| Fair Value | Fair Value Recurring Fair Values The table below presents a summary of financial assets and financial liabilities carried at fair value on a recurring basis, including financial instruments for which the fair value option was elected, but excluding financial assets under the NAV practical expedient, categorized into the following three tier hierarchy: Level 1 —Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 —Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in non-active markets, or valuation techniques utilizing inputs that are derived principally from or corroborated by observable data directly or indirectly for substantially the full term of the financial instrument. Level 3 —At least one assumption or input is unobservable and it is significant to the fair value measurement, requiring significant management judgment or estimate. Fair Value Measurements (In thousands) Level 1 Level 2 Level 3 Total March 31, 2019 Assets Equity method investments $ — $ — $ 178,131 $ 178,131 Marketable equity securities 131,226 — — 131,226 Debt securities available for sale — N-Star CDO bonds — — 64,410 64,410 CMBS of consolidated fund — 21,139 — 21,139 Other assets—derivative assets — 29,742 — 29,742 Liabilities Other liabilities — derivative liabilities — 304,714 — 304,714 Other liabilities—contingent consideration for THL Hotel Portfolio — — 9,312 9,312 December 31, 2018 Assets Equity method investments $ — $ — $ 81,085 $ 81,085 Marketable equity securities 36,438 — — 36,438 Debt securities available for sale—N-Star CDO bonds — — 64,127 64,127 CMBS of consolidated fund — 32,706 — 32,706 Other assets—derivative assets — 33,558 — 33,558 Liabilities Other liabilities — derivative liabilities — 132,808 — 132,808 Other liabilities—contingent consideration for THL Hotel Portfolio — — 8,903 8,903 Equity Method Investments Equity method investments for which fair value option was elected are carried at fair value on a recurring basis. Fair values are determined using either discounted cash flow models based on expected future cash flows for income and realization events of the underlying assets, applying revenue multiples, based on transaction price for recently acquired investments, or pending or comparable market sales price on an investment, as applicable. In valuing the Company's investment in third party private equity funds, the Company considers cash flows provided by the general partners of the funds and the implied yields of the funds. The Company has not elected the practical expedient to measure the fair value of its investments in these private equity funds using NAV of the underlying funds. Fair value of equity method investments are classified as Level 3 of the fair value hierarchy, unless investments are valued based on contracted sales prices which are classified as Level 2 of the fair value hierarchy. Changes in fair value of equity method investments under the fair value option are recorded in equity method earnings. Marketable Equity Securities Marketable equity securities consist of investment in a third party managed mutual fund and equity securities held by a consolidated fund, which are valued based on listed prices in active markets and classified as Level 1 of the fair value hierarchy. Debt Securities N-Star CDO bonds—Fair value of N-Star CDO bonds are determined internally based on recent trades, if any with such securitizations, the Company's knowledge of the underlying collateral and are determined using an internal price interpolated based on third party prices of the senior N-Star CDO bonds of the respective CDOs. All N-Star CDO bonds are classified as Level 3 of the fair value hierarchy. CMBS of consolidated fund—Fair value is determined based on broker quotes or third party pricing services, classified as Level 2 of the fair value hierarchy. Derivatives Derivative instruments consist of interest rate contracts and foreign exchange contracts that are generally traded over-the-counter, and are valued using a third-party service provider, except for exchange traded futures contracts which are Level 1 fair values. Quotations on over-the-counter derivatives are not adjusted and are generally valued using observable inputs such as contractual cash flows, yield curve, foreign currency rates and credit spreads, and are classified as Level 2 of the fair value hierarchy. Although credit valuation adjustments, such as the risk of default, rely on Level 3 inputs, these inputs are not significant to the overall valuation of its derivatives. As a result, derivative valuations in their entirety are classified as Level 2 of the fair value hierarchy. Other Liabilities — Contingent Consideration for THL Hotel Portfolio In connection with the consensual foreclosure of the THL Hotel Portfolio (Note 3 ), contingent consideration is payable to the former preferred equity holder of the borrower in an amount up to $13.0 million . Fair value of the contingent consideration is measured using discounted cash flows based on the probability of the former preferred equity holder receiving such payment. Level 3 Recurring Fair Value Measurements Quantitative information about recurring Level 3 fair value measurements, for which information about unobservable inputs is reasonably available to the Company, are as follows. Valuation Technique Key Unobservable Inputs Input Value Effect on Fair Value from Increase in Input Value (1) Financial Instrument Fair Value (In thousands) Weighted Average (Range) March 31, 2019 Level 3 Assets Equity method investments—third party private equity funds $ 5,354 Transaction price and NAV (2) N/A N/A N/A Equity method investments—other 18,569 Discounted cash flows Discount rate 18.5% Decrease Equity method investments—other 25,000 Multiple Revenue multiple 5.5x (3) Equity method investments—other 129,208 Transaction price (4) N/A N/A N/A N-Star CDO bonds 64,410 Discounted cash flows Discount rate 22.2% Decrease Level 3 Liabilities Other liabilities—contingent consideration for THL Hotel Portfolio 9,312 Discounted cash flows Discount rate 20.0% Decrease December 31, 2018 Level 3 Assets Equity method investments—third party private equity funds $ 5,908 Transaction price and NAV (2) N/A N/A N/A Equity method investments—other 21,831 Discounted cash flows Discount rate 17.5% Decrease Equity method investments—other 25,000 Multiple Revenue multiple 5.8x (3) Equity method investments—other 28,346 Transaction price (4) N/A N/A N/A N-Star CDO bonds 64,127 Discounted cash flows Discount rate 21.6% Decrease Level 3 Liabilities Other liabilities—contingent consideration for THL Hotel Portfolio 8,903 Discounted cash flows Discount rate 20.0% Decrease __________ (1) Represents the directional change in fair value that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the reverse effect. Significant increases or decreases in these inputs in isolation could result in significantly higher or lower fair value measures. (2) Fair value was estimated based on a combination of inputs, namely indicative prices of investments sold by the Company as well as underlying NAV of the respective funds on a quarter lag. (3) Fair value is affected by change in revenue multiple relative to change in rate of revenue growth. (4) Valued based upon transaction price of investments recently acquired or offer prices on investments or underlying assets of investee pending sales. Transaction price approximates fair value for an investee engaged in multi-family development during the development stage and pending certificate of occupancy. The following table presents changes in recurring Level 3 fair value measurements, including realized and unrealized gains (losses) included in earnings and accumulated other comprehensive income. Level 3 Assets Level 3 Liabilities (In thousands) Securitized Loans Receivable Equity Method Investments Securities Debt—Securitized Bonds Payable Due to Affiliates—Contingent Consideration for Internalization Other Liabilities—Contingent Consideration for THL Hotel Portfolio Fair value at December 31, 2017 $ 45,423 $ 363,901 $ 323,243 $ (44,542 ) $ (20,650 ) $ (7,419 ) Purchases, contributions or accretion — 60,044 2,969 389 — — Paydowns or distributions (389 ) (158,943 ) (83,588 ) — — — Contribution to Colony Credit — (26,134 ) — — — — Realized gains in earnings — 2,842 4,030 — — — Unrealized gains (losses): In earnings (704 ) 6,273 — 50 10,480 (341 ) In other comprehensive loss — — (20,715 ) — — — Fair value at March 31, 2018 $ 44,330 $ 247,983 $ 225,939 $ (44,103 ) $ (10,170 ) $ (7,760 ) Unrealized gains (losses) on ending balance: In earnings $ (704 ) $ 6,021 $ — $ 50 $ 10,480 $ (341 ) In other comprehensive income (loss) $ — $ — $ (5,457 ) $ — $ — $ — Fair value at December 31, 2018 $ — $ 81,085 $ 64,127 $ — $ — $ (8,903 ) Purchases, contributions or accretion — 101,195 1,769 — — — Paydowns, distributions or sales — (6,341 ) (2,882 ) — — — Realized gains in earnings — 755 (667 ) — — — Unrealized gains (losses): In earnings — 1,437 — — — (409 ) In other comprehensive income (loss) — — 2,063 — — — Fair value at March 31, 2019 $ — $ 178,131 $ 64,410 $ — $ — $ (9,312 ) Unrealized gains (losses) on ending balance: In earnings $ — $ 1,437 $ — $ — $ — $ (409 ) In other comprehensive income (loss) $ — $ — $ (1,322 ) $ — $ — $ — Securitized Loans and Securitized Bonds Payable Prior to May 2018, the Company had elected the fair value option for loans receivable and bonds payable issued by a securitization trust that was consolidated by a N-Star CDO. The N-Star CDO was in turn consolidated by the Company. In May 2018, the Company sold its interests in the N-Star CDO and deconsolidated the N-Star CDO along with the securitization trust consolidated by the N-Star CDO. Prior to deconsolidation, the Company had adopted the measurement alternative to measure the fair value of the loans receivable held by the securitization trust using the fair value of the bonds payable issued by the securitization trust as the latter represented the more observable fair value. As such, the net gain or loss that was reflected in earnings was limited to changes in fair value of the beneficial interest held by the Company in the previously consolidated securitization trust, and not as a result of a remeasurement of the loans receivable and bonds payable held by third parties in the previously consolidated securitization trust. Fair value of the bonds payable issued by the securitization trust was determined based on broker quotes, which were generally derived from unobservable inputs, and therefore classified as Level 3 of the fair value hierarchy. Correspondingly, the fair value of the loans receivable held by the securitization trust was also classified as Level 3. Due To Affiliates — Contingent Consideration for Internalization In connection with the Company's acquisition of the investment management business and operations of its former manager in April 2015 (the "Internalization"), contingent consideration is payable to certain senior management personnel of the Company. The contingent consideration is payable in a combination of shares of class A common stock, shares of class B common stock and OP Units, measured based on multi-year performance targets for achievement of a contractually-defined funds from operations ("Benchmark FFO") per share target, as well as real estate and non-real estate capital-raising thresholds from the funds management business, to the extent these targets are met. If the minimum performance target for either of these metrics is not met or exceeded, a portion of the contingent consideration paid in respect of the other metric would not be paid out in full. Prior to June 30, 2018, the contingent consideration had been remeasured at fair value using a third party valuation service provider and classified as Level 3 of the fair value hierarchy, with the change in fair value recorded in other gain (loss). Fair value of the contingent consideration was measured using a Monte Carlo probability simulation model for the Benchmark FFO component and a discounted payout analysis based on probabilities of achieving prescribed targets for the capital-raising component, adjusted for certain targets that had not been met and that had expired. The Company's class A common stock price and related equity volatilities were applied to convert the contingent consideration payout into shares. At June 30, 2018, the end of the measurement period, the contingent consideration was settled with certain senior management personnel of the Company in a combination of approximately 15,000 shares of class A common stock, 40,000 shares of class B common stock and 1.95 million OP Units. At June 30, 2018, as the contingency was resolved and the number of shares and units to be issued was no longer variable, the payable of $12.5 million , valued based on the closing price of the Company's class A common stock on June 29, 2018, the last trading day of the second quarter, was reclassified out of liabilities into equity, while the associated dividends payable of approximately $6.4 million remained in liabilities. The contingent consideration and associated dividends were fully settled in August 2018. Investments Carried at Fair Value Using Net Asset Value Investments in a Company-sponsored non-traded REIT and limited partnership interest in a third party private fund are valued using NAV of the respective vehicles. March 31, 2019 December 31, 2018 (In thousands) Fair Value Unfunded Commitments Fair Value Unfunded Commitments Private fund—real estate $ 16,711 $ 10,153 $ 12,617 $ 13,658 Retail Company—real estate 14,312 — 11,990 — The Company's limited partnership interest in the private fund is not subject to redemption, with distributions to be received through liquidation of underlying investments of the fund. The private fund has an expected life of eight years from its inception in 2017, which may be extended in one year increments up to two years at the discretion of its general partner, an equity method investee of the Company. No secondary market currently exists for shares of the non-traded REIT and the Company does not currently expect to seek liquidity of its shares of the non-traded REIT. Subject to then-existing market conditions, the board of directors of the non-traded REIT, along with the Company, as sponsor, expects to consider alternatives for providing liquidity to the non-traded REIT shares beginning five years from completion of the offering stage in January 2016, but with no definitive date by which it must do so. In addition, the Company has agreed that any right to have its shares redeemed is subordinated to third party stockholders for so long as its advisory agreement is in effect. Nonrecurring Fair Values The Company measures fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Adjustments to fair value generally result from the application of lower of amortized cost or fair value accounting for assets held for sale or write-down of asset values due to impairment. The following table summarizes assets carried at fair value on a nonrecurring basis, measured at the time of impairment. March 31, 2019 December 31, 2018 (In thousands) Level 2 Level 3 Total Level 2 Level 3 Total Real estate held for sale $ — $ 223,052 $ 223,052 $ 68,864 $ 200,281 $ 269,145 Real estate held for investment — 85,186 85,186 — 416,272 416,272 Intangible assets—investment management contracts — — — — 36,400 36,400 Equity method investments — 7,014 7,014 — 32,761 32,761 The following table summarizes the fair value write-downs to assets carried at nonrecurring fair values during the periods presented. Three Months Ended March 31, (In thousands) 2019 2018 Impairment loss Real estate held for sale $ 25,183 $ 8,763 Real estate held for investment 439 4,206 Intangible assets—investment management contracts — 140,429 Equity method earnings 2,622 — Impairment is discussed in Note 4 for loans receivable, Note 5 for equity method investments and Note 6 for investment management intangible assets. Real Estate Held For Sale At March 31, 2019 and December 31, 2018 , real estate held for sale carried at fair value consisted primarily of properties in the European portfolio, valued using either broker price opinions, or a combination of market information, including third-party appraisals and indicative selling prices, adjusted as deemed appropriate by management to account for the inherent risk associated with the properties, and net of 2% to 5% selling cost, classified as Level 3. Other significant real estate held for sale carried at fair value comprised of certain hotels in the hospitality segment for which the Company previously held a long term hold strategy but in the third quarter of 2018, adopted a sales strategy. These hotels are currently classified as held for sale. Impairment was mostly recorded in 2018 when the hotels were classified as held for investment, based on broker price opinions and net of 3% selling cost, classified as Level 3. In the first quarter of 2019, additional impairment was recorded on certain hotels based on their respective auction prices, classified as Level 2. Real estate held for sale carried at fair value also included U.S. multi tenant office buildings, valued based on broker quotes net of 2% selling cost, classified as Level 3. Additionally, at December 31, 2018 , certain properties in the THL Hotel Portfolio were impaired and valued based on auction prices or contracted sales prices, net of 2% selling costs, classified as Level 2. Real Estate Held For Investment At March 31, 2019 , further impairment was recorded on certain properties in the THL Hotel Portfolio that were impacted by the hurricanes in 2017 based upon revised insurance estimates. At December 31, 2018 , real estate held for investment carried at fair value consisted of $282.4 million of healthcare properties that were impaired in the fourth quarter of 2018, driven by shorter hold periods. In the fourth quarter of 2018, the Company had reassessed the hold period on its healthcare properties, taking into consideration the Company's ability to refinance the related debt with upcoming maturities. The Company considered the possibility of shorter hold periods to be an indicator of impairment, among other factors. For properties for which indicators of impairment were identified, the Company compared their carrying values to the undiscounted future net cash flows expected to be generated by these properties over their hold periods, with terminal values estimated based on indicative capitalization rates, adjusted as appropriate for risk characteristics of each property. In performing this analysis, the Company considered the likelihood of possible outcomes under various hold period scenarios depending on its ability to refinance the related debt and applied a probability-weighted approach to different hold periods for each property. For properties where carrying value exceeded undiscounted future net cash flows, the carrying value was determined to not be recoverable. Fair values were estimated for these properties based on the income capitalization approach, using net operating income for each property and applying capitalization rates ranging from 5.5% to 11% . Impairment was measured as the excess of carrying value over fair value, totaling $212.0 million . As the impairment assessment involved subjectivity and judgment, actual results may differ if changes occur in the assumptions used and/or in market conditions and accordingly, negative changes to these variables would result in further impairment charge in the future. Other significant real estate held for investment carried at fair value at December 31, 2018 pertained to certain healthcare properties and THL Hotel Portfolio that were damaged by hurricanes or fire in 2017, and further impaired in 2018, with impairment based on estimates from insurance appraisers. Fair Value Information on Financial Instruments Reported at Cost Carrying amounts and estimated fair values of financial instruments reported at amortized cost are presented below. The carrying values of cash, interest receivable, accounts receivable, due from and to affiliates, interest payable and accounts payable approximate fair value due to their short term nature and credit risk, if any, are negligible. Fair Value Measurements Carrying Value (In thousands) Level 1 Level 2 Level 3 Total March 31, 2019 Assets Loans at amortized cost $ — $ — $ 1,607,914 $ 1,607,914 $ 1,596,673 Liabilities Debt at amortized cost Convertible and exchangeable senior notes 573,423 13,095 — 586,518 612,618 Secured debt — — 9,956,842 9,956,842 9,900,607 Junior subordinated debt — — 203,039 203,039 199,563 December 31, 2018 Assets Loans at amortized cost $ — $ — $ 1,667,892 $ 1,667,892 $ 1,659,217 Liabilities Debt at amortized cost Convertible and exchangeable senior notes 547,300 13,095 — 560,395 612,150 Secured and unsecured debt — — 9,218,692 9,218,692 9,228,721 Junior subordinated debt — — 169,619 169,619 199,086 Loans Receivable —Loans receivable carried at amortized cost consist of first mortgages, subordinated mortgages and corporate loans, including such loans held by securitization trusts consolidated by the Company. Fair values were determined by comparing the current yield to the estimated yield of newly originated loans with similar credit risk or the market yield at which a third party might expect to purchase such investment; or based on discounted cash flow projections of principal and interest expected to be collected, which includes consideration of the financial standing of the borrower or sponsor as well as operating results of the underlying collateral. Carrying values of loans held for investment carried at amortized cost are presented net of allowance for loan losses, where applicable. Debt —Fair value of convertible notes was determined using the last trade price in active markets. Fair value of exchangeable notes was determined based on unadjusted quoted prices in a non-active market. Fair values of the corporate credit facility and secured and unsecured debt were estimated by discounting expected future cash outlays at interest rates currently available to the Company for instruments with similar terms and remaining maturities; and such fair values approximated carrying value for floating rate debt with credit spreads that approximate market rates. Fair value of junior subordinated debt was based on unadjusted quotations from a third party valuation firm, with such quotes derived using a combination of internal valuation models, comparable trades in non-active markets and other market data. Fair value of securitization bonds payable was based on quotations from brokers or financial institutions that act as underwriters of the securitized bonds. Other —The carrying values of cash, due from and to affiliates, other receivables and other payables approximate fair value due to their short term nature, and credit risk, if any, are negligible. |
