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MarketScreener Homepage  >  Equities  >  Nyse  >  Apollo Commercial Real Estate Finance, Inc.    ARI

APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.

(ARI)
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APOLLO COMMERCIAL REAL ESTATE FINANCE : Management's Discussion and Analysis of Financial Condition and Results of Operations FORWARD-LOOKING INFORMATION (form 10-Q)

10/26/2020 | 03:18pm EST
We make forward-looking statements herein and will make forward-looking
statements in future filings with the SEC, press releases or other written or
oral communications within the meaning of Section 27A of the Securities Act of
1933, as amended (the "Securities Act"), and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). For these statements, we
claim the protections of the safe harbor for forward-looking statements
contained in such Sections. Forward-looking statements are subject to
substantial risks and uncertainties, many of which are difficult to predict and
are generally beyond our control. These forward-looking statements include
information about possible or assumed future results of our business, financial
condition, liquidity, results of operations, plans and objectives. When we use
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: the macro- and micro-economic impact of the
COVID-19 pandemic; the severity and duration of the COVID-19 pandemic; actions
taken by governmental authorities to contain the COVID-19 pandemic or treat its
impact; the impact of the COVID-19 pandemic on our financial condition, results
of operations, liquidity and capital resources; market trends in our industry,
interest rates, real estate values, the debt securities markets or the general
economy; the demand for commercial real estate loans; our business and
investment strategy; our 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; our ability to obtain and maintain
financing arrangements, including secured debt arrangements and securitizations;
the timing and amount of expected future fundings of unfunded commitments; the
availability of debt financing from traditional lenders; the volume of
short-term loan extensions; the demand for new capital to replace maturing
loans; expected leverage; general volatility of the securities markets in which
we participate; changes in the value of our assets; the scope of our target
assets; interest rate mismatches between our target assets and any borrowings
used to fund such assets; changes in interest rates and the market value of our
target assets; changes in prepayment rates on our target assets; effects of
hedging instruments on our target assets; rates of default or decreased recovery
rates on our target assets; the degree to which hedging strategies may or may
not protect us from interest rate volatility; impact of and changes in
governmental regulations, tax law and rates, accounting, legal or regulatory
issues or guidance and similar matters; our continued maintenance of our
qualification as a REIT for U.S. federal income tax purposes; our continued
exclusion from registration under the Investment Company Act of 1940, as
amended; the availability of opportunities to acquire commercial
mortgage-related, real estate-related and other securities; the availability of
qualified personnel; estimates relating to our ability to make distributions to
our stockholders in the future; our present and potential future competition;
and unexpected costs or unexpected liabilities, including those related to
litigation.
The forward-looking statements are based on our beliefs, assumptions and
expectations of our future performance, taking into account all information
currently available to us. Forward-looking statements are not predictions of
future events. These beliefs, assumptions and expectations can change as a
result of many possible events or factors, not all of which are known to us. See
"Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q and our Annual
Report. These and other risks, uncertainties and factors, including those
described in the annual, quarterly and current reports that we file with the
SEC, could cause our actual results to differ materially from those included in
any forward-looking statements we make. All forward-looking statements speak
only as of the date they are made. New risks and uncertainties arise over time
and it is not possible to predict those events or how they may affect us. Except
as required by law, we are not obligated to, and do not intend to, update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
Overview
We are a Maryland corporation and have elected to be taxed as a REIT for U.S.
federal income tax purposes. We primarily originate, acquire, invest in and
manage performing commercial first mortgage loans, subordinate financings, and
other commercial real estate-related debt investments. These asset classes are
referred to as our target assets.
We are externally managed and advised by the Manager, an indirect subsidiary of
Apollo, a leading global alternative investment manager with a contrarian and
value-oriented investment approach in private equity, credit and real estate
with assets under management of approximately $413.6 billion as of June 30,
2020.
The Manager is led by an experienced team of senior real estate professionals
who have significant expertise in underwriting and structuring commercial real
estate financing transactions. We benefit from Apollo's global infrastructure
and operating platform, through which we are able to source, evaluate and manage
potential investments in our target assets.




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Current Market Conditions


During the first quarter of 2020, there was a global outbreak of COVID-19, which
was declared by the World Health Organization as a pandemic. In response to
COVID-19, the United States and numerous other countries declared national
emergencies, which has led to large scale quarantines as well as restrictions to
business deemed non-essential. These responses to COVID-19 have disrupted
economic activities and could have a significant continued adverse effect on
economic and market conditions, and could result in a recession. As we are still
in the midst of the COVID-19 pandemic we are not in a position to estimate the
ultimate impact this will have on our business and the economy as a whole. The
effects of COVID-19 have adversely impacted the value of our assets, business,
financial condition, results of operations and cash flows, and our ability to
operate successfully. Some of the factors that impacted us to date and may
continue to affect us are outlined in "Item 1A. Risk Factors" of this Quarterly
Report on Form 10-Q. Please see "Liquidity and Capital Resources" below for
additional discussion surrounding the ongoing impact we expect COVID-19 will
have on our liquidity and capital resources.
Critical Accounting Policies

A summary of our critical accounting policies is set forth in our Annual Report
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 our critical accounting policies
described in our Annual Report other than the adoption of the CECL Standard, as
described in "Note 2 - Summary of Significant Accounting Policies."
Results of Operations
All non-USD denominated assets and liabilities are translated to USD at the
exchange rate prevailing at the reporting date and income, expenses, gains, and
losses are translated at the prevailing exchange rate on the dates that they
were recorded.
Loan Portfolio Overview
The following table sets forth certain information regarding our commercial real
estate debt portfolio as of September 30, 2020 ($ in thousands):
                                            Amortized           

Weighted-Average Coupon Weighted Average Secured Debt

                         Equity at
            Description                        Cost                       (1)                    All-in Yield          Arrangements (3)       Cost of Funds           cost(4)
                                                                                                    (1)(2)
Commercial mortgage loans, net            $ 5,427,945                             4.7  %                  5.2  %       $   3,478,083                  2.2  %       $ 1,949,862
Subordinate loans and other lending         1,009,092                            10.5  %                 11.4  %                   -                    -            1,009,092
assets, net
Total/Weighted-Average                    $ 6,437,037                             5.6  %                  6.2  %       $   3,478,083                  2.2  %       $ 2,958,954


-------
(1)  Weighted-Average Coupon and Weighted-Average All-in Yield are based on the
applicable benchmark rates as of September 30, 2020 on the floating rate loans.
(2)   Weighted-Average All-in Yield includes the amortization of deferred
origination fees, loan origination costs and accrual of both extension and exit
fees. Weighted-Average All-in Yield excludes the benefit of forward points on
currency hedges relating to loans denominated in currencies other than USD.
(3)  Gross of deferred financing costs of $12.7 million.
(4)  Represents loan portfolio at amortized cost less secured debt outstanding.
The following table provides details of our commercial mortgage loan portfolio
and subordinate and other lending assets portfolio, on a loan-by-loan basis, as
of September 30, 2020 ($ in millions):
Commercial Mortgage Loan Portfolio
                                                                                                                             Construction
   #              Property Type            Risk Rating       Origination Date        Amortized Cost   Unfunded Commitment        Loan          Fully-extended Maturity         Location
1        Urban Retail                           3                 08/2019                 $317                 $-                                      09/2024           Manhattan, NY
2        Urban Retail                           3                 12/2019                 320                  -                                       12/2023           London, UK
3        Hotel                                  3                 10/2019                 261                  50                                      08/2024           Various
4        Healthcare                             3                 10/2019                 220                  29                                      10/2024           Various
5        Office                                 3                 02/2020                 216                  -                                       02/2025           London, UK






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6       Industrial                           3        01/2019        197            7                       02/2024      Brooklyn, NY
7       Office                               3        06/2019        204           29                       11/2026      Berlin, Germany
8       Office                               3        10/2018        197            3                       01/2022      Manhattan, NY
9       Urban Predevelopment (1)             5        01/2016        115            -                       09/2021      Miami, FL
10      Office                               3        09/2019        179            -                       09/2023      London, UK
11      Office                               3        01/2020        184           103                      02/2025      Long Island City, NY
12      Office                               3        11/2017        151            -                       01/2023      Chicago, IL
13      Urban Predevelopment(1)              5        03/2017        128            -                       12/2020      Brooklyn, NY
14      Hotel                                3        04/2018        152            -                       04/2023      Honolulu, HI
15      Hotel                                3        09/2015        145            -                       06/2024      Manhattan, NY
16      Hotel                                3        05/2018        140            -                       06/2023      Miami, FL
17      Hotel                                3        08/2019        139            -                       08/2024      Puglia, Italy
18      Office                               3        01/2018        135           56                       01/2022      Renton, WA
19      Retail center(1)                     5        11/2014        105            -                       09/2021      Cincinnati, OH
20      Office                               3        10/2018        135           51            Y          10/2023      Manhattan, NY
        Residential-for-sale:
21      construction                         3        12/2019        135           15            Y          01/2023      Boston, MA
22      Hotel                                3        03/2017        105            -                       03/2022      Atlanta, GA
23      Hotel                                3        11/2018        100            -                       12/2023      Vail, CO
24      Hotel                                3        12/2017        91             -                       12/2022      Manhattan, NY
25      Office                               3        03/2018        92             -                       04/2023      Chicago, IL
26      Residential-for-sale: inventory      3        12/2019        73             -                       07/2021      Manhattan, NY
27      Office                               3        04/2019        97            62            Y          09/2025      Culver City, CA
28      Office                               3        12/2017        87            37                       07/2022      London, UK
29      Mixed Use                            3        12/2019        75             1                       12/2024      London, UK
        Residential-for-sale:
30      construction                         3        12/2018        71            107           Y          12/2023      Manhattan, NY
        Residential-for-sale:
31      construction                         3        10/2015        69             -                       08/2021      Manhattan, NY
32      Multifamily                          3        04/2014        66             -                       07/2023      Various
33      Hotel                                3        08/2019        67             -                       09/2022      Manhattan, NY
34      Hotel                                3        04/2018        64             -                       05/2023      Scottsdale, AZ
35      Urban Predevelopment                 3        12/2016        52             -                       06/2022      Los Angeles, CA
36      Hotel                                3        09/2019        60             -                       10/2024      Miami, FL
        Residential-for-sale:
37      construction                         3        01/2018        68            12            Y          01/2023      Manhattan, NY
38      Hotel                                3        12/2019        59             -                       01/2025      Tucson, AZ
39      Multifamily                          3        11/2014        54             -                       11/2021      Various
40      Hotel                                3        05/2019        52             -                       06/2024      Chicago, IL
41      Multifamily                          3        02/2020        50             1                       03/2024      Cleveland, OH
42      Hotel                                3        12/2015        42             -                       08/2024      St. Thomas, USVI
        Residential-for-sale:
43      construction                         3        12/2018        65            38            Y          01/2024      Hallandale Beach, FL
44      Hotel(1)                             5        02/2018        29             -                       03/2023      Pittsburgh, PA
45      Office                               3        12/2019        34             3                       12/2022      Edinburgh, Scotland
46      Residential-for-sale: inventory      3        05/2018        24             -                       03/2021      Manhattan, NY
47      Residential-for-sale: inventory      3        06/2018        13             -                       07/2021      Manhattan, NY
48      Residential-for-sale:                5        02/2014         3             -                       04/2021
        inventory(1)                                                                                                     Bethesda, MD
49      Mixed Use                            3        12/2019        11            789           Y          06/2025      London, UK
        General CECL Allowance                                      (20)
        Sub total / Weighted-Average
        Subordinate Loans and Other
        Lending Assets                      3.1                    $5,428$1,393                    3.0 Years


Subordinate Loan and Other Lending Asset Portfolio

   #                  Property Type               Risk Rating     

Origination Date Amortized Cost Unfunded Commitment Construction Loan Fully-extended Maturity

           Location
1        Residential-for-sale: construction (2)        3               06/2015               $224                     -                       Y                       12/2020            Manhattan, NY
2        Residential-for-sale: construction            3               12/2017                108                    11                       Y                       06/2022            Manhattan, NY






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

        Total / Weighted-Average
        Loan Portfolio                       3.1                    $6,437$1,426                    2.9 Years


-------

(1)Amortized cost for these loans is net of the recorded provisions for loan
losses.
(2)Both loans are secured by the same property.
(3)Loan and Single Asset, Single Borrower CMBS are secured by the same
properties.
(4)Single Asset, Single Borrower CMBS.

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

                                                     Average month-end 

balances for the nine months ended

                                                                      September 30, 2020
Description                                                   Assets                     Related debt
Commercial mortgage loans, net                       $           5,635,603          $         3,399,455
Subordinate loans and other lending assets,
net                                                              1,048,555                            -


Portfolio Management
Due to the impact of COVID-19, some of our borrowers have experienced
consequences which are preventing the execution of their business plans and in
some cases temporary closures. As a result, we have worked with borrowers to
execute loan modifications which are typically coupled with additional equity
contributions from borrowers. Loan modifications to date have included
repurposing of reserves, temporary deferrals of interest or principal, and
partial deferral of coupon interest as payment-in-kind interest. None of these
modifications are troubled debt restructurings.
Investment Activity
During the nine months ended September 30, 2020, we committed $562.0 million of
capital to loans ($457.4 million of which was funded during the nine months
ended September 30, 2020). In addition, during the nine months ended
September 30, 2020, we received $543.5 million in repayments and sales and
funded $309.8 million for loans closed prior to 2020.

Net Income (Loss) Available to Common Stockholders
For the three months ended September 30, 2020 and 2019 our net income available
to common stockholders was $46.0 million, or $0.31 per diluted share of common
stock, and $25.7 million, or $0.16 per diluted share of common




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stock, respectively. For the nine months ended September 30, 2020 and 2019, our
net income (loss) available to common stockholders was $(28.5) million, or
$(0.20) per diluted share of common stock, and $143.1 million, or $0.97 per
diluted share of common stock, respectively.
Operating Results
The following table sets forth information regarding our consolidated results of
operations and certain key operating metrics ($ in thousands):
                              Three months ended September                            2020 vs 2019          Nine months ended September 30,             2020 vs. 2019
                                          30,
                                 2020              2019                                   2020                 2019
Net interest income:
Interest income from         $  74,522$ 81,136$ (6,614)$     232,018$  236,880$   (4,862)
commercial mortgage loans
Interest income from
subordinate loans and other     28,857            43,421           (14,564)                95,491             125,303             (29,812)
lending assets
Interest expense               (34,824)          (39,341)            4,517               (113,527)           (109,147)             (4,380)
Net interest income             68,555            85,216           (16,661)               213,982             253,036             (39,054)
Operating expenses:
General and administrative      (6,624)           (5,839)             (785)               (19,580)            (18,564)             (1,016)

expenses

Management fees to related      (9,927)          (10,434)              507                (30,152)            (30,306)                154
party
Total operating expenses       (16,551)          (16,273)             (278)               (49,732)            (48,870)               (862)
Other income                       128               429              (301)                 1,479               1,431                  48
Realized loss on investments    (1,037)                -            (1,037)               (17,442)            (12,513)             (4,929)
Reversal of (provision for)
loan losses - Specific CECL        550           (35,000)           35,550               (139,950)            (20,000)           (119,950)

Allowance

Reversal of (provision for)
loan losses - General CECL       5,792                 -             5,792                (12,004)                  -             (12,004)

Allowance

Foreign currency translation    27,002           (19,129)           46,131                 (8,388)            (20,012)             11,624
gain (loss)
Gain (loss) on foreign         (34,537)           24,153           (58,690)                32,959              28,619               4,340
currency forwards
Loss on interest rate             (564)          (10,307)            9,743                (39,207)            (23,420)            (15,787)
hedging instruments
Net income (loss)            $  49,338$ 29,089$ 20,249$     (18,303)$  158,271$ (176,574)


Net Interest Income

Net interest income decreased by $16.7 million and $39.1 million during the
three and nine months ended September 30, 2020, respectively, as compared to the
same periods in 2019. The decrease was primarily due to (i) a 2.02% and 1.73%
decrease in average one-month LIBOR, respectively, for the three and nine months
ended September 30, 2020 compared to the same periods in September 30, 2019 and
(ii) loans with an aggregate principal balance of $602.2 million being on cost
recovery or non-accrual status as of September 30, 2020 compared to $196.4
million as of September 30, 2019. This decrease was offset by (i) a $0.5 billion
increase in loan principal balance as of September 30, 2020 compared to the same
date in 2019 and (ii) in the money LIBOR floors on several of our loans.
We recognized PIK interest of $12.5 million and $37.3 million for the three and
nine months ended September 30, 2020, respectively, and $13.7 million and $42.8
million for the three and nine months ended September 30, 2019, respectively.
We recognized $0 and $0.2 million in pre-payment penalties and accelerated fees
for the three and nine months ended September 30, 2020, respectively, and
$0.3 million and $4.0 million for the three and nine months ended September 30,




                                       38
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2019, respectively.
Operating Expenses
General and administrative expenses
General and administrative expenses increased by $0.8 million for the three
months ended September 30, 2020 compared to the same period in 2019. The
increase was primarily driven by a $0.5 million increase in general operating
expenses and $0.3 million increase in non-cash restricted stock and RSU
amortization related to shares of stock awarded under the LTIPs.
General and administrative expenses increased by $1.0 million for the nine
months ended September 30, 2020 compared to the same period in 2019. The
increase was primarily due to a $0.6 million increase in non-cash restricted
stock and RSU amortization related to shares of common stock awarded under the
LTIPs and $0.4 million increase in general operating expenses.
Management fees to related party
Management fee expense decreased by $0.5 million during the three months ended
September 30, 2020 as compared to the same periods in 2019. The decrease is
primarily attributable to a decrease in our stockholders' equity (as defined in
the Management Agreement) as a result of our common stock repurchase of
10,834,595 shares during the nine months ended September 30, 2020 (as described
in "Note 14 - Stockholders' Equity").
Management fees decreased by $0.2 million during the nine months ended
September 30, 2020 as compared to the same period in 2019. The decrease is
primarily attributable to the decrease in our stockholders' equity as noted
above and was partially offset by an increase in our management fee as a result
of a decrease in our quarterly dividend during 2020.
Management fees and the relationship between us and the Manager under the
Management Agreement are discussed further in the accompanying condensed
consolidated financial statements, in "Note 12 - Related Party Transactions."
Reversal of (provision for) loan losses - General CECL Allowance
The General CECL Allowance decreased by $5.8 million during the three months
ended September 30, 2020 and increased by $12.0 million during the nine months
ended September 30, 2020. For the three months ended September 30, 2020, the
decrease is primarily related to an improvement in our view of estimated future
market conditions since prior quarter end; for the nine months ended
September 30, 2020, the increase is primarily related to a more negative view of
estimated future macroeconomic conditions in the backdrop of the global COVID-19
pandemic and an increase in our view of the remaining expected term of our loan
portfolio. Refer to "Note 2 - Summary of Significant Accounting Policies" and
"Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net"
for additional information related to our General CECL Allowance.
Reversal of (provision for) loan losses - Specific CECL Allowance
During the three months ended September 30, 2020, we recorded a net reversal of
$0.6 million of Specific CECL Allowances predominately due to a reversal of a
previously recorded allowance. During the nine months ended September 30, 2020,
we recorded Specific CECL Allowances on eight loans, totaling $156.9 million,
two of which had existing loan loss provisions, partially offset by $16.9
million in reversals of previously recorded allowances. Refer to "Note 4 -
Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net" for
additional information related to our Specific CECL Allowance.
Foreign currency gain and (loss) on derivative instruments
We use forward currency contracts to economically hedge interest and principal
payments due under our loans denominated in currencies other than USD. When
foreign currency gain and (loss) on derivative instruments are evaluated on a
combined basis, the net impact for the three and nine months ended September 30,
2020 was $(7.5) million and $24.6 million, respectively, and the net impact for
the three and nine months ended September 30, 2019 was $5.0 million and $8.6
million, respectively.
Loss on interest rate hedges
In connection with the senior secured term loan, we had previously entered into
an interest rate swap to fix LIBOR at 2.12% effectively fixing our all-in coupon
on the senior secured term loan at 4.87%. During the second quarter of 2020 we
terminated the interest rate swap and recognized a realized loss of $53.9
million. Subsequent to the termination of the




                                       39
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interest rate swap in the second quarter of 2020, we entered into a three-year
interest rate cap to cap LIBOR at 0.75%. This effectively limits the maximum
all-in coupon on our senior secured term loan to 3.50%. During the three and
nine months ended September 30, 2020, the interest rate cap had an unrealized
loss of $0.6 million and an unrealized gain of $0.2 million, respectively.

Dividends

The following table details our dividend activity:

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


Subsequent Events
Refer to "Note 18 - Subsequent Events" to the accompanying condensed
consolidated financial statements for disclosure regarding significant
transactions that occurred subsequent to September 30, 2020.
Liquidity and Capital Resources
Liquidity is a measure of our ability to meet potential cash requirements,
including ongoing commitments to repay borrowings, fund and maintain our assets
and operations, make distributions to our stockholders and other general
business needs. As of September 30, 2020, we had $1.1 billion of corporate debt
and $3.5 billion of asset specific financings. We have no corporate debt
maturities until August 2022. As of September 30, 2020, we had $438 million of
cash on hand and $11.9 million of approved and undrawn capacity from our secured
debt arrangements. In addition, we have a significant amount of unencumbered
loan assets. In light of COVID-19 and its severe impact on the economy we have
taken steps to increase our cash balances in order to maintain an adequate level
of liquidity to meet future outflows. As the duration and severity of COVID-19
remain unknown, so does the impact it will have on our borrowers, lenders, and
the economy as a whole. We will continue to closely monitor developments related
to COVID-19 as it relates to our liquidity position and financial obligations.
At this time we believe we have sufficient liquidity and access to additional
liquidity to meet financial obligations for at least the next 12 months.
Debt-to-Equity Ratio
The following table presents our debt-to-equity ratio:
                                      September 30, 2020      December 31, 2019
          Debt to Equity Ratio (1)           1.7                     1.4


-------
(1)Represents total debt less cash and loan proceeds held by servicer to total
stockholders' equity.
Our primary sources of liquidity are as follows:
Cash Generated from Operations
Cash from operations is generally comprised of interest income from our
investments, net of any associated financing expense, principal repayments from
our investments, net of associated financing repayments, proceeds from the sale
of investments, and changes in working capital balances. See "Results of
Operations - Loan Portfolio Overview" above for a summary of interest rates
related to our investment portfolio as of September 30, 2020.

Borrowings Under Various Financing Arrangements
JPMorgan Facility
In November 2019, through three indirect wholly-owned subsidiaries, we entered
into a Sixth Amended and Restated Master Repurchase Agreement with JPMorgan
Chase Bank, National Association. The JPMorgan Facility allows for $1.3 billion
of maximum borrowings (with amounts borrowed in British pounds and Euros
converted to USD for




                                       40
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purposes of calculating availability based on the greater of the spot rate as of
the initial financing under the corresponding mortgage loan and the then-current
spot rate) and matures in June 2022 and has two one-year extensions available at
our option, which are subject to certain conditions. The JPMorgan Facility
enables us to elect to receive advances in USD, GBP, or EUR. Margin calls may
occur any time at specified aggregate margin deficit thresholds.
As of September 30, 2020, we had $1.2 billion (including £75.6 million and €60.0
million assuming conversion into USD) of borrowings outstanding under the
JPMorgan Facility secured by certain of our commercial mortgage loans.
DB Facility
In March 2020, through an indirect wholly-owned subsidiary, we entered into a
Third Amended and Restated Master Repurchase Agreement with Deutsche Bank AG,
Cayman Islands Branch, London Branch, which provides for advances of up to $1.0
billion 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 us to elect to receive advances in
USD, GBP, or EUR. The repurchase facility matures in March 2021, and has two
one-year extensions available at our option, subject to certain conditions.
Margin calls may occur any time at specified aggregate margin deficit
thresholds.
As of September 30, 2020, we had $526.7 million of borrowings outstanding under
the DB Facility secured by certain of our commercial mortgage loans.
Goldman Facility
In November 2017, through an indirect wholly-owned subsidiary, we entered into a
master repurchase and securities contract agreement with Goldman Sachs Bank USA,
which provides advances up to $500.0 million and matures in November 2020, and
has one one-year extension available at our option, subject to certain
conditions. Margin calls may occur any time at specified margin deficit
thresholds.
As of September 30, 2020, we had $362.1 million of borrowings outstanding under
the Goldman Facility secured by certain of our commercial mortgage loans.
CS Facility - USD
In July 2018, through an indirect wholly-owned subsidiary, we entered into a
Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman
Islands Branch and Alpine Securitization Ltd, which provides for advances for
the sale and repurchase of eligible commercial mortgage loans secured by real
estate. The CS Facility - USD has an "evergreen" feature such that the facility
continues unless terminated at any time by Credit Suisse with six months'
notice. Margin calls may occur any time at specified aggregate margin deficit
thresholds.
As of September 30, 2020, we had $378.8 million of borrowings outstanding under
the CS Facility - USD secured by certain of our commercial mortgage loans.
CS Facility - GBP
In June 2018, through an indirect wholly-owned subsidiary, we entered into a
Global Master Repurchase Agreement with Credit Suisse Securities (Europe)
Limited. During the third quarter of 2020, the facility was repaid in connection
with the sale of the underlying loan.
HSBC Facility - USD
In October 2019, through an indirect wholly-owned subsidiary, we entered into a
secured debt arrangement with HSBC Bank plc, which provides for a single asset
financing. The facility is scheduled to mature in January 2021. Margin calls may
occur any time at specified aggregate margin thresholds.
As of September 30, 2020, we had $47.2 million of borrowings under the HSBC
Facility - USD secured by one commercial mortgage loan.
HSBC Facility - GBP
In September 2018, through an indirect wholly-owned subsidiary, we entered into
a secured debt arrangement with HSBC Bank plc, which provided for a single asset
financing. The facility matured and was repaid in June 2020 in connection with
the repayment of the underlying loan.
HSBC Facility - EUR




                                       41
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In July 2019, through an indirect wholly-owned subsidiary, we entered into a
secured debt arrangement with HSBC Bank plc, which provides for a single asset
financing. The facility matures in July 2021. Margin calls may occur any time at
specified aggregate margin deficit thresholds.
As of September 30, 2020, we had $157.1 million (€134.1 million assuming
conversion into USD) of borrowings outstanding under the HSBC Facility - EUR
secured by one commercial mortgage loan.
Barclays Facility - USD
In March 2020, through an indirect wholly-owned subsidiary, we entered into a
secured debt arrangement pursuant to a Master Repurchase Agreement with Barclays
Bank plc. The Barclays Facility - USD allows for $200.0 million of maximum
borrowings and initially matures in March 2023 with extensions available at our
option, subject to certain conditions. Margin calls may occur any time at
specified aggregate margin deficit thresholds.
As of September 30, 2020, we had $35.2 million of borrowings outstanding under
the Barclays Facility - USD secured by one commercial mortgage loan.
Barclays Facility - GBP/EUR
Beginning in October 2019, through an indirect wholly-owned subsidiary, we
entered into five secured debt arrangements pursuant to a Global Master
Repurchase Agreement with Barclays Bank plc. In June 2020, all assets previously
financed pursuant to this facility were refinanced under the Barclays Private
Securitization.
Barclays Private Securitization
In June 2020, through a newly formed entity, we entered into a private
securitization with Barclays Bank plc, of which Barclays Bank plc retained
$813.6 million of senior notes. This Barclays Private Securitization finances
the loans that were previously financed under the Barclays Facility - GBP/EUR.
In addition, we pledged an additional commercial mortgage loan with an
outstanding principal balance of £26.0 million and pledged additional collateral
of a financed loan of €5.3 million as of June 30, 2020.
The securitization eliminates daily margining provisions and grants us
significant discretion to modify certain terms of the underlying collateral
including waiving certain loan-level covenant breaches and deferring or waiving
of debt service payments for up to 18 months. The securitization includes LTV
based covenants with significant headroom to existing levels that are also
subject to a six-month holiday through December 2020. These deleveraging
requirements are based on significant declines in the value of the collateral as
determined by an annual third-party (engaged by us) appraisal process tied to
the provisions of the underlying loan agreements. We believe this provides us
with both cushion and predictability to avoid sudden unexpected outcomes and
material repayment requirements. In addition to the pledge of the additional
collateral noted above, we paid down the previous financing by €16.5 million
(totaling $18.5 million in USD) and agreed to increase the financing spreads by
0.25%.
The table below provides the borrowings outstanding (on an as converted basis)
and weighted-average fully-extended maturities by currency for the assets
financed under the Barclays Private Securitization as of September 30, 2020 ($
in thousands):
                                                                           Borrowings outstanding             Fully-Extended Maturity(1)
Total/Weighted-Average GBP                                                                      $670,024             January 2024
Total/Weighted-Average EUR                                                                       143,568            August 2021(2)
Total/Weighted-Average Securitization                                                           $813,592              March 2024


-------

(1)Assumes underlying loans extend to fully extended maturity and extensions at
our option are exercised.
(2)The EUR portion of the Barclays Private Securitization has an "evergreen"
feature such that the facility continues for one year and can be terminated by
either party on certain dates with, depending on the date of notice, a minimum
of nine to twelve months' notice.


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





                                       42
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Debt Covenants
The guarantees related to our secured debt arrangements contain the following
financial covenants (i) tangible net worth must be greater than $1.25 billion
plus 75% of the net cash proceeds of any equity issuance after March 31, 2017
(ii) our ratio of total indebtedness to tangible net worth cannot be greater
than 3.75:1; and (iii) our liquidity cannot be less than an amount equal to the
greater of 5% of total recourse indebtedness or $30.0 million. Under these
covenants, our General CECL Allowance is added back to our tangible net worth
calculation.
Senior Secured Term Loan
In May 2019, we entered into the $500.0 million senior secured term loan. During
the nine months ended September 30, 2020, we repaid $3.8 million of principal
related to the senior secured term loan. The senior secured term loan bears
interest at LIBOR plus 2.75% and was issued at a price of 99.5%. The outstanding
balance as of September 30, 2020 was $493.8 million. The senior secured term
loan matures in May 2026 and contains restrictions relating to liens, asset
sales, indebtedness, and investments in non-wholly owned entities. The senior
secured term loan includes the following financial covenants: (i) our ratio of
total recourse debt to tangible net worth cannot be greater than 3:1; and (ii)
our ratio of total unencumbered assets to total pari-passu indebtedness must be
at least 1.25:1.
Convertible Senior Notes
In two separate offerings during 2017, we issued an aggregate principal amount
of $345.0 million of 4.75% Convertible Senior Notes due 2022, for which we
received $337.5 million, after deducting the underwriting discount and offering
expenses. At September 30, 2020, the 2022 Notes had a carrying value of $339.7
million and an unamortized discount of $5.3 million.
During the fourth quarter of 2018, we issued $230.0 million of 5.375%
Convertible Senior Notes due 2023, for which we received $223.7 million after
deducting the underwriting discount and offering expenses. At September 30,
2020, the 2023 Notes had a carrying value of $224.9 million and an unamortized
discount of $5.1 million.
Cash Generated from Equity Offerings
During the second quarter of 2019, we completed a follow-on public offering of
17,250,000 shares of our common stock, including shares issued pursuant to the
underwriters' option to purchase additional shares, at a price of $18.27 per
share. The aggregate net proceeds from the offering were $314.8 million after
deducting offering expenses.
In March 2020, our board of directors approved a stock repurchase program for up
to an aggregate of $150.0 million of our common stock. During the nine months
ended September 30, 2020, we repurchased 10,834,595 shares of our common stock
under this program at a weighted-average price of $8.45 per share.
Other Potential Sources of Financing
Our primary sources of cash currently consist of cash available, which was
$438.2 million as of September 30, 2020, principal and interest payments we
receive on our portfolio of assets, and available borrowings under our secured
debt arrangements. We expect our other sources of cash to consist of cash
generated from operations and prepayments of principal received on our portfolio
of assets. Such prepayments are difficult to estimate in advance. Depending on
market conditions, we may utilize additional borrowings as a source of cash,
which may also include additional secured debt arrangements as well as other
borrowings or conduct additional public and private debt and equity offerings.
As of September 30, 2020 we also held $1.0 billion of unencumbered assets,
consisting of $42.9 million of senior mortgages and $1.0 billion of mezzanine
loans.
We maintain policies relating to our borrowings and use of leverage. See
"Leverage Policies" below. In the future, we may seek to raise further equity or
debt capital or engage in other forms of borrowings in order to fund future
investments or to refinance expiring indebtedness.
We generally intend to hold our target assets as long-term investments, although
we may sell certain of our investments in order to manage our interest rate risk
and liquidity needs, meet other operating objectives and adapt to market
conditions.
To maintain our qualification as a REIT under the Internal Revenue Code, we must
distribute annually at least 90% of our REIT taxable income, determined without
regard to the deduction for dividends paid and excluding net capital gain. These
distribution requirements limit our ability to retain earnings and replenish or
increase capital for operations.




                                       43
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Leverage Policies
We use leverage for the sole purpose of financing our portfolio and not for the
purpose of speculating on changes in interest rates. In addition to our secured
debt arrangements and senior secured term loan, we access additional sources of
borrowings. Our charter and bylaws do not limit the amount of indebtedness we
can incur; however, we are subject to and carefully monitor the limits placed on
us by our credit providers and those that assign ratings on our Company.

At September 30, 2020, our debt-to-equity ratio was 1.7 and our portfolio was
comprised of $5.4 billion of commercial mortgage loans and $1.0 billion of
subordinate loans and other lending assets. In order to achieve our return on
equity, we generally finance our mortgage loans with 2.0 to 3.0 turns of
leverage and generally do not finance our subordinate loan portfolio given
built-in inherent structural leverage. Consequently, depending on our portfolio
mix, our debt-to-equity ratio may exceed our previously disclosed thresholds.
Investment Guidelines
Our current investment guidelines, approved by our board of directors, are
comprised of the following:
•no investment will be made that would cause us to fail to qualify as a REIT for
U.S. federal income tax purposes;
•no investment will be made that would cause us to register as an investment
company under the 1940 Act;
•investments will be predominantly in our target assets;
•no more than 20% of our cash equity (on a consolidated basis) will be invested
in any single investment at the time of the investment; and
•until appropriate investments can be identified, the Manager may invest the
proceeds of any offering in interest bearing, short-term investments, including
money market accounts and/or funds, that are consistent with our intention to
qualify as a REIT.
The board of directors must approve any change in or waiver to these investment
guidelines.
Contractual Obligations and Commitments
Our contractual obligations including expected interest payments as of
September 30, 2020 are summarized as follows ($ in thousands):

                                                                                                                                            More
                                                Less than 1                                       2 to 3               3 to 5              than 5
                                                  year (1)            1 to 2 years(1)           years (1)            years (1)           years (1)             Total
Secured debt arrangements(1)(2)                $   575,514          $       

924,928 $ 904,842$ 1,248,750 $ -

    $ 3,654,034
Senior secured term loan(2)                         19,465                    19,317               19,170               37,938            477,267       

573,157

Convertible senior notes                            28,750                   372,172               12,363              231,030                  -       

644,315

Unfunded loan commitments (3)                      573,344                   429,516              302,134               66,328                  -            1,371,322
Total                                          $ 1,197,073$      1,745,933$ 1,238,509$ 1,584,046$ 477,267$ 6,242,828


-------
(1)   Assumes underlying assets are financed through the fully extended maturity
date of the secured debt arrangement.
(2)   Based on the applicable benchmark rates as of September 30, 2020 on the
floating rate debt for interest payments due.
(3)   Based on fully extended maturity and our expected funding schedule, which
is based upon the Manager's estimates based upon the best information available
to the Manager at the time. There is no assurance that the payments will occur
in accordance with these estimates or at all, which could affect our operating
results. Refer to "Note 15- Commitments and Contingencies" for further detail
regarding unfunded loan commitments.

Loan Commitments. As of September 30, 2020, we had $1.4 billion of unfunded loan
commitments, comprised of $1.4 billion related to our commercial mortgage loan
portfolio, and $32.9 million related to our subordinate loan portfolio.
Management Agreement. On September 23, 2009, we entered into the Management
Agreement with the Manager pursuant to which the Manager is entitled to receive
a management fee and the reimbursement of certain expenses. The table above does
not include amounts due under the Management Agreement as those obligations do
not have fixed and determinable payments. Pursuant to the Management Agreement,
the Manager is entitled to a base management fee calculated and payable
quarterly in arrears in an amount equal to 1.5% of our stockholders' equity (as
defined in the Management Agreement), per annum. The Manager will use the
proceeds from its management fee in part to pay




                                       44
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compensation to its officers and personnel. We do not reimburse the Manager or
its affiliates for the salaries and other compensation of their personnel,
except for the allocable share of the compensation of (1) our Chief Financial
Officer based on the percentage of time spent on our affairs and (2) other
corporate finance, tax, accounting, internal audit, legal, risk management,
operations, compliance and other non-investment professional personnel of the
Manager or its affiliates who spend all or a portion of their time managing our
affairs based on the percentage of time devoted by such personnel to our
affairs. We are also required to reimburse the Manager for operating expenses
related to us incurred by the Manager, including expenses relating to legal,
accounting, due diligence and other services. Expense reimbursements to the
Manager are made in cash on a monthly basis following the end of each month. Our
reimbursement obligation is not subject to any dollar limitation.
The current term of the Management Agreement will expire on September 29, 2021.
Absent certain action by the independent directors of our board of directors, as
described below, the Management Agreement will automatically renew on each
anniversary for a one-year term. The Management Agreement may be terminated upon
expiration of the one-year term only upon the affirmative vote of at least
two-thirds of our independent directors, based upon (1) unsatisfactory
performance by the Manager that is materially detrimental to us or (2) a
determination that the management fee payable to the Manager is not fair,
subject to the Manager's right to prevent such a termination based on unfair
fees by accepting a mutually acceptable reduction of management fees agreed to
by at least two-thirds of our independent directors. The Manager must be
provided with written notice of any such termination at least 180 days prior to
the expiration of the then existing term and will be paid a termination fee
equal to three times the sum of the average annual base management fee during
the 24-month period immediately preceding the date of termination, calculated as
of the end of the most recently completed fiscal quarter prior to the date of
termination. Amounts payable under the Management Agreement are not fixed and
determinable. Following a meeting by our independent directors in February 2020,
which included a discussion of the Manager's performance and the level of the
management fees thereunder, we determined not to terminate the Management
Agreement.
Forward Currency Contracts. We use forward currency contracts to economically
hedge interest and principal payments due under our loans denominated in
currencies other than U.S. dollars. We have entered into a series of forward
contracts to sell an amount of foreign currency (GBP and EUR) for an agreed upon
amount of USD at various dates through December 2024. These forward contracts
were executed to economically fix the USD amounts of foreign denominated cash
flows expected to be received by us related to foreign denominated loan
investments. Refer to "Note 10- Derivatives, Net" to the accompanying condensed
consolidated financial statements for details regarding our forward currency
contracts.
Interest Rate Swap and Cap. In connection with the senior secured term loan, we
previously entered into an interest rate swap to fix LIBOR at 2.12%, effectively
fixing our all-in coupon on the senior secured term loan at 4.87%. During the
second quarter of 2020 we terminated our interest rate swap due to significant
decrease in LIBOR and recognized a realized loss on the accompanying condensed
consolidated statement of operations. Subsequently, in June 2020, we entered
into an interest rate cap for approximately $1.1 million. We use our interest
rate cap to manage exposure to variable cash flows on our borrowings under our
senior secured term loan by effectively limiting LIBOR from exceeding 0.75%.
Refer to "Note 10- Derivatives, Net" to the accompanying condensed consolidated
financial statements for details regarding our interest rate cap.
Off-balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured investment
vehicles, or special purpose or variable interest entities, established to
facilitate off-balance sheet arrangements or other contractually narrow or
limited purposes. Further, we have not guaranteed any obligations of
unconsolidated entities or entered into any commitment to provide additional
funding to any such entities.
Dividends
We intend to continue to make regular quarterly distributions to holders of our
common stock. U.S. federal income tax law generally requires that a REIT
distribute annually at least 90% of our REIT taxable income, without regard to
the deduction for dividends paid and excluding net capital gains, and that we
pay tax at regular corporate rates to the extent that we annually distribute
less than 100% of our net taxable income. We generally intend over time to pay
dividends to our stockholders in an amount equal to our net taxable income, if
and to the extent authorized by our board of directors. Any distributions we
make are at the discretion of our board of directors and depend upon, among
other things, our actual results of operations. These results and our ability to
pay distributions are affected by various factors, including the net interest
and other income from our portfolio, our operating expenses and any other
expenditures. If our cash available for distribution is less than our net
taxable income, we could be required to sell assets or borrow funds to make cash
distributions or we may make a portion of the required distribution in the form
of a taxable stock distribution or




                                       45
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distribution of debt securities.
As of September 30, 2020, we had 6,770,393 shares of Series B Preferred Stock
outstanding, which entitles holders to receive dividends that are payable
quarterly in arrears. The Series B Preferred Stock pay cumulative cash
dividends, which are payable quarterly in equal amounts in arrears on the 15th
day of each January, April, July and October: (i) from, and including, the
original date of issuance of the Series B Preferred Stock to, but
excluding, September 20, 2020, at an initial rate of 8.00% per annum of
the $25.00 per share liquidation preference; and (ii) from, and
including, September 20, 2020, at the rate per annum equal to the greater of (a)
8.00% and (b) a floating rate equal to the 3-month LIBOR rate as calculated on
each applicable date of determination plus 6.46% of the $25.00 liquidation
preference. Except under certain limited circumstances, the Series B Preferred
Stock is generally not convertible into or exchangeable for any other property
or any other of our securities at the election of the holders. We may, at our
option, redeem the shares at a redemption price of $25.00, plus any accrued
unpaid distribution through the date of the redemption.
In June 2019, we redeemed all 6,900,000 shares of Series C Preferred Stock
outstanding. Holders of the Series C Preferred Stock received the redemption
price of $25.00 plus accumulated but unpaid dividends to the redemption date of
$0.2223.

Non-GAAP Financial Measures

Operating Earnings
For the three and nine months ended September 30, 2020, our Operating Earnings
were $52.9 million, or $0.36 per share, and $104.3 million, or $0.68 per share,
respectively, as compared to $72.6 million, or $0.47 per share, and $197.6
million, or $1.35 per share, respectively, for the same periods in the prior
year. Operating Earnings is a non-GAAP financial measure that we define as net
income available to common stockholders, computed in accordance with GAAP,
adjusted for (i) equity-based compensation expense (a portion of which may
become cash-based upon final vesting and settlement of awards should the holder
elect net share settlement to satisfy income tax withholding), (ii) any
unrealized gains or losses or other non-cash items included in net income
available to common stockholders, (iii) unrealized income from unconsolidated
joint ventures, (iv) foreign currency gains (losses), other than (a) realized
gains/(losses) related to interest income, and (b) forward point gains/(losses)
realized on our foreign currency hedges, (v) the non-cash amortization expense
related to the reclassification of a portion of the Notes to stockholders'
equity in accordance with GAAP, and (vi) provision for loan losses. Operating
Earnings may also be adjusted to exclude certain other non-cash items, as
determined by the Manager and approved by a majority of our independent
directors.
The table below summarizes the reconciliation from weighted-average basic and
diluted shares under GAAP to the weighted-average diluted shares used for
Operating Earnings ($ in thousands):
                                                                      Three months ended September 30,                                                                    Nine months ended September 30,
                                                              2020                               2019                           2020                     2019
Weighted-Averages                                            Shares                             Shares                         Shares                   Shares
Weighted-average basic and diluted
shares - GAAP                                              146,612,313                        153,531,678                    150,679,773              144,638,237

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



In order to evaluate the effective yield of the portfolio, we use Operating
Earnings to reflect the net investment income of our portfolio as adjusted to
include the net interest income or expense related to our derivative
instruments. Forward points effectively convert our foreign rate exposure to USD
LIBOR, which we believe is a better reflection of our operating results and we
believe the inclusion of the resulting gain or loss in Operating Earnings is
useful to our investors. Operating Earnings allows us to isolate the net
interest income or expense associated with our swaps and caps in order to
monitor and project our full cost of borrowings.
As discussed in "Note 10 - Derivatives" we terminated our interest rate swap,
which we used to manage exposure to variable cash flows on our borrowings under
our senior secured term loan, in the second quarter of 2020 and recorded a
realized loss in our condensed consolidated statement of operations. As of
September 30, 2020, there are no interest rate swaps on our condensed
consolidated balance sheet. In addition, as discussed in "Note 4 - Commercial
Mortgage, Subordinate Loans and Other Lending Assets, Net," we recorded a net
realized loss on the sale of a residential-for-sale: inventory loan, three
construction loans and, in connection with a troubled debt restructuring, on one
hotel loan.




                                       46
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We believe it is useful to our investors to also present Operating Earnings
excluding realized loss on investments and realized loss on interest rate swap
to reflect our operating results because our operating results are primarily
comprised of earning interest income on our investments net of borrowing and
administrative costs, which are our ongoing operations. We believe that our
investors use Operating Earnings and Operating Earnings excluding realized loss
on investments and realized loss on interest rate swap, or a comparable
supplemental performance measure, to evaluate and compare the performance of our
company and our peers and, as such, we believe that the disclosure of Operating
Earnings and Operating Earnings excluding realized loss on investments and
realized loss on interest rate swap is useful to our investors.
A significant limitation associated with Operating Earnings as a measure of our
financial performance over any period is that it excludes unrealized gains
(losses) from investments. In addition, our presentation of Operating Earnings
may not be comparable to similarly-titled measures of other companies, that use
different calculations. As a result, Operating Earnings should not be considered
as a substitute for our GAAP net income as a measure of our financial
performance or any measure of our liquidity under GAAP.
  The table below summarizes the reconciliation from net income (loss) available
to common stockholders to Operating Earnings and Operating Earnings excluding
realized loss on investments and realized loss on interest rate swap ($ in
thousands):
                                                                                                                              Nine months ended
                                                        Three months ended September 30,                                        September 30,
                                                          2020                     2019                   2020                    2019

Net income (loss) available to common stockholders $ 45,953

$ 25,704$ (28,458)$ 143,132 Adjustments: Equity-based compensation expense

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

Realized loss on investments                                  1,037                      -                 17,442                   12,513
Realized loss on interest rate swap                               -                      -                 53,851                        -
Operating Earnings excluding realized loss on
investments and realized loss on interest rate     $         53,890         

$ 72,554$ 175,583$ 210,070 swap Diluted Operating Earnings per share of common $

           0.36         

$ 0.47$ 0.68 $ 1.35 stock Diluted Operating Earnings excluding realized loss on investments and realized loss on interest rate $

           0.36         

$ 0.47$ 1.15 $ 1.43 swap Basic weighted-average shares of common stock

           146,612,313            153,531,678            150,679,773              144,638,237

outstanding

Weighted-average diluted shares - Operating             148,663,624            155,371,309            152,708,346              146,483,323
Earnings













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Book Value Per Share


The table below calculates our book value per share ($ in thousands, except per
share data):
                                                   September 30, 2020             December 31, 2019
Stockholders' Equity                             $          2,319,281          $          2,629,975
   Series B Preferred Stock (Liquidation
Preference)                                                  (169,260)                     (169,260)
Common Stockholders' Equity                      $          2,150,021          $          2,460,715
Common Stock                                              143,288,347                   153,537,296
Book value per share                             $              15.00          $              16.03



The table below shows the changes in our book value per share:

                                                                        Book value per share
Book value per share at December 31, 2019                             $     

16.03

Net unrealized gain on currency hedges                                                 0.15
Repurchase of common stock                                                             0.45
Decrease in fair value on interest rate swap                                          (0.27)
Vesting and delivery of RSUs                                                          (0.07)
Other                                                                                 (0.01)

Book value per share at September 30, 2020 prior to CECL Allowances $

16.28

Specific CECL Allowance                                               $     

(0.98)

Book value per share at September 30, 2020 prior to General CECL Allowance

                                                             $     

15.30

General CECL Allowance                                                $     

(0.30)

Book value per share at September 30, 2020                            $     

15.00




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




                                       48

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