Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 06, 2020 | |
Document Information [Line Items] | ||
Entity Registrant Name | BROADMARK REALTY CAPITAL INC. | |
Entity Central Index Key | 0001784797 | |
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2020 | |
Entity File Number | 001-39134 | |
Entity Incorporation, State or Country Code | MD | |
Entity Tax Identification Number | 84-2620891 | |
Entity Address, Address Line One | 1420 Fifth Avenue, Suite 2000 | |
Entity Address, City or Town | Seattle | |
Entity Address, State or Province | WA | |
Entity Address, Postal Zip Code | 98101 | |
City Area Code | 206 | |
Local Phone Number | 971-0800 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 132,236,307 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Common Stock [Member] | ||
Document Information [Line Items] | ||
Title of 12(b) Security | Common Stock | |
Trading Symbol | BRMK | |
Security Exchange Name | NYSE | |
Warrant | ||
Document Information [Line Items] | ||
Title of 12(b) Security | Warrants | |
Trading Symbol | BRMK WS | |
Security Exchange Name | NYSE |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Assets | ||
Cash and cash equivalents | $ 173,602 | $ 238,214 |
Mortgage notes receivable, net | 858,713 | 821,589 |
Interest and fees receivable, net | 11,917 | 4,108 |
Investment in real property, net | 3,743 | 5,837 |
Intangible assets, net | 706 | 4,970 |
Goodwill | 136,965 | 131,965 |
Other assets | 4,981 | 2,046 |
Total assets | 1,190,627 | 1,208,729 |
Liabilities and Equity | ||
Accounts payable and accrued liabilities | 3,504 | 8,415 |
Dividends payable | 7,934 | 15,842 |
Total liabilities | 11,438 | 24,257 |
Commitments and Contingencies | ||
Common stock, $0.001 par value, 500,000,000 shares authorized, 132,236,307 and 132,015,635 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | 132 | 132 |
Preferred stock, $0.001 par value, 100,000,000 shares authorized, 0 shares issued and outstanding at September 30, 2020 and December 31, 2019 | ||
Additional Paid in Capital | 1,212,914 | 1,209,120 |
Accumulated deficit | (33,857) | (24,780) |
Total equity | 1,179,189 | 1,184,472 |
Total liabilities and equity | $ 1,190,627 | $ 1,208,729 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
Unaudited Condensed Consolidated Balance Sheets | ||
Common stock par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock shares issued (in shares) | 132,236,307 | 132,015,635 |
Common stock shares outstanding (in shares) | 132,236,307 | 132,015,635 |
Preferred stock par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock shares authorized (in shares) | 100,000,000 | 100,000,000 |
Preferred stock shares issued (in shares) | 0 | 0 |
Preferred stock shares outstanding (in shares) | 0 | 0 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | ||||
Financial Designation | Successor | Predecessor | [1] | Successor | Predecessor | [1] | |
Revenues | |||||||
Revenues | $ 28,983 | $ 34,581 | [1] | $ 89,821 | $ 100,937 | [1] | |
Other Income: | |||||||
Change in fair value of optional subscription liabilities | 1,948 | 5,094 | |||||
Impairment: | |||||||
Loan loss (benefit) provision | (652) | 2,704 | [1] | 3,279 | 2,777 | [1] | |
Operating expenses: | |||||||
Compensation and employee benefits | 5,160 | 794 | [1] | 11,397 | 4,647 | [1] | |
General and administrative | 3,199 | 5,227 | [1] | 9,977 | 11,468 | [1] | |
Total Expenses | 7,707 | 8,725 | [1] | 24,653 | 18,892 | [1] | |
Income before income taxes | 23,224 | 25,856 | [1] | 70,262 | 82,045 | [1] | |
Income tax provision | 0 | 0 | |||||
Net income | $ 23,224 | 25,856 | [1] | $ 70,262 | 82,045 | [1] | |
Earnings per common share: | |||||||
Basic | [2] | $ 0.18 | $ 0.53 | ||||
Diluted | [2] | $ 0.18 | $ 0.53 | ||||
Weighted-average shares of common stock outstanding, basic and diluted | |||||||
Basic | 132,282,252 | 132,156,844 | |||||
Diluted | 132,316,746 | 132,207,605 | |||||
Interest Income | |||||||
Revenues | |||||||
Revenues | $ 21,844 | 25,284 | [1] | $ 68,577 | 69,363 | [1] | |
Fee Income | |||||||
Revenues | |||||||
Revenues | $ 7,139 | $ 9,297 | [1] | $ 21,244 | $ 31,574 | [1] | |
[1] | Predecessor periods are combined as disclosed in Note 1. | ||||||
[2] | The Company determined that earnings per unit in the Predecessor periods would not be meaningful to the users of this filing, given the different unit holders and members’ equity structures of each individual entity in the Predecessor Company Group. |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands | Preferred units | Common Units [Member]Common Class A Units [Member] | Common Units [Member]Common Class P Units [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings (Accumulated Deficit) [Member] | Total | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Net Income | $ 24,989 | $ 24,989 | ||||||||
Balances as of at Dec. 31, 2018 | $ 684,979 | $ 1 | $ 767 | (637) | 685,110 | |||||
Balance as of (in units) at Dec. 31, 2018 | 20,950 | 50 | ||||||||
Balance as of (in units) at Dec. 31, 2018 | [1] | 6,827,701 | ||||||||
Increase (Decrease) In Members Equity [RollForward] | ||||||||||
Contributions | $ 79,535 | $ 200 | 79,735 | |||||||
Contributions (in units) | 796,028 | [1] | 850 | |||||||
Reinvestments | $ 7,094 | 7,094 | ||||||||
Reinvestments (in units) | [1] | 71,086 | ||||||||
Net Income | 24,989 | 24,989 | ||||||||
Distributions | (24,134) | (24,134) | ||||||||
Redemptions | $ (13,331) | (13,331) | ||||||||
Redemptions (in units) | [1] | (133,513) | ||||||||
Compensation expense related to grant of profits interest | 734 | 734 | ||||||||
Compensation expense related to grants of restricted stock units. | (100) | 100 | ||||||||
Grants of restricted units | 134 | 134 | ||||||||
Grants of restricted units (in unit) | 150 | |||||||||
Balance as of at Mar. 31, 2019 | $ 758,277 | $ 201 | 1,635 | 218 | $ 760,331 | |||||
Balance as of (in units) at Mar. 31, 2019 | 21,850 | 150 | ||||||||
Balance as of (in units) at Mar. 31, 2019 | [1] | 7,561,302 | ||||||||
Financial Designation | [2] | Predecessor | ||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Net Income | [2] | $ 82,045 | ||||||||
Balances as of at Dec. 31, 2018 | $ 684,979 | $ 1 | 767 | (637) | 685,110 | |||||
Balance as of (in units) at Dec. 31, 2018 | 20,950 | 50 | ||||||||
Balance as of (in units) at Dec. 31, 2018 | [1] | 6,827,701 | ||||||||
Increase (Decrease) In Members Equity [RollForward] | ||||||||||
Net Income | [2] | 82,045 | ||||||||
Balance as of at Sep. 30, 2019 | $ 1,010,625 | $ 201 | 1,975 | (1,208) | 1,011,593 | |||||
Balance as of (in units) at Sep. 30, 2019 | 21,850 | 150 | ||||||||
Balance as of (in units) at Sep. 30, 2019 | [1] | 9,356,572 | ||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Net Income | 31,200 | 31,200 | ||||||||
Balances as of at Mar. 31, 2019 | $ 758,277 | $ 201 | 1,635 | 218 | 760,331 | |||||
Balance as of (in units) at Mar. 31, 2019 | 21,850 | 150 | ||||||||
Balance as of (in units) at Mar. 31, 2019 | [1] | 7,561,302 | ||||||||
Increase (Decrease) In Members Equity [RollForward] | ||||||||||
Contributions | $ 122,414 | 122,414 | ||||||||
Contributions (in units) | [1] | 1,441,711 | ||||||||
Reinvestments | $ 8,594 | 8,594 | ||||||||
Reinvestments (in units) | [1] | 86,222 | ||||||||
Net Income | 31,200 | 31,200 | ||||||||
Distributions | (29,125) | (29,125) | ||||||||
Redemptions | $ (22,927) | (22,927) | ||||||||
Redemptions (in units) | [1] | (227,248) | ||||||||
Grants of restricted units | 170 | 170 | ||||||||
Balance as of at Jun. 30, 2019 | $ 866,358 | $ 201 | 1,805 | 2,293 | $ 870,657 | |||||
Balance as of (in units) at Jun. 30, 2019 | 21,850 | 150 | ||||||||
Balance as of (in units) at Jun. 30, 2019 | [1] | 8,861,987 | ||||||||
Financial Designation | [2] | Predecessor | ||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Net Income | 25,856 | $ 25,856 | [2] | |||||||
Increase (Decrease) In Members Equity [RollForward] | ||||||||||
Contributions | $ 154,437 | 154,437 | ||||||||
Contributions (in units) | [1] | 567,905 | ||||||||
Reinvestments | $ 9,340 | 9,340 | ||||||||
Reinvestments (in units) | [1] | 43,293 | ||||||||
Net Income | 25,856 | 25,856 | [2] | |||||||
Distributions | (29,357) | (29,357) | ||||||||
Redemptions | $ (19,510) | (19,510) | ||||||||
Redemptions (in units) | [1] | (116,613) | ||||||||
Grants of restricted units | 170 | 170 | ||||||||
Balance as of at Sep. 30, 2019 | $ 1,010,625 | $ 201 | 1,975 | (1,208) | 1,011,593 | |||||
Balance as of (in units) at Sep. 30, 2019 | 21,850 | 150 | ||||||||
Balance as of (in units) at Sep. 30, 2019 | [1] | 9,356,572 | ||||||||
Balance at Dec. 31, 2019 | $ 132 | 1,209,120 | (24,780) | 1,184,472 | ||||||
Balance, Shares at Dec. 31, 2019 | 132,015,635 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Issuance of shares from vested RSUs (in shares) | 95,694 | |||||||||
Net Income | 27,279 | 27,279 | ||||||||
Dividends | (31,700) | (31,700) | ||||||||
Stock-based compensation expense | 914 | 914 | ||||||||
Balance at Mar. 31, 2020 | $ 132 | 1,210,034 | (29,201) | 1,180,965 | ||||||
Balance, Shares at Mar. 31, 2020 | 132,111,329 | |||||||||
Increase (Decrease) In Members Equity [RollForward] | ||||||||||
Net Income | 27,279 | $ 27,279 | ||||||||
Financial Designation | Successor | |||||||||
Balance at Dec. 31, 2019 | $ 132 | 1,209,120 | (24,780) | $ 1,184,472 | ||||||
Balance, Shares at Dec. 31, 2019 | 132,015,635 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Net Income | 70,262 | |||||||||
Balance at Sep. 30, 2020 | $ 132 | 1,212,914 | (33,857) | 1,179,189 | ||||||
Balance, Shares at Sep. 30, 2020 | 132,236,307 | |||||||||
Increase (Decrease) In Members Equity [RollForward] | ||||||||||
Net Income | 70,262 | |||||||||
Balance at Mar. 31, 2020 | $ 132 | 1,210,034 | (29,201) | 1,180,965 | ||||||
Balance, Shares at Mar. 31, 2020 | 132,111,329 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Issuance of shares from vested RSUs (in shares) | 119,855 | |||||||||
Net Income | 19,759 | 19,759 | ||||||||
Dividends | (23,793) | (23,793) | ||||||||
Stock-based compensation expense | 967 | 967 | ||||||||
Balance at Jun. 30, 2020 | $ 132 | 1,211,001 | (33,235) | 1,177,898 | ||||||
Balance, Shares at Jun. 30, 2020 | 132,231,184 | |||||||||
Increase (Decrease) In Members Equity [RollForward] | ||||||||||
Net Income | 19,759 | $ 19,759 | ||||||||
Financial Designation | Successor | |||||||||
Issuance of shares from vested RSUs (in shares) | 5,098 | |||||||||
Issuance of shares from exercised warrants | 25 | |||||||||
Net Income | 23,224 | $ 23,224 | ||||||||
Dividends | (23,846) | (23,846) | ||||||||
Stock-based compensation expense | 1,913 | 1,913 | ||||||||
Balance at Sep. 30, 2020 | $ 132 | $ 1,212,914 | (33,857) | 1,179,189 | ||||||
Balance, Shares at Sep. 30, 2020 | 132,236,307 | |||||||||
Increase (Decrease) In Members Equity [RollForward] | ||||||||||
Net Income | $ 23,224 | $ 23,224 | ||||||||
[1] | The Company determined that earnings per unit in the Predecessor periods would not be meaningful to the users of this filing, given the different unit holders and members’ equity structures of each individual entity in the Predecessor Company Group. | |||||||||
[2] | Predecessor periods are combined as disclosed in Note 1. |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||||
Dec. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020 | Sep. 30, 2019 | Nov. 14, 2019 | ||||
Unaudited Condensed Consolidated Statement of Cash Flows [Abstract] | ||||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | [1] | Predecessor | |||
Cash flows from operating activities | ||||||||||
Net income | $ 70,262 | $ 82,045 | [1] | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Accretion of deferred origination and amendment fees | (7,270) | |||||||||
Amortization of intangible assets | (736) | |||||||||
Depreciation | 54 | 35 | [1] | |||||||
Compensation expense related to grant of profits interest | [1] | 734 | ||||||||
Stock-based compensation expense for restricted stock units | 3,794 | |||||||||
Grants of restricted units | [1] | 474 | ||||||||
Loan loss (benefit) provision | $ (652) | $ 2,704 | 3,279 | 2,777 | [1] | |||||
Write down of investment in real property | [1] | 179 | ||||||||
Change in fair value of optional subscription liabilities | (5,094) | |||||||||
Changes in operating assets and liabilities: | ||||||||||
Interest and fees receivable, net | (7,809) | (1,419) | [1] | |||||||
Change in other assets | (2,989) | (867) | [1] | |||||||
Accounts payable and accrued liabilities | 183 | 581 | [1] | |||||||
Net cash provided by operating activities | 53,674 | 84,539 | [1] | |||||||
Cash flows from investing activities: | ||||||||||
Investments in fixed assets | [1] | (63) | ||||||||
Proceeds from sale of real property | 2,213 | 6,363 | [1] | |||||||
Improvements to investments in real property | (119) | (229) | [1] | |||||||
Change in mortgage notes receivable, net | (33,133) | (220,197) | [1] | |||||||
Net cash provided by (used in) investing activities | (31,039) | (214,126) | [1] | |||||||
Cash flows from financing activities: | ||||||||||
Contributions from members | [1] | 356,386 | ||||||||
Contributions received in advance | [1] | (24,507) | ||||||||
Dividends paid | (87,247) | |||||||||
Distributions | [1] | (55,619) | ||||||||
Redemptions of members | [1] | (55,768) | ||||||||
Net cash provided by (used in) financing activities | (87,247) | 220,492 | [1] | |||||||
Net increase (decrease) in cash and cash equivalents | (64,612) | 90,905 | [1] | |||||||
Cash and cash equivalents, beginning of period | 238,214 | 112,209 | [1] | $ 112,209 | [1] | |||||
Cash and cash equivalents, end of period | $ 238,214 | 173,602 | $ 203,114 | 173,602 | 203,114 | [1] | ||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||||
Dividends payable | $ 15,842 | $ 7,934 | 7,934 | |||||||
Reinvested distributions | [1] | 25,028 | ||||||||
Measurement period adjustment to goodwill and intangible assets | $ 5,000 | |||||||||
Mortgage notes receivable converted to real property owned | [1] | $ 2,046 | ||||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Organization and business
Organization and business | 9 Months Ended |
Sep. 30, 2020 | |
Organization and business | |
Organization and business | Note 1 - Organization and business Broadmark Realty Capital Inc. (“Broadmark Realty,” “the Company,” “Successor,” “we,” “us” and “our”) is an internally managed commercial real estate finance company that provides secured financing to real estate investors and developers. Broadmark Realty’s objective is to preserve and protect shareholder capital while producing attractive risk-adjusted returns primarily through dividends generated from current income from its loan portfolio. Broadmark Realty operates in select states that it believes to have favorable demographic trends and provide Broadmark Realty the ability to efficiently access the underlying collateral in the event of borrower default. On November 14, 2019 (the “Closing Date”), Broadmark Realty Capital Inc., a Maryland corporation (formerly named Trinity Sub Inc.) (“Broadmark Realty”), consummated a business combination (the “Business Combination”) pursuant to an Agreement and Plan of Merger, dated August 9, 2019 (the “Merger Agreement”), by and among the Company, Trinity Merger Corp. (“Trinity”), Trinity Merger Sub I, Inc. (“Merger Sub I”), Trinity Merger Sub II, LLC (“Merger Sub II” and together with Trinity and Merger Sub I, the “Trinity Parties”), PBRELF I, LLC (“PBRELF”), BRELF II, LLC (“BRELF II”), BRELF III, LLC (“BRELF III”), BRELF IV, LLC (“BRELF IV” and, together with PBRELF, BRELF II and BRELF III, the “Predecessor Companies” and each a “Predecessor Company”), Pyatt Broadmark Management, LLC (“MgCo I”), Broadmark Real Estate Management II, LLC (“MgCo II”), Broadmark Real Estate Management III, LLC (“MgCo III”), and Broadmark Real Estate Management IV, LLC (“MgCo IV” and, together with MgCo I, MgCo II and MgCo III, the “Predecessor Management Companies” and each a “Predecessor Management Company,” and the Predecessor Management Companies, together with the Predecessor Companies and their subsidiaries, the “Predecessor Company Group”). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, (i) Merger Sub I merged with and into Trinity, with Trinity being the surviving entity of such merger (the “Trinity Merger”), (ii) immediately following the Trinity Merger, each of the Predecessor Companies merged with and into Merger Sub II, with Merger Sub II being the surviving entity of such merger (the “Company Merger”), and (iii) immediately following the Company Merger, each of the Predecessor Management Companies merged with and into Trinity, with Trinity being the surviving entity of such merger (the “Management Company Merger” and, together with the Trinity Merger and the Company Merger, the “Mergers”). As a result of the Mergers, Merger Sub II and Trinity became wholly owned subsidiaries of Broadmark Realty. The consolidated subsidiaries of Broadmark Realty after the Business Combination include BRMK Lending, LLC, BRMK Management, Corp., and Broadmark Private REIT Management, LLC. BRMK Lending, LLC originates short-term loans secured by first deed of trust liens on residential and commercial real estate. BRMK Management, Corp. (the “Manager”) manages the underwriting, closing, servicing and disposition of mortgage notes, and performs all general and administrative duties for Broadmark Realty. Broadmark Private REIT Management, LLC (the “Private REIT Manager”) manages the newly organized Broadmark Private REIT, LLC (the “Private REIT”), an unconsolidated affiliate of the Company that primarily participates in loans originated, underwritten and serviced by a subsidiary of Broadmark Realty. Broadmark Realty has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with the tax period ending December 31, 2019. Broadmark Realty generally will not be subject to U.S. federal corporate income tax on that portion of its net income that is distributed to stockholders if it distributes at least 90% of its REIT taxable income to its stockholders by prescribed dates and complies with various other requirements. The Company also operates its business in a manner that permits it to maintain an exclusion from registration under the Investment Company Act of 1940. As a REIT, Broadmark Realty may own up to 100% of the stock of one or more taxable REIT subsidiaries (“TRSs”), which may earn income that would not be qualifying income if earned directly by a REIT. The Manager is a TRS and this election applies to the wholly owned subsidiaries of the Manager, including the Private REIT Manager. Unless the context otherwise requires, references to “Broadmark Realty,” the “Company,” “we,” “us” and “our” in the remainder of this report refer to Broadmark Realty and its consolidated subsidiaries after the Business Combination and refer to the Predecessor Company Group for periods prior to the Business Combination. |
Summary of significant accounti
Summary of significant accounting policies | 9 Months Ended |
Sep. 30, 2020 | |
Summary of significant accounting policies | |
Summary of significant accounting policies | Note 2 - Summary of significant accounting policies Basis of Presentation For periods prior to November 15, 2019, the accompanying consolidated financial statements do not represent the financial position and results of operations of one controlling legal entity, but rather a combination of the historical results of the Predecessor Company Group, which was under common management. Therefore, any reference herein to the Predecessor financial statements is made on a combined basis. For periods beginning November 15, 2019, the accompanying consolidated financial statements represent the consolidated financial statements of the Company, beginning with BRELF II as the accounting acquirer and successor entity. In addition, as a result of the Business Combination, the consolidated financial statements for periods beginning November 15, 2019 are presented on a new basis of accounting pursuant to Accounting Standards Codification (“ASC”) 805, Business Combinations The financial information presented in the accompanying unaudited condensed consolidated financial statements has been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements and notes include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the condensed consolidated financial position, results of operations and cash flows for the periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in our Annual Report on Form 10-K filed on March 16, 2020 with the SEC (the “Annual Report”). The condensed consolidated balance sheet as of December 31, 2019, included herein, was derived from the audited financial statements of Broadmark Realty Capital Inc. as of that date. The presentation of the Predecessor period has been conformed to the current period’s presentation for the purposes of these consolidated financial statements. Additionally, certain balance sheet captions as of December 31, 2019 have been reclassified to conform to the current period's presentation. Principles of Consolidation For the Predecessor period, all intra-entity accounts, balances and transactions have been eliminated in the preparation of the unaudited condensed consolidated financial statements. Beginning November 15, 2019, all significant intercompany accounts, balances and transactions have been eliminated in consolidation. Broadmark Realty consolidates those entities in which it has control over significant operating, financial and investing decisions of the entity, as well as those entities deemed to be variable interest entities (“VIEs”), if any, in which Broadmark Realty is determined to be the primary beneficiary. Broadmark Realty is not the primary beneficiary of, and therefore does not consolidate, any VIEs at September 30, 2020 and December 31, 2019. Certain Significant Risks and Uncertainties In the normal course of business, we encounter one primary type of economic risk in the form of credit risk. Credit risk is the risk of default on our investment in mortgage notes receivable resulting from a borrower’s inability or unwillingness to make contractually required payments. We believe that the carrying values of our investments in mortgage notes receivable reasonably consider this credit risk. In addition, we are subject to significant tax risks. If we were to fail to qualify as a REIT in any taxable year, we would be subject to U.S. federal corporate income tax, which could be material. We operate in a dynamic industry and, accordingly, can be affected by a variety of factors. For example, we believe that changes in any of the following areas could have a significant negative effect on us in terms of our future financial position, results of operations or cash flows: public health crises, like the novel coronavirus (“COVID-19”) pandemic; competition in our market; the stability of the real estate market and the impact of interest rate changes; changes in government regulation affecting our business; natural disasters and catastrophic events; our ability to attract and retain qualified employees and key personnel; and protection of customers’ information and other privacy concerns, among other things. Use of Estimates The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The most significant estimates relate to the fair value of financial instruments, such as impaired loans and real property, goodwill, identified intangible assets and optional subscription liabilities. Accordingly, our actual results could differ from those estimates. Reportable Segments We operate the business as one reportable segment. BALANCE SHEET MEASUREMENT Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents. We have a cash management sweep account repurchase agreement whereby our bank sweeps cash in excess of $750,000 nightly, sells us specific U.S. Government Agency securities and then repurchases these securities the next day. We maintain our cash and cash equivalents with financial institutions. At times, such amounts may exceed federally insured limits. As of September 30, 2020 and December 31, 2019, the uninsured cash and cash equivalents balance was $172.1 million and $236.7 million, respectively. There were no restrictions on cash as of September 30, 2020 or December 31, 2019. Mortgage Notes Receivable Mortgage notes receivable (referred to herein as “mortgage notes receivable,” “construction loans,” “loans” or “notes”) are classified as held for investment as we have the intent and ability to hold until maturity or payoff and are carried at amortized cost, net of allowance for loan losses, interest reserves, construction holdbacks and deferred origination fees. Mortgage notes receivable that are in contractual default are deemed to be non-performing and are evaluated for impairment. All of our loans are considered collateral dependent, and therefore, non-performing loans are evaluated for impairment based on the fair value of the collateral less estimated costs to sell. Participations in mortgage notes receivables are accounted for as sales and derecognized from the balance sheet when control over the transferred assets has been surrendered. Control over transferred assets is deemed to be surrendered when: (1) a group of financial assets or a participating interest in an entire financial asset has been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. If the sales do not meet these criteria, the sale of the participation is treated as a secured borrowing. As of September 30, 2020, all participations in mortgage notes receivable sold to the Private REIT have achieved sale accounting. There were no participations as of December 31, 2019. Deferred Income Deferred income represents the amount of our origination and amendment or extension fees that have been deferred and will be recognized in income over the contractual maturity of the underlying loan. Origination fees are included in the total commitment to the borrower and financed at the time of loan origination. Deferred origination fees are included within mortgage notes receivable, net on the unaudited condensed consolidated balance sheets. Extension and amendment fees are not capitalized into the principal outstanding, and as such, these deferred fees are presented within interest and fees receivable, net on the unaudited condensed consolidated balance sheets. Interest and Fees Receivable Interest on performing loans is accrued and recognized as interest income at the contractual rate of interest, or at the contractual rate of monthly minimum interest. Extension fees are charged when we agree to extend the maturity dates of loans. Amendment fees are charged when loan terms are modified, such as increases in interest reserves and construction holdbacks in line with our underwriting criteria or upon modification of a loan for the transition from horizontal development to vertical construction. Extension and amendment fees represent an outstanding fee receivable that is generally collected at loan pay off. In addition, late fees are changed when borrower payments are contractually past due. We monitor each note’s outstanding interest and fee receivables and, based on historical performance, generally write off the balance after a receivable is greater than 60 days past due. Real property Real property owned by us consists of real estate acquired in settlement of loans. Real estate acquired through foreclosure or deed in lieu of foreclosure is recorded at fair value at the time of acquisition, which generally approximates the net carrying value of the loan secured by such property. Costs related to acquisition, development, construction and improvements are capitalized. Expenditures for repairs and maintenance are charged to expense when incurred. As of September 30, 2020 and December 31, 2019, real properties owned by us consist of real estate acquired as a result of foreclosure proceedings on one and two partially completed construction projects, respectively. Goodwill Goodwill represents the excess of the consideration paid over the fair value of net assets acquired in connection with the Business Combination in November 2019. Goodwill is not amortized, but rather tested for impairment annually in October or more frequently if events or changes in circumstances indicate potential impairment. In testing goodwill for impairment, we follow ASC 350, Intangibles—Goodwill and Other Intangible Assets As a result of the Business Combination in November 2019, we identified intangible assets in the form of customer relationships. We recorded the intangible assets at fair value at the acquisition date and are amortizing the value of these finite lived intangibles into expense over the expected useful life. Fixed Assets Fixed assets, which are included in other assets in the accompanying unaudited condensed consolidated balance sheets are stated at cost, less accumulated depreciation. Repairs and maintenance to these assets are charged to expense as incurred; major improvements enhancing the function and/or useful life are capitalized. When items are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gains or losses arising from such transactions are recognized. Depreciation is recorded on the straight-line basis over the estimated useful life of the assets, which ranges from three Other Assets Other assets primarily consist of prepaid insurance, right-of-use asset and other operating receivables. In connection with the Business Combination, we entered into an arrangement to sublease an operating lease and have recorded a right-of-use asset and a lease liability Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities primarily consist of accruals for payments of professional services fees, lease liabilities, optional subscription liabilities and other operating payables. INCOME RECOGNITION Interest Income Interest income on mortgage notes receivable is accrued based on contractual rates applied to the principal balance outstanding, unless there is a minimum interest provision in the mortgage note. Many construction loans provide for minimum interest provisions, under which the contractual rate applies to between 50% and 70% of the face amount of the note until the actual outstanding principal exceeds the minimum threshold. The accrual of interest income is suspended when a loan is designated non-performing and we believe, after considering collection efforts and other factors, the amount ultimately to be collected will be insufficient to cover the additional interest payments. Interest previously accrued may be reversed at that time, and such reversal offset against interest income in the condensed consolidated statement of income. The accrual of interest income resumes only when the suspended loan becomes contractually current and a credit analysis supports the ability to collect in accordance with the terms of the loan. Fee Income We collect loan origination fees in conjunction with origination. In addition, we charge extension fees in conjunction with modification of the terms of our existing loans. We defer and amortize loan origination fees, direct loan origination costs and loan extension fees over the contractual terms of the loans. The Predecessor Companies did not defer origination fees, direct loan origination costs, and loan extension fees and, rather, recorded origination fees and costs at the time of origination due to the short-term nature of the loans, and the difference is not considered significant. We charge inspection fees, which we use to hire independent inspectors to report on the status of construction projects. These fees are earned and recognized upon each construction draw request. Impairment of Loans We designate loans as non-performing at such time as (1) the borrower fails to make the required monthly interest-only loan payments; (2) the loan has a maturity default; or (3) in the opinion of management, it is probable we will be unable to collect all amounts due according to the contractual terms of the loan. We evaluate loans designated as non-performing for impairment as we have some expectation that the repayment of loan, including both contractual interest and principal payments, may not be realized in full. The allowance for loan losses reflects our estimate of loan losses inherent in the loan portfolio as of the balance sheet date. The allowance is increased or decreased by recording the loan loss provision or recovery in our consolidated statements of income and is decreased by charge-offs when losses are confirmed through the receipt of assets, such as in a pre-foreclosure sale or upon ownership control of the underlying collateral in full satisfaction of the loan upon foreclosure or when significant collection efforts have ceased. The allowance for loan losses is determined on an asset-specific basis. The asset-specific allowance relates to estimated losses on individual impaired loans. This assessment is made on a monthly basis based on factors such as payment status, lien position, borrower financial resources and investment collateral, collateral type, project economics and geographic location as well as national and regional economic factors. An allowance is established for an impaired loan when the estimated fair value of the collateral is lower than the carrying value of that loan. For impaired loans, impairment is measured using the estimated fair value of collateral less the estimated cost to sell in comparison to the carrying value. Valuations are performed or obtained at the time a loan is determined to be impaired and designated as non-performing, and they are updated if circumstances indicate that a significant change in value has occurred. Given the short term nature of our loans, we evaluate the most recent external “as is” appraisal and depending on the age of the appraisal, may order a new appraisal or, where available, will evaluate against existing comparable sales or other pertinent information to estimate the fair value of the collateral for such loans. As of September 30, 2020, all of our allowance for loan losses represents an asset-specific allowance. EXPENSE RECOGNITION Operating Expenses Operating expenses are expensed as incurred. General and administrative expenses primarily consist of professional services, insurance, excise taxes and amortization of intangible assets. During 2020, no commissions were paid to a related party and for the three and nine months ended September 30, 2019, commissions paid to a related party were $2.2 and $5.3 million, respectively, which are included in general and administrative expenses. Share‑Based Payments We follow the accounting guidance for share-based payments which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and non-employee directors. Awards are issued under the Broadmark Realty Capital Inc. 2019 Stock Incentive Plan. For awards made to our employees and directors, we initially value restricted stock units based on the grant date closing price of our common stock. For awards with periodic vesting, we recognize the related expense on a straight -line basis over the requisite service period for the entire award, subject to periodic adjustments to ensure that the cumulative amount of expense recognized through the end of any reporting period is at least equal to the portion of the grant date value of the award that has vested through that date. We account for forfeitures prospectively as they occur. If there are any modifications or cancellations of the underlying unvested share-based awards, we may be required to accelerate or increase any remaining unrecognized or previously recorded stock-based compensation expense. Profit Interests (Predecessor) The Predecessor Management Companies’ profits interests were accounted for as share-based compensation. The Predecessor Management Companies’ expensed the fair value of profits interests granted to its employees and directors over the period each award vested. Compensation cost was measured using the Black-Scholes model. All unvested profits interests vested at the time of the Business Combination. Income Taxes (Successor) We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes (the “Code”). As a REIT, we generally are not subject to U.S. federal income taxes on net income we distribute to our shareholders. We intend to make timely distributions sufficient to satisfy the annual distribution requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax on our taxable income at regulator corporate tax rates. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property and U.S. federal income and excise taxes on our undistributed income and our TRSs are subject to U.S. federal income taxes. Income Taxes (Predecessor) The Predecessor Companies were taxed as partnerships and REITs under provisions of the Code. As such, the tax attributes of the partnerships are included in the individual tax returns of its members for partnerships and not for the Predecessor Company Group and the REIT entities met the qualifications to be taxed as REITs. Accordingly, the accompanying unaudited condensed consolidated statement of income for the three and nine months ended September 30, 2019 includes no provision for income taxes for the Predecessor Company Group. Earnings per Share We follow the accounting guidance in ASC 260, Earnings Per Share For purposes of the Predecessor period which includes the financial results of the Predecessor Company Group, we determined that earnings per unit would not be meaningful to the users of this filing, given the different unitholders and members’ equity structures of each individual entity in the Predecessor Company Group. Recent Accounting Pronouncements As an emerging growth company, the Jumpstart Our Business Startups Act (“JOBS Act”) permits us an extended transition period for complying with new or revised accounting standards affecting public companies. We have elected to use this extended transition period and adopt certain new accounting standards on the private company timeline, which means that our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards on a non-delayed basis. We will cease to qualify as an emerging growth company effective December 31, 2020 unless the eligibility standards are modified. Loss of emerging growth company status will result in our losing our reporting exemptions noted above. In June 2016, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326), and in 2019 issued ASU 2019-04, which provides codification improvements, and ASU 2019-05, which provides targeted transition relief for entities adopting ASU 2016-13. The financial instruments-credit losses guidance replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables and held-to maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance, such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments, and net investments in certain leases recognized by a lessor. In addition, the new guidance requires that credit losses be presented as an allowance rather than as a write-down on available-for-sale debt securities. We have formed a CECL committee that is assessing data and system needs in order to evaluate the impact of adopting the new guidance. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which we adopt the standard. At this time, the impact on our consolidated financial statements is being evaluated. We are required to adopt the standard in the fourth quarter of 2020 for the annual period as of and ending December 31, 2020 with an adoption date as of January 1, 2020. In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the amendments in ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The updated guidance requires prospective adoption. We adopted the standard on January 1, 2020 and there was no material impact on our unaudited condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which (1) adds incremental requirements for entities to disclose (a) the amount of total gains or losses for the period recognized in other comprehensive income that is attributable to fair value changes in assets and liabilities held as of the balance sheet date and categorized within Level 3 of the fair value hierarchy (b) the range and weighted average used to develop significant unobservable inputs and (c) how the weighted average was calculated for fair value measurements categorized within Level of the fair value hierarchy and (2) eliminates disclosure requirements for (a) transfers between Level 1 and Level 2 and (b) valuation processes for Level 3 fair value measurements. We adopted the standard on January 1, 2020 and there was no material impact on our unaudited condensed consolidated financial statements. |
Business Combination
Business Combination | 9 Months Ended |
Sep. 30, 2020 | |
Business Combination | |
Business Combination | Note 3 – Business Combination As discussed in Note 1, the Company entered into the Merger Agreement with Trinity, the Trinity Parties, the Predecessor Companies and the Predecessor Management Companies. The Business Combination was accounted for in accordance with ASC 805, Business Combinations one-fourth th Separately, the cash and equity consideration transferred per the Merger Agreement was allocated between the legal amounts issued for the recapitalization of BRELF II and the cash and equity issued for the acquisition of the Predecessor Company Group. Given that the Merger Agreement was negotiated at arm’s length and based on the fair value of the entities, the legal consideration best depicted the relative fair value of separating the acquisitions from the recapitalization. The amount of common stock issued in the transaction that was attributable to the recapitalization of BRELF II was $495.5 million, along with $12.7 million of transaction costs, which costs were recorded as operating expenses and were settled in cash of $11.3 million and common stock of $1.4 million. Total consideration allocated to the Business Combination under ASC 805 was $581.8 million, which was measured at its acquisition date fair value, consisting of $102.2 million in cash and $479.6 million of the Company common stock. Such amounts are inclusive of seller-transaction costs of $13.5 million, settled by the acquirer at closing in cash of $11.9 million and common stock of $1.6 million. The purchase price allocation of assets acquired, and liabilities assumed have been recorded at their fair values as of the closing of November 14, 2019 The fair values of assets acquired and liabilities assumed by BRELF II on November 14, 2019 Consideration paid: $ (in thousands) Cash $ 102,245 Common stock 479,619 Total consideration paid $ 581,864 Assets acquired: Cash and cash equivalents 88,505 Investment in real property 8,413 Mortgage notes receivable 344,837 Interest and fees receivable 2,743 Intangible assets 1,000 Other assets 174 Total Assets 445,672 Liabilities assumed: Accounts payable and accrued liability 205 Other liabilities 568 Total Liabilities 773 Net assets acquired 444,899 Goodwill $ 136,965 In the first quarter of 2020, based on additional information obtained about facts and circumstances that existed as of November 14, 2019, we recorded a measurement period adjustment to reduce the fair value of intangible assets in the form of customer relationships from $6.0 to $1.0 million. This adjustment increased the preliminary amount of goodwill previously recorded by $5.0 million. The purchase price for the acquisition was determined based on our expectations of future earnings and cash flows, resulting in the recognition of goodwill. Goodwill predominantly relates to the value of the assembled workforce and intangible assets that do not qualify for separate recognition at the time of the acquisition. Purchased goodwill is deductible for income tax purposes over 15 years. The fair value of the customer relationships was determined using the replacement cost approach. The cost provides a systematic framework for estimating the value of the intangible asset based on the economic principle of substitution. Under this approach, value is estimated by developing the cost to either replace or reproduce (replicate) the asset as if new. The preliminary useful lives for customer relationships were determined based upon the remaining useful economic lives of the assets that are expected to contribute to future cash flows and approximates between two As described above, the Company incurred a total of $26.2 million of transaction-related costs for both the Business Combination and the recapitalization of BRELF II, of which $25.8 million was incurred and expensed in the Predecessor period and $0.4 million was incurred and expensed in the Successor period. Transaction-related expenses are comprised primarily of transaction fees, including legal, finance, consulting, professional fees and other third-party costs. These amounts were recorded as operating expenses in the consolidated statements of income in the periods incurred. At the closing of the transaction in the Successor period, the acquirer directly paid (or repaid to the sellers) the amounts owed for such expenses, settling them in a combination of cash and equity. From the perspective of the Successor entity, the settlement of these amounts by the acquirer at closing were allocated between purchase price for the business combination and recapitalization of BRELF II, using a methodology consistent with the allocation of the overall consideration transferred. Included within the transaction-related expenses referred to above, is a termination fee of $10.0 million related to the termination of certain referral agreements the Predecessor Management Companies had in place with a related entity, which settled in $7.0 million of cash and $3.0 million of the Company common stock at closing. Supplemental pro forma financial information When giving effect to the Business Combination as if it closed on January 1, 2019, there are no material differences between historical revenue and earnings of the Company and results on a pro forma basis, except for the timing of transaction costs and amortization expense related to intangible assets, which would have been incurred as of an earlier date. Refer to Note 6 for the future impact of estimated amortization expense related to acquired intangible assets based on the preliminary fair values and preliminary estimated useful lives. |
Mortgage notes receivable
Mortgage notes receivable | 9 Months Ended |
Sep. 30, 2020 | |
Mortgage notes receivable | |
Mortgage notes receivable | Note 4 - Mortgage notes receivable The stated principal amount of loans receivable in our portfolio represents our interest in loans secured by first deeds of trust, security agreements or legal title to real estate located in the United States. Our lending standards require that all mortgage notes receivable be secured by a first deed of trust lien on real estate and that the maximum loan to value ratio (“LTV”) be no greater than 65%. The LTV is calculated on an “as-complete” appraised value of the underlying collateral as determined by an independent appraiser at the time of the loan origination. The lending standards also limit the initial outstanding principal balance of the loan to a maximum LTV of up to 65% of the “as-is” appraised value of the underlying collateral as determined by an independent appraiser at the time of the loan origination. Unless otherwise indicated, LTV is measured by the total commitment amount of the loan divided by the “as-completed” appraisal. LTVs do not reflect interim loan activity such as construction draws or interest payments capitalized to loans, or partial repayments of the loan. The maximum amount of a single loan may not exceed 10% of our total assets and the maximum amount to a single borrower may not exceed 15% of our total assets. We consider the maximum LTV as an indicator for the credit quality of a mortgage note receivable. Mortgage notes receivable are recorded at cost, which represents the carrying value, and interest rates generally range from a fixed annual rate of 10% to 13%. Mortgage notes receivable are considered to be short-term financings, with initial terms typically ranging from five Mortgage notes receivable are presented net of construction holdbacks, interest reserves, allowance for loans losses and deferred origination fee income in the consolidated balance sheets. The construction holdback represents amounts withheld from the funding of construction loans until we deem construction to be sufficiently completed. The interest reserve represents amounts withheld from the funding of certain mortgage notes receivable for the purpose of satisfying monthly interest payments over all or part of the term of the related note. Accrued interest is paid out of the interest reserve and recognized as interest income at the end of each month. The deferred origination fee income represents amounts that will be recognized over the contractual life of the underlying mortgage notes receivable. The following table summarizes information pertaining to mortgage notes receivable as of September 30, 2020 and December 31, 2019: (dollars in thousands) September 30, 2020 December 31, 2019 Total loan commitments $ 1,220,354 $ 1,101,275 Less: Construction holdbacks (1) 305,410 253,708 Interest reserves (1) 24,988 18,601 Private REIT participation (2) 15,597 — Total principal outstanding for our mortgage notes receivable 874,359 828,966 Less: Allowance for loan losses 6,143 4,096 Deferred origination fees 9,503 3,281 Mortgage notes receivable, net $ 858,713 $ 821,589 (1) Includes construction holdbacks of $19.8 million and interest reserves of $2.0 million on participating interests sold to the Private REIT as of September 30, 2020. (2) The Private REIT was determined to be a voting interest entity for which we, through our wholly owned subsidiary acting as manager with no equity investment, do not hold a controlling interest in and do not consolidate. Furthermore, the Private REIT participation in loans originated by us meets the characteristics of a participating interest in accordance with ASC 860 and therefore, is treated as a sale of mortgage notes receivable and is derecognized from our unaudited condensed consolidated financial statements. Non-accrual status Mortgage notes receivable that are in contractual default are deemed to be non-performing and are evaluated for impairment. Loans can be placed in contractual default status for any of the following reasons: (1) an interest payment is more than 30 days past due; (2) a note matures and the borrower fails to make payment of all amounts owed or extend the loan; or (3) the collateral becomes impaired in such a way that the ultimate collection of the note is doubtful. A loan can be removed from contractual default status if the late interest payments are brought current, the borrower complies with appropriate re-underwriting to extend the note, or additional collateral is provided for the note to provide cash flow or bring the LTV below 65%. No interest income is recognized on mortgage notes receivable that are in contractual default, unless the interest is paid in cash or collectability of all amounts due is reasonably assured. In addition, in certain instances, where the interest reserve on a current loan has been fully depleted and the interest payment is not expected to be collected from the borrower, we may place a current loan on non-accrual status and recognize interest income on a cash-basis. As of September 30, 2020, and December 31, 2019, the principal outstanding on loans placed on non-accrual status were $173.5 and $32.9 million, respectively. For the three and nine months ended September 30, 2020, the average recorded investments in loans placed on non-accrual status were $175.3 and $133.9 million, respectively. For the three and nine months ended September 30, 2019, the average recorded investments in loans placed on non-accrual status were $9.7 and $15.5 million, respectively. Impaired mortgage notes receivable We evaluate each loan for impairment at least quarterly. Loans in contractual default are designated as non-performing and are considered impaired as we have some expectation that the repayment of the loan, including both contractual interest and principal payments, may not be realized in full. Placing a loan in contractual default does not in and of itself result in an impairment if we deem it probable that we will ultimately collect all amounts due. If a loan is determined to have impairment, we record an allowance through the provision for loan losses to reduce the carrying value of the loan to the fair value of the collateral less estimated costs to sell, as all of our loans are classified as collateral dependent as repayment is expected solely from the collateral. As of September 30, 2020 and December 31, 2019, the principal outstanding on impaired loans was $217.7 and $32.9 million, respectively. As of September 30, 2020 and December 31, 2019, the principal outstanding on loans with impairment was $63.0 and $20.8 million, respectively. For the three and nine months ended September 30, 2020, the average recorded investments in loans with impairment was $227.3 and $159.9 million, respectively. For the three and nine months ended September 30, 2019, the average recorded investments in loans with impairment was $14.5 and $11.9 million, respectively. The following table summarizes the activity in the allowance for loan losses for the three and nine months ended September 30, 2020 and September 30, 2019. All of the allowance for loan losses relates to loans deemed to be impaired. Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended (dollars in thousands) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Beginning $ 6,795 $ 1,777 $ 4,096 $ 1,704 Provision for loan losses (benefits) (652) 2,704 3,279 2,777 Charge offs — (453) (1,232) (453) Ending $ 6,143 $ 4,028 $ 6,143 $ 4,028 |
Fair value measurements
Fair value measurements | 9 Months Ended |
Sep. 30, 2020 | |
Fair value measurements | |
Fair value measurements | Note 5 – Fair value measurements The following tables present estimated fair values of our financial instruments as of the period indicated, whether or not recognized or recorded in the consolidated balance sheets at the period indicated: September 30, 2020 Fair Value Measurements Using Carrying Estimated (dollars in thousands) Value Fair Value Level 1 Level 2 Level 3 Financial Assets Cash and cash equivalents $ 173,602 $ 173,602 $ 173,602 $ — $ — Mortgage notes receivable, net 858,713 858,713 — — 858,713 Interest and fees receivable 11,917 11,917 — 11,917 — Investment in real property, net 3,743 3,743 — — 3,743 Financial Liabilities Accounts payable and accrued liabilities (1) $ 3,504 $ 3,504 $ — $ 3,106 $ 398 December 31, 2019 Fair Value Measurements Using Carrying Estimated (dollars in thousands) Value Fair Value Level 1 Level 2 Level 3 Financial Assets Cash and cash equivalents $ 238,214 $ 238,214 $ 238,214 $ — $ — Mortgage notes receivable, net 821,589 821,589 — — 821,589 Interest and fees receivable 4,108 4,108 — 4,108 — Investment in real property, net 5,837 5,837 — — 5,837 Financial Liabilities Accounts payable and accrued liabilities (1) $ 8,415 $ 8,415 $ — $ 2,923 $ 5,492 (1) Includes the level 3 valuation of the optional subscription liability derivative measured at fair value on a recurring basis. We follow the accounting guidance in ASC 820, Fair Value Measurements and Disclosures, which requires the categorization of fair value measurement into three broad levels of the fair value hierarchy as follows: Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The following table sets forth assets and liabilities measured and reported at fair value on a recurring and nonrecurring basis, as well as for which fair value is only disclosed, as of September 30, 2020 and December 31, 2019. All of these fair values are categorized as Level 3. The table also contains information about valuation methodologies and inputs used for assets that are measured at fair value and categorized within Level 3 as of September 30, 2020 and December 31, 2019: Level 3 Valuation Unobservable Range of (dollars in thousands) September 30, 2020 December 31, 2019 technique inputs inputs Optional subscription liability (1) $ 398 $ 5,492 Valuation model Refer to Note 7 for assumptions 0 - 5 % Real property (2) 3,743 5,837 Collateral valuations Discount to appraised value based on comparable market prices 0 - 10 % Impaired loans, net of allowance for loan losses (3) 211,575 28,853 Collateral valuations Discount to appraised value based on comparable market prices 0 - 10 % Total $ 215,716 $ 40,182 (1) Optional subscription liability derivative measured at fair value on a recurring basis. (2) Real estate property is stated at lower of cost or fair value, a non-recurring measurement of fair value. (3) For impaired loans, the fair value is based on the fair value less the costs to sell the underlying property. The carrying value of the impaired loans, net of the allowance for loan losses, approximates fair value. Fair value on a recurring basis In connection with the Mergers, Trinity Merger Corp. issued $75 million of common stock, along with 7.2 million warrants and an optional subscription of up to $25 million of additional common stock (the “Optional Subscription Liability”) in a private placement transaction with certain entities affiliated with Farallon Capital Management, LLC (“Farallon”), which transaction is described in further detail in Note 11. We account for the Optional Subscription Liability as a derivative and, in accordance with ASC 815, we measure at fair value on a recurring basis. The value of this Optional Subscription Liability is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets. The $5.1 million decrease in value for the nine months ended September 30, 2020 was recorded as other income in the accompanying unaudited condensed consolidated statement of income for that period. The Optional Subscription Liability is valued using a lattice model that primarily incorporates observable inputs such as our common stock price, exercise price term of the option and the risk-free rate, however, it also incorporates an assumption for equity volatility based on the volatility of the common stock of comparable public companies. As the result of using unobservable inputs in the valuation, we classify the Optional Subscription Liability as Level 3 within the fair value hierarchy. Fair value on a nonrecurring basis Investments in real properties are initially recorded at the acquisition cost less estimated costs to sell, which approximates fair value. Upon transfer from mortgage notes receivable to investment in real estate property, the fair value less costs to sell becomes the new cost for the property. Costs related to acquisition, development, construction and improvements are capitalized. At each reporting date, the fair value of real properties is based upon the most recent independent third-party appraisals of value discounted based upon our experience with actual liquidation values. These discounts to the appraisals generally range from 0% to 10%. As the result of using unobservable inputs in the valuation, we classify investments in real properties as Level 3 within the fair value hierarchy. For impaired loans, fair values are based on the value of the underlying collateral less the costs to sell. At each reporting date, loans in contractual default status are evaluated based upon the most recent independent third-party appraisals of value discounted based upon our experience with actual liquidation values. These discounts to the appraisals generally range from 0% to 10%. As the result of using unobservable inputs in the valuation, we classify impaired loans as Level 3 within the fair value hierarchy. Fair value disclosure only For certain of our financial instruments, including cash equivalents, interest and fees receivable, other receivables, accounts payable, and accrued liabilities, which are classified under Level 1 within the fair value hierarchy, the carrying amounts approximate fair value due to their short-term maturities. The mortgage notes receivable are secured by first deeds of trust, security agreements or legal title to real estate located in the United States. The mortgage notes receivable generally have initial terms ranging between five |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | Note 6 – Goodwill and Intangible Assets Goodwill All of our goodwill relates to the Business Combination. As discussed in Note 3, in the first quarter of 2020, we recorded a measurement period adjustment to reduce the preliminary fair value of intangible assets in the form of customer relationships by $5.0 million and increased our preliminary value of goodwill by $5.0 million resulting in $137.0 million of goodwill as of September 30, 2020. As a result of this adjustment to preliminary values, $0.9 million of amortization of intangible assets recorded in 2019 was reversed in the first quarter of 2020. In accordance with ASC Topic 350, we continuously evaluate the presence of triggering events that require an impairment test. In the first quarter of 2020, we determined that COVID-19 was a triggering event based on the adverse impact on our business and results of operations. Specifically, we noted that COVID-19 and containment measures have contributed to, among other things, adverse impacts on the progress of construction on our borrowers’ projects, the demand for and value of commercial and residential real estate that our borrowers have developed, the creditworthiness of our borrowers and other counterparties, the capital and credit market conditions and potential delays in foreclosure proceedings. We performed a quantitative assessment of our goodwill based on both the market and income approach and determined that, as of March 31, 2020, the fair value of the reporting unit exceeded the carrying value and there was goodwill impairment. Intangible Assets All of our intangible assets relate to the Business Combination, specifically the value of customer relationships. The following table summarizes the balances of intangible assets as of September 30, 2020: Acquired (dollars in thousands) Intangibles Asset Type Customer relationships $ 1,000 Less: Accumulated amortization 294 Intangible assets, net $ 706 The weighted average life remaining of the intangible assets is approximately 2.1 years. Amortization expense is expected to be as follows: Year ended December 31, (dollars in thousands) 2020 2021 2022 Estimated future intangible amortization expense $ 85 $ 339 $ 282 |
Stockholders' Equity and Member
Stockholders' Equity and Members' Equity | 9 Months Ended |
Sep. 30, 2020 | |
Stockholders' Equity and Members' Equity | |
Stockholders' Equity and Members' Equity | Note 7 - Stockholders’ Equity and Members’ Equity Stockholders’ Equity The Company is authorized to issue 500,000,000 shares of common stock with a par value of $0.001 per share and 100,000,000 shares of preferred stock with a par value of $0.001 per share. Holders of our common stock are entitled to one vote for each share. As of September 30, 2020 and December 31, 2019, there were 132,236,307 and 132,015,635 shares of common stock issued outstanding As of September 30, 2020 and December 31, 2019 As part of the PIPE Investment (for further details, refer to Note 11), the Farallon Entities have an option to purchase up to $25 million of additional shares of common stock, which will be exercisable during the 365-day period following the consummation of the Business Combination at the Reference Price (the “Optional Subscription”). The Farallon Entities are entitled to cash settle, in whole or in part, the exercise of the Optional Subscription, and therefore, the Optional Subscription does not meet the requirements for equity classification and is assumed to be settled in cash and classified as a liability in our consolidated balance sheet. The liability for the Optional Subscription was $0.4 million as of September 30, 2020 and $5.5 million as of December 31, 2019 and is included in accounts payable and accrued liabilities. The fair value of the Optional Subscription Liability was estimated using a lattice model in accordance with ASC 820, Fair Value, using the assumptions noted below in the following table. Expected volatility is based on the historical volatility of a peer group of public companies. The risk-free interest rate is based on the US Treasury Constant Maturity curve, commensurate with the time to expiry of warrants. As of September 30, 2020 As of December 31, 2019 Expected volatility 30.0 % 13.0 % Expected dividend yield 7.3 % 7.3 % Expected life (in years) 0.1 0.9 Risk-free interest rate 0.1 % 1.6 % Earnings per Share We present both basic and diluted earnings per share (“EPS”) amounts in our condensed consolidated financial statements. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects the maximum potential dilution that could occur from our outstanding warrants and restricted stock units. We consider the two-class method to measure dilution to earnings per share: (a) calculate the net number of shares that would be issued assuming any related proceeds are used to buy back outstanding shares (the treasury stock method), or (b) assume the gross number of shares are issued and calculate any related effects on net income available for shareholders, considering participating securities, such as certain unvested restricted stock units which are entitled to nonforfeitable dividends rights (the two-class method). For the period presented within these unaudited condensed consolidated financial statements, the two-class method was deemed to be insignificant. In accordance with GAAP, our policy is to apply the more dilutive methodology upon issuance of such instruments. The table below presents the computation of basic and diluted net income per share of common stock for the three and nine months ended September 30, 2020. Three Months Ended Nine Months Ended (dollars in thousands, except share and per share data): September 30, 2020 September 30, 2020 Net income $ 23,224 $ 70,262 Basic weighted-average shares of common stock outstanding 132,282,252 132,156,844 Dilutive effect of share-based compensation 34,494 50,761 Diluted weighted-average shares of common stock outstanding (1) 132,316,746 132,207,605 Basic earnings per share $ 0.18 $ 0.53 Diluted earnings per share $ 0.18 $ 0.53 (1) We exclude anti-dilutive shares from calculation of weighted-average shares for diluted earnings per share. There were 15.6 million shares related to the Public Warrants and Private Warrants, 2.4 million shares of optional subscription warrants and 662,400 and 615,715 shares of unvested restricted stock unit awards for the three and nine months ended September 30, 2020, respectively, which are not included in the above calculation of diluted earnings per share because in doing so they would be anti-dilutive. Members’ Equity (Predecessor) Members’ Equity is presented on a consolidated basis for the Predecessor Company Group, which includes the consolidated preferred units for the Predecessor Companies and the total consolidated Class A and Class P units for the Predecessor Management Companies. The applicable Predecessor Management Company was the sole common unit holder of the Predecessor Company it managed, and, therefore all common units have been eliminated in the preparation of the condensed consolidated Predecessor Company Group financial statements, as they represent intra-entity balances between entities within the consolidated Predecessor Company Group. Earnings Per Unit (Predecessor) We determined that earnings per unit would not be meaningful to the users of these financial statements for the Predecessor period. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Taxes | |
Income Taxes | Note 8 - Income Taxes For the Successor period, the Manager has elected to be treated as a TRS and this election applies to the wholly owned subsidiaries of the Manager, including the Private REIT Manager. Having TRSs permit us to participate in certain activities from which REITs are generally precluded, as long as these activities meet specific criteria, are conducted within the parameters of certain limitations established by the Code and are conducted in entities which elect to be treated as taxable subsidiaries under the Code. To the extent these criteria are met, we will continue to maintain the qualification as a REIT. We generally must distribute annually at least 90% of our net taxable income, subject to certain adjustments and excluding any net capital gain, in order for U.S. federal income tax not to apply to our earnings that we distribute. To the extent that we satisfy this distribution requirement but distribute less than 100% of our net taxable income, we will be subject to U.S. federal income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. Our qualification as a REIT also depends on our ability to meet various other requirements imposed by the Code, which relate to organizational structure, diversity of stock ownership, and certain restrictions with regard to the nature of assets and the sources of income. Even if we qualify as a REIT, we may be subject to certain U.S. federal income and excise taxes and state and local taxes on our income and assets. If we fail to maintain our qualification as a REIT for any taxable year, we may be subject to material penalties as well as federal, state, and local income tax on our taxable income at regular corporate rates and we would not be able to qualify as a REIT for the subsequent four full taxable years. As of September 30, 2020 and December 31, 2019, we were in compliance with all REIT requirements. Based on our evaluation, we concluded that there are no significant uncertain tax positions requiring recognition in our unaudited condensed consolidated financial statements of a contingent tax liability for uncertain tax positions. Additionally, there were no amounts accrued for penalties or interest as of or during the periods presented in the accompanying unaudited condensed consolidated financial statements. The state and local tax jurisdictions for which we are subject to tax-filing obligations recognize our status as a REIT, and therefore, we generally do not pay income tax in such jurisdictions. We may, however, be subject to certain minimum state and local tax filing fees as well as certain excise or business taxes. Our TRSs are subject to federal, state and local income taxes. |
Equity Incentive Plan
Equity Incentive Plan | 9 Months Ended |
Sep. 30, 2020 | |
Equity Incentive Plan | |
Equity Incentive Plan | Note 9 - Equity Incentive Plan Stock Incentive Plan On November 14, 2019, we established the Broadmark Realty 2019 Stock Incentive Plan (the “Plan”), which allows for the issuance of up to 5,000,000 stock options, stock appreciation rights, restricted stock awards, restricted stock units or other equity-based awards or any combination thereof to the directors, employees, consultants or any other party providing services to us. The Plan is administered by the compensation committee of our board of directors. As of September 30, 2020 and December 31, 2019, respectively, 4,049,134 and 4,569,378 share awards were available to be issued under the Plan. The restricted stock units (“RSUs”) generally vest from one All RSUs awarded will be settled upon vesting in shares of our common stock. If (1) the recipient becomes disabled and the recipient’s employment or service is terminated as a result, (2) the recipient dies during the vesting period, or (3) the recipient’s employment is terminated without cause (as defined in the Plan) in connection with, or in certain cases within a specified period following a change in control (as defined in the Plan), then the vesting of the RSUs will fully accelerate as of the date of termination of employment. Dividend equivalents are not accrued or paid on RSUs granted to executive officers and directors and accordingly those RSUs are not considered participating securities. The RSUs granted to non-executive officer employees are considered participating or entitled to receive all dividends and other distributions paid with respect to those unvested shares of common stock, unless determined otherwise by the Compensation Committee. If an award granted under the Plan expires or terminates, the shares subject to any portion of the award that expires or terminates without having been exercised or paid will again become available for the issuance of additional awards. The following table summarizes the activity related to RSUs during 2020: Weighted Average Grant Date Fair Shares Market Value Unvested RSUs outstanding as of January 1, 2020 334,928 $ 11.08 Granted 186,759 11.77 Vested (95,694) 11.08 Unvested RSUs outstanding as of March 31, 2020 425,993 Granted 47,226 9.64 Vested (119,855) $ 11.08 Unvested RSUs outstanding as of June 30, 2020 353,364 Granted 382,041 10.64 Vested (5,098) $ 11.08 Unvested RSUs outstanding as of September 30, 2020 730,307 For the three and nine months ended September 30, 2020, we recognized compensation expense related to RSUs of $1.9 and $3.8 million, respectively, based on amortizing the fair value of the awards over the service (vesting) period. As of September 30, 2020, there was $5.2 million of net unrecognized compensation cost related to unvested stock-based compensation arrangements. This compensation is recognized on a straight-line basis has a weighted-average recognition period of 1.7 years. Profits Interests and Equity Compensation (Predecessor) The Predecessor Company Group expensed the fair value of share-based compensation awards granted to employees and directors over the period each award vests. Compensation cost was measured using the Black-Scholes model. The Predecessor Company Group expensed the fair value of restricted unit awards granted to employees over the period each award vested. There were . The fair value of restricted unit awards was equal to the fair value of the Predecessor Company’s units at the date of grant. The units were valued using an internal model with market inputs available on the date of grant. The restricted units were settled as part of the Business Combination and, accordingly, |
Commitments and contingencies
Commitments and contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and contingencies. | |
Commitments and contingencies | Note 10 - Commitments and contingencies The following table illustrates our contractual obligations and commercial commitments by due date as of September 30, 2020: Less than 1 More than (dollars in thousands) Total year 1-3 years 3-5 years 5 years Construction holdbacks (1) 305,410 234,845 70,565 — — Operating lease obligations $ 11,962 $ 761 $ 1,893 $ 2,008 $ 7,300 Total $ 317,372 $ 235,606 $ 72,458 $ 2,008 $ 7,300 (1) Includes construction holdbacks of $19.8 million on participating interests sold to the Private REIT as of September 30, 2020. Our commitments and contingencies include usual obligations incurred by real estate lending companies in the normal course of business, including construction holdbacks as disclosed in Note 4. In addition, on March 18, 2020, we signed a new ten-year lease agreement for our Seattle headquarters which is expected to commence in the first quarter of 2021 upon completion of tenant improvements, which is included in the above table. From time to time, we are named as a defendant in legal actions relating to transactions conducted in the ordinary course of business. Although there can be no assurance of the outcome of such legal actions, in the opinion of management, we do not have a potential liability related to any current legal proceeding or claim that would individually or in the aggregate materially affect our results of operations, financial condition or cash flows. Concentration Risk We originate primarily short-term loans secured by first deed of trust liens on residential and commercial real estate located in 13 states and the District of Columbia. Our loan portfolio is also concentrated within ten counties, the largest being Wasatch in Utah. As of September 30, 2020, the top ten counties make up 50.0% of the total committed amount of loans in our total portfolio. |
Related party transactions
Related party transactions | 9 Months Ended |
Sep. 30, 2020 | |
Related party transactions | |
Related party transactions | Note 11 - Related party transactions Private Placement with Farallon In connection with the Business Combination and concurrently with the execution of the Merger Agreement, the Company entered into certain subscription agreements with affiliates of Farallon Capital Management, L.L.C. (the “Farallon Entities”) for a private placement (the “PIPE Investment”) of the Company’s shares of common stock, pursuant to which, immediately prior to the consummation of the Business Combination, the Company issued and sold to the Farallon Entities an aggregate of 7,174,163 shares of common stock for an aggregate purchase price of approximately $75.0 million at a price per share equal to $10.45352229 (the “Reference Price”). In addition, pursuant to the subscription agreements, the Farallon Entities have an option to purchase up to $25.0 million of additional shares of common stock, exercisable at the Reference Price. This option expires on November 14, 2020. In connection with the PIPE Investment, the Company issued to the Farallon Entities an aggregate of 7,174,163 Public Warrants. The Farallon Entities received a fee for each warrant equal to the cash payable per each warrant held by unaffiliated Public Warrant holders in connection with the warrant amendment proposal approved as part of the Business Combination, in an amount equal to $1.60 per warrant. In addition, the Farallon Entities are entitled to cash settle, in whole or in part, the exercise of their option to purchase up to $25.0 million of additional shares of common stock to the extent the delivery of the additional shares to the Farallon Entities would result, together with their affiliates and any other persons whose beneficial ownership of shares of common stock would be aggregated with the Farallon Entities or their affiliates for purpose of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in beneficial ownership in excess of 9.9% of the shares of common stock outstanding immediately after giving effect to such issuance of the shares of common stock. As a result of the PIPE Investment, the Farallon Entities own more than 5% of our outstanding common stock. The Company also provided the Farallon Entities with certain registration rights in connection with the PIPE Investment, pursuant to which we registered in December 2019 the shares of our common stock, Public Warrants and shares issuable upon exercise of the option and Public Warrants under the Securities Act. Broadmark Private REIT, LLC The Private REIT is a private real estate finance company that primarily participates in short-term, first deed of trust loans secured by real estate that are originated, underwritten and serviced by Broadmark Realty Capital Inc. The Private REIT was determined to be a voting interest entity for which we, through our wholly owned subsidiary acting as manager with no equity investment, do not hold a controlling interest in and do not consolidate. Furthermore, the Private REIT participation in loans originated by us meets the characteristics of a participating interest in accordance with ASC 860 and therefore, is treated as a sale of mortgage notes receivable and is derecognized from our unaudited condensed consolidated financial statements. As of September 30, 2020, the Private REIT’s assets under management were approximately $15.6 million. |
Subsequent events
Subsequent events | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent events | |
Subsequent events | Note 12 - Subsequent events Dividend Declaration On October 13, 2020, our board of directors declared a cash dividend of $0.06 per common share payable on November 13, 2020 to stockholders of record as of October 30, 2020, and on November 9, 2020, the board of directors declared a cash dividend of $0.06 per common share payable on December 15, 2020 to stockholders of record as of November 30, 2020. |
Summary of significant accoun_2
Summary of significant accounting policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Summary of significant accounting policies | |
Basis of Presentation | Basis of Presentation For periods prior to November 15, 2019, the accompanying consolidated financial statements do not represent the financial position and results of operations of one controlling legal entity, but rather a combination of the historical results of the Predecessor Company Group, which was under common management. Therefore, any reference herein to the Predecessor financial statements is made on a combined basis. For periods beginning November 15, 2019, the accompanying consolidated financial statements represent the consolidated financial statements of the Company, beginning with BRELF II as the accounting acquirer and successor entity. In addition, as a result of the Business Combination, the consolidated financial statements for periods beginning November 15, 2019 are presented on a new basis of accounting pursuant to Accounting Standards Codification (“ASC”) 805, Business Combinations The financial information presented in the accompanying unaudited condensed consolidated financial statements has been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements and notes include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the condensed consolidated financial position, results of operations and cash flows for the periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in our Annual Report on Form 10-K filed on March 16, 2020 with the SEC (the “Annual Report”). The condensed consolidated balance sheet as of December 31, 2019, included herein, was derived from the audited financial statements of Broadmark Realty Capital Inc. as of that date. The presentation of the Predecessor period has been conformed to the current period’s presentation for the purposes of these consolidated financial statements. Additionally, certain balance sheet captions as of December 31, 2019 have been reclassified to conform to the current period's presentation. |
Principles of Consolidation | Principles of Consolidation For the Predecessor period, all intra-entity accounts, balances and transactions have been eliminated in the preparation of the unaudited condensed consolidated financial statements. Beginning November 15, 2019, all significant intercompany accounts, balances and transactions have been eliminated in consolidation. Broadmark Realty consolidates those entities in which it has control over significant operating, financial and investing decisions of the entity, as well as those entities deemed to be variable interest entities (“VIEs”), if any, in which Broadmark Realty is determined to be the primary beneficiary. Broadmark Realty is not the primary beneficiary of, and therefore does not consolidate, any VIEs at September 30, 2020 and December 31, 2019. |
Certain Significant Risks and Uncertainties | Certain Significant Risks and Uncertainties In the normal course of business, we encounter one primary type of economic risk in the form of credit risk. Credit risk is the risk of default on our investment in mortgage notes receivable resulting from a borrower’s inability or unwillingness to make contractually required payments. We believe that the carrying values of our investments in mortgage notes receivable reasonably consider this credit risk. In addition, we are subject to significant tax risks. If we were to fail to qualify as a REIT in any taxable year, we would be subject to U.S. federal corporate income tax, which could be material. We operate in a dynamic industry and, accordingly, can be affected by a variety of factors. For example, we believe that changes in any of the following areas could have a significant negative effect on us in terms of our future financial position, results of operations or cash flows: public health crises, like the novel coronavirus (“COVID-19”) pandemic; competition in our market; the stability of the real estate market and the impact of interest rate changes; changes in government regulation affecting our business; natural disasters and catastrophic events; our ability to attract and retain qualified employees and key personnel; and protection of customers’ information and other privacy concerns, among other things. |
Use of Estimates | Use of Estimates The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The most significant estimates relate to the fair value of financial instruments, such as impaired loans and real property, goodwill, identified intangible assets and optional subscription liabilities. Accordingly, our actual results could differ from those estimates. |
Reportable Segments | Reportable Segments We operate the business as one reportable segment. |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents. We have a cash management sweep account repurchase agreement whereby our bank sweeps cash in excess of $750,000 nightly, sells us specific U.S. Government Agency securities and then repurchases these securities the next day. We maintain our cash and cash equivalents with financial institutions. At times, such amounts may exceed federally insured limits. As of September 30, 2020 and December 31, 2019, the uninsured cash and cash equivalents balance was $172.1 million and $236.7 million, respectively. There were no restrictions on cash as of September 30, 2020 or December 31, 2019. |
Mortgage Notes Receivable | Mortgage Notes Receivable Mortgage notes receivable (referred to herein as “mortgage notes receivable,” “construction loans,” “loans” or “notes”) are classified as held for investment as we have the intent and ability to hold until maturity or payoff and are carried at amortized cost, net of allowance for loan losses, interest reserves, construction holdbacks and deferred origination fees. Mortgage notes receivable that are in contractual default are deemed to be non-performing and are evaluated for impairment. All of our loans are considered collateral dependent, and therefore, non-performing loans are evaluated for impairment based on the fair value of the collateral less estimated costs to sell. Participations in mortgage notes receivables are accounted for as sales and derecognized from the balance sheet when control over the transferred assets has been surrendered. Control over transferred assets is deemed to be surrendered when: (1) a group of financial assets or a participating interest in an entire financial asset has been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. If the sales do not meet these criteria, the sale of the participation is treated as a secured borrowing. As of September 30, 2020, all participations in mortgage notes receivable sold to the Private REIT have achieved sale accounting. There were no participations as of December 31, 2019. |
Deferred Income | Deferred Income Deferred income represents the amount of our origination and amendment or extension fees that have been deferred and will be recognized in income over the contractual maturity of the underlying loan. Origination fees are included in the total commitment to the borrower and financed at the time of loan origination. Deferred origination fees are included within mortgage notes receivable, net on the unaudited condensed consolidated balance sheets. Extension and amendment fees are not capitalized into the principal outstanding, and as such, these deferred fees are presented within interest and fees receivable, net on the unaudited condensed consolidated balance sheets. |
Interest and Fees Receivable | Interest and Fees Receivable Interest on performing loans is accrued and recognized as interest income at the contractual rate of interest, or at the contractual rate of monthly minimum interest. Extension fees are charged when we agree to extend the maturity dates of loans. Amendment fees are charged when loan terms are modified, such as increases in interest reserves and construction holdbacks in line with our underwriting criteria or upon modification of a loan for the transition from horizontal development to vertical construction. Extension and amendment fees represent an outstanding fee receivable that is generally collected at loan pay off. In addition, late fees are changed when borrower payments are contractually past due. We monitor each note’s outstanding interest and fee receivables and, based on historical performance, generally write off the balance after a receivable is greater than 60 days past due. |
Real property | Real property Real property owned by us consists of real estate acquired in settlement of loans. Real estate acquired through foreclosure or deed in lieu of foreclosure is recorded at fair value at the time of acquisition, which generally approximates the net carrying value of the loan secured by such property. Costs related to acquisition, development, construction and improvements are capitalized. Expenditures for repairs and maintenance are charged to expense when incurred. As of September 30, 2020 and December 31, 2019, real properties owned by us consist of real estate acquired as a result of foreclosure proceedings on one and two partially completed construction projects, respectively. |
Goodwill | Goodwill Goodwill represents the excess of the consideration paid over the fair value of net assets acquired in connection with the Business Combination in November 2019. Goodwill is not amortized, but rather tested for impairment annually in October or more frequently if events or changes in circumstances indicate potential impairment. In testing goodwill for impairment, we follow ASC 350, Intangibles—Goodwill and Other |
Intangible Assets | Intangible Assets As a result of the Business Combination in November 2019, we identified intangible assets in the form of customer relationships. We recorded the intangible assets at fair value at the acquisition date and are amortizing the value of these finite lived intangibles into expense over the expected useful life. |
Fixed Assets | Fixed Assets Fixed assets, which are included in other assets in the accompanying unaudited condensed consolidated balance sheets are stated at cost, less accumulated depreciation. Repairs and maintenance to these assets are charged to expense as incurred; major improvements enhancing the function and/or useful life are capitalized. When items are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gains or losses arising from such transactions are recognized. Depreciation is recorded on the straight-line basis over the estimated useful life of the assets, which ranges from three |
Other Assets | Other Assets Other assets primarily consist of prepaid insurance, right-of-use asset and other operating receivables. In connection with the Business Combination, we entered into an arrangement to sublease an operating lease and have recorded a right-of-use asset and a lease liability |
Accounts Payable and Accrued Liabilities | Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities primarily consist of accruals for payments of professional services fees, lease liabilities, optional subscription liabilities and other operating payables. |
Interest Income | Interest Income Interest income on mortgage notes receivable is accrued based on contractual rates applied to the principal balance outstanding, unless there is a minimum interest provision in the mortgage note. Many construction loans provide for minimum interest provisions, under which the contractual rate applies to between 50% and 70% of the face amount of the note until the actual outstanding principal exceeds the minimum threshold. The accrual of interest income is suspended when a loan is designated non-performing and we believe, after considering collection efforts and other factors, the amount ultimately to be collected will be insufficient to cover the additional interest payments. Interest previously accrued may be reversed at that time, and such reversal offset against interest income in the condensed consolidated statement of income. The accrual of interest income resumes only when the suspended loan becomes contractually current and a credit analysis supports the ability to collect in accordance with the terms of the loan. |
Fee Income | Fee Income We collect loan origination fees in conjunction with origination. In addition, we charge extension fees in conjunction with modification of the terms of our existing loans. We defer and amortize loan origination fees, direct loan origination costs and loan extension fees over the contractual terms of the loans. The Predecessor Companies did not defer origination fees, direct loan origination costs, and loan extension fees and, rather, recorded origination fees and costs at the time of origination due to the short-term nature of the loans, and the difference is not considered significant. We charge inspection fees, which we use to hire independent inspectors to report on the status of construction projects. These fees are earned and recognized upon each construction draw request. |
Impairment of Loans | Impairment of Loans We designate loans as non-performing at such time as (1) the borrower fails to make the required monthly interest-only loan payments; (2) the loan has a maturity default; or (3) in the opinion of management, it is probable we will be unable to collect all amounts due according to the contractual terms of the loan. We evaluate loans designated as non-performing for impairment as we have some expectation that the repayment of loan, including both contractual interest and principal payments, may not be realized in full. The allowance for loan losses reflects our estimate of loan losses inherent in the loan portfolio as of the balance sheet date. The allowance is increased or decreased by recording the loan loss provision or recovery in our consolidated statements of income and is decreased by charge-offs when losses are confirmed through the receipt of assets, such as in a pre-foreclosure sale or upon ownership control of the underlying collateral in full satisfaction of the loan upon foreclosure or when significant collection efforts have ceased. The allowance for loan losses is determined on an asset-specific basis. The asset-specific allowance relates to estimated losses on individual impaired loans. This assessment is made on a monthly basis based on factors such as payment status, lien position, borrower financial resources and investment collateral, collateral type, project economics and geographic location as well as national and regional economic factors. An allowance is established for an impaired loan when the estimated fair value of the collateral is lower than the carrying value of that loan. For impaired loans, impairment is measured using the estimated fair value of collateral less the estimated cost to sell in comparison to the carrying value. Valuations are performed or obtained at the time a loan is determined to be impaired and designated as non-performing, and they are updated if circumstances indicate that a significant change in value has occurred. Given the short term nature of our loans, we evaluate the most recent external “as is” appraisal and depending on the age of the appraisal, may order a new appraisal or, where available, will evaluate against existing comparable sales or other pertinent information to estimate the fair value of the collateral for such loans. As of September 30, 2020, all of our allowance for loan losses represents an asset-specific allowance. |
Operating Expenses | Operating Expenses Operating expenses are expensed as incurred. General and administrative expenses primarily consist of professional services, insurance, excise taxes and amortization of intangible assets. During 2020, no commissions were paid to a related party and for the three and nine months ended September 30, 2019, commissions paid to a related party were $2.2 and $5.3 million, respectively, which are included in general and administrative expenses. |
Share-Based Payments | Share‑Based Payments We follow the accounting guidance for share-based payments which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and non-employee directors. Awards are issued under the Broadmark Realty Capital Inc. 2019 Stock Incentive Plan. For awards made to our employees and directors, we initially value restricted stock units based on the grant date closing price of our common stock. For awards with periodic vesting, we recognize the related expense on a straight -line basis over the requisite service period for the entire award, subject to periodic adjustments to ensure that the cumulative amount of expense recognized through the end of any reporting period is at least equal to the portion of the grant date value of the award that has vested through that date. We account for forfeitures prospectively as they occur. If there are any modifications or cancellations of the underlying unvested share-based awards, we may be required to accelerate or increase any remaining unrecognized or previously recorded stock-based compensation expense. |
Profit Interests (Predecessor) | Profit Interests (Predecessor) The Predecessor Management Companies’ profits interests were accounted for as share-based compensation. The Predecessor Management Companies’ expensed the fair value of profits interests granted to its employees and directors over the period each award vested. Compensation cost was measured using the Black-Scholes model. All unvested profits interests vested at the time of the Business Combination. |
Income Taxes | Income Taxes (Successor) We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes (the “Code”). As a REIT, we generally are not subject to U.S. federal income taxes on net income we distribute to our shareholders. We intend to make timely distributions sufficient to satisfy the annual distribution requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax on our taxable income at regulator corporate tax rates. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property and U.S. federal income and excise taxes on our undistributed income and our TRSs are subject to U.S. federal income taxes. Income Taxes (Predecessor) The Predecessor Companies were taxed as partnerships and REITs under provisions of the Code. As such, the tax attributes of the partnerships are included in the individual tax returns of its members for partnerships and not for the Predecessor Company Group and the REIT entities met the qualifications to be taxed as REITs. Accordingly, the accompanying unaudited condensed consolidated statement of income for the three and nine months ended September 30, 2019 includes no provision for income taxes for the Predecessor Company Group. |
Earnings per Share | Earnings per Share We follow the accounting guidance in ASC 260, Earnings Per Share For purposes of the Predecessor period which includes the financial results of the Predecessor Company Group, we determined that earnings per unit would not be meaningful to the users of this filing, given the different unitholders and members’ equity structures of each individual entity in the Predecessor Company Group. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements As an emerging growth company, the Jumpstart Our Business Startups Act (“JOBS Act”) permits us an extended transition period for complying with new or revised accounting standards affecting public companies. We have elected to use this extended transition period and adopt certain new accounting standards on the private company timeline, which means that our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards on a non-delayed basis. We will cease to qualify as an emerging growth company effective December 31, 2020 unless the eligibility standards are modified. Loss of emerging growth company status will result in our losing our reporting exemptions noted above. In June 2016, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326), and in 2019 issued ASU 2019-04, which provides codification improvements, and ASU 2019-05, which provides targeted transition relief for entities adopting ASU 2016-13. The financial instruments-credit losses guidance replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables and held-to maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance, such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments, and net investments in certain leases recognized by a lessor. In addition, the new guidance requires that credit losses be presented as an allowance rather than as a write-down on available-for-sale debt securities. We have formed a CECL committee that is assessing data and system needs in order to evaluate the impact of adopting the new guidance. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which we adopt the standard. At this time, the impact on our consolidated financial statements is being evaluated. We are required to adopt the standard in the fourth quarter of 2020 for the annual period as of and ending December 31, 2020 with an adoption date as of January 1, 2020. In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the amendments in ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The updated guidance requires prospective adoption. We adopted the standard on January 1, 2020 and there was no material impact on our unaudited condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which (1) adds incremental requirements for entities to disclose (a) the amount of total gains or losses for the period recognized in other comprehensive income that is attributable to fair value changes in assets and liabilities held as of the balance sheet date and categorized within Level 3 of the fair value hierarchy (b) the range and weighted average used to develop significant unobservable inputs and (c) how the weighted average was calculated for fair value measurements categorized within Level of the fair value hierarchy and (2) eliminates disclosure requirements for (a) transfers between Level 1 and Level 2 and (b) valuation processes for Level 3 fair value measurements. We adopted the standard on January 1, 2020 and there was no material impact on our unaudited condensed consolidated financial statements. |
Business Combination (Tables)
Business Combination (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Business Combination | |
Summary of preliminary fair values of assets acquired and liabilities assumed by BRELF II | The fair values of assets acquired and liabilities assumed by BRELF II on November 14, 2019 Consideration paid: $ (in thousands) Cash $ 102,245 Common stock 479,619 Total consideration paid $ 581,864 Assets acquired: Cash and cash equivalents 88,505 Investment in real property 8,413 Mortgage notes receivable 344,837 Interest and fees receivable 2,743 Intangible assets 1,000 Other assets 174 Total Assets 445,672 Liabilities assumed: Accounts payable and accrued liability 205 Other liabilities 568 Total Liabilities 773 Net assets acquired 444,899 Goodwill $ 136,965 |
Mortgage notes receivable (Tabl
Mortgage notes receivable (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Mortgage notes receivable | |
Schedule of mortgage notes receivable | (dollars in thousands) September 30, 2020 December 31, 2019 Total loan commitments $ 1,220,354 $ 1,101,275 Less: Construction holdbacks (1) 305,410 253,708 Interest reserves (1) 24,988 18,601 Private REIT participation (2) 15,597 — Total principal outstanding for our mortgage notes receivable 874,359 828,966 Less: Allowance for loan losses 6,143 4,096 Deferred origination fees 9,503 3,281 Mortgage notes receivable, net $ 858,713 $ 821,589 (1) Includes construction holdbacks of $19.8 million and interest reserves of $2.0 million on participating interests sold to the Private REIT as of September 30, 2020. (2) The Private REIT was determined to be a voting interest entity for which we, through our wholly owned subsidiary acting as manager with no equity investment, do not hold a controlling interest in and do not consolidate. Furthermore, the Private REIT participation in loans originated by us meets the characteristics of a participating interest in accordance with ASC 860 and therefore, is treated as a sale of mortgage notes receivable and is derecognized from our unaudited condensed consolidated financial statements. |
Schedule of allowance for loan losses relates to loans in default | Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended (dollars in thousands) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Beginning $ 6,795 $ 1,777 $ 4,096 $ 1,704 Provision for loan losses (benefits) (652) 2,704 3,279 2,777 Charge offs — (453) (1,232) (453) Ending $ 6,143 $ 4,028 $ 6,143 $ 4,028 |
Fair value measurements (Tables
Fair value measurements (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Fair value measurements | |
Schedule of fair value of assets and liabilities | September 30, 2020 Fair Value Measurements Using Carrying Estimated (dollars in thousands) Value Fair Value Level 1 Level 2 Level 3 Financial Assets Cash and cash equivalents $ 173,602 $ 173,602 $ 173,602 $ — $ — Mortgage notes receivable, net 858,713 858,713 — — 858,713 Interest and fees receivable 11,917 11,917 — 11,917 — Investment in real property, net 3,743 3,743 — — 3,743 Financial Liabilities Accounts payable and accrued liabilities (1) $ 3,504 $ 3,504 $ — $ 3,106 $ 398 December 31, 2019 Fair Value Measurements Using Carrying Estimated (dollars in thousands) Value Fair Value Level 1 Level 2 Level 3 Financial Assets Cash and cash equivalents $ 238,214 $ 238,214 $ 238,214 $ — $ — Mortgage notes receivable, net 821,589 821,589 — — 821,589 Interest and fees receivable 4,108 4,108 — 4,108 — Investment in real property, net 5,837 5,837 — — 5,837 Financial Liabilities Accounts payable and accrued liabilities (1) $ 8,415 $ 8,415 $ — $ 2,923 $ 5,492 (1) Includes the level 3 valuation of the optional subscription liability derivative measured at fair value on a recurring basis. |
Schedule of valuation methodologies and inputs used for assets that are measured at fair value | Level 3 Valuation Unobservable Range of (dollars in thousands) September 30, 2020 December 31, 2019 technique inputs inputs Optional subscription liability (1) $ 398 $ 5,492 Valuation model Refer to Note 7 for assumptions 0 - 5 % Real property (2) 3,743 5,837 Collateral valuations Discount to appraised value based on comparable market prices 0 - 10 % Impaired loans, net of allowance for loan losses (3) 211,575 28,853 Collateral valuations Discount to appraised value based on comparable market prices 0 - 10 % Total $ 215,716 $ 40,182 (1) Optional subscription liability derivative measured at fair value on a recurring basis. (2) Real estate property is stated at lower of cost or fair value, a non-recurring measurement of fair value. (3) For impaired loans, the fair value is based on the fair value less the costs to sell the underlying property. The carrying value of the impaired loans, net of the allowance for loan losses, approximates fair value. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets | |
Schedule of change in net book value of intangible assets | Acquired (dollars in thousands) Intangibles Asset Type Customer relationships $ 1,000 Less: Accumulated amortization 294 Intangible assets, net $ 706 |
Schedule of future amortization expense | Year ended December 31, (dollars in thousands) 2020 2021 2022 Estimated future intangible amortization expense $ 85 $ 339 $ 282 |
Stockholders' Equity and Memb_2
Stockholders' Equity and Members' Equity (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Stockholders' Equity and Members' Equity | |
Schedule of assumptions used in estimating fair value of derivative liability | As of September 30, 2020 As of December 31, 2019 Expected volatility 30.0 % 13.0 % Expected dividend yield 7.3 % 7.3 % Expected life (in years) 0.1 0.9 Risk-free interest rate 0.1 % 1.6 % |
Schedule of basic and diluted earnings per share | Three Months Ended Nine Months Ended (dollars in thousands, except share and per share data): September 30, 2020 September 30, 2020 Net income $ 23,224 $ 70,262 Basic weighted-average shares of common stock outstanding 132,282,252 132,156,844 Dilutive effect of share-based compensation 34,494 50,761 Diluted weighted-average shares of common stock outstanding (1) 132,316,746 132,207,605 Basic earnings per share $ 0.18 $ 0.53 Diluted earnings per share $ 0.18 $ 0.53 (1) We exclude anti-dilutive shares from calculation of weighted-average shares for diluted earnings per share. There were 15.6 million shares related to the Public Warrants and Private Warrants, 2.4 million shares of optional subscription warrants and 662,400 and 615,715 shares of unvested restricted stock unit awards for the three and nine months ended September 30, 2020, respectively, which are not included in the above calculation of diluted earnings per share because in doing so they would be anti-dilutive. |
Equity Incentive Plan (Tables)
Equity Incentive Plan (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity Incentive Plan | |
Summary of the activity related to restricted stock | Weighted Average Grant Date Fair Shares Market Value Unvested RSUs outstanding as of January 1, 2020 334,928 $ 11.08 Granted 186,759 11.77 Vested (95,694) 11.08 Unvested RSUs outstanding as of March 31, 2020 425,993 Granted 47,226 9.64 Vested (119,855) $ 11.08 Unvested RSUs outstanding as of June 30, 2020 353,364 Granted 382,041 10.64 Vested (5,098) $ 11.08 Unvested RSUs outstanding as of September 30, 2020 730,307 |
Commitments and contingencies (
Commitments and contingencies (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and contingencies. | |
Schedule of contractual obligations and commercial commitments | Less than 1 More than (dollars in thousands) Total year 1-3 years 3-5 years 5 years Construction holdbacks (1) 305,410 234,845 70,565 — — Operating lease obligations $ 11,962 $ 761 $ 1,893 $ 2,008 $ 7,300 Total $ 317,372 $ 235,606 $ 72,458 $ 2,008 $ 7,300 (1) Includes construction holdbacks of $19.8 million on participating interests sold to the Private REIT as of September 30, 2020. |
Summary of significant accoun_3
Summary of significant accounting policies - (Details) | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | |||||
Dec. 31, 2019USD ($)loan | Sep. 30, 2020USD ($)loan | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)loansegment | Sep. 30, 2019USD ($) | Nov. 14, 2019 | Mar. 18, 2020 | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | [1] | Successor | Predecessor | [1] | Predecessor | |
Number of Reportable Segments | segment | 1 | ||||||||
Threshold Sweep Account Balance | $ 750,000 | $ 750,000 | |||||||
Uninsured cash and cash equivalents balance | $ 236,700,000 | 172,100,000 | 172,100,000 | ||||||
Restricted cash | $ 0 | $ 0 | $ 0 | ||||||
Number of non performing loans | loan | 2 | 1 | 1 | ||||||
Right-of-use asset | $ 400,000 | $ 400,000 | |||||||
Lease Liability | 400,000 | 400,000 | |||||||
Lease agreement yet to commence term | 10 years | ||||||||
Commissions paid to a related party | $ 0 | $ 2,200,000 | $ 0 | $ 5,300,000 | |||||
Provision for income taxes | $ 0 | $ 0 | |||||||
Maximum | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Estimated Useful Lives of fixed assets | 7 years | ||||||||
Contractual Rate | 70.00% | ||||||||
Minimum | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Estimated Useful Lives of fixed assets | 3 years | ||||||||
Contractual Rate | 50.00% | ||||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Business Combination - Acquisit
Business Combination - Acquisition (Details) - USD ($) $ / shares in Units, $ in Thousands | Nov. 14, 2019 | Dec. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Nov. 14, 2019 |
Business Acquisition [Line Items] | |||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | |||
Total consideration | $ 581,800 | ||||||||
Settlement in cash | 102,200 | ||||||||
Settlement in common stock | 479,600 | ||||||||
Seller transaction costs | 13,500 | ||||||||
Seller transaction costs (settled in cash) | 11,900 | ||||||||
Seller transaction costs (settled in stock) | 1,600 | ||||||||
Trinity | |||||||||
Business Acquisition [Line Items] | |||||||||
Proceeds From Recapitalization | $ 327,100 | ||||||||
Number of share per warrant | 0.250 | 0.250 | |||||||
Exercise price per share (in dollars per share) | $ 2.875 | $ 2.875 | |||||||
Consent fee paid to holders of Public Warrants | $ 66,700 | ||||||||
Net proceeds | 260,400 | ||||||||
Remaining proceeds from recapitalization | 146,900 | ||||||||
Total consideration | 581,864 | ||||||||
Settlement in cash | 102,245 | ||||||||
Settlement in common stock | $ 479,619 | ||||||||
BRELF II | |||||||||
Business Acquisition [Line Items] | |||||||||
Percentage of acquisition | 100.00% | 100.00% | |||||||
Stock issued in connection with recapitalization | $ 495,500 | ||||||||
Transaction cost settled in cash | 11,300 | ||||||||
Transaction cost settled in stock | 1,400 | ||||||||
BRELF II | Operating expense | |||||||||
Business Acquisition [Line Items] | |||||||||
Transaction costs in connection with recapitalization | $ 12,700 | ||||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Business Combination - Fair Val
Business Combination - Fair Values of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands | Nov. 14, 2019 | Dec. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Nov. 14, 2019 |
Business Acquisition [Line Items] | |||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | |||
Cash | $ 102,200 | ||||||||
Common stock | 479,600 | ||||||||
Total consideration paid | 581,800 | ||||||||
Goodwill | $ 131,965 | $ 136,965 | $ 136,965 | ||||||
Trinity | |||||||||
Business Acquisition [Line Items] | |||||||||
Cash | 102,245 | ||||||||
Common stock | 479,619 | ||||||||
Total consideration paid | 581,864 | ||||||||
Cash and cash equivalents | 88,505 | $ 88,505 | |||||||
Investment in real property | 8,413 | 8,413 | |||||||
Mortgage notes receivable | 344,837 | 344,837 | |||||||
Interest and fees receivable | 2,743 | 2,743 | |||||||
Intangible assets | 1,000 | 1,000 | |||||||
Other assets | 174 | 174 | |||||||
Total Assets | 445,672 | 445,672 | |||||||
Accounts payable and accrued liability | 205 | 205 | |||||||
Other liabilities | 568 | 568 | |||||||
Total Liabilities | 773 | 773 | |||||||
Net assets acquired | 444,899 | 444,899 | |||||||
Goodwill | $ 136,965 | $ 136,965 | |||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Business Combination - Purchase
Business Combination - Purchase Consideration (Details) - USD ($) $ in Thousands | Nov. 14, 2019 | Dec. 31, 2019 | Sep. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Nov. 14, 2019 | Sep. 30, 2020 | Sep. 30, 2020 |
Business Acquisition [Line Items] | ||||||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | ||||||
Purchased Goodwill, Income Tax Amortization Period | 15 years | |||||||||||
Settlement made for termination of referral agreements | $ 10,000 | |||||||||||
Settlement made in the form of cash | 7,000 | |||||||||||
Settlement made in the form of common stock | 3,000 | |||||||||||
Customer relationships | ||||||||||||
Business Acquisition [Line Items] | ||||||||||||
Allocation of the preliminary fair value | $ 6,000 | $ 1,000 | 1,000 | $ 6,000 | $ 1,000 | $ 1,000 | ||||||
Goodwill, Period Increase (Decrease), Total | $ 5,000 | $ 5,000 | ||||||||||
Customer relationships | Maximum | ||||||||||||
Business Acquisition [Line Items] | ||||||||||||
Useful economic lives | 5 years | |||||||||||
Customer relationships | Minimum | ||||||||||||
Business Acquisition [Line Items] | ||||||||||||
Useful economic lives | 2 years | |||||||||||
Trinity | ||||||||||||
Business Acquisition [Line Items] | ||||||||||||
Allocation of the preliminary fair value | $ 1,000 | 1,000 | ||||||||||
Transaction costs | $ 25,800 | $ 400 | $ 26,200 | |||||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Mortgage notes receivable - Add
Mortgage notes receivable - Additional Information (Details) - USD ($) $ in Millions | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||
Dec. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Nov. 14, 2019 | |||
Loans and Leases Receivable Disclosure [Line Items] | ||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | [1] | Successor | Predecessor | [1] | Predecessor |
Percentage of maximum loan to value ratio | 65.00% | |||||||
Percentage of maximum of amount of a single loan | 10.00% | |||||||
Percentage of maximum amount of loans to single borrower | 15.00% | |||||||
Monthly interest rate payment term | 10 days | |||||||
Percentage of minimum collateral ratio | 65.00% | 65.00% | ||||||
Interest income mortgage notes receivable | $ 0 | |||||||
Principal outstanding on non accrual status | $ 32.9 | $ 173.5 | 173.5 | |||||
Average principal outstanding on non accrual status | 175.3 | $ 9.7 | 133.9 | $ 15.5 | ||||
Principal outstanding on impaired loans | 32.9 | 217.7 | 217.7 | |||||
Principal outstanding on loans with impairment | $ 20.8 | 63 | 63 | |||||
Average investment in impaired loans | $ 227.3 | $ 14.5 | $ 159.9 | $ 11.9 | ||||
Maximum | ||||||||
Loans and Leases Receivable Disclosure [Line Items] | ||||||||
Interest rate (as a percent) | 13.00% | 13.00% | ||||||
Term of mortgage notes receivable | 18 months | |||||||
Minimum | ||||||||
Loans and Leases Receivable Disclosure [Line Items] | ||||||||
Interest rate (as a percent) | 10.00% | 10.00% | ||||||
Term of mortgage notes receivable | 5 months | |||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Mortgage notes receivable - Inf
Mortgage notes receivable - Information pertaining to mortgage notes receivable (Details) - USD ($) | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||
Dec. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Nov. 14, 2019 | |
Loans and Leases Receivable Disclosure [Line Items] | ||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | ||
Total loan commitments | $ 1,101,275,000 | $ 1,220,354,000 | $ 1,220,354,000 | |||||
Construction holdbacks | 253,708,000 | 305,410,000 | 305,410,000 | |||||
Interest reserves | 18,601,000 | 24,988,000 | 24,988,000 | |||||
Private REIT participation | 0 | 15,597,000 | 15,597,000 | |||||
Total principal outstanding for our mortgage notes, receivable | 828,966,000 | 874,359,000 | 874,359,000 | |||||
Allowance for loan losses | 4,096,000 | 6,143,000 | 6,143,000 | |||||
Deferred origination fees | 3,281,000 | 9,503,000 | 9,503,000 | |||||
Mortgage notes receivable, net | $ 821,589,000 | 858,713,000 | 858,713,000 | |||||
Sale Of Mortgage Notes Receivable, Construction Holdbacks | 19,800,000 | 19,800,000 | ||||||
Sale Of Mortgage Notes Receivable, Interest Reserves | 2,000,000 | 2,000,000 | ||||||
Broadmark Private REIT, LLC | ||||||||
Loans and Leases Receivable Disclosure [Line Items] | ||||||||
Equity investment | $ 0 | $ 0 | ||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Mortgage notes receivable - All
Mortgage notes receivable - Allowance for loan loss (Details) - USD ($) $ in Thousands | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||
Dec. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Nov. 14, 2019 | |||
Mortgage notes receivable | ||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | [1] | Successor | Predecessor | [1] | Predecessor |
Financing Receivable, Allowance for Credit Loss [Roll Forward] | ||||||||
Financing Receivable, Allowance for Credit Loss, Beginning Balance | $ 6,795 | $ 1,777 | $ 4,096 | $ 1,704 | $ 1,704 | |||
Provision for loan losses (benefits) | (652) | 2,704 | 3,279 | 2,777 | ||||
Charge offs | (453) | (1,232) | (453) | |||||
Financing Receivable, Allowance for Credit Loss, Ending Balance | $ 4,096 | $ 6,143 | $ 4,028 | $ 6,143 | $ 4,028 | |||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Fair value measurements - Fair
Fair value measurements - Fair value of assets and liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Carrying Value | ||
Financial Assets | ||
Cash and cash equivalents | $ 173,602 | $ 238,214 |
Mortgage notes receivable, net | 858,713 | 821,589 |
Interest and fees receivable | 11,917 | 4,108 |
Investment in real property, net | 3,743 | 5,837 |
Financial Liabilities | ||
Accounts payable and accrued liabilities | 3,504 | 8,415 |
Estimated Fair Value | ||
Financial Assets | ||
Cash and cash equivalents | 173,602 | 238,214 |
Mortgage notes receivable, net | 858,713 | 821,589 |
Interest and fees receivable | 11,917 | 4,108 |
Investment in real property, net | 3,743 | 5,837 |
Financial Liabilities | ||
Accounts payable and accrued liabilities | 3,504 | 8,415 |
Level 1 | Estimated Fair Value | ||
Financial Assets | ||
Cash and cash equivalents | 173,602 | 238,214 |
Level 2 | Estimated Fair Value | ||
Financial Assets | ||
Interest and fees receivable | 11,917 | 4,108 |
Financial Liabilities | ||
Accounts payable and accrued liabilities | 3,106 | 2,923 |
Level 3 | Estimated Fair Value | ||
Financial Assets | ||
Mortgage notes receivable, net | 858,713 | 821,589 |
Investment in real property, net | 3,743 | 5,837 |
Financial Liabilities | ||
Accounts payable and accrued liabilities | $ 398 | $ 5,492 |
Fair value measurements - Valua
Fair value measurements - Valuation Methodologies and Inputs Used for Assets Measured at Fair Value (Details) $ in Thousands | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||
Dec. 31, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019 | [1] | Sep. 30, 2020USD ($) | Sep. 30, 2019 | [1] | Nov. 14, 2019 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | ||
Level 3 | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Assets measured at fair value | $ 40,182 | $ 215,716 | $ 215,716 | |||||
Recurring | Equity Volatility | Warrant Liability | Minimum | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Range of inputs | 0 | 0 | ||||||
Recurring | Equity Volatility | Warrant Liability | Maximum | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Range of inputs | 5 | 5 | ||||||
Recurring | Level 3 | Warrant Liability | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Assets measured at fair value | 5,492 | $ 398 | $ 398 | |||||
Non recurring | Minimum | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Range of inputs | 0 | 0 | ||||||
Non recurring | Maximum | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Range of inputs | 10 | 10 | ||||||
Non recurring | Real Property | Minimum | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Range of inputs | 0 | 0 | ||||||
Non recurring | Real Property | Maximum | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Range of inputs | 10 | 10 | ||||||
Non recurring | Impaired Loans | Minimum | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Range of inputs | 0 | 0 | ||||||
Non recurring | Impaired Loans | Maximum | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Range of inputs | 10 | 10 | ||||||
Non recurring | Level 3 | Real Property | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Assets measured at fair value | 5,837 | $ 3,743 | $ 3,743 | |||||
Non recurring | Level 3 | Impaired Loans | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Assets measured at fair value | $ 28,853 | $ 211,575 | $ 211,575 | |||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Fair value measurements - Addit
Fair value measurements - Additional Information (Details) shares in Millions, $ in Millions | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||
Dec. 31, 2019shares | Sep. 30, 2020shares | Sep. 30, 2019 | [1] | Sep. 30, 2020USD ($)shares | Sep. 30, 2019 | [1] | Nov. 14, 2019 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | ||
Warrants outstanding (in shares) | shares | 41.7 | 41.7 | 41.7 | |||||
Minimum | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Term of mortgage notes receivable | 5 months | |||||||
Maximum | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Term of mortgage notes receivable | 18 months | |||||||
Recurring | Trinity Public Warrants | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Value of shares issued | $ 75 | |||||||
Recurring | Farallon PIPE Warrants | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Warrants outstanding (in shares) | shares | 7.2 | 7.2 | ||||||
Purchase of additional shares of common stock | $ 25 | |||||||
Recurring | Other expense | Farallon PIPE Warrants | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Increase in warrant liability | $ 5.1 | |||||||
Non recurring | Minimum | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Percentage of discounts to appraisals | 0.00% | |||||||
Percentage of discounts to appraisals for mortgage notes receivable | 0 | 0 | ||||||
Non recurring | Maximum | ||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||
Percentage of discounts to appraisals | 10.00% | |||||||
Percentage of discounts to appraisals for mortgage notes receivable | 10 | 10 | ||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | |||||
Oct. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Nov. 14, 2019 | |
Finite-Lived Intangible Assets [Line Items] | ||||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | ||||
Goodwill | $ 131,965 | $ 136,965 | $ 136,965 | |||||||
Impairment of goodwill | $ 0 | $ 0 | ||||||||
Customer relationships | ||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||
Adjustment to fair value of intangible assets | (5,000) | |||||||||
Goodwill, Period Increase (Decrease), Total | 5,000 | 5,000 | ||||||||
Goodwill | 137,000 | 137,000 | ||||||||
Amortization of intangible assets | $ 900 | |||||||||
Acquired Intangibles, Gross | 1,000 | 1,000 | ||||||||
Less Accumulated Amortization | 294 | 294 | ||||||||
Acquired Intangibles, Net | $ 706 | $ 706 | ||||||||
Weighted average life remaining of the intangible assets | 2 years 1 month 6 days | |||||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Amortization (Details) - USD ($) $ in Thousands | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||
Dec. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Nov. 14, 2019 | |
Goodwill and Intangible Assets | ||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | ||
Estimated future intangible amortization expense | ||||||||
2020 | $ 85 | $ 85 | ||||||
2021 | 339 | 339 | ||||||
2022 | $ 282 | $ 282 | ||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Stockholders' Equity and Memb_3
Stockholders' Equity and Members' Equity - Stock (Details) | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||
Dec. 31, 2019$ / sharesshares | Sep. 30, 2020$ / sharesshares | Sep. 30, 2019 | [1] | Sep. 30, 2020Vote$ / sharesshares | Sep. 30, 2019 | [1] | Nov. 14, 2019 | |
Stockholders' Equity and Members' Equity | ||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | ||
Common stock shares authorized (in shares) | 500,000,000 | 500,000,000 | 500,000,000 | |||||
Common stock par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | |||||
Preferred stock shares authorized (in shares) | 100,000,000 | 100,000,000 | 100,000,000 | |||||
Preferred stock par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | |||||
Common stock number of voting rights | Vote | 1 | |||||||
Common stock shares issued (in shares) | 132,015,635 | 132,236,307 | 132,236,307 | |||||
Common stock shares outstanding (in shares) | 132,015,635 | 132,236,307 | 132,236,307 | |||||
Preferred stock shares issued (in shares) | 0 | 0 | 0 | |||||
Preferred stock shares outstanding (in shares) | 0 | 0 | 0 | |||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Stockholders' Equity and Memb_4
Stockholders' Equity and Members' Equity - Warrant (Details) - USD ($) $ / shares in Units, $ in Millions | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||
Dec. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Nov. 14, 2019 | |
Class of Warrant or Right [Line Items] | ||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | ||
Warrants outstanding (in shares) | 41,700,000 | 41,700,000 | 41,700,000 | |||||
Trinity Public Warrants | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Warrants issued | 15,600,000 | 15,600,000 | 15,600,000 | |||||
Exercise price per share (in dollars per share) | $ 11.50 | $ 11.50 | $ 11.50 | |||||
Private Placement Warrants | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Number of share per warrant | 1 | 1 | 1 | |||||
Warrants outstanding (in shares) | 5,200,000 | 5,200,000 | 5,200,000 | |||||
Exercise price per share (in dollars per share) | $ 11.50 | $ 11.50 | $ 11.50 | |||||
Farallon Capital Management, L.L.C | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Warrants outstanding (in shares) | 7,174,163 | 7,174,163 | ||||||
Common stock exercisable term | 365 days | |||||||
Maximum | Farallon Capital Management, L.L.C | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Additional shares of common stock | 25,000,000 | |||||||
Accounts payable and accrued liabilities | Farallon Capital Management, L.L.C | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Warrants outstanding | $ 5.5 | $ 0.4 | $ 0.4 | |||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Stockholders' Equity and Memb_5
Stockholders' Equity and Members' Equity - Optional Subscription (Details) | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||
Dec. 31, 2019Y | Sep. 30, 2020Y | Sep. 30, 2019 | [1] | Sep. 30, 2020Y | Sep. 30, 2019 | [1] | Nov. 14, 2019 | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | ||
Expected volatility | ||||||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||||||||
Measurement input | 13 | 30 | 30 | |||||
Expected dividend yield | ||||||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||||||||
Measurement input | 7.3 | 7.3 | 7.3 | |||||
Expected life (in years) | ||||||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||||||||
Measurement input | 0.9 | 0.1 | 0.1 | |||||
Risk-free interest rate | ||||||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||||||||
Measurement input | 1.6 | 0.1 | 0.1 | |||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Stockholders' Equity and Memb_6
Stockholders' Equity and Members' Equity - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | |||||
Dec. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Nov. 14, 2019 | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | |||
Net income | $ 23,224 | $ 70,262 | |||||||
Basic weighted-average shares of common stock outstanding | 132,282,252 | 132,156,844 | |||||||
Dilutive effect of share-based compensation | 34,494 | 50,761 | |||||||
Diluted weighted-average shares of common stock outstanding | 132,316,746 | 132,207,605 | |||||||
Basic earnings per share | [2] | $ 0.18 | $ 0.53 | ||||||
Diluted earnings per share | [2] | $ 0.18 | $ 0.53 | ||||||
Public and Private Warrants | |||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||||||
Antidilutive securities | 15,600,000 | ||||||||
Optional Subscription Warrants | |||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||||||
Antidilutive securities | 2,400,000 | ||||||||
Restricted Stock | |||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||||||
Antidilutive securities | 662,400 | 615,715 | |||||||
[1] | Predecessor periods are combined as disclosed in Note 1. | ||||||||
[2] | The Company determined that earnings per unit in the Predecessor periods would not be meaningful to the users of this filing, given the different unit holders and members’ equity structures of each individual entity in the Predecessor Company Group. |
Income Taxes - (Details)
Income Taxes - (Details) - USD ($) $ in Thousands | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||
Dec. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Nov. 14, 2019 | |
Income Taxes | ||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | ||
Uncertain tax positions | $ 0 | $ 0 | ||||||
Amount accrued for penalties or interest | $ 0 | $ 0 | ||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Equity Incentive Plan - (Detail
Equity Incentive Plan - (Details) - shares | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||||
Dec. 31, 2019 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020 | Sep. 30, 2019 | Nov. 14, 2019 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | [1] | Predecessor | |||
2019 Stock Incentive Plan | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Shares authorized | 5,000,000 | |||||||||
Shares available for grant | 4,569,378 | 4,049,134 | 4,049,134 | |||||||
Restricted stock units | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
RSU's granted | 382,041 | 47,226 | 186,759 | 150 | ||||||
Vesting period | 48 months | |||||||||
Restricted stock units | 2019 Stock Incentive Plan | Minimum | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Vesting period | 1 year | |||||||||
Restricted stock units | 2019 Stock Incentive Plan | Maximum | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Vesting period | 3 years | |||||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Equity Incentive Plan - RSU's A
Equity Incentive Plan - RSU's Activity - (Details) - $ / shares | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||||
Dec. 31, 2019 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020 | Sep. 30, 2019 | Nov. 14, 2019 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | [1] | Predecessor | |||
Restricted stock units | ||||||||||
Shares | ||||||||||
Outstanding at the beginning | 353,364 | 425,993 | 334,928 | 334,928 | ||||||
Granted | 382,041 | 47,226 | 186,759 | 150 | ||||||
Vested | (5,098) | (119,855) | (95,694) | |||||||
Outstanding at the end | 334,928 | 730,307 | 353,364 | 425,993 | 730,307 | |||||
Weighted Average Grant Date Fair Market Value | ||||||||||
Outstanding at the beginning | $ 11.08 | $ 11.08 | ||||||||
Granted | $ 10.64 | $ 9.64 | 11.77 | $ 11,717 | ||||||
Vested | $ 11.08 | $ 11.08 | $ 11.08 | |||||||
Outstanding at the end | $ 11.08 | |||||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Equity Incentive Plan - Compens
Equity Incentive Plan - Compensation (Details) - USD ($) $ / shares in Units, $ in Millions | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||||
Dec. 31, 2019 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020 | Sep. 30, 2019 | Nov. 14, 2019 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | [1] | Predecessor | |||
Restricted stock units | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Share based compensation expense | $ 1.9 | $ 3.8 | ||||||||
Unrecognized compensation cost related to unvested stock-based compensation arrangements | $ 5.2 | $ 5.2 | ||||||||
Weighted-average recognition period | 1 year 8 months 12 days | |||||||||
RSU's granted | 382,041 | 47,226 | 186,759 | 150 | ||||||
Share based compensation, settled units | $ 0 | $ 0 | ||||||||
Fair value of grants | $ 10.64 | $ 9.64 | $ 11.77 | $ 11,717 | ||||||
Vesting period | 48 months | |||||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Commitments and contingencies -
Commitments and contingencies - Contractual Obligations (Details) $ in Thousands | Sep. 30, 2020USD ($) |
Other Commitments [Line Items] | |
Less than 1 year | $ 235,606 |
1-3 years | 72,458 |
3-5 years | 2,008 |
More than 5 years | 7,300 |
Total | 317,372 |
Construction holdbacks on participating interests solds to REIT | 19,800 |
Construction holdbacks | |
Other Commitments [Line Items] | |
Less than 1 year | 234,845 |
1-3 years | 70,565 |
Total | 305,410 |
Operating lease obligations | |
Other Commitments [Line Items] | |
Less than 1 year | 761 |
1-3 years | 1,893 |
3-5 years | 2,008 |
More than 5 years | 7,300 |
Total | $ 11,962 |
Commitments and contingencies_2
Commitments and contingencies (Details) | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | |||||
Dec. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020countystate | Sep. 30, 2019 | [1] | Nov. 14, 2019 | Mar. 18, 2020 | |
Concentration Risk [Line Items] | |||||||||
Financial Designation, Predecessor and Successor [Fixed List] | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | |||
Lease agreement yet to commence term | 10 years | ||||||||
Mortgage notes receivables | Geographic concentration risk | |||||||||
Concentration Risk [Line Items] | |||||||||
Number of states in mortgage loans were originated | state | 13 | ||||||||
Number of counties in which loan portfolio concentrated | county | 10 | ||||||||
Concentration risk percentage | 50.00% | ||||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Related party transactions (Det
Related party transactions (Details) - USD ($) | 2 Months Ended | 3 Months Ended | 9 Months Ended | 10 Months Ended | ||||
Dec. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Sep. 30, 2020 | Sep. 30, 2019 | [1] | Nov. 14, 2019 | |
Related Party Transaction [Line Items] | ||||||||
Financial Designation | Successor | Successor | Predecessor | Successor | Predecessor | Predecessor | ||
Warrants outstanding (in shares) | 41,700,000 | 41,700,000 | 41,700,000 | |||||
Farallon Capital Management, L.L.C | ||||||||
Related Party Transaction [Line Items] | ||||||||
Shares issued | 7,174,163 | |||||||
Aggregate purchase price | $ 75,000,000 | |||||||
Reference Price | $ 10.45352229 | $ 10.45352229 | ||||||
Warrants outstanding (in shares) | 7,174,163 | 7,174,163 | ||||||
Class of Warrant or Right, Amendment Fee Price of Warrants or Rights | $ 1.60 | $ 1.60 | ||||||
Farallon Capital Management, L.L.C | Farallon Capital Management, L.L.C | ||||||||
Related Party Transaction [Line Items] | ||||||||
Ownership percentage | 5.00% | 5.00% | ||||||
Broadmark Private REIT, LLC | ||||||||
Related Party Transaction [Line Items] | ||||||||
Equity investment | $ 0 | $ 0 | ||||||
Private REIT's assets under management | $ 15,600,000 | $ 15,600,000 | ||||||
Maximum | Farallon Capital Management, L.L.C | ||||||||
Related Party Transaction [Line Items] | ||||||||
Additional shares of common stock | 25,000,000 | |||||||
Minimum | Farallon Capital Management, L.L.C | ||||||||
Related Party Transaction [Line Items] | ||||||||
Beneficial ownership percentage | 9.90% | |||||||
[1] | Predecessor periods are combined as disclosed in Note 1. |
Subsequent events (Details)
Subsequent events (Details) - $ / shares | Nov. 09, 2020 | Oct. 13, 2020 |
Subsequent Event | ||
Subsequent Event [Line Items] | ||
Common stock dividend declared | $ 0.06 | $ 0.06 |