Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________ 
FORM 10-Q
__________________________________ 
(Mark One)
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2018
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                     to                    
Commission File Number: 001-34452
__________________________________ 
Apollo Commercial Real Estate Finance, Inc.
(Exact name of registrant as specified in its charter)
__________________________________ 
Maryland
 
27-0467113
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
Apollo Commercial Real Estate Finance, Inc.
c/o Apollo Global Management, LLC
9 West 57th Street, 43rd Floor,
New York, New York 10019
(Address of registrant’s principal executive offices)
(212) 515–3200
(Registrant’s telephone number, including area code)
__________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
 
x
  
Accelerated filer
 
¨
 
 
 
 
 
 
 
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)

  
Smaller reporting company
 
¨
 
 
 
 
 
 
 
Emerging growth company
 
¨
 
 
 
 




If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.
As of July 24, 2018, there were 123,020,656 shares, par value $0.01, of the registrant’s common stock issued and outstanding.
 



Table of Contents
 
 
Page
 
 


3



PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands—except share data)
 
June 30, 2018
 
December 31, 2017
Assets:
 
 
 
Cash
$
76,384

 
$
77,671

Commercial mortgage loans, net (includes $3,115,916 and $2,148,368 pledged as collateral under secured debt arrangements in 2018 and 2017, respectively)
3,724,221

 
2,653,826

Subordinate loans, net
1,142,514

 
1,025,932

Loan proceeds held by servicer
—

 
302,756

Other assets
27,584

 
28,420

Derivative assets, net
10,297

 
—

Total Assets
$
4,981,000

 
$
4,088,605

Liabilities and Stockholders' Equity
 
 
 
Liabilities:
 
 
 
Secured debt arrangements, net (net of deferred financing costs of $20,307 and $14,348 in 2018 and 2017, respectively)
$
1,960,874

 
$
1,330,847

Convertible senior notes, net
587,063

 
584,897

Derivative liabilities, net
—

 
5,644

Accounts payable, accrued expenses and other liabilities
81,397

 
70,906

Payable to related party
9,013

 
8,168

Total Liabilities
2,638,347

 
2,000,462

Commitments and Contingencies (see Note 15)


 


Stockholders’ Equity:
 
 
 
Preferred stock, $0.01 par value, 50,000,000 shares authorized:
 
 
 
Series B preferred stock, 6,770,393 shares issued and outstanding ($169,260 aggregate liquidation preference) in 2018 and 2017
68

 
68

Series C preferred stock, 6,900,000 shares issued and outstanding ($172,500 aggregate liquidation preference) in 2018 and 2017
69

 
69

Common stock, $0.01 par value, 450,000,000 shares authorized, 123,020,301 and 107,121,235 shares issued and outstanding in 2018 and 2017, respectively
1,230

 
1,071

Additional paid-in-capital
2,447,973

 
2,170,078

Accumulated deficit
(106,687
)
 
(83,143
)
Total Stockholders’ Equity
2,342,653

 
2,088,143

Total Liabilities and Stockholders’ Equity
$
4,981,000

 
$
4,088,605












See notes to unaudited condensed consolidated financial statements.

4



Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations (Unaudited)
(in thousands—except share and per share data)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
2018
 
2017
 
2018
 
2017
Net interest income:
 
 
 
 
 
 
 
Interest income from commercial mortgage loans
$
65,141

 
$
37,089

 
$
117,255

 
$
71,487

Interest income from subordinate loans
34,075

 
39,640

 
67,928

 
74,030

Interest income from securities
—

 
4,700

 
—

 
10,754

Interest expense
(28,437
)
 
(19,205
)
 
(51,177
)
 
(36,235
)
Net interest income
70,779

 
62,224

 
134,006

 
120,036

Operating expenses:
 
 
 
 

 

General and administrative expenses (includes equity-based compensation of $4,014 and $7,356 in 2018 and $3,461 and $7,252 of equity-based compensation in 2017, respectively)
(5,652
)
 
(5,200
)
 
(10,650
)
 
(10,958
)
Management fees to related party
(9,013
)
 
(7,742
)
 
(17,105
)
 
(15,175
)
Total operating expenses
(14,665
)
 
(12,942
)
 
(27,755
)
 
(26,133
)
Loss from unconsolidated joint venture
—

 
(3,305
)
 
—

 
(2,847
)
Other income
343

 
244

 
546

 
352

Provision for loan losses and impairments
(5,000
)
 
(5,000
)
 
(5,000
)
 
(5,000
)
Realized loss on sale of assets
—

 
—

 
—

 
(1,042
)
Unrealized loss on securities
—

 
(4,510
)
 
—

 
(1,658
)
Foreign currency gain (loss)
(29,649
)
 
6,913

 
(19,524
)
 
10,085

Gain (loss) on derivative instruments (includes unrealized gains (losses) of $24,796 and $15,941 in 2018 and $(7,435) and $(10,324) in 2017, respectively)
33,538

 
(7,389
)
 
22,506

 
(10,434
)
Net income
55,346

 
36,235

 
104,779

 
83,359

Preferred dividends
$
(6,834
)
 
$
(9,310
)
 
$
(13,669
)
 
$
(18,620
)
Net income available to common stockholders
48,512

 
26,925

 
91,110

 
64,739

Net income per share of common stock
$
0.39

 
$
0.28

 
$
0.78

 
$
0.68

Basic weighted average shares of common stock outstanding
123,019,993

 
95,428,134

 
116,651,305

 
93,530,831

Diluted weighted average shares of common stock outstanding
124,629,317

 
96,796,289

 
118,281,153

 
94,907,762

Dividend declared per share of common stock
$
0.46

 
$
0.46

 
$
0.92

 
$
0.92


















See notes to unaudited condensed consolidated financial statements.

5



Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Comprehensive Income (Unaudited)
(in thousands)
 
Three months ended June 30,
 
Six months ended June 30,
 
2018
 
2017
 
2018
 
2017
Net income available to common stockholders
$
48,512

 
$
26,925

 
$
91,110

 
$
64,739

Foreign currency translation adjustment
—

 
3,560

 
—

 
3,811

Comprehensive income
$
48,512

 
$
30,485

 
$
91,110

 
$
68,550
















































See notes to unaudited condensed consolidated financial statements.

6



Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)
(in thousands—except share and per share data)
 
Preferred Stock
 
Common Stock
 
Additional
Paid-In-Capital
 
Accumulated
Deficit
 
Total
 
Shares
 
Par
 
Shares
 
Par
 
Balance at January 1, 2018
13,670,393

 
$
137

 
107,121,235

 
$
1,071

 
$
2,170,078

 
$
(83,143
)
 
$
2,088,143

Capital increase related to Equity Incentive Plan
—

 
—

 
374,066

 
4

 
2,624

 
—

 
2,628

Issuance of common stock
—

 
—

 
15,525,000

 
155

 
275,724

 
—

 
275,879

Offering costs
—

 
—

 
—

 
—

 
(453
)
 
—

 
(453
)
Net income
—

 
—

 
—

 
—

 
—

 
104,779

 
104,779

Dividends declared on preferred stock
—

 
—

 
—

 
—

 
—

 
(13,669
)
 
(13,669
)
Dividends declared on common stock - $0.46 per share
—

 
—

 
—

 
—

 
—

 
(114,654
)
 
(114,654
)
Balance at June 30, 2018
13,670,393
 
$
137

 
123,020,301
 
$
1,230

 
$
2,447,973

 
$
(106,687
)
 
$
2,342,653







































See notes to unaudited condensed consolidated financial statements.

7



Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)
(in thousands)
 
For the six months ended June 30,
 
2018
 
2017
Cash flows (used in) provided by operating activities:
 
 
 
     Net income
$
104,779

 
$
83,359

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
     Amortization of discount/premium and PIK
(30,192
)
 
(7,934
)
     Amortization of deferred financing costs
5,355

 
2,761

     Equity-based compensation
2,628

 
4,921

     Unrealized loss on securities
—

 
1,658

     Provision for loan losses and impairment
5,000

 
5,000

     Loss from unconsolidated joint venture
—

 
2,259

     Foreign currency (gain) loss
17,371

 
(10,014
)
     Unrealized (gain) loss on derivative instruments
(15,941
)
 
10,433

     Realized loss on derivative instruments
—

 
110

     Realized loss on sale of assets
—

 
1,042

     Changes in operating assets and liabilities:
 
 
 
          Proceeds received from PIK
75,652

 
—

          Other assets
(4,069
)
 
(17,734
)
          Accounts payable, accrued expenses and other liabilities
10,190

 
(5,127
)
          Payable to related party
845

 
728

Net cash (used in) provided by operating activities
171,618

 
71,462

Cash flows used in investing activities:
 
 
 
     New funding of commercial mortgage loans
(1,275,507
)
 
(339,394
)
     Add-on funding of commercial mortgage loans
(60,500
)
 
(61,296
)
     New funding of subordinate loans
(201,966
)
 
(146,738
)
     Add-on funding of subordinate loans
(43,284
)
 
(76,796
)
     Payments received on commercial mortgage loans
227,913

 
10,199

     Payments received on subordinate loans
367,143

 
58,615

     Funding of derivative instruments
—

 
(201
)
     Origination and exit fees received on commercial mortgage and subordinate loans
28,362

 
7,129

     Funding of unconsolidated joint venture
—

 
(726
)
     Funding of other assets
—

 
(1,379
)
     (Increase) decrease in collateral held related to derivative contracts
4,930

 
(22
)
     Payments and proceeds received on securities
—

 
217,708

     Proceeds from sale of investments in unconsolidated joint venture
—

 
24,498

Net cash (used in) provided by investing activities
(952,909
)
 
(308,403
)
Cash flows from financing activities:
 
 
 
     Proceeds from issuance of common stock
275,879

 
249,021

     Payment of offering costs
(188
)
 
(359
)
     Proceeds from secured debt arrangements
1,367,211

 
464,153

     Repayments of secured debt arrangements
(723,260
)
 
(272,878
)
     Repayments of participations sold
—

 
(85,081
)
     Payment of deferred financing costs
(11,314
)
 
(5,343
)
     Dividends on common stock
(114,655
)
 
(85,724
)
     Dividends on preferred stock
(13,669
)
 
(18,620
)
Net cash (used in) provided by financing activities
780,004

 
245,169

Net increase (decrease) in cash and cash equivalents
(1,287
)
 
8,228

Cash and restricted cash, beginning of period
77,671

 
263,453

Cash and restricted cash, end of period
$
76,384

 
$
271,681

Supplemental disclosure of cash flow information:
 
 
 
     Interest paid
$
43,420

 
$
11,916

Supplemental disclosure of non-cash financing activities:
 
 
 
     Dividend declared, not yet paid
$
64,162

 
$
57,464

     Offering costs payable
$
265

 
$
41

























































See notes to unaudited condensed consolidated financial statements.

8



Apollo Commercial Real Estate Finance Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 – Organization
Apollo Commercial Real Estate Finance, Inc. (together with its consolidated subsidiaries, is referred to throughout this report as the “Company,” “ARI,” “we,” “us” and “our”) is a corporation that has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes and primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments. These asset classes are referred to as the Company’s target assets.
The Company, organized in Maryland on June 29, 2009, commenced operations on September 29, 2009 and is externally managed and advised by ACREFI Management, LLC (the “Manager”), an indirect subsidiary of Apollo Global Management, LLC (together with its subsidiaries, "Apollo").
The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2009. To maintain its tax qualification as a REIT, the Company is required to distribute at least 90% of its taxable income, excluding net capital gains, to stockholders and meet certain other asset, income, and ownership tests.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements include the Company’s accounts and those of its consolidated subsidiaries. All intercompany amounts have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company’s most significant estimates include loan loss reserves and impairment. Actual results could differ from those estimates.
These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission (the “SEC”). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows have been included. The Company's results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the full year or any other future period.
The Company currently operates in one reporting segment.
Recent Accounting Pronouncements
In June 2018, the FASB issued ASU 2018-07 "Compensation - Stock Compensation (Topic 718): Improvements to Nonemployees Share-Based Payment Accounting" ("ASU 2018-07"). The intention of ASU 2018-07 is to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. These share-based payments will now be measured at grant-date fair value of the equity instrument issued. Upon adoption, only liability-classified awards that have not been settled and equity-classified awards for which a measurement date has not been established should be remeasured through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. ASU 2018-07 is effective for fiscal years beginning after December 15, 2019 and is applied retrospectively. The Company is currently assessing the impact, if any, the guidance will have on the Company's condensed consolidated financial statements.
In August 2017, the FASB issued ASU 2017-12 "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” ("ASU 2017-12"). The intention of ASU 2017-12 is to align an entity’s financial reporting for hedging activities with the economic objectives of those activities. Upon adoption of ASU 2017-12, the cumulative ineffectiveness previously recognized on existing cash flow and net investment hedges will be adjusted and removed from beginning retained earnings and placed in accumulated other comprehensive income (loss). The Company notes that this guidance will not have a material impact on the Company's condensed consolidated financial statements. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018 and is applied retrospectively.
In November 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows (Topic 230): Restricted Cash” ("ASU 2016-18"). ASU 2016-18 is intended to clarify how entities present restricted cash in the statement of cash flows. The guidance

10



requires entities to show the changes in the total of cash and cash equivalents and restricted cash in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash in the statement of cash flows. When cash and cash equivalents and restricted cash are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet. This reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017 and is to be applied retrospectively. The Company early adopted ASU 2016-18 on June 30, 2017, which changed the Company's condensed consolidated statement of cash flows and related disclosures for all periods presented. The following is a reconciliation of the Company's cash, cash equivalents, and restricted cash to the total presented in the Company's condensed consolidated statement of cash flows for the six months ended June 30, 2018 and June 30, 2017, respectively ($ in thousands):
 
Balance at June 30, 2018
 
Balance at June 30, 2017
Cash
$
76,384

 
$
214,016

Restricted cash
—

 
57,665

Total cash and restricted cash shown in the condensed consolidated statement of cash flows
$
76,384

 
$
271,681


In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments (Topic 326)" ("ASU 2016-13"). ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.  The guidance will replace the “incurred loss” approach under existing guidance with an “expected loss” model for instruments measured at amortized cost, and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. The guidance is effective for fiscal years beginning after December 15, 2019 and is to be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. While the Company is currently evaluating the impact ASU 2016-13 will have on its condensed consolidated financial statements, we expect that the adoption will result in higher provisions for potential loan losses.    
Note 3 – Fair Value Disclosure
GAAP establishes a hierarchy of valuation techniques based on the observability of the inputs utilized in measuring financial instruments at fair values. Market based or observable inputs are the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy as noted in ASC 820, Fair Value Measurements and Disclosures, are described below:
Level I — Quoted prices in active markets for identical assets or liabilities.
Level II — Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.
Level III — Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used.
While the Company anticipates that its valuation methods will be appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The Company will use inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced.
The estimated fair values of the Company’s derivative instruments are determined using a discounted cash flow analysis on the expected cash flows of each derivative. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The fair values of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts (or payments) that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected cash flows are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The fair values of foreign exchange forwards are determined by comparing the contracted forward exchange rate to the current market exchange rate.  The current market

11



exchange rates are determined by using market spot rates, forward rates and interest rate curves for the underlying countries.  The Company’s derivative instruments are classified as Level II in the fair value hierarchy.
The following table summarizes the levels in the fair value hierarchy into which the Company’s financial instruments were categorized as of June 30, 2018 and December 31, 2017 ($ in thousands): 
 
Fair Value as of June 30, 2018
 
Fair Value as of December 31, 2017
 
Level I
 
Level II
 
Level III
 
Total
 
Level I
 
Level II
 
Level III
 
Total
Derivative assets (liabilities), net
$
—

 
$
10,297

 
$
—

 
$
10,297

 
$
—

 
$
(5,644
)
 
$
—

 
$
(5,644
)
Note 4 – Securities

The Company previously held CMBS, all of which were sold in 2017. During the six months ended June 30, 2017, the Company sold CMBS (Fair Value Option) resulting in a net realized loss of $1.0 million. The Company did not sell CMBS (Fair Value Option) during the three months ended June 30, 2017.

During the three and six months ended June 30, 2017, CMBS (Held-to-Maturity) of $146.5 million was fully repaid. The Company did not hold any CMBS (Held-to-Maturity) during the three and six months ended June 30, 2018.

During the three and six months ended June 30, 2017, the Company recorded interest income from securities of $4.7 million and $10.8 million, respectively, of which $1.3 million and $4.2 million was interest income from CMBS (Held-to-Maturity), respectively, and $3.4 million and $6.6 million of CMBS (Fair Value Option), respectively.

To conform to the 2018 presentation of the condensed consolidated statement of cash flows, the Company reclassified the combination of $146.5 million of payments received on securities, held-to-maturity, $69.2 million of proceeds from sale of securities and $1.9 million of payments received on securities into payments and proceeds received on securities.

Note 5 – Commercial Mortgage and Subordinate Loans, Net
The Company’s loan portfolio was comprised of the following at June 30, 2018 and December 31, 2017 ($ in thousands):
Loan Type
 
June 30, 2018
 
December 31, 2017
Commercial mortgage loans, net
 
$
3,724,221

 
$
2,653,826

Subordinate loans, net
 
1,142,514

 
1,025,932

Total loans, net
 
$
4,866,735

 
$
3,679,758


The Company's loan portfolio consisted of 91% and 88% floating rate loans, based on amortized cost, as of June 30, 2018 and December 31, 2017, respectively.
 
Activity relating to our loan investment portfolio was as follows ($ in thousands):
 
 
Principal Balance
 
Deferred Fees/Other Items (1)
 
Provision for Loan Loss (2)
 
Carrying Value
December 31, 2017
 
$
3,706,169

 
$
(9,430
)
 
$
(16,981
)
 
$
3,679,758

New loan fundings
 
1,477,473

 
—

 
—

 
1,477,473

Add-on loan fundings (3)
 
103,784

 
—

 
—

 
103,784

Loan repayments
 
(375,708
)
 
—

 
—

 
(375,708
)
Unrealized gain (loss) on foreign currency translation
 
(25,539
)
 
216

 
—

 
(25,323
)
Provision for loan loss (2)
 
—

 
—

 
(5,000
)
 
(5,000
)
Deferred fees and other items (1)
 
—

 
(20,607
)
 
—

 
(20,607
)
PIK interest, amortization of fees and other items (1)
 
19,695

 
12,663

 
—

 
32,358

June 30, 2018
 
$
4,905,874

 
$
(17,158
)
 
$
(21,981
)
 
$
4,866,735

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

12



(2) In addition to the $22.0 million provision for loan loss, the Company recorded an impairment of $3.0 million against an investment previously recorded under other assets on the Company's consolidated balance sheet.
(3) Represents fundings for loans closed prior to 2018.


The following table details overall statistics for our loan portfolio ($ in thousands):
 
 
June 30, 2018
 
December 31, 2017
Number of loans
 
70

 
59

Principal balance
 
$
4,905,874

 
$
3,706,169

Carrying value
 
$
4,866,735

 
$
3,679,758

Unfunded loan commitments (1)
 
$
818,095

 
$
435,627

Weighted-average cash coupon (2)
 
8.1
%
 
8.4
%
  ———————
(1)
Unfunded loan commitments are primarily funded to finance property improvements or lease-related expenditures by the borrowers. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.
(2)
For floating rate loans, based on applicable benchmark rates as of the specified dates.


The table below details the property type of the properties securing the loans in our portfolio ($ in thousands):
 
 
June 30, 2018
 
December 31, 2017
Property Type
 
Carrying
Value
 
% of
Portfolio
 
Carrying
Value
 
% of
Portfolio
Hotel
 
$1,137,737
 
23.4%
 
$645,056
 
17.6%
Residential-for-sale: inventory (1)
 
616,608
 
12.7%
 
92,438
 
2.5%
Residential-for-sale: construction (1)
 
333,884
 
6.8%
 
349,739
 
9.5%
Urban Predevelopment
 
724,366
 
14.9%
 
654,736
 
17.8%
Office
 
603,947
 
12.4%
 
513,830
 
14.0%
Multifamily
 
449,414
 
9.2%
 
465,057
 
12.6%
Mixed Use
 
356,703
 
7.3%
 
354,640
 
9.6%
Healthcare
 
256,372
 
5.3%
 
173,870
 
4.7%
Retail Center
 
201,551
 
4.1%
 
198,913
 
5.4%
Other
 
154,153
 
3.2%
 
154,141
 
4.2%
Industrial
 
32,000
 
0.7%
 
77,338
 
2.1%
Total
 
$4,866,735
 
100.0%
 
$3,679,758
 
100.0%

(1)
To conform to the current period’s presentation, loans with a combined carrying value of $442.0 million classified as residential-for-sale as of December 31, 2017 were broken out into $349.8 million of residential-for-sale: construction and $92.4 million of residential-for-sale: inventory.

The table below details the geographic distribution of the properties securing the loans in our portfolio ($ in thousands):
 
 
June 30, 2018
 
December 31, 2017
Geographic Location
 
Carrying
Value
 
% of
Portfolio
 
Carrying
Value
 
% of
Portfolio
Manhattan, NY
 
$1,445,389
 
29.7%
 
$1,173,833
 
31.9%
Brooklyn, NY
 
388,814
 
8.0%
 
357,611
 
9.7%
Northeast
 
37,956
 
0.8%
 
100,536
 
2.7%
Midwest
 
718,600
 
14.8%
 
683,380
 
18.6%
Southeast
 
608,884
 
12.5%
 
531,582
 
14.4%
West
 
500,102
 
10.2%
 
227,024
 
6.2%
Mid Atlantic
 
214,521
 
4.4%
 
191,976
 
5.2%
Southwest
 
115,639
 
2.4%
 
33,615
 
0.9%
United Kingdom
 
711,324
 
14.6%
 
303,488
 
8.3%

13



Other International
 
125,506
 
2.6%
 
76,713
 
2.1%
Total
 
$4,866,735
 
100.0%
 
$3,679,758
 
100.0%

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

The following table allocates the carrying value of our loan portfolio based on the Company's internal risk ratings ($ in thousands):
 
 
June 30, 2018
 
December 31, 2017
Risk Rating
 
Number of Loans
 
Carrying Value
 
% of Loan Portfolio
 
Number of Loans
 
Carrying Value
 
% of Loan Portfolio
1
 
—
 
$
—

 
—
%
 
—
 
$
—

 
—
%
2
 
4
 
263,216

 
5
%
 
5
 
399,326

 
10
%
3
 
63
 
4,367,766

 
90
%
 
51
 
3,034,358

 
83
%
4
 
1
 
170,685

 
4
%
 
1
 
168,208

 
5
%
5
 
2
 
65,068

 
1
%
 
2
 
77,866

 
2
%
 
 
70
 
$
4,866,735

 
100
%
 
59
 
$
3,679,758

 
100
%

The Company evaluates its loans for possible impairment on a quarterly basis. The Company regularly evaluates the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan by loan basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the property’s liquidation value. The Company also evaluates the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the properties. In addition, the Company considers the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. Such loan loss analysis is completed and reviewed by asset management and finance personnel who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants. An allowance for loan loss is established when it is deemed probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan.
The Company recorded a $10.0 million loan loss provision and impairment against a commercial mortgage loan secured by a fully-built, for-sale residential condominium units located in Bethesda, MD. This was comprised of (i) $5.0 million loan loss recorded during the second quarter of 2018, and (ii) $2.0 million loan loss provision and $3.0 million of impairment recorded during the second quarter of 2017. The impairment was recorded on an investment previously recorded under other assets on the Company's condensed consolidated balance sheet. The loan loss provision and impairment were based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision and related impairment). Fair value of the collateral was determined using a discounted cash flow analysis. The significant unobservable inputs used in determining the collateral value were sales price per square foot and discount rate which were an average of $662 dollars per square foot across properties and 15%, respectively. Effective April 1, 2017, the Company ceased accruing all interest associated with the loan and accounts for the loan on a cost-recovery basis (all proceeds are applied

14



towards the loan balance). As of June 30, 2018 and December 31, 2017, this was assigned a risk rating of 5.
During 2016, the Company recorded a loan loss provision of $10.0 million on a commercial mortgage loan and $5.0 million on a contiguous subordinate loan secured by a multifamily property located in Williston, ND. The loan loss provision was based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision). Fair value of the collateral was determined using a discounted cash flow analysis. The significant unobservable inputs used in determining the collateral value were terminal capitalization rate and discount rate which were 11% and 10%, respectively. The Company ceased accruing payment in kind ("PIK") interest associated with the loan and recognizing interest income upon receipt of cash. As of June 30, 2018 and December 31, 2017, this was assigned a risk rating of 5.
The Company evaluates modifications to its loan portfolio to determine if the modifications constitute a troubled debt restructuring ("TDR"), under ASC Topic 310, “Receivables." During the second quarter of 2018, the Company determined that a modification of one commercial mortgage loan with a principal balance of $169.0 million constituted a TDR as the interest rate spread was reduced from 5.5% over LIBOR to 3.0% over LIBOR. As of June 30, 2018 and December 31, 2017, this loan was assigned a risk rating of 4.
As of June 30, 2018 and December 31, 2017, the aggregate loan loss provision was $17.0 million and $5.0 million for commercial mortgage loans and subordinate loans, respectively.
The Company recognized PIK interest of $9.1 million and $19.7 million for the three and six months ended June 30, 2018, respectively, and $6.1 million and $14.0 million for the three and six months ended June 30, 2017, respectively.
The Company recognized pre-payment penalties and accelerated fees of $1.6 million for the three and six months ended June 30, 2018 and $0.6 million for the three and six months ended June 30, 2017.
Note 6 – Loan Proceeds Held by Servicer
Loan proceeds held by servicer represents principal payments held by the Company's third-party loan servicer as of the balance sheet date which were remitted to us subsequent to the balance sheet date. Loan proceeds held by servicer was $302.8 million as of December 31, 2017. There were no loan proceeds held by servicer as of June 30, 2018.
Note 7 – Other Assets
The following table details the components of the Company's other assets ($ in thousands):
 
June 30, 2018
 
December 31, 2017
Interest receivable
$
27,195

 
$
23,101

Collateral deposited under derivative agreements
—

 
4,930

Other
389

 
389

Total
$
27,584

 
$
28,420



15



Note 8 – Secured Debt Arrangements, Net
At June 30, 2018 and December 31, 2017, the Company’s borrowings had the following secured debt arrangements, maturities and weighted average interest rates ($ in thousands):
 
 
June 30, 2018 (2)
 
December 31, 2017
 
Maximum Amount of Borrowings
 
Borrowings Outstanding
 
Maturity (1)
 
Maximum Amount of Borrowings
 
Borrowings Outstanding
 
Maturity (1)
 
Weighted
Average
Rate (2)
JPMorgan Facility (USD) (3)
$
1,331,780

 
$
950,634

 
June 2021
 
$
1,393,000

 
$
944,529

 
March 2020
 
USD L + 2.30%
JPMorgan Facility (GBP) (3)
50,220

 
50,220

 
June 2021
 
N/A

 
N/A

 
N/A
 
N/A
DB Repurchase Facility (USD) (4)
698,824

 
469,200

 
March 2021
 
472,090

 
225,367

 
March 2020
 
USD L + 2.56%
DB Repurchase Facility (GBP) (4)
156,176

 
156,176

 
March 2021
 
93,919

 
93,919

 
March 2020
 
GBP L + 2.60%
Goldman Facility
300,000

 
209,014

 
November 2020
 
331,130

 
81,380

 
November 2020
 
USD L + 2.73%
CS Facility
145,937

 
145,937

 
December 2018
 
N/A

 
N/A

 
N/A
 
N/A
Sub-total
2,682,937

 
1,981,181

 
 
 
2,290,139

 
1,345,195

 
 
 

less: deferred financing costs
N/A

 
(20,307
)
 
 
 
N/A

 
(14,348
)
 
 
 
N/A
Total / Weighted Average
$
2,682,937

 
$
1,960,874

 
$
2,290,139

 
$
1,330,847

 
USD L + 2.37% /
 
GBP L + 2.60%
———————
(1) Maturity date assumes extensions at the Company's option are exercised.
(2) Weighted average rate as of June 30, 2018 was USD L + 2.27% / GBP L + 2.30%.
(3) As of June 30, 2018, the Company's secured debt arrangements with JPMorgan Chase Bank, National Association (the "JPMorgan Facility") provided
for maximum total borrowings comprised of a $1.3 billion repurchase facility and $132.0 million of an asset specific financing.
(4) As of June 30, 2018, the Company's secured debt arrangements with Deutsche Bank AG, Cayman Islands Branch and Deutsche Bank AG, London Branch (the "DB Repurchase Facility") provided for maximum total borrowings comprised of a $800.0 million repurchase facility and a $55.0 million asset specific financing.
At June 30, 2018, the Company’s borrowings had the following remaining maturities ($ in thousands):
 
 
Less than
1 year (1)
 
1 to 3
years (1)
 
3 to 5
years
 
More than
5 years
 
Total
JPMorgan Facility
$
115,615

 
$
885,239

 
$
—


$
—

 
$
1,000,854

DB Repurchase Facility
123,816

 
501,560

 
—


—

 
625,376

Goldman Facility
—

 
209,014

 
—

 
—

 
209,014

CS Facility
145,937

 
—

 
—

 
—

 
145,937

Total
$
385,368

 
$
1,595,813

 
$
—

 
$
—

 
$
1,981,181

———————
(1) Assumes underlying assets are financed through the fully extended maturity date of the facility.
The table below summarizes the outstanding balances at June 30, 2018, as well as the maximum and average month-end balances for the six months ended June 30, 2018 for the Company's borrowings under secured debt arrangements ($ in thousands).
 
 
 
 
 
For the six months ended June 30, 2018
 
Balance at
June 30, 2018
 
Amortized Cost of Collateral at June 30, 2018
 
Maximum Month-End
Balance
 
Average Month-End
Balance
JPMorgan Facility
$
1,000,854

 
$
1,601,812

 
$
1,000,854

 
$
865,101

DB Repurchase Facility
625,376

 
1,010,503

 
632,990

 
446,571

Goldman Facility
209,014

 
280,699

 
236,764

 
135,123

CS Facility
145,937

 
222,902

 
145,937


24,323

Total
$
1,981,181

 
$
3,115,916

 
 
 
 
JPMorgan Facility

16



In June 2018, the Company, through two indirect wholly owned subsidiaries, entered into an amendment to the Fifth Amended and Restated Master Repurchase Agreement for the JPMorgan Facility, which extended the term to June 2020, plus a one-year extension option available at the Company's option, subject to certain conditions. The JPMorgan Facility provides for maximum total borrowing capacity of $1.4 billion, comprised of a $1.25 billion repurchase facility and a $132.0 million asset specific financing and enables the Company to elect to receive advances in either U.S. dollars, British pounds ("GBP"), or Euros ("EUR"). The asset specific financing matures in February 2019. Margin calls may occur any time at specified aggregate margin deficit thresholds. The Company has agreed to provide a limited guarantee of the obligations of its indirect wholly-owned subsidiaries under the JPMorgan Facility.
As of June 30, 2018, the Company had $1.0 billion (including £38.0 million assuming conversion into U.S. dollars) of borrowings outstanding under the JPMorgan Facility secured by certain of the Company's commercial mortgage loans.
DB Repurchase Facility
In April 2018, the Company, through an indirect wholly-owned subsidiary, entered into a Second Amended and Restated Master Repurchase Agreement (the "Second Amendment and Restatement") with Deutsche Bank AG, Cayman Islands Branch and Deutsche Bank AG, London Branch. The Second Amendment and Restatement provides for advances of up to $800.0 million for the sale and repurchase of eligible first mortgage loans secured by commercial or multifamily properties located in the United States, United Kingdom and the European Union, and enables the Company to elect to receive advances in either U.S. dollars, British pounds, or Euros. Additionally, the Company has $55.0 million of asset specific financings with Deutsche Bank in connection with financing first mortgage loans secured by real estate. The Second Amendment and Restatement has a maturity date of March 31, 2020 plus one one-year extension available at the Company's option, subject to certain conditions. The asset specific financings mature in September 2018. Margin calls may occur any time at specified aggregate margin deficit thresholds. The Company has agreed to provide a limited guarantee of the obligations of its indirect wholly-owned subsidiaries under this facility.
As of June 30, 2018, the Company had $625.4 million (including £118.3 million assuming conversion into U.S. dollars) of borrowings outstanding under the DB Repurchase Facility secured by certain of the Company's commercial mortgage loans.
Goldman Facility
In November 2017, the Company, through an indirect wholly-owned subsidiary, entered into a master repurchase and securities contract agreement with Goldman Sachs Bank USA (the "Goldman Facility), which provides for advances of up to $300.0 million and matures in November 2020. Margin calls may occur any time at specified margin deficit thresholds. The Company has agreed to provide a limited guarantee of the obligations of the seller under the Goldman Facility.
As of June 30, 2018, the Company had total borrowings of $209.0 million of borrowings outstanding under the Goldman Facility.
CS Facility
In June 2018, the Company, through an indirect wholly-owned subsidiary, entered into a master repurchase agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS Facility"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility matures six months after either party notifies the other party of intention to terminate. Margin calls may occur any time at specified aggregate margin deficit thresholds. The Company has agreed to provide a guarantee of the obligations of its indirect wholly-owned subsidiaries under this facility.
As of June 30, 2018, the Company had total borrowings of $145.9 million (£110.5 million assuming conversion into U.S. dollars) of borrowings outstanding under the CS Facility secured by one of the Company's commercial mortgage loans.
The Company was in compliance with the financial covenants under each of its secured debt arrangements at June 30, 2018 and December 31, 2017.
Note 9 – Convertible Senior Notes, Net
On March 17, 2014, the Company issued $143.8 million aggregate principal amount of 5.50% Convertible Senior Notes due 2019 (the "March 2019 Notes"), for which the Company received net proceeds, after deducting the underwriting discount and estimated offering expense payable by the Company, of approximately $139.0 million. At June 30, 2018, the March 2019 Notes had a carrying value of $143.0 million and an unamortized discount of $0.8 million.
On August 18, 2014, the Company issued an additional $111.0 million aggregate principal amount of 5.50% Convertible Senior Notes due 2019 (the "August 2019 Notes," and together with the March 2019 Notes, the "2019 Notes"), for which the

17



Company received net proceeds, after deducting the underwriting discount and estimated offering expense payable by the Company, of approximately $109.6 million. At June 30, 2018, the August 2019 Notes had a carrying value of $110.0 million and an unamortized discount of $1.0 million.
On August 21, 2017, the Company issued an aggregate principal amount of $230.0 million of 4.75% Convertible Senior Notes due 2022 (the "August 2022 Notes"), for which the Company received net proceeds, after deducting the underwriting discount and estimated offering expense payable by the Company, of approximately $224.8 million. At June 30, 2018, the August 2022 Notes had a carrying value of $221.8 million and an unamortized discount of $8.2 million.
On November 9, 2017, the Company issued an aggregate principal amount of $115.0 million of 4.75% Convertible Senior Notes due 2022 (the "November 2022 Notes," and together with the August 2022 Notes, the "2022 Notes" and the 2022 Notes together with the 2019 Notes, "the Notes"), for which the Company received net proceeds, after deducting the underwriting discount and estimated offering expense payable by the Company of approximately $112.7 million. At June 30, 2018, the November 2022 Notes had a carrying value of $112.3 million and an unamortized discount of $2.7 million.
The following table summarizes the terms of the Notes ($ in thousands):
 
Principal Amount
Coupon Rate
Effective Rate (1)
Conversion Rate (2)
Maturity Date
Remaining Period of Amortization
2019 Notes
$
254,750

5.50
%
6.36
%
57.8613

3/15/2019
0.70 years
2022 Notes
345,000

4.75
%
5.61
%
50.2260

8/23/2022
4.15 years
Total
$
599,750

 
 
 
 
 
———————
(1)
Effective rate includes the effect of the adjustment for the conversion option (See endnote (2) below), the value of which reduced the initial liability and was recorded in additional paid-in-capital.
(2)
The Company has the option to settle any conversions in cash, shares of common stock or a combination thereof.  The conversion rate represents the number of shares of common stock issuable per $1.0 million principal amount of the Notes converted, and includes adjustments relating to cash dividend payments made by the Company to stockholders that have been deferred and carried-forward in accordance with, and are not yet required to be made pursuant to, the terms of the applicable supplemental indenture.
The Company may not redeem the Notes prior to maturity. The closing price of the Company's common stock on June 27, 2018 of $18.58 was greater than the per share conversion price of the 2019 Notes and less than the per share conversion price of the 2022 Notes. The Company has the intent and ability to settle the Notes in cash and, as a result, the Notes did not have any impact on the Company's diluted earnings per share.
In accordance with ASC 470 the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) is to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. GAAP requires that the initial proceeds from the sale of the Notes be allocated between a liability component and an equity component in a manner that reflects interest expense at the interest rate of similar nonconvertible debt that could have been issued by the Company at such time. The Company measured the fair value of the debt components of the Notes as of their issuance date based on effective interest rates.  As a result, the Company attributed approximately $22.4 million of the proceeds to the equity component of the Notes ($11.4 million to the 2019 Notes and $11.0 million to the 2022 Notes), which represents the excess proceeds received over the fair value of the liability component of the Notes at the date of issuance. The equity component of the Notes has been reflected within additional paid-in capital in the condensed consolidated balance sheet as of June 30, 2018. The resulting debt discount is being amortized over the period during which the Notes are expected to be outstanding (the maturity date) as additional non-cash interest expense. The additional non-cash interest expense attributable to each of the Notes will increase in subsequent reporting periods through the maturity date as the Notes accrete to their par value over the same period.
The aggregate contractual interest expense was approximately $7.6 million and $15.2 million for the three and six months ended June 30, 2018, respectively, as compared to approximately $3.5 million and $7.0 million for the three and six months ended June 30, 2017, respectively. With respect to the amortization of the discount on the liability component of the Notes as well as the amortization of deferred financing costs, the Company reported additional non-cash interest expense of approximately $1.8 million and $3.7 million for the three and six months ended June 30, 2018, respectively, as compared to approximately $0.9 million and $1.8 million for the three and six months ended June 30, 2017, respectively.
Note 10 – Derivatives, Net
The Company uses forward currency contracts to economically hedge interest and principal payments due under its loans denominated in currencies other than U.S. dollars.

18



The Company has entered into a series of forward contracts to sell an amount of foreign currency (British pound and Euro) for an agreed upon amount of U.S. dollars at various dates through November 2020. These forward contracts were executed to economically fix the U.S. dollar amounts of foreign denominated cash flows expected to be received by the Company related to foreign denominated loan investments.

The following table summarizes the Company's non-designated foreign exchange (“Fx”) forwards as of June 30, 2018:
Type of Derivative
June 30, 2018
 
Number of Contracts
 
Aggregate Notional Amount (in thousands)
 
Notional Currency
 
Maturity
Fx Contracts - GBP
40
 
314,226
 
GBP
 
July 2018 - November 2020
Fx Contracts - EUR
1
 
42,247
 
EUR
 
October 2018


The following table summarizes the Company's non-designated Fx forwards as of December 31, 2017:
Type of Derivative
December 31, 2017
 
Number of Contracts
 
Aggregate Notional Amount (in thousands)
 
Notional Currency
 
Maturity
Fx Contracts - GBP
24
 
177,077
 
GBP
 
January 2018- November 2020

The Company has not designated any of its derivative instruments as hedges as defined in ASC 815, Derivatives and Hedging and, therefore, changes in the fair value of the Company's derivative instruments are recorded directly in earnings. The following table summarizes the amounts recognized on the condensed consolidated statements of operations related to the Company’s derivatives for the three and six months ended June 30, 2018 and 2017 ($ in thousands):
 
 
 
 
Amount of gain (loss)
recognized in income
 
Amount of gain (loss)
recognized in income
 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
Location of Gain (Loss) Recognized in Income
 
2018
 
2017
 
2018
 
2017
Forward currency contracts
Gain (loss) on derivative instruments - unrealized
 
$
24,800

 
$
(7,438
)
 
$
15,941

 
$
(10,321
)
Forward currency contracts
Gain (loss) on derivative instruments - realized
 
8,742

 
46

 
6,565

 
(110
)
Interest rate caps (1)
Gain (loss) on derivative instruments - unrealized
 
(4
)
 
3

 
—

 
(3
)
Total
 
 
$
33,538

 
$
(7,389
)
 
$
22,506

 
$
(10,434
)
———————
(1)
With a notional amount of $37.5 million and $42.8 million at June 30, 2018, and 2017, respectively.
The following table summarizes the gross asset and liability amounts related to the Company’s derivatives at June 30, 2018 and December 31, 2017 ($ in thousands).
 

19



 
June 30, 2018
 
December 31, 2017
 
Gross
Amount of
Recognized
Assets
 
Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet
 
Net Amounts
of Assets
Presented in
the Condensed Consolidated Balance Sheet
 
Gross
Amount of
Recognized
Liabilities
 
Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet
 
Net Amounts of Assets (Liabilities) Presented in the Condensed Consolidated Balance Sheet
Interest rate caps
$
1

 
$
—

 
$
1

 
$
—

 
$
1

 
$
1

Forward currency contracts
11,409

 
(1,113
)
 
10,296

 
(5,645
)
 
—

 
(5,645
)
Total derivative instruments
$
11,410

 
$
(1,113
)
 
$
10,297

 
$
(5,645
)

$
1


$
(5,644
)

Note 11 – Accounts Payable, Accrued Expenses and Other Liabilities
The following table details the components of the Company's accounts payable, accrued expense and other liabilities ($ in thousands):
 
June 30, 2018

 
December 31, 2017

Accrued dividends payable
$
63,604

 
$
56,576

Accrued interest payable
14,339

 
12,796

Accounts payable and other liabilities
3,454

 
1,534

Total
$
81,397

 
$
70,906


Note 12 – Related Party Transactions
Management Agreement
In connection with the Company’s initial public offering in September 2009, the Company entered into a management agreement (the “Management Agreement”) with the Manager, which describes the services to be provided by the Manager and its compensation for those services. The Manager is responsible for managing the Company’s day-to-day operations, subject to the direction and oversight of the Company’s board of directors.
Pursuant to the terms of the Management Agreement, the Manager is paid a base management fee equal to 1.5% per annum of the Company’s stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears.
The current term of the Management Agreement expires on September 29, 2018 and is automatically renewed for successive one-year terms on each anniversary thereafter. The Management Agreement may be terminated upon expiration of the one-year extension term only upon the affirmative vote of at least two-thirds of the Company’s independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to the Company or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair fees by accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of the Company’s independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual base management fee during the 24-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. Following a meeting by the Company’s independent directors in February 2018, which included a discussion of the Manager’s performance and the level of the management fees thereunder, the Company determined not to seek termination of the Management Agreement.
The Company incurred approximately $9.0 million and $17.1 million in base management fees under the Management Agreement for the three and six months ended June 30, 2018, respectively, as compared to approximately $7.7 million and $15.2 million for the three and six months ended June 30, 2017, respectively.
In addition to the base management fee, the Company is also responsible for reimbursing the Manager for certain expenses paid by the Manager on behalf of the Company or for certain services provided by the Manager to the Company.
For the three and six months ended June 30, 2018, the Company paid expenses totaling $0.6 million and $1.2 million,

20



respectively, related to reimbursements for certain expenses paid by the Manager on behalf of the Company under the Management Agreement. For the three and six months ended June 30, 2017, the Company paid expenses totaling $0.1 million and $0.2 million, respectively, related to reimbursements for certain expenses paid by the Manager on behalf of the Company under the Management Agreement. Expenses incurred by the Manager and reimbursed by the Company are reflected in the respective condensed consolidated statement of operations expense category or the condensed consolidated balance sheet based on the nature of the item.
Included in payable to related party on the condensed consolidated balance sheet at June 30, 2018 and December 31, 2017 are approximately $9.0 million and $8.2 million, respectively, for base management fees incurred but not yet paid under the Management Agreement.
Unconsolidated Joint Venture
In September 2014, the Company, through a wholly owned subsidiary, acquired a 59% ownership interest in Champ Limited Partnership ("Champ LP") following which a wholly-owned subsidiary of Champ LP then acquired a 35% ownership interest in Bremer Kreditbank AG ("BKB"). In May 2017, the Company sold its remaining ownership interest in Champ LP, to unaffiliated third parties. As such, in 2018 the Company no longer held any interest in Champ LP.
Loans receivable
In June, 2017, the Company increased its outstanding loan commitment through the acquisition of an additional $25.0 million of interests in an existing subordinate loan from a fund managed by an affiliate of the Manager, increasing the Company's total outstanding loan commitment to $100.0 million. Furthermore, in September 2017 the Company funded an additional $25.0 million to acquire a portion of the same pre-development subordinate loan from a fund managed by an affiliate of the Manager, increasing the Company's total outstanding loan commitment to $125.0 million. In May 2018, the Company increased its outstanding principal balance through the acquisition of an additional $28.2 million interest in the same subordinate loan from a fund managed by an affiliate of the Manager. The pre-development subordinate loan is for the construction of a residential condominium building in New York, New York and is part of a $300.0 million subordinate loan.
In June, 2018, the Company increased its outstanding loan commitment through the acquisition of £4.8 million ($6.4 million assuming conversion into U.S. dollars) pari-passu interest in an existing subordinate loan from a fund managed by an affiliate of the Manager. The subordinate loan is secured by a healthcare portfolio located in the United Kingdom.

Note 13 – Share-Based Payments
On September 23, 2009, the Company’s board of directors approved the Apollo Commercial Real Estate Finance, Inc., 2009 Equity Incentive Plan (as amended from time to time, the “LTIP”). The LTIP provides for grants of restricted common stock, restricted stock units (“RSUs”) and other equity-based awards up to an aggregate of 7.5% of the issued and outstanding shares of the Company’s common stock (on a fully diluted basis). The LTIP is administered by the compensation committee of the Company’s board of directors (the “Compensation Committee”) and all grants under the LTIP must be approved by the Compensation Committee.
The Company recognized stock-based compensation expense of $4.0 million and $7.4 million for the three and six months ended June 30, 2018, respectively, related to restricted stock and RSU vesting, as compared to $3.5 million and $7.3 million for the three and six months ended June 30, 2017, respectively, related to restricted stock and RSU vesting.
The following table summarizes the grants, vesting and forfeitures of restricted common stock and RSUs during the six months ended June 30, 2018:
 
Type
 
Restricted Stock
 
RSUs
 
Grant Date Fair Value ($ in thousands)
Outstanding at December 31, 2017
 
105,561

 
1,632,746

 
 
 
Grant
 
28,070

 
—

 
500

 
Vested
 
(10,394
)
 
—

 
N/A

 
Forfeiture
 
—

 
(29,410
)
 
N/A

Outstanding at June 30, 2018
 
123,237

 
1,603,336

 
 

21




Below is a summary of restricted stock and RSU vesting dates as of June 30, 2018: 
Vesting Year
Restricted Stock
 
RSU
 
Total Awards
2018
57,540

 
744,497

 
802,037

2019
60,803

 
560,138

 
620,941

2020
4,894

 
298,701

 
303,595

Total
123,237

 
1,603,336

 
1,726,573


At June 30, 2018, the Company had unrecognized compensation expense of approximately $1.4 million and $22.6 million, respectively, related to the vesting of restricted stock awards and RSUs noted in the table above.

RSU Deliveries
During the six months ended June 30, 2018, the Company delivered 345,996 shares of common stock for 603,677 vested RSUs. The Company did not deliver any common stock for the three months ended June 30, 2018. The Company allows RSU participants to settle their tax liabilities with a reduction of their share delivery from the originally granted and vested RSUs. The amount, when agreed to by the participant, results in a cash payment to the Manager related to this tax liability and a corresponding adjustment to additional paid in capital on the condensed consolidated statement of changes in stockholders' equity. The adjustment was $4.7 million for the six months ended June 30, 2018, and is included as a reduction of capital related to the Company's equity incentive plan in the condensed consolidated statement of changes in stockholders' equity. There was no adjustment for the three months ended June 30, 2018.
Note 14 – Stockholders’ Equity
The Company’s authorized capital stock consists of 450,000,000 shares of common stock, $0.01 par value per share and 50,000,000 shares of preferred stock, $0.01 par value per share. As of June 30, 2018, 123,020,301 shares of common stock were issued and outstanding, 6,770,393 shares of 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock ("Series B Preferred Stock") were issued and outstanding and 6,900,000 shares of 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock ("Series C Preferred Stock") were issued and outstanding.
Dividends. During 2018, the Company declared the following dividends:
 
Three months ended
Dividend declared per share of:
June 30, 2018
 
March 31, 2018
Common Stock
$0.46
 
$0.46
Series B Preferred Stock
0.50
 
0.50
Series C Preferred Stock
0.50
 
0.50
Common Stock Offerings. During the first quarter of 2018, the Company completed a follow-on public offering of 15,525,000 shares of its common stock, at a price of $17.77 per share. The aggregate net proceeds from the offering, including proceeds from the sale of the additional shares, were approximately $275.9 million after deducting estimated offering expenses.
Note 15 – Commitments and Contingencies
Legal Proceedings. From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of business. On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57th Investment LLC commenced an action captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No. 653251/2018) in New York Supreme Court.  The complaint names as defendants (i) ACREFI Mortgage Lending, LLC, a subsidiary of the Company, (ii) the Company, and (iii) certain funds managed by Apollo, who are co-lenders on a mezzanine loan against the development of a residential condominium building in Manhattan, New York. The plaintiffs allege that the defendants tortiously interfered with the contractual equity put right in the plaintiffs’ joint venture agreement with the developers of the project, and that the defendants aided and abetted breaches of fiduciary duty by the developers of the project.  The plaintiffs allege the loss of a $70.0 million investment as part of total damages of $700.0 million, which includes punitive damages.  The Company believes the claims are without merit and will vigorously defend the case.

22



On January 4, 2017, the United States Department of Justice served a Request for Information and Documents (the “Request”) on the Company, in connection with a preliminary investigation into certain aspects of the Company's former residential real estate portfolio, which the Company acquired in connection with the merger of Apollo Residential Mortgage, Inc. with and into the Company and subsequently sold in 2016. The Request sought a range of information in connection with the residential real estate portfolio, including, among other things, information concerning policies, procedures, and practices related to advertising, marketing, identifying, or acquiring residential properties for sale or rent, and various data for all rental and sales contracts executed since January 1, 2012. The Company fully cooperated with the Department of Justice, and was advised, by a letter dated May 2, 2018, that the Department of Justice did not intend to take any further actions in this matter as it relates to the Company.
Loan Commitments. As described in "Note 5 - Commercial Mortgage and Subordinate Loans, Net," at June 30, 2018, the Company had $818.1 million of unfunded commitments related to its commercial mortgage and subordinate loan portfolios.
Note 16 – Fair Value of Financial Instruments
The following table presents the carrying value and estimated fair value of the Company’s financial instruments not carried at fair value on the condensed consolidated balance sheet at June 30, 2018 and December 31, 2017 ($ in thousands):
 
June 30, 2018
 
December 31, 2017
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Cash
$
76,384

 
$
76,384

 
$
77,671

 
$
77,671

Commercial first mortgage loans, net
3,724,221

 
3,722,116

 
2,653,826

 
2,657,262

Subordinate loans, net
1,142,514

 
1,140,501

 
1,025,932

 
1,029,390

Secured debt arrangements
(1,981,181
)
 
(1,981,181
)
 
(1,345,195
)
 
(1,345,195
)
2019 Notes
(252,952
)
 
(270,753
)
 
(251,935
)
 
(267,506
)
2022 Notes
(334,111
)
 
(345,000
)
 
(332,962
)
 
(350,175
)
To determine estimated fair values of the financial instruments listed above, market rates of interest, which include credit assumptions, are used to discount contractual cash flows. The estimated fair values are not necessarily indicative of the amount the Company could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. Estimates of fair value for cash and convertible senior notes, net are measured using observable Level I inputs as defined in "Note 3 - Fair Value Disclosure." Estimates of fair value for all other financial instruments in the table above are measured using significant estimates, or unobservable Level III inputs as defined in "Note 3 - Fair Value Disclosure."
Note 17 – Net Income (Loss) per Share
ASC 260, Earnings per share, requires the use of the two-class method of computing earnings per share for all periods presented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for dividends declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for dividends declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.
The remaining earnings are allocated to common stockholders and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. Each total is then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding shares of common stock and all potential shares of common stock assumed issued if they are dilutive. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of these potential shares of common stock.

23



The table below presents basic and diluted net income (loss) per share of common stock using the two-class method for the three and six months ended June 30, 2018 and 2017 ($ in thousands except per share data): 
 
For the three months ended June 30,
 
For the six months ended June, 30
 
2018
 
2017
 
2018
 
2017
Numerator:
 
 
 
 
 
 
 
Net income
$
55,346

 
$
36,235

 
$
104,779

 
$
83,359

Preferred dividends
(6,834
)
 
(9,310
)
 
(13,669
)
 
(18,620
)
Net income available to common stockholders
48,512

 
26,925

 
91,110

 
64,739

Dividends declared on common stock
(56,588
)
 
(48,501
)
 
(113,165
)
 
(90,647
)
Dividends on participating securities
(738
)
 
(630
)
 
(1,489
)
 
(1,259
)
Net loss attributable to common stockholders
$
(8,814
)
 
$
(22,206
)
 
$
(23,544
)
 
$
(27,167
)
Denominator:
 
 
 
 
 
 
 
Basic weighted average shares of common stock outstanding
123,019,993

 
95,428,134

 
116,651,305

 
93,530,831

Diluted weighted average shares of common stock outstanding
124,629,317

 
96,796,289

 
118,281,153

 
94,907,762

Net income per weighted average share of common stock

 

 

 
 
Distributable earnings per share of common stock
$
0.46

 
$
0.51

 
$
0.98

 
$
0.97

Undistributed loss per share of common stock
$
(0.07
)
 
$
(0.23
)
 
$
(0.20
)
 
$
(0.29
)
Basic and diluted net income per share of common stock
$
0.39

 
$
0.28

 
$
0.78

 
$
0.68

For the three and six months ended June 30, 2018, 1,609,324 and 1,629,848 weighted average unvested RSUs, respectively, were excluded from the calculation of diluted net income per share because the effect was anti-dilutive. For the three and six months ended June 30, 2017, 1,368,155 and 1,376,930 weighted average unvested RSUs, respectively, were excluded from the calculation of diluted net income per share because the effect was anti-dilutive.
Note 18 – Subsequent Events
Investment activity.  Subsequent to the end of the quarter, the Company committed capital of $87.0 million, all of which was funded at closing, of first mortgage loans.
In addition, the Company funded approximately $18.9 million for loans closed prior to the quarter.
Loan Repayments. Subsequent to the end of the quarter, the Company received approximately $52.3 million from loan repayments.



24



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

The Company makes forward-looking statements herein and will make forward-looking statements in future filings with the SEC, press releases or other written or oral communications within the meaning of Section 27A of the Securities Act of
1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For these statements, the Company claims the protections of the safe harbor for forward-looking statements contained in such Sections. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company’s control. These forward-looking statements include information about possible or assumed future results of the Company’s business, financial condition, liquidity, results of operations, plans and objectives. When the Company uses the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions, it intends to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: market trends in the Company’s industry, interest rates, real estate values, the debt securities markets or the general economy; the demand for commercial real estate loans; the Company’s business and investment strategy; the Company’s operating results; actions and initiatives of the U.S. government and governments outside of the United States, changes to government policies and the execution and impact of these actions, initiatives and policies; the state of the economy generally or in specific geographic regions; economic trends and economic recoveries; the Company’s ability to obtain and maintain financing arrangements, including secured debt arrangements and securitizations; the availability of debt financing from traditional lenders; the volume of short-term loan extensions; the demand for new capital to replace maturing loans; expected leverage; general volatility of the securities markets in which the Company participates; changes in the value of the Company’s assets; the scope of the Company’s target assets; interest rate mismatches between the Company’s target assets and any borrowings used to fund such assets; changes in interest rates and the market value of the Company’s target assets; changes in prepayment rates on the Company’s target assets; effects of hedging instruments on the Company’s target assets; rates of default or decreased recovery rates on the Company’s target assets; the degree to which hedging strategies may or may not protect the Company from interest rate volatility; impact of and changes in governmental regulations, tax law and rates, accounting, legal or regulatory issues or guidance and similar matters; the Company’s continued maintenance of its qualification as a REIT for U.S. federal income tax purposes; the Company’s continued exclusion from registration under the Investment Company Act of 1940, as amended; the availability of opportunities to acquire commercial mortgage-related, real estate-related and other securities; the availability of qualified personnel; estimates relating to the Company’s ability to make distributions to its stockholders in the future; the Company's present and potential future competition; and unexpected costs or unexpected liabilities, including those related to litigation.
The forward-looking statements are based on the Company’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to the Company. See “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. These and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that the Company files with the SEC, could cause its actual results to differ materially from those included in any forward-looking statements the Company makes. All forward-looking statements speak only as of the date they are made. New risks and uncertainties arise over time and it is not possible to predict those events or how they may affect us. Except as required by law, the Company is not obligated to, and does not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
The Company is a Maryland corporation that has elected to be taxed as a REIT for U.S. federal income tax purposes. The Company primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments. These asset classes are referred to as the Company’s target assets.
The Company is externally managed and advised by the Manager, an indirect subsidiary of Apollo, a leading global alternative investment manager with a contrarian and value-oriented investment approach in private equity, credit and real estate with assets under management of approximately $247.4 billion as of March 31, 2018.
The Manager is led by an experienced team of senior real estate professionals who have significant expertise in underwriting and structuring commercial real estate financing transactions. The Company benefits from Apollo’s global infrastructure and operating platform, through which the Company is able to source, evaluate and manage potential investments in the Company’s target assets.


25




Market Overview
    
Based on the current market dynamics, including significant upcoming commercial real estate debt maturities, we believe there remains compelling opportunities for the Company to invest capital in its target assets at attractive risk adjusted returns. The Company continues to focus on underlying real estate value, and transactions that benefit from the Company’s ability to execute complex and sophisticated transactions.
The Company believes the challenges faced by conduit lenders and the general uncertainty around value and pricing could create attractive risk adjusted investment opportunities for the Company. As a result, the Company expects to continue to see opportunities to originate first mortgage and subordinate financings in transactions which benefit from the Company’s ability to source, structure and execute complex transactions.
Critical Accounting Policies

A summary of the Company’s critical accounting policies is set forth in its Annual Report on Form 10-K for the year ended December 31, 2017 under “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Use of Estimates.” There have been no material changes to the Company's critical accounting policies described in the Company's Annual Report on Form 10-K filed with the SEC on February 14, 2018.
Results of Operations
All non-U.S. dollar denominated assets and liabilities are translated to U.S. dollars at the exchange rate prevailing at the reporting date and income, expenses, gains, and losses are translated at the prevailing exchange rate on the dates that they were recorded.
Investments
The following table sets forth certain information regarding the Company’s commercial real estate debt portfolio as of June 30, 2018 ($ in thousands):
Description
 
Amortized
Cost
 
Weighted Average Coupon (1)
 
Weighted Average All-in Yield (1)(2)
 
Secured Debt (3)
 
Cost of Funds
 
Equity at
cost(4)
 
Commercial mortgage loans, net
 
$
3,724,221

 
6.9
%
 
7.8
%
 
$
1,981,181

 
4.1
%
 
$
1,743,040

Subordinate loans, net
 
1,142,514

 
12.1
%
 
13.4
%
 
—

 
—

 
1,142,514

Total/Weighted Average
 
$
4,866,735

 
8.1
%
 
9.1
%
 
$
1,981,181

 
4.1
%
 
$
2,885,554

———————    
(1)
Weighted-Average Coupon and Weighted Average All-in-Yield are based on the applicable benchmark rates as of June 30, 2018 on the floating rate loans.
(2)
Weighted-Average All-in-Yield includes the amortization of deferred origination fees, loan origination costs and accrual of both extension and exit fees.
(3)
Gross of deferred financing costs of $20.3 million.
(4)
Represents loan portfolio at amortized cost less secured debt outstanding.
Loan Portfolio Overview
The following table provides details of our commercial mortgage and subordinate loan portfolios, on a loan-by-loan basis, as of June 30, 2018 ($ in millions):
Commercial Mortgage Loan Portfolio
Property Type
Risk Rating
Origination Date
Amortized Cost
Unfunded Commitment
Construction Loan
Fully-extended Maturity
Location
Residential-for-sale: inventory
3
3/2018
$223
—

3/2021
London, UK
Urban Predevelopment
3
1/2016
221
—

7/2019
Miami, FL
Hotel
3
9/2016
215
—

8/2021
Manhattan, NY
Urban Predevelopment
3
4/2017
183
—

3/2019
London, UK
Office
3
11/2017
176
—

1/2023
Chicago, IL

26



Retail Center
4
11/2014
171
—

9/2018
Cincinnati, OH
Hotel
3
4/2018
151
2

4/2023
Honolulu, HI
Hotel(1)
3
9/2015
140
—

6/2023
Manhattan, NY
Hotel
3
5/2018
139
—

6/2023
Miami, FL
Mixed Use
3
9/2016
133
—

10/2020
Chicago, IL
Urban Predevelopment
3
3/2017
128
—

9/2018
Brooklyn, NY
Mixed Use
2
7/2017
125
—

6/2019
Manhattan, NY
Office
3
11/2017
120
127
Y
12/2022
Manhattan, NY
Residential-for-sale: inventory
3
6/2018
113
—

6/2020
Manhattan, NY
Multifamily
3
4/2014
80
—

7/2023
Various
Other
2
10/2016
80
—

8/2019
Manassas, VA
Hotel
3
3/2017
77
—

3/2022
Atlanta, GA
Office
3
12/2017
76
59

3/2022
London, UK
Residential-for-sale: inventory
3
5/2018
75
4

6/2020
Brooklyn, NY
Residential-for-sale: inventory
3
6/2018
71
—

6/2020
London, UK
Multifamily
3
10/2017
67
—

11/2021
Brooklyn, NY
Urban Predevelopment
3
11/2016
65
—

12/2018
Manhattan, NY
Urban Predevelopment
3
7/2017
64
16

4/2019
London, UK
Hotel
3
4/2018
63
—

5/2023
Scottsdale, AZ
Urban Predevelopment
3
12/2016
62
19

12/2020
Los Angeles, CA
Hotel
2
1/2017
60
—

1/2022
Miami, FL
Multifamily
3
11/2014
59
—

11/2021
Various
Office
3
3/2018
58
29

4/2023
Chicago, IL
Hotel
3
12/2017
57
32
Y
12/2022
Manhattan, NY
Office(2)
3
1/2018
55
158
Y
1/2022
Renton, WA
Residential-for-sale: inventory
3
5/2018
50
—

4/2021
Manhattan, NY
Multifamily
3
5/2016
44
8

6/2019
Brooklyn, NY
Multifamily
3
10/2017
43
—

10/2022
London, UK
Hotel
3
12/2015
42
1

12/2020
St. Thomas, USVI
Multifamily
3
12/2017
39
1

1/2020
Manhattan, NY
Hotel
3
2/2018
38
—

3/2023
Pittsburgh, PA
Multifamily(3)
5
11/2014
37
—

11/2019
Williston, ND
Mixed Use
3
7/2017
36
—

2/2019
Manhattan, NY
Retail Center
3
2/2017
31
3

9/2020
Miami, FL
Residential-for-sale: inventory(3)
5
2/2014
28
—

4/2019
Bethesda, MD
Residential-for-sale: construction
3
1/2018
16
64
Y
1/2023
Manhattan, NY
Mixed Use
3
7/2017
14
—

2/2019
Manhattan, NY
Residential-for-sale: construction
2
3/2018
(1)
115
Y
3/2023
San Francisco, CA
Commercial mortgage loans
 
 
$3,724
$638
7%
2.7 Years
 


27










Subordinate Loan Portfolio
Property Type
Risk Rating
Origination Date
Amortized Cost
Unfunded Commitment
Construction Loan
Fully-extended Maturity
Location
Residential-for-sale: construction(4)
3
6/2015
$171
—
Y
7/2020
Manhattan, NY
Healthcare
3
10/2016
112
—

10/2021
Various
Healthcare
3
6/2018
94
—

5/2019
Various
Residential-for-sale: construction
3
2/2016
77
—
Y
2/2021
Manhattan, NY
Office
3
3/2017
75
—

10/2018
Brooklyn, NY
Other
3
9/2017
74
—

9/2022
Various
Multifamily
3
10/2015
60
4

7/2019
Manhattan, NY
Healthcare
3
1/2015
50
—

12/2019
Various
Hotel
3
6/2018
48
—

2/2023
Various
Mixed Use
3
1/2017
42
—

2/2027
Cleveland, OH
Residential-for-sale: construction(4)
3
11/2017
37
—
Y
7/2020
Manhattan, NY
Residential-for-sale: inventory
3
10/2016
34
—

11/2020
Manhattan, NY
Industrial
3
5/2013
32
—

5/2023
Various
Residential-for-sale: construction
3
12/2017
31
25
Y
4/2023
Los Angeles, CA
Hotel
3
6/2015
25
—

7/2025
Phoenix, AZ
Residential-for-sale: inventory
3
6/2017
23
—

12/2020
Manhattan, NY
Multifamily
3
5/2018
21
—

5/2028
Cleveland, OH
Hotel
3
6/2015
20
—

7/2019
Washington, DC
Hotel
3
2/2015
20
—

1/2020
Burbank, CA
Hotel
3
6/2018
20
—

6/2023
Las Vegas, NV
Hotel(1)
3
9/2015
15
9

6/2023
Manhattan, NY
Office
3
7/2013
14
—

7/2022
Manhattan, NY
Office(2)
3
1/2018
13
36
Y
1/2022
Renton, WA
Office
3
9/2012
9
—

10/2022
Kansas City, MO
Hotel
3
5/2017
8
—

6/2027
Anaheim, CA
Office
3
8/2017
8
—

9/2024
Troy, MI
Mixed Use
3
7/2012
7
—

8/2022
Chapel Hill, NC
Residential-for-sale: construction
3
12/2017
3
106
Y
6/2022
Manhattan, NY
Sub total- Subordinate loans
 
 
$1,143
$180
29%
3.0 Years
 
 
 
 
 
 
 
 
 
Total Loan Portfolio
 
 
$4,867
$818
12%
2.8 Years
 
———————
(1) Both loans are secured by the same property.
(2) Both loans are secured by the same property
(3) Amortized cost for these loans is net of the recorded provisions for loan losses and impairments
(4) Both loans are secured by the same property


The Company's average asset and debt balances for the six months ended June 30, 2018, were ($ in thousands):

28



 
 
Average month-end balances for the six months ended June 30, 2018
Description