
| Senior Debt 126 | Multifamily | 32,370 | 1 month LIBOR + 6.75% | 7.0% | 78.2% | ||||||||||||
| Senior Debt 127 | Multifamily | 12,325 | 1 month LIBOR + 4.50% | 4.7% | 83.3% | ||||||||||||
| Senior Debt 128 | Multifamily | 6,300 | 1 month LIBOR + 5.35% | 5.6% | 84.0% | ||||||||||||
| Senior Debt 129 | Multifamily | 30,600 | 1 month LIBOR + 3.00% | 3.1% | 74.3% | ||||||||||||
| Senior Debt 130 | Multifamily | 11,529 | 1 month LIBOR + 4.25% | 4.6% | 76.4% | ||||||||||||
| Senior Debt 131 | Multifamily | 5,575 | 1 month LIBOR + 4.50% | 4.8% | 83.6% | ||||||||||||
| Senior Debt 132 | Multifamily | 51,582 | 1 month LIBOR + 3.00% | 3.3% | 71.6% | ||||||||||||
| Senior Debt 133 | Multifamily | 13,700 | 1 month LIBOR + 3.39% | 3.5% | 70.6% | ||||||||||||
| Senior Debt 134 | Multifamily | 8,140 | 1 month LIBOR + 3.80% | 4.1% | 69.9% | ||||||||||||
| Senior Debt 135 | Multifamily | 13,582 | 1 month LIBOR + 4.50% | 4.8% | 76.7% | ||||||||||||
| Senior Debt 136 | Multifamily | 18,277 | 1 month LIBOR + 5.25% | 5.5% | 67.0% | ||||||||||||
| Senior Debt 137 | Multifamily | 17,704 | 1 month LIBOR + 3.60% | 3.8% | 70.8% | ||||||||||||
| Senior Debt 138 | Multifamily | 67,392 | 1 month LIBOR + 2.95% | 3.1% | 72.6% | ||||||||||||
| Senior Debt 139 | Multifamily | 26,556 | 1 month LIBOR + 2.95% | 3.1% | 70.4% | ||||||||||||
| Senior Debt 140 | Hospitality | 17,401 | 5.75% | 5.8% | 52.9% | ||||||||||||
| Mezzanine Loan 1 | Multifamily | 3,480 | 9.50% | 9.5% | 84.3% | ||||||||||||
| Mezzanine Loan 2 | Retail | 3,500 | 10.00% | 10.0% | 59.7% | ||||||||||||
| Mezzanine Loan 3 | Multifamily | 6,500 | 1 month LIBOR + 10.25% | 11.0% | 90.4% | ||||||||||||
| Mezzanine Loan 4 | Retail | 1,438 | 1 month LIBOR + 10.75% | 11.0% | 84.0% | ||||||||||||
| Mezzanine Loan 5 | Multifamily | 3,000 | 1 month LIBOR + 9.20% | 10.0% | 62.2% | ||||||||||||
| Mezzanine Loan 6 | Multifamily | 1,000 | 11.00% | 11.0% | 68.9% | ||||||||||||
| $3,037,546 | 5.3% | 64.7% | |||||||||||||||
(1) Our floating rate loan agreements contain the contractual obligation for the borrower to maintain an interest rate cap to protect against rising interest rates. In a simple interest rate cap, the borrower pays a premium for a notional principal amount based on a capped interest rate (the "cap rate"“cap rate”). When the floating rate exceeds the cap rate, the borrower receives a payment from the cap counterparty equal to the difference between the floating rate and the cap rate on the same notional principal amount for a specified period of time. When interest rates rise, the value of an interest rate cap will increase, thereby reducing the borrower's exposure to rising interest rates.
(2) Loan to value percentage is from metrics at origination.
(3) The total commitment of this loan is $40.5 million, however none was funded as of March 31, 2021.
(4) The total commitment of this loan is $31.5 million, however none was funded as of March 31, 2021.
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The following table shows selected data from our commercial mortgage loans, held-for-sale,held for sale, measured at fair value.value as of March 31, 2021 (dollars in thousands):
| Loan Type | Property Type | Par Value | Interest Rate | Effective Yield | Loan to Value (1) | ||||||||||||
| TRS Senior Debt 1 | Manufactured Housing | $2,446 | 4.3% | 4.3% | 59.8% | ||||||||||||
| TRS Senior Debt 2 | Mixed Use | $15,973 | 4.0% | 4.0% | 63.7% | ||||||||||||
| TRS Senior Debt 3 | Industrial | $9,024 | 4.3% | 4.3% | 58.4% | ||||||||||||
| TRS Senior Debt 4 | Multifamily | $18,000 | 3.4% | 3.4% | 50.4% | ||||||||||||
| TRS Senior Debt 5 | Mixed Use | $2,625 | 4.2% | 4.2% | 55.3% | ||||||||||||
| TRS Senior Debt 6 | Retail | $7,660 | 4.4% | 4.4% | 66.6% | ||||||||||||
| TRS Senior Debt 7 | Office | $30,500 | 4.0% | 4.0% | 69.0% | ||||||||||||
| TRS Senior Debt 8 | Retail | $5,110 | 4.7% | 4.7% | 68.1% | ||||||||||||
| TRS Senior Debt 9 | Retail | $1,200 | 4.5% | 4.5% | 63.2% | ||||||||||||
| TRS Mezzanine Loan 10 | Multifamily | $100 | 1 month LIBOR + 14.00% | 15.0% | 76.4% | ||||||||||||
| $92,638 | 4.0% | 62.5% | |||||||||||||||
| Loan Type | Property Type | Par Value | Interest Rate | Effective Yield | Loan to Value (1) |
| TRS Senior 1 | Mixed Use | $14,150 | 4.41% | 4.4% | 53.4% |
| TRS Senior 2 | Retail | 28,000 | 4.34% | 4.3% | 69.5% |
| TRS Senior 3 | Multifamily | 7,200 | 4.87% | 4.9% | 49.7% |
| TRS Senior 4 | Industrial | 11,600 | 4.21% | 4.2% | 55.8% |
| 60,950 | n/m | 60.8% | |||
(1) Loan to value percentage is from metrics at origination. | |||||
| n/m - not meaningful. | |||||
The following table shows selected data from our real estate securities, available for sale, measured at fair value as of March 31, 2021 (dollars in thousands):
The following table shows selected data from our other real estate investments, measured at fair value as of March 31, 2021 (dollars in thousands):
| Type | Property Type | Par Value | Preferred Return | ||||||||
| Preferred Equity 1 | Retail | $ | 2,500 | 12.50% | |||||||
| $ | 2,500 | ||||||||||
The following table shows selected data from our real estate owned assets in our portfolio as of March 31, 2021 (dollars in thousands):
| Type | Property Type | Carrying Value | ||||||
| Real Estate Owned 1 | Office | $ | 26,310 | |||||
| Real Estate Owned 2 | Multifamily | 37,523 | ||||||
| $ | 63,833 | |||||||
Results of Operations
•The real estate debt business which is focusedfocuses on originating, acquiring and asset managing commercial real estate debt investments, including first mortgage loans, subordinate mortgages, mezzanine loans and participations in such loans.
•The real estate securities business focuses on investing in and asset managing commercial real estate securities primarily consisting of CMBS and may include unsecured REIT debt, CDO notes and other securities.
•The conduitConduit business operated through the Company's TRS, which is focused on generating superior risk-adjusted returns by originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market at a profit.
•The real estate owned business represents real estate acquired by the Company performed a recastthrough foreclosure, deed in lieu of its results of operations for the TRS, a new line of business, and determined there to be no material changes.foreclosure, or purchase.
56
Comparison of the Three Months Ended September 30,2017March 31, 2021 to the Three Months Ended September 30, 2016March 31, 2020
Net Interest Income
Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt, and real estate securities and TRS segments.
The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the three months ended September 30, 2017March 31, 2021 and 2016March 31, 2020 (dollars in thousands):
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||||||||||||||||
Average Carrying Value (1) | Interest Income/Expense (2) | WA Yield/Financing Cost (3)(4) | Average Carrying Value (1) | Interest Income/Expense (2) | WA Yield/Financing Cost (3)(4) | |||||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||||||||||
| Real estate debt | $ | 2,723,798 | $ | 40,757 | 6.0% | $ | 2,702,936 | $ | 43,369 | 6.4% | ||||||||||||||||||||||||||||
| Real estate conduit | 116,781 | 1,056 | 3.6% | 100,175 | 1,190 | 4.8% | ||||||||||||||||||||||||||||||||
| Real estate securities | 79,668 | 424 | 2.1% | 406,186 | 3,295 | 3.2% | ||||||||||||||||||||||||||||||||
| Total | $ | 2,920,247 | $ | 42,237 | 5.8% | $ | 3,209,297 | $ | 47,854 | 6.0% | ||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Repurchase Agreements - commercial mortgage loans | $ | 340,485 | $ | 2,830 | 3.3% | $ | 282,282 | $ | 3,911 | 5.5% | ||||||||||||||||||||||||||||
| Other financing and loan participation - commercial mortgage loans | 44,939 | 527 | 4.7% | 1,502 | 18 | 4.8% | ||||||||||||||||||||||||||||||||
| Repurchase Agreements - real estate securities | 123,322 | 1,246 | 4.0% | 412,809 | 2,572 | 2.5% | ||||||||||||||||||||||||||||||||
| Collateralized loan obligations | 1,598,532 | 6,766 | 1.7% | 1,776,274 | 17,991 | 4.1% | ||||||||||||||||||||||||||||||||
| Total | $ | 2,107,278 | $ | 11,369 | 2.2% | $ | 2,472,867 | $ | 24,492 | 4.0% | ||||||||||||||||||||||||||||
| Net interest income/spread | $ | 30,868 | 3.6% | $ | 23,362 | 2.0% | ||||||||||||||||||||||||||||||||
Average leverage % (5) | 72.2 | % | 77.1 | % | ||||||||||||||||||||||||||||||||||
Weighted average levered yield (6) | 15.2 | % | 12.7 | % | ||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, | ||||||||||||||||||||||
| 2017 | 2016 | |||||||||||||||||||||
Average Carrying Value(1) | Interest Income / Expense(2) | WA Yield / Financing Cost(3)(4) | Average Carrying Value(1) | Interest Income / Expense(2) | WA Yield / Financing Cost(3)(4) | |||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||
| Real estate debt | $ | 1,272,914 | $ | 21,919 | 6.9 | % | $ | 1,127,464 | $ | 18,682 | 6.6 | % | ||||||||||
| Real estate securities | 12,749 | 276 | 8.7 | % | 122,264 | 1,568 | 5.1 | % | ||||||||||||||
| Total | $ | 1,285,663 | $ | 22,195 | 6.9 | % | $ | 1,249,728 | $ | 20,250 | 6.5 | % | ||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||
| Repurchase agreements - commercial mortgage loans | $ | 237,017 | $ | 2,784 | 4.7 | % | $ | 253,860 | $ | 4,451 | 7.0 | % | ||||||||||
| Other financing - commercial mortgage loans | 34,681 | 472 | 5.4 | % | — | — | — | % | ||||||||||||||
| Repurchase agreements - real estate securities | 47,477 | 409 | 3.4 | % | 114,086 | 675 | 2.4 | % | ||||||||||||||
| Collateralized loan obligations | 523,227 | 5,180 | 4.0 | % | 287,443 | 2,191 | 3.0 | % | ||||||||||||||
| Total | $ | 842,402 | $ | 8,845 | 4.2 | % | $ | 655,389 | $ | 7,317 | 4.5 | % | ||||||||||
| Net interest income/spread | $ | 13,350 | 2.7 | % | $ | 12,933 | 2.0 | % | ||||||||||||||
Average leverage %(5) | 65.5 | % | 52.4 | % | ||||||||||||||||||
Weighted average levered yield(6) | 8.7 | % | 7.5 | % | ||||||||||||||||||
(1) Based on amortized cost for real estate debt and real estate securities and principal amount for repurchase agreements. Amounts are calculated based on daily averages for the three months ended September 30, 2017March 31, 2021 and 2016,March 31, 2020, respectively.
(2) Includes the effect of amortization of premium or accretion of discount and deferred fees.
(3) Calculated as interest income or expense divided by average carrying value.
(4) Annualized.
(5) Calculated by dividing total average interest-bearing liabilities by total average interest-earning assets.
(6) Calculated by taking the sum of (i)dividing net interest income/spread by the net interest spread multiplied by the average leverageinterest-earning assets and (ii) the interest-earning assets.
average interest-bearing liabilities.
Interest Incomeincome
Interest income earned duringfor the three months ended September 30, 2017 was $1.9March 31, 2021 and March 31, 2020 totaled $42.2 million higher compared to the three months ended September 30, 2016.and $47.9 million, respectively. As of March 31, 2021, our portfolio consisted of 146 commercial mortgage loans, held for investment, ten commercial mortgage loans, held for sale, measured at fair value, one investment in CMBS and one other real estate investment, measured at fair value. The increasedecrease in interest income of $5.6 million was primarily due to an increase in the 1 Month LIBOR, the benchmark index for our loans and an increasea decrease of $35$289.1 million in the average carrying value of our interest-earning assets. As of September 30, 2017,assets and a decrease in the one-month LIBOR, the benchmark index for our loans had a total carrying value of $1,379.2 million and our CMBS investments had a fair value of $0.0 million, while as of September 30, 2016, our loans had a total carrying value of $1,120.9 million and our CMBS investments had a fair value of $57.6 million.loans.
Interest Expenseexpense
Interest expense for the three months ended September 30, 2017 was $1.5March 31, 2021 decreased to $11.4 million higher compared to theinterest expense for three months ended September 30, 2016.March 31, 2020 of $24.5 million. The increasedecrease in interest expense of $13.1 million was due to an increase in the 1 Month LIBOR, the benchmark index for our financing lines and an increasea decrease of $187$365.6 million in the average carrying value of our interest-bearing liabilities.interest-earning liabilities and a decrease in the one-month LIBOR, the benchmark index for our financing lines.
57
Realized Gain/Loss on Real Estate Securities Available for Sale
For the three months ended March 31, 2021 and 2016March 31, 2020 our real estate securities, available for sale, measured at fair value had a realized loss of $1.1 million and $0.4 million included within the consolidated statements of operations. The loss is attributable to eight CMBS sales during the three months ended March 31, 2021. There had been one sale of CMBS securities during the three months ended March 31, 2020.
Unrealized Gain/Loss on Real Estate Securities Available for Sale
For the three months ended March 31, 2021 our real estate securities, available for sale, measured at fair value had an unrecognized unrealized gain of $8.0 million included within the consolidated statements of comprehensive income. The increase in fair value of real estate securities for the three months ended March 31, 2021 can be attributed mainly to the reversal of the unrealized losses on the eight CMBS sales that occurred in the quarter.
Expenses from operations
Expenses from operations for the three months ended March 31, 2021 and March 31, 2020 were made up of the following (in(dollars in thousands):
| Three Months Ended September 30, | Three Months Ended March 31, | |||||||||||||||||||||
| 2017 | 2016 | 2021 | 2020 | |||||||||||||||||||
| Asset management and subordinated performance fee | $ | 2,299 | $ | 1,066 | Asset management and subordinated performance fee | $ | 5,416 | $ | 3,912 | |||||||||||||
| Acquisition fees and acquisition expenses | 1,685 | 255 | ||||||||||||||||||||
| Administrative services expenses | Administrative services expenses | 3,474 | 4,112 | |||||||||||||||||||
| Acquisition expenses | Acquisition expenses | 153 | 142 | |||||||||||||||||||
| Professional fees | 1,348 | 2,154 | Professional fees | 1,997 | 2,784 | |||||||||||||||||
| Administrative services expenses | 1,480 | 2,480 | ||||||||||||||||||||
| Real estate owned operating expenses | Real estate owned operating expenses | — | 1,645 | |||||||||||||||||||
| Depreciation and amortization | Depreciation and amortization | 406 | 588 | |||||||||||||||||||
| Other expenses | 1,411 | 686 | Other expenses | 495 | 1,587 | |||||||||||||||||
| Total expenses | $ | 8,223 | $ | 6,641 | ||||||||||||||||||
| Total expenses from operations | Total expenses from operations | $ | 11,941 | $ | 14,770 | |||||||||||||||||
Comparison of the NineThree Months Ended September 30, 2017March 31, 2021 to the NineThree Months Ended September 30, 2016December 31, 2020
Net Interest Income
Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt, and real estate securities and TRS segments.
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The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the ninethree months ended September 30, 2017March 31, 2021 and 2016December 31, 2020 (dollars in thousands):
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||
| March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||||||||
Average Carrying Value (1) | Interest Income/Expense (2) | WA Yield/Financing Cost (3)(4) | Average Carrying Value (1) | Interest Income/Expense (2) | WA Yield/Financing Cost (3)(4) | |||||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||||||||||
| Real estate debt | $ | 2,723,798 | $ | 40,757 | 6.0% | $ | 2,681,645 | $ | 42,623 | 6.4% | ||||||||||||||||||||||||||||
| Real estate conduit | 116,781 | 1,056 | 3.6% | 72,588 | 756 | 4.2% | ||||||||||||||||||||||||||||||||
| Real estate securities | 79,668 | 424 | 2.1% | 179,402 | 984 | 2.2% | ||||||||||||||||||||||||||||||||
| Total | $ | 2,920,247 | $ | 42,237 | 5.8% | $ | 2,933,635 | $ | 44,363 | 6.0% | ||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Repurchase Agreements - commercial mortgage loans | $ | 340,485 | $ | 2,830 | 3.3% | $ | 279,187 | $ | 2,370 | 3.4% | ||||||||||||||||||||||||||||
| Other financing and loan participation - commercial mortgage loans | 44,939 | 527 | 4.7% | 26,556 | 328 | 4.9% | ||||||||||||||||||||||||||||||||
| Repurchase Agreements - real estate securities | 123,322 | 1,246 | 4.0% | 183,632 | 1,990 | 4.3% | ||||||||||||||||||||||||||||||||
| Collateralized loan obligations | 1,598,532 | 6,766 | 1.7% | 1,645,097 | 7,128 | 1.7% | ||||||||||||||||||||||||||||||||
| Total | $ | 2,107,278 | $ | 11,369 | 2.2% | $ | 2,134,472 | $ | 11,816 | 2.2% | ||||||||||||||||||||||||||||
| Net interest income/spread | $ | 30,868 | 3.6% | $ | 32,547 | 3.8% | ||||||||||||||||||||||||||||||||
Average leverage % (5) | 72.2 | % | 72.8 | % | ||||||||||||||||||||||||||||||||||
Weighted average levered yield (6) | 15.2 | % | 16.3 | % | ||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||||||||
| 2017 | 2016 | |||||||||||||||||||||
Average Carrying Value(1) | Interest Income / Expense(2) | WA Yield / Financing Cost(3)(4) | Average Carrying Value(1) | Interest Income / Expense(2) | WA Yield / Financing Cost(3)(4) | |||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||
| Real estate debt | $ | 1,157,015 | $ | 60,566 | 7.0 | % | $ | 1,133,211 | $ | 55,973 | 6.6 | % | ||||||||||
| Real estate securities | 25,424 | 1,351 | 7.1 | % | 128,474 | 4,790 | 5.0 | % | ||||||||||||||
| Total | $ | 1,182,439 | $ | 61,917 | 7.0 | % | $ | 1,261,685 | $ | 60,763 | 6.4 | % | ||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||
| Repurchase agreements - commercial mortgage loans | $ | 301,665 | $ | 10,511 | 4.6 | % | $ | 248,436 | $ | 9,019 | 4.8 | % | ||||||||||
| Other financing - commercial mortgage loans | 17,555 | 712 | 5.4 | % | — | — | n/a | |||||||||||||||
| Repurchase agreements - real estate securities | 54,928 | 1,254 | 3.0 | % | 119,054 | 2,035 | 2.3 | % | ||||||||||||||
| Collateralized loan obligations | 335,683 | 9,513 | 3.8 | % | 287,351 | 6,424 | 3.0 | % | ||||||||||||||
| Total | $ | 709,831 | $ | 21,990 | 4.1 | % | $ | 654,841 | $ | 17,478 | 3.6 | % | ||||||||||
| Net interest income/spread | $ | 39,927 | 2.9 | % | $ | 43,285 | 2.8 | % | ||||||||||||||
Average leverage %(5) | 60.0 | % | 51.9 | % | ||||||||||||||||||
Weighted average levered yield(6) | 8.7 | % | 7.9 | % | ||||||||||||||||||
(1) Based on amortized cost for real estate debt and real estate securities and principal amount for repurchase agreements. Amounts are calculated based on daily averages for ninethe three months ended September 30, 2017March 31, 2021 and 2016,December 31, 2020, respectively.
(2) Includes the effect of amortization of premium or accretion of discount and deferred fees.
(3) Calculated as interest income or expense divided by average carrying value.
(4) Annualized.
(5) Calculated by dividing total average interest-bearing liabilities by total average interest-earning assets.
(6) Calculated by taking the sum of (i)dividing net interest income/spread by the net interest spread multiplied by the average leverageinterest-earning assets and (ii) the interest-earning assets.
average interest-bearing liabilities.
Interest Incomeincome
Interest Expenseexpense
Interest expense for the ninethree months ended September 30, 2017 was $4.5March 31, 2021 decreased to $11.4 million higher compared to the nineinterest expense for three months ended September 30, 2016.December 31, 2020 of $11.8 million. The increasedecrease in interest expense of $0.4 million was primarily due to the increasea decrease of $27.2 million in the average carrying value of our interest-bearinginterest-earning liabilities.
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Realized Gain/Loss on Real Estate Securities Available for Sale
For the three months ended March 31, 2021 and 2016December 31, 2020 our real estate securities, available for sale, measured at fair value had a realized loss of $1.1 million and zero included within the consolidated statements of operations. The loss is attributable to eight CMBS sales during the three months ended March 31, 2021. There had been no sales of CMBS securities during the three months ended December 31, 2020.
Expenses from operations
Expenses from operations for the three months ended March 31, 2021 and December 31, 2020 were made up of the following (in(dollars in thousands):
| Nine Months Ended September 30, | Three Months Ended | |||||||||||||||||||||
| 2017 | 2016 | March 31, 2021 | December 31, 2020 | |||||||||||||||||||
| Asset management and subordinated performance fee | $ | 6,952 | $ | 7,091 | Asset management and subordinated performance fee | $ | 5,416 | $ | 3,779 | |||||||||||||
| Acquisition fees and acquisition expenses | 4,175 | 635 | ||||||||||||||||||||
| Administrative services expenses | Administrative services expenses | 3,474 | 2,940 | |||||||||||||||||||
| Acquisition expenses | Acquisition expenses | 153 | 213 | |||||||||||||||||||
| Professional fees | 3,320 | 4,226 | Professional fees | 1,997 | 2,488 | |||||||||||||||||
| Administrative services expenses | 3,285 | 3,835 | ||||||||||||||||||||
| Real estate owned operating expenses | Real estate owned operating expenses | — | 403 | |||||||||||||||||||
| Depreciation and amortization | Depreciation and amortization | 406 | 468 | |||||||||||||||||||
| Other expenses | 2,773 | 2,092 | Other expenses | 495 | 99 | |||||||||||||||||
| Total expenses from operations | $ | 20,505 | $ | 17,879 | Total expenses from operations | $ | 11,941 | $ | 10,390 | |||||||||||||