TPG RE FINANCE TRUST, INC. The following discussion and analysis should be read in conjunction with the unaudited and audited consolidated financial statements and the accompanying notes included elsewhere in this Form 10-Q and in our Form 10-K filed with theSEC onFebruary 24, 2021 . In addition to historical data, this discussion contains forward-looking statements about our business, results of operations, cash flows, and financial condition based on current expectations that involve risks, uncertainties and assumptions. See "Cautionary Note Regarding Forward-Looking Statements." Our actual results may differ materially from any results expressed or implied by these forward-looking statements as a result of various factors, including but not limited to those discussed under the heading "Risk Factors" in this Form 10-Q and in our Form 10-K filed with theSEC onFebruary 24, 2021 .
Overview
We are a commercial real estate finance company externally managed byTPG RE Finance Trust Management, L.P. and sponsored by TPG. We directly originate, acquire and manage commercial mortgage loans and other commercial real estate-related debt instruments inNorth America for our balance sheet. Our objective is to provide attractive risk-adjusted returns to our stockholders over time through cash distributions and capital appreciation. To meet our objective, we focus primarily on directly originating and selectively acquiring floating rate first mortgage loans that are secured by high quality commercial real estate properties undergoing some form of transition and value creation, such as retenanting, refurbishment or other form of repositioning. The collateral underlying our loans is located in primary and select secondary markets in theU.S. that we believe have attractive economic conditions and commercial real estate fundamentals. We operate our business as one segment. As ofJune 30, 2021 , our loan investment portfolio consisted of 61 first mortgage loans (or interests therein) and one mezzanine loan with total loan commitments of$5.3 billion , an aggregate unpaid principal balance of$4.8 billion , a weighted average credit spread of 3.2%, a weighted average all-in yield of 5.0%, a weighted average term to extended maturity (assuming all extension options have been exercised by borrowers) of 2.9 years, and a weighted average LTV of 66.7%. As ofJune 30, 2021 , 100% of the loan commitments in our portfolio consisted of floating rate loans, of which 99.3% were first mortgage loans or, in two instances a first mortgage loan and contiguous mezzanine loan both owned by us, and 0.7% was a mezzanine loan. As ofJune 30, 2021 , we had$488.9 million of unfunded loan commitments, our funding of which is subject to borrower satisfaction of certain milestones. As ofJune 30, 2021 , we had$99.2 million of real estate owned comprising 27 acres across two undeveloped commercially-zoned land parcels on theLas Vegas Strip (the "REO Property") acquired pursuant to a negotiated deed-in-lieu of foreclosure. This Property is held for investment and reflected on our consolidated balance sheets at its estimated fair value at the time of acquisition, net of estimated selling costs. We have made an election to be taxed as a REIT forU.S. federal income tax purposes, commencing with our initial taxable year endedDecember 31, 2014 . We believe we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code and we believe that our organization and current and intended manner of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT. As a REIT, we generally are not subject toU.S. federal income tax on our REIT taxable income that we distribute currently to our stockholders. We operate our business in a manner that permits us to maintain an exclusion or exemption from registration under the Investment Company Act. During 2020, the COVID-19 pandemic caused significant disruptions to theU.S. and global economies. These disruptions contributed to significant and ongoing volatility, widening credit spreads and sharp declines in liquidity in the real estate securities and whole loan financing markets at points during 2020. The pace of recovery following this disruption remains uncertain, as do the longer-term economic effects and shifts in behavior. As a result of the impact of COVID-19, many commercial real estate finance and financial services industry participants, including us, reduced new investment activity until the capital markets became more stable, the macroeconomic outlook became clearer, market liquidity improved, and transaction volumes increased. For most of 2020, we focused on actively managing portfolio credit, generating and recycling liquidity from existing assets, extending the maturities and further reducing the mark-to-market exposure of our liabilities and controlling corporate overhead as a percentage of our total assets and total revenues. Although market conditions remain uncertain due to COVID-19 and evolving new variants of the virus, the credit performance of our portfolio, loan repayments that have allowed us to retire certain borrowings and increase our liquidity, extended maturity dates for many of our secured credit agreements, and the increase in non-mark-to-market liabilities to 82% of total borrowings positioned us to resume the origination of first mortgage transitional loans in the first quarter of 2021. For more information regarding the impact that COVID-19 has had and may have on our business, see risk factors set forth in our Form 10-K filed with theSEC onFebruary 24, 2021 . 44
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Our Manager
We are externally managed by our Manager,TPG RE Finance Trust Management, L.P. , an affiliate of TPG. TPG manages investments across multiple asset classes, including private equity, real estate, energy, infrastructure, and hedge funds. Our Manager manages our investments and our day-to-day business and affairs in conformity with our investment guidelines and other policies that are approved and monitored by our board of directors. Our Manager is responsible for, among other matters, the selection, origination or purchase and sale of our portfolio investments, our financing activities and providing us with investment advisory services. Our Manager is also responsible for our day-to-day operations and performs (or causes to be performed) such services and activities relating to our investments and business and affairs as may be appropriate. Our investment decisions are approved by an investment committee of our Manager that is comprised of senior investment professionals of TPG, including senior investment professionals of TPG's real estate equity group and TPG's executive committee. For a summary of certain terms of the management agreement between us and our Manager (the "Management Agreement"), see Note 11 to our consolidated financial statements included in this Form 10-Q.
Second Quarter 2021 Activity
Operating Results:
• Recognized GAAP net income of
compared to the three months ended
• Generated Distributable Earnings of
million compared to the three months ended
• Net (Loss) Attributable to Common Stockholders of
driven by our Series B Preferred Stock redemption and the associated
make-whole payment and discount write-off, including unamortized allocated
Warrant fair value and transaction costs, totaling $45.0 million .
• Produced net interest income of
Income of $61.9 million and interest expense of $22.0 million in the
second quarter of 2021. All net interest income was generated by our
transitional first mortgage lending activity.
• Recorded a decrease in our allowance for credit loss of
total allowance for credit losses of
• Declared dividends on our common stock of
common share.
Investment Portfolio Activity:
• Originated nine first mortgage loans with total loan commitments of
million, an aggregate initial unpaid principal balance of
unfunded loan commitments of $155.5 million , and a weighted average
interest rate of LIBOR plus 3.48%.
• Funded
existing loans.
• Received loan repayments in-full of
principal amortization payments of $3.3 million across seven loans, for
total loan repayments of $334.0 million .
Corporate and Investment Portfolio Financing Activity:
• Issued 8,050,000 shares of 6.25% Series C Cumulative Redeemable Preferred
Stock (the "Series C Preferred Stock"), generating net proceeds of
million after issuance costs of $6.9 million .
• Redeemed 9,000,000 shares of 11.0% Series B Cumulative Redeemable
Preferred Stock (the "Series B Preferred Stock") at an aggregate
redemption price of approximately $247.5 million .
• Invested the entire
$77.2 million in TRTX 2021-FL4, involving seven loans or participation interests therein. 45
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Liquidity Position:
Available liquidity as of
• Cash-on-hand of
investment, net of
under our secured credit agreements.
•
investment depending upon our ability to contribute eligible collateral.
• Undrawn capacity (liquidity available to us without the need to pledge
additional collateral to our lenders) of
agreements with seven lenders.
Additionally, we held unencumbered loan investments with an aggregate unpaid
principal balance of
Financing capacity for loan investments as ofJune 30, 2021 was$2.8 billion under our three CLOs, two of which currently allow reinvestment of eligible loan collateral, and$3.1 billion under secured credit agreements provided by seven lenders. AtJune 30, 2021 , approximately 76.6% of our borrowings were via our CLO vehicles and 23.4% were pursuant to our secured credit agreements. Our ability to draw on our secured credit agreements is dependent upon our lenders' willingness to accept as collateral loan investments we pledge to them to secure additional borrowings. These financing arrangements have credit spreads based upon the LTV and other risk characteristics of collateral pledged, and provide stable financing with mark-to-market provisions generally limited to collateral-specific events and, in only one instance, to capital markets-specific events. As ofJune 30, 2021 , borrowings under these secured credit agreements had a weighted average credit spread of 2.3% (1.7% for facilities with mark-to-market provisions and 4.5% for one facility with no mark-to-market provisions), and a weighted average term to extended maturity assuming exercise of all extension options and term-out provisions of 2.3 years. These financing arrangements are generally 25% recourse toHoldco .
Key Financial Measures and Indicators
As a commercial real estate finance company, we believe the key financial measures and indicators for our business are earnings per share, dividends declared per common share, Distributable Earnings, and book value per share. For the three months endedJune 30, 2021 , we recorded a loss per diluted common share of$0.27 , a decrease of$0.57 per diluted common share from the three months endedMarch 31, 2021 , primarily due to the redemption of the Series B Preferred Stock. In connection with the redemption of the Series B Preferred Stock, we made a make-whole payment to the holder of the Series B Preferred Stock of$22.5 million and recorded a$22.5 million write-off associated with the unamortized discount upon redemption. Distributable Earnings per diluted common share was$0.27 for both of the three month periods endedJune 30, 2021 andMarch 31, 2021 .
For the three months ended
Our book value per common share as ofJune 30, 2021 was$16.03 , a decrease of$0.58 from our book value per common share as ofMarch 31, 2021 , primarily due to the redemption of the Series B Preferred Stock onJune 16, 2021 , offset by net income in excess of our dividends declared per common share in the period. As further described below, Distributable Earnings is a measure that is not prepared in accordance with GAAP. We use Distributable Earnings to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan activity and operations.
Earnings Per Common Share and Dividends Declared Per Common Share
The computation of diluted earnings per share is based on the weighted average number of participating securities outstanding plus the incremental shares that would be outstanding assuming exercise of the Warrants, which are exercisable only on a net-settlement basis. The number of incremental shares is calculated by applying the treasury stock method. We exclude participating securities and the Warrants from the calculation of basic earnings (loss) per share in periods of net losses since their effect would be anti-dilutive. For the three months endedJune 30, 2021 , we incurred a net (loss) attributable to common stockholders and therefore excluded participating securities and the Warrants from the calculation of diluted (loss) per share. 46 -------------------------------------------------------------------------------- The following table sets forth the calculation of basic and diluted net income per share and dividends declared per share (in thousands, except share and per share data): Three Months Ended June 30, 2021 March 31, 2021 Net Income (Loss)$ 32,391 $ 31,955 Preferred Stock Dividends (1) (6,799 ) (6,124 )Participating Securities' Share in Earnings (loss) (148 ) (146 ) Series B Preferred Stock Redemption Make-Whole Payment(2) (22,485 ) - Series B Preferred Stock Accretion and Write-off of Discount, including Allocated Warrant Fair Value and Transaction Costs(3) (23,997 ) (1,452 ) Net (Loss) Income Attributable to Common Stockholders - See Note 12$ (21,038 ) $
24,233
Weighted Average Number of Common Shares Outstanding, Basic 76,899,270
76,895,615
Weighted Average Number of Common Shares Outstanding, Diluted 76,899,270
80,673,236
(Loss) Earnings per Common Share, Basic $ (0.27 ) $
0.32
(Loss) Earnings per Common Share, Diluted $ (0.27 ) $
0.30
Dividends Declared per Common Share $ 0.20 $ 0.20
(1) Includes preferred stock dividends declared and paid for Series A preferred
stock and Series B Preferred Stock shares outstanding for the three months
ended
Preferred Stock shares outstanding of
(2) Represents the make-whole payment to the holder of the Series B Preferred
Stock for an amount equal to the present value of all remaining dividend
payments due on such shares of Series B Preferred Stock from and after the
redemption date (and not including any declared or paid dividends or accrued
dividends prior to such redemption date) through the second anniversary of
the original issue date, computed in accordance with the terms of the
Articles Supplementary. See Note 13 to our consolidated financial statements
included in this Form 10-Q.
(3) Series B Preferred Stock Accretion and Write-off of Discount, including
Allocated Warrant Fair Value and Transaction Costs includes amounts recorded
as deemed dividends and the write-off of unamortized transaction costs and
the unaccreted portion of the allocated Warrant fair value related to the
Series B Preferred Stock. For the three months ended
write-off of unamortized transaction costs and unaccreted allocated Warrant
fair value was
Distributable Earnings
We use Distributable Earnings to evaluate our performance excluding the effects of certain transactions and GAAP adjustments we believe are not necessarily indicative of our current loan investment and operating activities. Distributable Earnings is a non-GAAP measure, which we define as GAAP net income (loss) attributable to our common stockholders, including realized gains and losses, regardless of whether such items are included in other comprehensive income or loss, or in GAAP net income (loss), and excluding (i) non-cash equity compensation expense, (ii) depreciation and amortization expense, (iii) unrealized gains (losses), and (iv) certain non-cash or income and expense items included in GAAP net income (loss) during the applicable reporting period. The exclusion of depreciation and amortization expense from the calculation of Distributable Earnings only applies to debt investments related to real estate to the extent we foreclose upon the property or properties underlying such debt investments. We believe that Distributable Earnings provides meaningful information for our investors to consider in addition to our net income (loss) and cash flow from operating activities determined in accordance with GAAP. We made an election to be taxed as a REIT forU.S. federal income tax purposes, commencing with our initial taxable year endedDecember 31, 2014 . Annually, we generally must distribute at least 90% of our net taxable income, subject to certain adjustments and excluding any net capital gains, for us to qualify as a REIT forU.S. federal income tax purposes. To the extent that we satisfy this distribution requirement but distribute less than 100% of our net taxable income, we will be subject toU.S. federal income tax on our undistributed taxable income. One of the primary reasons investors purchase our common stock is to receive our dividends. Over time, Distributable Earnings has been a useful indicator of our distribution policy and dividends per common share. Because of our investors' focus on dividends, Distributable Earnings and net taxable income are important measures considered by us in determining dividends per common share. In assessing the impact of our allowance for credit losses on our Distributable Earnings, we determined that, consistent with our accounting policy for the measurement of credit losses, the fact that credit losses only impact our taxable income when such credit losses are realized, and our stakeholders' view of realized loan losses, the recognition of our credit loss provision or reversals of our credit loss provision should be included in unrealized gains, losses or other non-cash items as referenced above, but only to the extent that our credit loss provision exceeds any realized credit losses during the applicable reporting period. A loan will be written off as a realized loss when it is deemed non-recoverable upon a realization event and is generally recognized at the time the loan receivable is settled, transferred or exchanged, or in the case of foreclosure, when the underlying property is foreclosed upon or sold based on the facts and circumstances of the underlying transaction. Non-recoverability may also be concluded by us if, in our determination, it is nearly certain that all amounts due will not be collected. A realized loss may equal the difference between the cash or consideration 47 -------------------------------------------------------------------------------- received or expected to be received, and the net book value of the loan, reflecting our economics as it relates to the ultimate realization of the asset. See Note 2 to our consolidated financial statements included in this Form 10-Q for details related to our accounting policy on credit loss measurement and our application of Accounting Standards Codification ("ASC") 326 and ASU 2016-13, Financial Instruments - Credit Losses. Distributable Earnings does not represent net income (loss) or cash generated from operating activities and should not be considered as an alternative to GAAP net income (loss), or an indication of our GAAP cash flows from operations, a measure of our liquidity, or an indication of funds available for our cash needs. In addition, our methodology for calculating Distributable Earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures, and accordingly, our reported Distributable Earnings may not be comparable to the Distributable Earnings reported by other companies. The following table provides a reconciliation of GAAP net income attributable to common stockholders to Distributable Earnings (in thousands, except share and per share data): Three Months Ended June 30, 2021 March 31, 2021 Net Income (Loss)$ 32,391 $ 31,955 Preferred Stock Dividends (1) (6,799 ) (6,124 )Participating Securities' Share in Earnings (Loss) (148 ) (146 ) Series B Preferred Stock Redemption Make-Whole Payment(2) (22,485 ) - Series B Preferred Stock Accretion and Write-off of Discount, including Allocated Warrant Fair Value and Transaction Costs(3) (23,997 ) (1,452 ) Net (Loss) Income Attributable to Common Stockholders$ (21,038 ) $
24,233
Series B Preferred Stock Redemption Make-Whole Payment 22,485 - Series B Preferred Stock Write-off of Discount, including Allocated Warrant Fair Value and Transaction Costs 22,489 - Non-Cash Stock Compensation Expense 1,393
1,456
Credit Loss (Benefit) Expense (4) (3,478 ) (4,038 ) Distributable Earnings$ 21,851 $
21,651
Weighted-Average Common Shares Outstanding, Basic 76,899,270
76,895,615
Weighted-Average Common Shares Outstanding, Diluted 81,875,946
80,673,236
Distributable Earnings per Common Share, Basic $ 0.28 $
0.28
Distributable Earnings per Common Share, Diluted $ 0.27 $
0.27
(1) Includes preferred stock dividends declared and paid for Series A preferred
stock and Series B Preferred Stock shares outstanding for the three months
ended
Preferred Stock shares outstanding of
(2) Represents the make-whole payment to the holder of the Series B Preferred
Stock for an amount equal to the present value of all remaining dividend
payments due on such shares of Series B Preferred Stock from and after the
redemption date (and not including any declared or paid dividends or accrued
dividends prior to such redemption date) through the second anniversary of
the original issue date, computed in accordance with the terms of the
Articles Supplementary. See Note 13 to our consolidated financial statements
included in this Form 10-Q.
(3) Series B Preferred Stock Accretion and Write-off of Discount, including
Allocated Warrant Fair Value and Transaction Costs includes amounts recorded
as deemed dividends and the write-off of unamortized transaction costs and
the unaccreted portion of the allocated Warrant fair value related to the
Series B Preferred Stock. For the three months ended
write-off of unamortized transaction costs and unaccreted allocated Warrant
fair value was
(4) Credit Loss (Benefit) Expense for the three months ended
excludes the impact of a
Book Value Per Common Share
The following table sets forth the calculation of our book value per share (in thousands, except share and per share data):
June 30, 2021 March 31, 2021
Total Stockholders' Equity and Temporary Equity $ 1,437,191 $ 1,478,231
Series C Preferred Stock ($201,250 aggregate liquidation preference)$ (201,250 ) - Series B Preferred Stock - (201,003 ) Series A Preferred Stock (125 ) (125 ) Stockholders' Equity, Net of Preferred Stock$ 1,235,816 $
1,277,103
Number of Common Shares Outstanding at Period End 77,089,125
76,897,102
Book Value per Common Share $ 16.03 $ 16.61
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Investment Portfolio Overview Our interest-earning assets are primarily comprised of a portfolio of floating rate, first mortgage loans, or in limited instances, mezzanine loans. As ofJune 30, 2021 , our loan portfolio consisted of 62 loans totaling$5.3 billion of commitments with an unpaid principal balance of$4.8 billion , as compared to 58 loans with$5.0 billion of commitments and an unpaid principal balance of$4.6 billion as ofMarch 31, 2021 . As ofJune 30, 2021 , we owned real estate with a carrying value of$99.2 million comprising 27 acres across two undeveloped commercially-zoned land parcels on the Las Vegas Strip acquired pursuant to a negotiated deed-in-lieu of foreclosure. This Property is held for investment and reflected on our consolidated balance sheets at its estimated fair value at the time of acquisition, net of estimated selling costs.
Loan Portfolio
During the three months endedJune 30, 2021 , we originated nine mortgage loans, with a total commitment of$752.5 million , an initial unpaid principal balance of$597.0 million , and unfunded commitment at closing of$155.5 million . Loan fundings included$43.9 million of deferred fundings related to previously originated loan commitments. We received proceeds from loan repayments in-full of$330.7 million across four loans, and principal amortization payments of$3.3 million across seven loans, for total loan repayments of$334.0 million during the period. We generated interest income of$61.9 million and incurred interest expense of$22.0 million , which resulted in net interest income of$39.9 million . Additionally, we sold one performing first mortgage hotel loan with an unpaid principal balance of$60.7 million for$59.5 million , resulting in a loss on sale of$1.6 million , including transaction costs of$0.4 million , before giving effect to the reduction of the general CECL reserve resulting from the related decline in loan commitments. The following table details our loan activity by unpaid principal balance for the three months endedJune 30, 2021 andMarch 31, 2021 (dollars in thousands): Three Months Ended June 30, 2021 March 31, 2021 Loan originations and acquisitions - initial funding$ 596,958 $ 37,545 Other loan fundings(1) 43,930 30,382 Loan repayments (334,021 ) (5,294 ) Loan sale (60,690 ) - Total loan activity, net$ 246,177 $ 62,633
(1) Additional fundings made under existing loan commitments.
The following table details overall statistics for our loan portfolio as of
Balance Sheet Total Loan
Portfolio Portfolio
Number of loans 62 63
Floating rate loans (by unpaid principal balance) 100.0 % 100.0 %
Total loan commitments(1) $ 5,318,297 $ 5,450,297
Unpaid principal balance(2) $ 4,833,535 $ 4,833,535
Unfunded loan commitments(3) $ 488,916 $ 488,916
Amortized cost $ 4,825,890 $ 4,825,890
Weighted average credit spread(4) 3.2 % 3.2 %
Weighted average all-in yield(4) 5.0 % 5.0 %
Weighted average term to extended maturity (in
years)(5) 2.9 2.9
Weighted average LTV(6) 66.7 % 66.7 %
(1) In certain instances, we create structural leverage through the
co-origination or non-recourse syndication of a senior loan interest to a
third-party. In either case, the senior mortgage loan (i.e., the
non-consolidated senior interest) is not included on our balance sheet. When
we create structural leverage through the co-origination or non-recourse
syndication of a senior loan interest to a third-party, we retain on our
balance sheet a mezzanine loan. Total loan commitment encompasses the entire
loan portfolio we originated, acquired and financed. As of
(2) Unpaid principal balance includes PIK interest of
million as of
(3) Unfunded loan commitments may be funded over the term of each loan, subject
in certain cases to an expiration date or a force-funding date, primarily to
finance property improvements or lease-related expenditures by our borrowers,
to finance operating deficits during renovation and lease-up, and in limited
instances to finance construction.
49
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(4) As of
addition to credit spread, all-in yield includes the amortization of deferred
origination fees, purchase price premium and discount, loan origination costs
and accrual of both extension and exit fees. Credit spread and all-in yield
for the total portfolio assumes the applicable floating benchmark rate as of
(5) Extended maturity assumes all extension options are exercised by the
borrower; provided, however, that our loans may be repaid prior to such date.
As of
exposure, 20.6% of our loans were subject to yield maintenance or other
prepayment restrictions and 79.4% were open to repayment by the borrower
without penalty.
(6) Except for construction loans, LTV is calculated for loan originations and
existing loans as the total outstanding principal balance of the loan or
participation interest in a loan (plus any financing that is pari passu with
or senior to such loan or participation interest) as of
divided by the as-is appraised value of our collateral at the time of
origination or acquisition of such loan or participation interest. For
construction loans only, LTV is calculated as the total commitment amount of
the loan divided by the as-stabilized value of the real estate securing the
loan. The as-is or as-stabilized (as applicable) value reflects our Manager's
estimates, at the time of origination or acquisition of the loan or
participation interest in a loan, of the real estate value underlying such
loan or participation interest determined in accordance with our Manager's
underwriting standards and consistent with third-party appraisals obtained by
our Manager.
For information regarding the financing of our loan portfolio, see the section entitled "Investment Portfolio Financing."
Real Estate Owned
InDecember 2020 , we acquired the REO Property pursuant to a negotiated deed-in-lieu of foreclosure. Our cost basis in the REO Property upon acquisition was$99.2 million , equal to the estimated fair value of the collateral at the date of acquisition, net of estimated selling costs. Our estimate of the REO Property's fair value was determined using a discounted cash flow model and Level 3 inputs, which include estimates of parcel-specific cash flows over a specific holding period, at a discount rate that ranges between 8.0% - 17.5% based on the risk profile of estimated cash flows associated with each respective parcel, and an estimated capitalization rate of 6.25%, where applicable. These inputs are based on the highest and best use for each parcel, estimated future values for the parcels based on extensive discussions with local brokers, investors and other market participants, the estimated holding period for the parcels, and discount rates that reflect estimated investor return requirements for the risks associated with the expected use of each sub-parcel. As ofJune 30, 2021 , we continued to hold the REO Property at its estimated fair value at the time of acquisition, net of estimated selling costs, of$99.2 million . We obtained from a third party a$50.0 million non-recourse first mortgage loan secured by the REO Property, which is classified as Mortgage Loan Payable on our consolidated balance sheets. See Note 7 to our consolidated financial statements included in this Form 10-Q for details of the Mortgage Loan Payable. Asset Management We actively manage the assets in our portfolio from closing to final repayment. We are party to an agreement withSitus Asset Management, LLC ("SitusAMC"), one of the largest commercial mortgage loan servicers, pursuant to whichSitusAMC provides us with dedicated asset management employees for performing asset management services pursuant to our proprietary guidelines. Following the closing of an investment, this dedicated asset management team rigorously monitors the investment under our Manager's oversight, with an emphasis on ongoing financial, legal and quantitative analyses. Through the final repayment of an investment, the asset management team maintains regular contact with borrowers, servicers and local market experts monitoring performance of the collateral, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.
Loan Portfolio Review
Our Manager reviews our entire loan portfolio quarterly, undertakes an assessment of the performance of each loan, and assigns it a risk rating between "1" and "5," from least risk to greatest risk, respectively. See Note 2 to our consolidated financial statements included in this Form 10-Q for a discussion regarding the risk rating system that we use in connection with our portfolio. The following table allocates among risk categories the amortized cost of our loan portfolio as ofJune 30, 2021 andDecember 31, 2020 based on our internal risk ratings (dollars in thousands): June 30, 2021 December 31, 2020 Amortized Number of Amortized Number of Risk Rating Cost Loans Cost Loans 1 $ - - $ - - 2 341,749 4 337,738 4 3 3,872,528 49 3,340,663 37 4 580,413 8 806,893 15 5 31,200 1 31,106 1 Unpaid principal balance$ 4,825,890 62$ 4,516,400 57 50
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The weighted average risk rating of our total loan exposure based on amortized
cost remained unchanged at 3.1 as of
During the three months endedJune 30, 2021 , we assigned to one of our loans originated in the current quarter a risk rating of "2" based on the continued outperformance of the underlying collateral. This loan refinanced a loan held in our loan portfolio that carried a "2" risk rating at the time it was repaid in full. Additionally, as ofJune 30, 2021 , we: upgraded two hotel loans from risk category "4" to "3" due to positive economic trends in the local markets and continued improvements to the property-level operating performance; upgraded four condominium loans, to the same Sponsor, from risk category "4" to "3" due to improved Sponsor financial condition, pace of conversion work, and improving market conditions; and downgraded one office loan from risk category "2" to "3" due to slowing leasing activity.
During the three months ended
Loan Modification Activity
The economic and market disruptions caused by COVID-19 have adversely impacted the financial condition of many of our borrowers. These impacts have and may differ in timing, duration and magnitude depending on factors such as property type and geography. We have experienced a small number of delinquencies and defaults, but we cannot be certain delinquencies and defaults will not increase in the future. Loan modifications implemented by us sinceJanuary 1, 2021 typically involve the adjustment or waiver of property level or business plan milestones or performance tests that are prerequisite to the extension of a loan maturity in exchange for borrower concessions that may include any or all of the following: a partial repayment of principal; termination of all or a portion of the remaining unfunded loan commitment; a cash infusion by the sponsor or borrower to replenish loan reserves (interest or capital improvements); additional call protection; and/or an increase in the loan coupon. Loan modifications implemented by us in 2020 typically involved the repurposing of existing reserves to pay interest and other property-level expenses, and providing relief to conditions for extension, such as waiving debt yield tests or modifying the conditions upon which the underlying borrower may extend the maturity date. In exchange, borrowers and sponsors made partial principal repayments and/or provided additional cash for payment of interest, operating expenses, and replenishment of interest reserves or capital reserves in amounts and combinations acceptable to us. As ofJune 30, 2021 , we had 12 loan modifications outstanding related to loans with an unpaid principal balance of$1,032.9 million .
Loan modification activity from
As of June 30, 2021
Executed loan modifications 26
Expired loan modifications(1) (14 ) Outstanding loan modifications
12
Unpaid principal balance of loans related to outstanding $ 1,032,905 loan modifications Total PIK accrued $ 6,004 PIK repayments and write-off (1,851 ) PIK outstanding $ 4,153
(1) Includes an amendment and simultaneous assignment of an existing first
mortgage loan by a third-party purchaser of the property securing the loan.
This transaction was treated as an extinguishment of the existing loan and
origination of a new loan under GAAP. Also includes the sale, at no gain or
loss, of a mezzanine loan related to a contiguous first mortgage loan held by
us.
During the three months endedJune 30, 2021 , we executed two loan modifications with borrowers. As ofJune 30, 2021 , the loans to which these modifications relate had an aggregate commitment amount of$186.9 million and an aggregate unpaid principal balance of$174.0 million . None of the loan modifications triggered the accounting requirements of a troubled debt restructuring. In connection with these modifications, borrowers infused approximately$1.4 million to replenish reserves. All of the modified loans are performing as ofJune 30, 2021 . Total PIK interest of$0.4 million on two loans was deferred and added to the outstanding loan principal during the three months endedJune 30, 2021 . As ofJune 30, 2021 , the total amount of PIK interest in the portfolio was$4.2 million with respect to eight loans. 51 -------------------------------------------------------------------------------- We continue to work with our borrowers to address the circumstances caused by COVID-19 while seeking to protect the credit attributes of our loans. However, we cannot assure you that these efforts will be successful, and we may experience payment delinquencies, defaults, foreclosures, or losses.
Allowance for Credit Losses
The amount of allowance for credit losses is influenced by the size of our loan portfolio, loan quality, risk rating, delinquency status, historic loss experience and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. During the three months endedJune 30, 2021 , the Company recorded a decrease of$3.5 million to its allowance for credit losses. The decline in the Company's allowance for credit losses was primarily due to an improving macroeconomic outlook based on recent observed economic data, improved property performance of underlying collateral for many of its loan investments that were adversely impacted by COVID-19, and normalizing commercial real estate capital markets activity. While the ultimate impact of these trends remains uncertain, we selected our macroeconomic outlook based on this uncertainty, made specific forward-looking valuation adjustments to the inputs of our calculation of the allowance for credit losses to reflect variability regarding the timing, strength, and distribution of a sustained economic recovery, and unknown post-COVID levels of economic activity that may result.
Investment Portfolio Financing
We finance our investment portfolio using secured credit agreements, including secured credit facilities, mortgage loans payable, asset-specific financing arrangements, and collateralized loan obligations. In certain instances, we may create structural leverage and obtain matched-term financing through the co-origination or non-recourse syndication of a senior loan interest to a third party (a "non-consolidated senior interest"). We generally seek to match-fund and match-index our investments by minimizing the differences between the durations and indices of our investments and those of our liabilities, while minimizing our exposure to mark-to-market risk.
Investment Portfolio Financing Arrangements
Our portfolio financing arrangements during the period endedJune 30, 2021 andDecember 31, 2020 included collateralized loan obligations, secured credit agreements, a mortgage loan payable, and a non-consolidated senior interest. The increase in total indebtedness as ofJune 30, 2021 is primarily due to the close of TRTX 2021-FL4, a$1.25 billion CLO, onMarch 31, 2021 . TRTX 2021-FL4 has a weighted average advance rate of 83% and increased our total indebtedness and our non-mark-to-market financing, which atJune 30, 2021 represented 81.9% of our total borrowings. In connection with TRTX 2021-FL4, we placed$1.04 billion (principal amount) of investment grade-rated notes with institutional investors. See Note 6 to our consolidated financial statements included in this Form 10-Q for details.
The following table details our loan portfolio borrowings as of
Portfolio Financing
Outstanding Principal Balance
June 30, 2021 December 31, 2020
CLO financing $ 2,835,887 $ 1,834,760
Secured credit facilities 863,211 1,522,859
Mortgage loan payable 50,000 50,000
Total indebtedness(1)(2) $ 3,749,098 $ 3,407,619
(1) Excludes a non-consolidated senior interest outstanding as of
and
(2) Excludes deferred financing costs of
June 30, 2021 andDecember 31, 2020 , respectively. 52
-------------------------------------------------------------------------------- Non-mark-to-market financing sources accounted for 81.9% of our total loan portfolio borrowings as ofJune 30, 2021 . The remaining 18.1% of our loan portfolio borrowings, which are comprised primarily of our seven secured credit facilities, are subject to credit marks, and in only one instance to credit and spread marks. The following table summarizes our loan portfolio borrowings as ofJune 30, 2021 (dollars in thousands): Initial Extended Basis of Loan Portfolio Financing Maturity Maturity Recourse Margin Arrangements Date Date Percentage Calls Non-Mark-to-Market Mark-to-Market Secured Credit Facilities Goldman Sachs(1) 08/19/21 08/19/22 25 % Credit $ - $ 97,989 Wells Fargo 04/18/22 04/18/22 25 % Credit - 63,069 Barclays 08/13/22 08/13/22 25 % Credit - 150,380 Morgan Stanley 05/04/22 05/04/22 25 % Credit - 169,083 JP Morgan Credit and 10/30/23 10/30/25 25 % Spread - 142,685 US Bank 07/09/22 07/09/24 25 % Credit - 39,245 Bank of America 09/29/21 09/29/22 25 % Credit - 31,664 Institutional Financing 10/30/23 10/30/25 25 % Credit 169,096 - 169,096 694,115 Collateralized Loan Agreements: TRTX 2018-FL2 11/29/37 11/29/37 0 % None 758,759 - TRTX 2019-FL3 10/01/34 10/01/34 0 % None 1,039,628 - TRTX 2021-FL4 03/31/38 03/31/38 0 % None 1,037,500 - Non-Consolidated Senior Interests None 132,000 - Total $ 3,136,983$ 694,115 Percentage of Total 81.9 % 18.1 %
(1) In
provided the secured credit facility is not in default.
Secured Credit Facilities
As ofJune 30, 2021 , aggregate borrowings outstanding under our secured credit facilities totaled$0.9 billion , relating solely to our mortgage loan investments. As ofJune 30, 2021 , the overall weighted average interest rate was LIBOR plus 2.3% per annum, the weighted average interest rate for borrowings with mark-to-market provisions was 1.7%, the weighted average interest rate for borrowings with no current mark-to-market provisions was 4.5%, and the overall weighted average advance rate was 70.3%. As ofJune 30, 2021 , outstanding borrowings under these facilities had a weighted average term to extended maturity of 2.3 years assuming exercise of all extension options and term out provisions. These secured credit facilities are 25% recourse toHoldco . The following table details our secured credit facilities as ofJune 30, 2021 (dollars in thousands): Commitment UPB of Advance Approved Outstanding Undrawn Available Interest Extended
Lender Amount(1) Collateral Rate Borrowings Balance Capacity(3) Capacity(2) Rate Maturity(4) Goldman Sachs(5)$ 250,000 $ 160,959 78.9 %$ 102,501 $ 97,989 $ 4,512 $ 147,499 L+ 2.01 % 08/19/22 Wells Fargo 750,000 169,396 79.8 % 135,099 63,069 72,030 614,901 L+ 1.75 % 04/18/22 Barclays 750,000 229,722 64.9 % 150,425 150,380 45 599,575 L+ 1.54 % 08/13/22 Morgan Stanley 500,000 223,976 78.1 % 176,942 169,083 7,859 323,058 L+ 1.81 % 05/04/22 JP Morgan 400,000 223,856 64.1 % 155,605 142,685 12,920 244,395 L+ 1.68 % 10/30/25 US Bank 44,730 58,519 70.0 % 40,963 39,245 1,718 3,767 L+ 1.40 % 07/09/24 Bank of America 200,000 42,813 75.0 % 32,110 31,664 446 167,890 L+ 1.75 % 09/29/22 Institutional Financing 249,546 293,120 58.7 % 169,096 169,096 - 80,450 L+ 4.50 % 10/30/25 Subtotal/Weighted
Average-Loans$ 3,144,276 $ 1,402,361 70.3 %$ 962,741 $ 863,211 $ 99,530 $ 2,181,535 L+ 2.27 %
(1) Commitment amount represents the largest amount of borrowings available under
a given agreement once sufficient collateral assets have been approved by the
lender and pledged by us.
(2) Represents the commitment amount less the approved borrowings, which amount
is available to be borrowed provided we pledge, and the lender approves,
additional collateral assets.
53
--------------------------------------------------------------------------------
(3) Undrawn capacity represents the positive difference between the borrowing
amount approved by the lender against collateral assets pledged by us and the
amount actually drawn against those collateral assets. The funding of such
amounts is generally subject to the sole and absolute discretion of each
lender.
(4) Our ability to extend our secured credit facilities to the dates shown above
is subject to satisfaction of certain conditions. Even if extended, our
lenders retain sole discretion to determine whether to accept pledged
collateral, and the advance rate and credit spread applicable to each
borrowing thereunder.
(5) In
provided the secured credit facility is not in default.
Once we identify an asset and the asset is approved by the secured credit facility lender to serve as collateral (which lender's approval is in its sole discretion), we and the lender may enter into a transaction whereby the lender advances to us a percentage of the value of the loan asset, which is referred to as the "advance rate." In the case of borrowings under our secured credit facilities that are repurchase arrangements, this advance serves as the purchase price at which the lender acquires the loan asset from us with an obligation of ours to repurchase the asset from the lender for an amount equal to the purchase price for the transaction plus a price differential, which is calculated based on an interest rate. Advance rates are subject to negotiation between us and our secured credit facility lenders. For each transaction, we and the lender agree to a trade confirmation which sets forth, among other things, the asset purchase price, the maximum advance rate, the interest rate and the market value of the asset. For transactions under our secured credit facilities, the trade confirmation may also set forth any future funding obligations which are contemplated with respect to the specific transaction the underlying loan asset. For loan assets which involve future funding obligations of ours, the transaction may provide for the lender to fund portions (for example, pro rata per the maximum advance rate of the related transaction) of such future funding obligations. The trade confirmation can also set forth loan-specific margin maintenance provisions, described below. Generally, our secured credit facilities allow for revolving balances, which allow us to voluntarily repay balances and draw again on existing available credit. The primary obligor on each secured credit facility is a separate special purpose subsidiary of ours which is restricted from conducting activity other than activity related to the utilization of its secured credit facility and the loans or loan interests that are originated or acquired by such subsidiary. As additional credit support, our holding company subsidiary,Holdco , provides certain guarantees of the obligations of its subsidiaries.Holdco's liability is generally capped at 25% of the outstanding obligations of the special purpose subsidiary which is the primary obligor under the related agreement. However, this liability cap does not apply in the event of certain "bad boy" defaults which can trigger recourse toHoldco for losses or the entire outstanding obligations of the borrower depending on the nature of the "bad boy" default in question. Examples of such "bad boy" defaults include, without limitation, fraud, intentional misrepresentation, willful misconduct, incurrence of additional debt in violation of financing documents, and the filing of a voluntary or collusive involuntary bankruptcy or insolvency proceeding of the special purpose entity subsidiary or the guarantor entity. Each of the secured credit facilities has "margin maintenance" provisions, which are designed to allow the lender to maintain a certain margin of credit enhancement against the assets which serve as collateral. The lender's margin amount is typically based on a percentage of the market value of the asset and/or mortgaged property collateral; however, certain secured credit facilities may also involve margin maintenance based on maintenance of a minimum debt yield with respect to the cash flow from the underlying real estate collateral. In certain cases, margin maintenance provisions can relate to minimum debt yields for pledged collateral considered as a whole, or limits on concentration of loan exposure measured by property type or loan type. Our secured credit facilities contain defined mark-to-market provisions that permit the lenders to issue margin calls to us in the event that the collateral properties underlying our loans pledged to our lenders experience a non-temporary decline in value or net cash flow ("credit marks"). In connection with one of these borrowing arrangements, the lender is also permitted to issue margin calls to us in the event the lender determines capital markets events have caused credit spreads to change for similar borrowing obligations ("spread marks"). Furthermore, in connection with one of these borrowing arrangements, the lender has the right to re-margin the secured credit facility based solely on appraised loan-to-values in the third year of the facility. In the event that we experience market turbulence, we may be exposed to margin calls in connection with our secured credit facilities. The maturity dates for each of our secured credit facilities are set forth in tables that appear earlier in this section. Our secured credit facilities generally have terms of between one and three years, but may be extended if we satisfy certain performance-based conditions. In the normal course of business, we maintain discussions with our lenders to extend or amend any financing facilities related to our loans. As ofJune 30, 2021 , the weighted average haircut (which is equal to one minus the advance rate percentage against collateral for our secured credit facilities taken as a whole) was 29.7% compared to 30.7% as ofDecember 31, 2020 and 30.8% as ofJune 30, 2020 . 54
-------------------------------------------------------------------------------- The secured credit facilities also include cash management features which generally require that income from collateral loan assets be deposited in a lender-controlled account for distribution in accordance with a specified waterfall of payments designed to keep facility-related obligations current before such income is disbursed for our own account. The cash management features generally require the trapping of cash in such controlled account if an uncured default under our borrowing arrangement remains outstanding. Furthermore, some secured credit facilities may require an accelerated principal amortization schedule if the secured credit facility is in its final extended term. Notwithstanding that a loan asset may be subject to a financing arrangement and serve as collateral under a secured credit facility, we retain the right to administer and service the loan and interact directly with the underlying obligors and sponsors of our loan assets so long as there is no default under the secured credit facility, and so long as we do not engage in certain material modifications (including amendments, waivers, exercises of remedies, or releases of obligors and collateral, among other things) of the loan assets without the lender's prior consent.
Collateralized Loan Obligations
As ofJune 30, 2021 , we had three collateralized loan obligations, TRTX 2021-FL4, TRTX 2019-FL3 and TRTX 2018-FL2, totaling$2.8 billion , financing 43 existing first mortgage loan investments totaling$3.4 billion and holding$53.8 million of cash for investment in eligible loan collateral. Our CLOs provide low cost, non-mark-to-market, non-recourse financing for 76.7% of our loan portfolio borrowings. The collateralized loan obligations bear a weighted average interest rate of LIBOR plus 1.5%, have a weighted average advance rate of 82.3%, and include a reinvestment feature that allows us to contribute existing or newly originated loan investments in exchange for proceeds from loan repayments held in the collateralized loan obligations. OnMarch 5, 2021 , theFinancial Conduct Authority of the U.K . (the "FCA") announced that all LIBOR tenors relevant to us will cease to be published or will no longer be representative afterJune 30, 2023 . The Alternative Reference Rates Committee (the "ARRC") interpreted this announcement to constitute a benchmark transition event, and onMay 17, 2021 ,Wells Fargo Bank, National Association , solely in their capacity as designated transaction representative under the FL3 indenture, determined that a benchmark transition event had occurred with respect to FL3. Accordingly, onJune 15, 2021 , the benchmark index interest rate for bondholders under FL3 was converted from LIBOR to the Compounded Secured Overnight Financing Rate ("SOFR") plus a benchmark replacement adjustment of 11.448 basis points, conforming with the FL3 Indenture and the recommendation of the ARRC. The designated transaction representative has further determined that SOFR for any interest accrual period shall be the "30-Day Average SOFR" published on the website of theFederal Reserve Bank of New York on each benchmark determination date. SOFR will be determined by the calculation agent in arrears using a lookback period equal to the number of calendar days in such interest accrual period plus two SOFR Business Days. As ofJune 30, 2021 , the FL3 mortgage assets are indexed to LIBOR and the borrowings under FL3 are indexed to SOFR, creating an underlying benchmark index interest rate basis difference between FL3 assets and liabilities, which is meant to be mitigated by the benchmark replacement adjustment described above. We have the right to transition the FL3 mortgage assets to SOFR, eliminating the basis difference between FL3 assets and liabilities, and will make this determination taking into account our loan portfolio as a whole. The transition to SOFR is not expected to have a material impact to FL3's assets and liabilities and related interest expense. During the three months endedJune 30, 2021 , we fully invested$308.9 million in the FL4 Ramp-Up Account available to purchase eligible collateral interests. See Note 6 to our consolidated financial statements included in this Form 10-Q for details. During the three months endedJune 30, 2021 , we utilized the reinvestment feature in TRTX 2021-FL4 twice and we did not utilize the reinvestment feature in TRTX 2019-FL3. The reinvestment period for TRTX 2018-FL2 ended onDecember 11, 2020 . Mortgage Loan Payable We are, through a special purpose entity subsidiary, a borrower under a$50.0 million mortgage loan secured by the REO Property. Refer to Note 4 to our consolidated financial statements included in this Form 10-Q for additional information. This mortgage loan was provided by an institutional lender, has an initial maturity date ofDecember 15, 2021 , and an option to extend the maturity for 12 months subject to the satisfaction of customary extension conditions, including (i) the purchase of a new interest rate cap for the extension term, (ii) replenishment of the interest reserve with an amount equal to 12 months of debt service, (iii) payment of a 0.25% extension fee on the outstanding principal balance, and (iv) no event of default. This mortgage loan permits partial releases of collateral in exchange for payment of a minimum release price equal to the greater of 100% of net sales proceeds (after reasonable transaction expenses) or 115% of the allocated loan amount for the respective parcel. This loan bears interest at a rate of LIBOR plus 4.50% subject to a LIBOR interest rate floor and cap of 0.50%. We posted cash of$2.4 million to pre-fund interest payments due under the note during its initial term. The remaining reserve balance as ofJune 30, 2021 was$1.4 million . 55 --------------------------------------------------------------------------------
Non-Consolidated Senior Interests and Retained Mezzanine Loans
In certain instances, we create structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third party. In either case, the senior mortgage loan (i.e., the non-consolidated senior interest) is not included on our balance sheet. When we create structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third party, we retain on our balance sheet a mezzanine loan. As ofJune 30, 2021 , we retained a mezzanine loan investment with a total commitment of$35.0 million , an unpaid principal balance of$34.3 million and an interest rate of LIBOR plus 10.3%.
The following table presents our non-consolidated senior interest and retained
mezzanine loan outstanding as of
Weighted
Weighted Average
Non-Consolidated Senior Average Term to
Interests and Retained Loan Principal Amortized Credit Extended
Mezzanine Loans Count Commitment Balance Cost Spread(1) Guarantee Maturity Senior loan sold or co-originated
1 $ 132,000 $ 132,000 N/A L+ 4.3 % N/A 6/28/2025
Retained mezzanine loan 1 35,000 34,262 34,160 L+ 10.3 % N/A 6/28/2025
Total loan 2 $ 167,000 $ 166,262 L+ 5.5 % 6/28/2025
(1) Loan commitment used as a basis for computation of weighted average credit
spread.
Financial Covenants for Outstanding Borrowings
Our financial covenants and guarantees for outstanding borrowings related to our secured credit facilities requireHoldco to maintain compliance with the following financial covenants (among others), which were revised onJune 7, 2021 as follows: Financial Covenant Current Prior to June 7, 2021 Cash Liquidity Minimum cash liquidity of no Minimum cash liquidity of no less than the greater of: less than the greater of:$15.0 million ; and 5.0% of$10.0 million ; and 5.0% of Holdco's recourse Holdco's recourse indebtedness indebtedness Tangible Net Worth$1.0 billion , plus 75% of all$1.1 billion as of April 1, subsequent equity issuances 2020, plus 75% of future (net of discounts, equity issuances thereafter commissions, expense), minus (net of discounts, 75% of the redeemed or commissions, expense) repurchased preferred or redeemable equity or stock Debt-to-Equity Debt-to-Equity ratio not to Debt-to-Equity ratio not to exceed 4.25 to 1.0 with exceed 3.5 to 1.0 with "equity" and "equity "equity" and "equity adjustment" as defined below adjustment" as defined below Interest Coverage Minimum interest coverage Minimum interest coverage ratio of no less than 1.5 to ratio of no less than 1.5 to 1.0 1.0 The amendments as ofJune 7, 2021 revised the minimum tangible net worth test such that the amount for testing was reset as ofJune 7, 2021 to$1.0 billion plus 75% of net future equity issuances afterJune 7, 2021 minus 75% of redeemed equity or stock afterJune 7, 2021 .Holdco's equity for purposes of calculating the debt-to-equity test (which was revised as ofJune 7, 2021 at 4.25 to 1:00) was revised to include: stockholders' equity as determined by GAAP; any other equity instrument(s) issued byHoldco or its Subsidiary that is or are classified as temporary equity under GAAP; and an adjustment equal to the sum of the Current Expected Credit Loss reserve, write-downs, impairments or realized losses taken against the value of any assets ofHoldco or its subsidiaries from and afterApril 1, 2020 ; provided, however, that the equity adjustment may not exceed the amount of (a)Holdco's total equity less (b) the product ofHoldco's total indebtedness multiplied by 25%. Additionally, the minimum liquidity test was increased as ofJune 7, 2021 to be no less than the greater of (x) 15.0 million and (y) 5% ofHoldco's recourse indebtedness, and the minimum interest coverage ratio test remained unchanged at 1.5 to 1.0. 56 --------------------------------------------------------------------------------
Financial Covenant relating to the Series B Preferred Stock
For as long as the Series B Preferred Stock is outstanding, we are required to maintain a debt-to-equity ratio not greater than 3.0 to 1.0. For the purpose of determining this ratio, the aggregate liquidation preference of the outstanding shares of Series B Preferred Stock is excluded from the calculation of total indebtedness of the Company and its subsidiaries, and is included in the calculation of total stockholders' equity. OnJune 16, 2021 , we redeemed all 9,000,000 outstanding shares of the Series B Preferred Stock. As ofJune 30, 2021 , we did not have any shares of Series B Preferred Stock outstanding. We were in compliance with all financial covenants for our secured credit facilities and mortgage loan payable to the extent of outstanding balances as ofJune 30, 2021 andDecember 31, 2020 , respectively, and were in compliance with the financial covenant relating to the Series B Preferred Stock as ofDecember 31, 2020 . If we fail to meet or satisfy any of the covenants in our financing arrangements and are unable to obtain a waiver or other suitable relief from the lenders, we would be in default under these agreements, which could result in a cross-default or cross-acceleration under other financing arrangements, and our lenders could elect to declare outstanding amounts due and payable (or such amounts may automatically become due and payable), terminate their commitments, require the posting of additional collateral and enforce their respective interests against existing collateral. A default also could significantly limit our financing alternatives, which could cause us to curtail our investment activities or dispose of assets when we otherwise would not choose to do so. Further, this could make it difficult for us to satisfy the requirements necessary to maintain our qualification as a REIT forU.S. federal income tax purposes. There can be no assurance that we will remain in compliance with these covenants in the future. For more information regarding the impact that COVID-19 may have on our ability to comply with these covenants, see risk factors set forth in our Form 10-K filed with theSEC onFebruary 24, 2021 .
Debt-to-Equity Ratio and Total Leverage Ratio
The following table presents our Debt-to-Equity ratio and Total Leverage ratio
as of
June 30, 2021 December 31, 2020
Debt-to-equity ratio(1) 2.44x 2.44x
Total leverage ratio(2) 2.53x 2.54x
(1) Represents (i) total outstanding borrowings under financing arrangements,
net, including collateralized loan obligations, secured credit facilities,
and mortgage loan payable, less cash, to (ii) total stockholders' equity, at
period end.
(2) Represents (i) total outstanding borrowings under financing arrangements,
net, including collateralized loan obligations, secured credit facilities,
and mortgage loan payable, plus non-consolidated senior interests sold or
co-originated (if any), less cash, to (ii) total stockholders' equity, at
period end.
Floating Rate Portfolio
Our business model seeks to minimize our exposure to changing interest rates by
match-indexing our assets using the same, or similar, benchmark indices,
typically LIBOR. Accordingly, rising interest rates will generally increase our
net interest income, while declining interest rates will generally decrease our
net interest income, subject to the beneficial impact of LIBOR floors in our
mortgage loan investment portfolio. As of June 30, 2021 , 100.0% of our loans by
unpaid principal balance earned a floating rate of interest and were financed
with liabilities that require interest payments based on floating rates, which
resulted in approximately $1.1 billion of net floating rate exposure, subject to
the impact of interest rate floors on all our floating rate loans and 5.7% of
our liabilities. We had no fixed rate loans outstanding as of June 30, 2021 .
Our liabilities are generally index-matched to each loan investment asset,
resulting in a net exposure to movements in benchmark rates that vary based on
the relative proportion of floating rate assets and liabilities. The following
table details our loan portfolio's net floating rate exposure as of June 30,
2021 (dollars in thousands):
Net Exposure
Floating rate assets(1) $ 4,833,535
Floating rate debt(1)(2) (3,699,097 )
Net floating rate exposure $ 1,134,438 (1) Floating rate mortgage loan assets and liabilities (with the sole exception
of TRTX-2019 FL3 liabilities which are indexed to SOFR) are indexed to LIBOR.
The net exposure to the underlying benchmark interest rate is directly
correlated to our assets indexed to the same rate.
(2) Floating rate liabilities include secured credit facilities and
collateralized loan obligations.
57
-------------------------------------------------------------------------------- With the cessation of LIBOR expected to occur effectiveJanuary 1, 2022 , we continue to evaluate the documentation and control processes associated with our assets and liabilities to manage the transition away from LIBOR to an alternative rate endorsed by theAlternative Reference Rates Committee of theFederal Reserve System . Although recent statements from regulators indicate the possibility of a longer period of transition, perhaps throughJune 2023 , we continue to utilize resources to revise our control and risk management systems to ensure there is no disruption to our day-to-day operations from the transition, when it does occur. We will continue to employ prudent risk management as it relates to the potential financial, operational and legal risks associated with the expected cessation of LIBOR, and to ensure that our assets and liabilities generally remain match-indexed following this event. While we generally seek to match index our assets and liabilities, there is likely to be a transition period as different underlying assets and sources of financing may transition from LIBOR to an alternative index at different times.
Interest-Earning Assets and Interest-Bearing Liabilities
The following table presents the average balance of interest-earning assets and related interest-bearing liabilities, associated interest income and interest expense, and financing costs and the corresponding weighted average yields for the three months endedJune 30, 2021 andMarch 31, 2021 (dollars in thousands): Three Months Ended,June 30, 2021 March 31, 2021
Average Average
Amortized Wtd. Avg. Amortized Wtd. Avg.
Cost / Interest Yield/ Cost / Interest Yield/
Carrying Income/ Financing Carrying Income/ Financing
Value(1) Expense Cost(2) Value(1) Expense Cost(2)
Core
Interest-earning
assets:
First mortgage
loans $ 4,729,443 $ 60,793 5.1 % $ 4,509,896 $ 57,067 5.1 %
Retained mezzanine
loans 34,025 1,122 13.2 % 33,070 1,081 13.1 %
Core
interest-earning
assets $ 4,763,468 $ 61,915 5.2 % $ 4,542,966 $ 58,148 5.1 %
Interest-bearing
liabilities:
Collateralized loanobligations$ 2,857,273 $ 13,528 1.9 %$ 1,833,303 $ 8,382 1.8 % Secured credit facilities 899,637 7,786 3.5 % 1,286,517 11,454 3.6 % Mortgage loan payable 50,000 703 0.0 % 50,000 454 0.0 % Total interest-bearing liabilities$ 3,806,910 $ 22,017 2.3 %$ 3,169,820 $ 20,290 2.6 % Net interest income(3)$ 39,898 $ 37,858 Other Interest-earning assets: Cash equivalents$ 228,815 $ 6 0.0 %$ 281,831 $ 7 0.0 % Accounts receivable from servicer/trustee 149,048 1 0.0 % 105,479 - 0.0 % Total interest-earning assets$ 5,141,331 $ 61,922 4.8 % $
4,930,276$ 58,155 4.7 %
(1) Based on carrying value for loans and carrying value for interest-bearing
liabilities. Calculated balances as the month-end averages.
(2) Weighted average yield or financing cost calculated based on annualized
interest income or expense divided by calculated month-end average
outstanding balance.
(3) Represents interest income on core interest-earning assets less interest
expense on total interest-bearing liabilities. Interest income on Other
Interest-earning assets is included in Other Income, net on the consolidated
statements of income (loss) and comprehensive income (loss).
58
-------------------------------------------------------------------------------- The following table presents the average balance of interest-earning assets and related interest-bearing liabilities, associated interest income and interest expense, and financing costs and the corresponding weighted average yields for the six months endedJune 30, 2021 and 2020 (dollars in thousands): Six Months Ended June 30, 2021 June 30, 2020 Average Amortized Wtd. Avg. Wtd. Avg. Cost / Interest Yield/ Average Interest Yield/ Carrying Income/ Financing Carrying Income/ Financing Value(1) Expense Cost(2) Value(1) Expense Cost(2) Core Interest-earning assets: First mortgage loans$ 4,619,670 $ 117,861 5.1 %$ 5,075,469 $ 142,770 5.6 % Retained mezzanine loans 33,548 2,203 13.1 % 19,749 1,358 13.8 % CRE debt securities(3) - - 0.0 % 394,494 7,672 0.0 % Core interest-earning assets$ 4,653,218 $ 120,064 5.2 %$ 5,489,712 $ 151,800 5.5 % Interest-bearing liabilities: Collateralized loan obligations$ 2,518,206 $ 21,849 1.7 %$ 1,827,411 $ 25,114 2.7 % Secured credit facilities 1,093,077 19,016 3.5 % 2,161,755 33,712 3.1 % Mortgage loan payable 50,000 1,442 5.8 % - - 0.0 % Asset-specific financings - - - 77,000 2,825 7.3 % Secured revolving credit agreement - - - 145,637 2,671 3.7 % Total interest-bearing liabilities$ 3,661,283 $ 42,307 2.3 %$ 4,211,803 $ 64,322 3.1 % Net interest income(4)$ 77,757 $ 87,478 Other Interest-earning assets: Cash equivalents$ 255,323 $ 13 0.0 %$ 155,486 $ 411 0.5 % Accounts receivable from servicer/trustee 127,264 1 0.0 % 20,134 36 0.4 % Total interest-earning
assets$ 5,035,805 $ 120,078 4.8 %$ 5,665,332 $ 152,247 5.4 %
(1) Based on carrying value for loans, amortized cost for CRE debt securities and
carrying value for interest-bearing liabilities. Calculated balances as the
month-end averages.
(2) Weighted average yield or financing cost calculated based on annualized
interest income or expense divided by calculated month-end average
outstanding balance.
(3) Reflects the sale of the entire existing CRE Debt securities portfolio during
March and April of 2020.
(4) Represents interest income on core interest-earning assets less interest
expense on total interest-bearing liabilities. Interest income on Other
Interest-earning assets is included in Other Income, net on the consolidated
statements of income (loss) and comprehensive income (loss).
59
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Our Results of Operations Operating Results
The following table sets forth information regarding our consolidated results of operations (dollars in thousands, except per share data):
Three Months Ended June 30, Variance Six Months Ended June 30, Variance
2021 vs 2021 vs
2021 2020 2020 2021 2020 2020
INTEREST INCOME
Interest Income $ 61,915 $ 70,051 $ (8,136 ) $ 120,064 $ 151,800 $ (31,736 )
Interest Expense (22,017 ) (25,865 ) 3,848 (42,307 ) (64,322 ) 22,015
Net Interest Income 39,898 44,186 (4,288 ) 77,757 87,478 (9,721 )
OTHER REVENUE
Other Income, net 157 119 38 253 447 (194 )
Total Other Revenue 157 119 38 253 447 (194 )
OTHER EXPENSES
Professional Fees 1,137 4,036 (2,899 ) 2,336 5,855 (3,519 )
General and Administrative 1,081 860 221 2,112 1,840 272
Stock Compensation Expense 1,393 1,686 (293 ) 2,849 3,087 (238 )
Servicing and Asset Management
Fees 328 261 67 655 537 118
Management Fee 5,344 5,115 229 10,437 10,115 322
Total Other Expenses 9,283 11,958 (2,675 ) 18,389 21,434 (3,045 )
Securities Impairments - 96 (96 ) - (203,397 ) 203,397
Credit Loss Benefit (Expense) 1,852 10,546 (8,694 ) 5,890 (52,802 ) 58,692
Income (Loss) Before Income
Taxes 32,624 42,989 (10,365 ) 65,511 (189,708 ) 255,219 Income Tax Expense, net
(233 ) (61 ) (172 ) (1,164 ) (154 ) (1,010 )
Net Income (Loss) 32,391 42,928 (10,537 ) 64,347 (189,862 ) 254,209
Preferred Stock Dividends and
Participating Securities Share
in Earnings (Loss) (6,947 ) (2,380 ) (4,567 ) (13,217 ) (2,651 ) (10,566 ) Series B Preferred Stock Redemption Make-Whole Payment
(22,485 ) - (22,485 ) (22,485 ) - (22,485 )
Series B Preferred Stock
Accretion and Write-off of
Discount, including Allocated
Warrant Fair Value and
Transaction Costs (23,997 ) (443 ) (23,554 ) (25,449 ) (443 ) (25,006 )
Net (Loss) Income Attributable
to Common Stockholders - See
Note 12 $ (21,038 ) $ 40,105 (61,143 ) $ 3,196 $ (192,956 ) $ 196,152
(Loss) Earnings per Common
Share, Basic(1) $ (0.27 ) $ 0.52 (0.79 ) $ 0.04 $ (2.53 ) 2.57
(Loss) Earnings per Common
Share, Diluted(1) $ (0.27 ) $ 0.52
(0.79 )
$ 0.20 $ 0.20 - $ 0.40 $ 0.63 (0.23 )
OTHER COMPREHENSIVE INCOME
(LOSS)
Unrealized Gain (Loss) on CRE
Debt Securities $ - $ (77 ) $ 77 $ - $ (1,051 ) $ 1,051 Comprehensive Net Income (Loss)
(1) Basic and diluted (loss) earnings per common share are computed independently
based on the weighted-average shares of common stock outstanding. Diluted
(loss) earnings per common share also includes the impact of participating
securities outstanding plus any incremental shares that would be outstanding
assuming the exercise of the Warrants. Accordingly, the sum of the quarterly
(loss) earnings per common share amounts may not agree to the total for the
six months ended
Comparison of the Three Months Ended
Net Interest Income
Net interest income decreased to$39.9 million , during the three months endedJune 30, 2021 compared to$44.2 million for the three months endedJune 30, 2020 . The decrease was primarily due to higher repayment and sales volume, which reduced the average interest earning asset base of our loan portfolio by$373.9 million , compared to the three months endedJune 30, 2020 . Our loan portfolio weighted average spread also decreased from 3.4% to 3.2%, and our weighted average LIBOR floors decreased from 1.67% to 1.44%, resulting in lower interest margins. 60
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Other Expenses
Other expenses decreased$2.7 million for the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 , mainly due to a decrease of$2.9 million in professional fees (legal, accounting and advisory fees) incurred in connection with our response to COVID-19 during the three months endedJune 30, 2020 . Credit Loss Credit loss benefit increased by$8.7 million for the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 , primarily due to the improving expectation of macroeconomic conditions and the improved operating performance of underlying collateral for many of our loan investments in 2021 that were adversely impacted by COVID-19 during 2020.
Dividends Declared Per Common Share
During the three months endedJune 30, 2021 , we declared cash dividends of$0.20 per common share, or$15.5 million . During the three months endedJune 30, 2020 , we declared cash dividends of$0.20 per common share, or$15.4 million .
Series B Preferred Stock Redemption Make-Whole Payment
During the three months endedJune 30, 2021 , we made a make-whole payment of$22.5 million to the holder of the Series B Preferred Stock for an amount equal to the present value of all remaining dividend payments due on such shares of Series B Preferred Stock from and after the redemption date (and not including any declared or paid dividends or accrued dividends prior to such redemption date) through the second anniversary of the original issue date, computed in accordance with the terms of the Articles Supplementary. See Note 13 to our consolidated financial statements included in this Form 10-Q for additional details.
Series B Preferred Stock Accretion and Write-off of Discount, including Allocated Warrant Fair Value and Transaction Costs
During the three months endedJune 30, 2021 , in connection with the redemption of the Series B Preferred Stock, we accelerated the accretion and wrote-off the unamortized discount related to the allocated Warrant fair value and transaction costs. See Note 13 to our consolidated financial statements included in this Form 10-Q for additional details.
Comparison of the Six Months Ended
Net Interest Income
Net interest income decreased to$77.8 million , during the six months endedJune 30, 2021 compared to$87.5 million for the six months endedJune 30, 2020 . The decrease was primarily due to higher repayment and sales volume, which reduced the average interest earning asset base of our loan portfolio by$347.9 million , compared to the six months endedJune 30, 2020 . Our loan portfolio weighted average spread also decreased from 3.4% to 3.2%, and our weighted average LIBOR floors decreased from 1.67% to 1.44%, resulting in lower interest margins. Other Revenue Other revenue is comprised of interest income earned on certain cash collection accounts, net operating income from REO held for investment and miscellaneous fee income. Other revenue decreased by$0.2 million during the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 , primarily due to lower overnight interest earned for the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 .
Other Expenses
Other expenses decreased$3.0 million for the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 , mainly due to a decrease of$3.5 million in professional fees (legal, accounting and advisory fees) incurred in connection with our response to COVID-19 during the six months endedJune 30, 2020 . 61
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Credit Loss
Credit loss expense decreased by$58.7 million for the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 , primarily due to the improving expectation of macroeconomic conditions and the improved operating performance of underlying collateral for many of our loan investments in 2021 that were adversely impacted by COVID-19 during 2020.
Securities Impairments
We had no securities impairment expense for the six months endedJune 30, 2021 compared to$203.4 million for the six months endedJune 30, 2020 . Securities impairment expense for the six months endedJune 30, 2020 include losses on sales of CRE debt securities of$36.2 million and an impairment charge of$167.3 million , offset by a realized gain on sale of$0.1 million related to one position in connection with CRE debt securities owned atMarch 31, 2020 .
Dividends Declared Per Common Share
During the six months endedJune 30, 2021 , we declared cash dividends of$0.40 per common share, or$31.0 million . During the six months endedJune 30, 2020 , we declared cash dividends of$0.63 per common share, or$48.7 million .
Unrealized Gain (Loss) on
Other comprehensive income (loss) decreased$1.0 million during the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 . The decrease is primarily related to the reversal of unrealized gains upon the sale of certain CRE debt securities.
Income Tax Expense
Income tax expense increased$1.0 million during the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 primarily due to the excess inclusion income ("EII") generated by certain of Sub-REIT's CLOs due to unusually low LIBOR rates beginning inMarch 2020 coupled with the benefit of LIBOR floors relating to the various loans and participation interests pledged to Sub-REIT's CLOs. Pursuant to our tax partnership ("Parent LLC ") operating agreement, any EII allocated from Sub-REIT toParent LLC is allocated further to our TRSs. Consequently, no EII is allocated to us and, as a result, our shareholders will not be allocated any EII or unrelated business taxable income by us. See Note 10 to our consolidated financial statements included in this Form 10-Q for additional details.
Series B Preferred Stock Redemption Make-Whole Payment
During the six months endedJune 30, 2021 , we made a make-whole payment of$22.5 million to the holder of the Series B Preferred Stock for an amount equal to the present value of all remaining dividend payments due on such shares of Series B Preferred Stock from and after the redemption date (and not including any declared or paid dividends or accrued dividends prior to such redemption date) through the second anniversary of the original issue date, computed in accordance with the terms of the Articles Supplementary. See Note 13 to our consolidated financial statements included in this Form 10-Q for additional details.
Series B Preferred Stock Accretion and Write-off of Discount, including Allocated Warrant Fair Value and Transaction Costs
During the six months endedJune 30, 2021 , in connection with the redemption of the Series B Preferred Stock, we accelerated the accretion and wrote-off the unamortized discount related to the allocated Warrant fair value and transaction costs. See Note 13 to our consolidated financial statements included in this Form 10-Q for additional details.
Liquidity and Capital Resources
Capitalization
We have capitalized our business to date through, among other things, the issuance and sale of shares of our common stock, issuance of Series C Preferred Stock classified as permanent equity, issuance of Series B Preferred Stock treated as temporary equity, borrowings under secured credit facilities, collateralized loan obligations, mortgage loan payable, asset-specific financings, and non-consolidated senior interests. As ofJune 30, 2021 , we had outstanding 77.1 million shares of our common stock representing$1.2 billion of stockholders' equity,$194.4 million of Series C Preferred Stock, and$3.7 billion of outstanding borrowings used to finance our operations. 62 --------------------------------------------------------------------------------
See Notes 6 and 7 to our consolidated financial statements included in this Form 10-Q for additional details regarding our borrowings under secured credit facilities, collateralized loan obligations, and mortgage loan payable.
Sources of Liquidity
Our primary sources of liquidity include cash and cash equivalents, available
borrowings under secured credit facilities and capacity in our collateralized
loan obligations available for reinvestment, which are set forth in the
following table (dollars in thousands):
June 30, 2021 December 31, 2020
Cash and cash equivalents $ 239,743 $ 319,669
Secured credit facilities 99,529 22,766
Collateralized Loan Obligation Proceeds
Held at Trustee 53,982 121
Total $ 393,254 $ 342,556
Our existing loan portfolio provides us with liquidity as loans are repaid or
sold, in whole or in part, of which some proceeds may be included in accounts
receivable from our servicers until released and the proceeds from such
repayments become available for us to reinvest. For the six months ended
June 30, 2021 , loan repayments totaled $339.3 million , and one loan with an
unpaid principal balance of $60.7 million was sold for $59.5 million . For the
six months ended June 30, 2020 , loan repayments totaled $320.7 million , and one
loan with an unpaid principal balance of $99.3 million was sold for $85.5
million .
We continue to monitor the COVID-19 pandemic and its impact on our borrowers,
their tenants, our lenders, and the economy as a whole. The magnitude and
duration of the COVID-19 pandemic, and its impact on our operations and
liquidity, are uncertain and continue to evolve in
Uses of Liquidity
In addition to our ongoing loan activity, our primary liquidity needs include interest and principal payments under our$3.7 billion of outstanding borrowings under secured credit facilities, collateralized loan obligations and mortgage loan payable,$488.9 million of unfunded loan commitments, dividend distributions to our preferred and common stockholders, and operating expenses.
Consolidated Cash Flows
Our primary cash flow activities involve actively managing our investment portfolio, originating floating rate, first mortgage loan investments, and raising capital through public offerings of our equity and debt securities. The following table provides a breakdown of the net change in our cash, cash equivalents, and restricted cash balances for the six months endedJune 30, 2021 and 2020 (dollars in thousands): Six Months EndedJune 30, 2021 2020
Cash flows provided by operating activities
70,677
Cash flows (used in) provided by investing activities (363,587 )
461,217
Cash flows provided by (used in) financing activities 223,429 (415,143 ) Net change in cash, cash equivalents, and restricted cash$ (79,098 ) $ 116,751 Operating Activities During the six months endedJune 30, 2021 , cash flows provided by operating activities totaled$61.1 million primarily related to net interest income, offset by operating expenses. During the six months endedJune 30, 2020 , cash flows provided by operating activities totaled$70.7 million primarily related to net interest income, offset by operating expenses.
Investing Activities
During the six months endedJune 30, 2021 , cash flows used in investing activities totaled$363.6 million primarily due to new loan originations of$631.4 million , advances on loans of$73.1 million and proceeds from sales of loans of$58.4 million , offset by loan repayments of$282.6 million . Cash flows from investing activities during the six months endedJune 30, 2020 totaled$461.2 63 --------------------------------------------------------------------------------
million primarily due to repayments on loans held for investment of
Financing Activities
During the six months endedJune 30, 2021 , cash flows provided by financing activities totaled$223.4 million primarily due to proceeds from the issuance of TRTX 2021-FL4 of$1.04 billion (described in Note 6 to our consolidated financial statements included in this Form 10-Q), issuance of Series C Preferred Stock of$201.3 million , offset by payments on secured financing agreements of$868.1 million , payments related to the redemption of Series B Preferred Stock of$247.5 million , payment of dividends on our common stock and Series B Preferred Stock of$57.3 million and payments of deferred financing costs of$8.2 million . During the six months endedJune 30, 2020 , cash flows used in financing activities totaled$415.1 million primarily due to payments on secured financing agreements of$1.4 billion offset by additional proceeds from secured financing agreements of$827.4 million , and the issuance of Series B Preferred Stock and Warrants of$225.0 million . During the period fromMarch 1, 2020 toMarch 31, 2020 , we received margin call notices with respect to borrowings against ourCRE CLO investment portfolio aggregating$170.9 million , which were satisfied with a combination of$89.8 million of cash, cash proceeds from bond sales, and increases in market values prior to quarter-end. As ofMarch 31, 2020 , unpaid margin calls totaled$19.0 million , which were satisfied inApril 2020 through cash proceeds from bond sales and increases in market value. During the quarter endedJune 30, 2020 , prior to making our voluntary deleveraging payments, we satisfied one margin call aggregating$20.0 million in connection with our secured credit agreements financing our loan investments by pledging a previously unencumbered loan investment. OnMay 28, 2020 , we made voluntary deleveraging payments totaling$157.7 million to all six of our secured credit agreement lenders and our one secured credit facility lender that provide financing for certain of our first mortgage loan investments in exchange for their agreement to suspend margin calls for defined periods, subject to certain conditions. When these payments were made, no margin deficits existed, and no margin calls have been issued to us since. If market turbulence persists or resurges, we may be required to post cash collateral in connection with our secured credit agreements secured by our mortgage loan investments upon or after the expiry of these agreements. We maintain frequent dialogue with the lenders under our secured credit agreements, and senior secured and secured credit agreements regarding our management of their collateral assets in light of the impacts of the COVID-19 pandemic. For more information regarding the impact that COVID-19 has had and may have on our business, see risk factors set forth in our Form 10-K filed with theSEC onFebruary 24, 2021 .
Contractual Obligations and Commitments
Our contractual obligations and commitments as ofJune 30, 2021 were as follows (dollars in thousands): Payment Timing Total Less than More than Obligation 1 Year 1 to 3 Years 3 to 5 Years 5 Years Unfunded loan commitments(1)$ 488,916 $ 117,703 $ 240,322 $ 130,891 $ - Collateralized loan obligations-principal(2) 2,835,887 - 1,627,464 1,137,883 70,540 Secured debt agreements-principal(3) 863,211 232,152 591,814 39,245 - Collateralized loan obligations-interest(4) 136,118 46,283 70,722 19,083 30 Secured debt agreements-interest(4) 36,634 20,273 16,345 16 - Mortgage loan payable - principal 50,000 - 50,000 - - Mortgage loan payable - interest 3,406 2,333 1,073 - - Total$ 4,414,172 $ 418,744 $ 2,597,740 $ 1,327,118 $ 70,570
(1) The allocation of our unfunded loan commitments is based on the earlier of
the commitment expiration date and the loan maturity date.
(2) Collateralized loan obligation liabilities are based on the fully extended
maturity of mortgage loan collateral, considering the reinvestment window of
our collateralized loan obligation.
(3) The allocation of secured debt agreements is based on the extended maturity
date for those credit facilities where extensions are at our option, subject
to no default, or the current maturity date of those facilities where
extension options are subject to counterparty approval.
(4) Amounts include the related future interest payment obligations, which are
estimated by assuming the amounts outstanding under our secured debt
agreements and collateralized loan obligations and the interest rates in
effect as of
an estimate, as actual amounts borrowed and rates will vary over time. Our
floating rate loans and related liabilities are indexed to LIBOR (with the
sole exception of TRTX-2019 FL3 liabilities which are indexed to SOFR).
64
-------------------------------------------------------------------------------- With respect to our debt obligations that are contractually due within the next five years, we plan to employ several strategies to meet these obligations, including: (i) exercising maturity date extension options that exist in our current financing arrangements; (ii) negotiating extensions of terms with our providers of credit; (iii) periodically accessing the public and private equity and debt capital markets to raise cash to fund new investments or the repayment of indebtedness; (iv) the issuance of additional structured finance vehicles, such as a collateralized loan obligations similar to TRTX 2021-FL4, TRTX 2019-FL3 or TRTX 2018-FL2, as a method of financing; (v) term loans with private lenders; (vi) selling loans to generate cash to repay our debt obligations; and/or (vii) applying repayments from underlying loans to satisfy the debt obligations which they secure. Although these avenues have been available to us in the past, we cannot offer any assurance that we will be able to access any or all of these alternatives as a result of the continuing market disruption caused by the COVID-19 pandemic. We are required to pay our Manager a base management fee, an incentive fee, and reimbursements for certain expenses pursuant to our Management Agreement. The table above does not include the amounts payable to our Manager under our Management Agreement as they are not fixed and determinable. No incentive fee was earned by our Manager during the three months endedJune 30, 2021 . See Note 11 to our consolidated financial statements included in this Form 10-Q for additional terms and details of the fees payable under our Management Agreement. As a REIT, we generally must distribute substantially all of our net taxable income to stockholders in the form of dividends to comply with the REIT provisions of the Internal Revenue Code. In 2017, the Internal Revenue Service issued a revenue procedure permitting "publicly offered" REITs to make elective stock dividends (i.e. dividends paid in a mixture of stock and cash), with at least 20% of the total distribution being paid in cash, to satisfy their REIT distribution requirements. Pursuant to this revenue procedure, we may elect to make future distributions of our taxable income in a mixture of stock and cash. Our REIT taxable income does not necessarily equal our net income as calculated in accordance with GAAP or our Distributable Earnings as described above. See Note 10 to our consolidated financial statements included in this Form 10-Q for additional details.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Corporate Activities
Issuance of Series C Preferred Stock
OnJune 14, 2021 , we received net proceeds of$194.4 million from the sale of the 8,050,000 shares of Series C Preferred Stock after deducting the underwriting discount and commissions of$6.3 million and issuance costs of$0.6 million . We used the net proceeds from the offering to partially fund the redemption of all of the outstanding shares of the Series B Preferred Stock. The Series C Preferred Stock is currently listed on the NYSE under the symbol "TRTX PRC." The Series C Preferred Stock has a liquidation preference of$25.00 per share. When, as, and if authorized by the board of directors and declared by us, dividends on the Series C Preferred Stock will be payable quarterly in arrears on or aboutMarch 30 ,June 30 ,September 30 , andDecember 30 of each year at a rate per annum equal to 6.25% per annum of the$25.00 per share liquidation preference. Dividends on the Series C Preferred Stock are cumulative. The first dividend on the Series C Preferred Stock is payable onSeptember 30, 2021 , and will cover the period from, and including,June 14, 2021 to, but not including,September 30, 2021 and will be in the amount of$0.46 per share.
For additional details regarding the offering of Series C Preferred Stock, see Note 13 to our consolidated financial statements included in this Form 10-Q.
Issuance of Series B Preferred Stock and Warrants to Purchase Common Stock
OnMay 28, 2020 , we entered into an Investment Agreement with the Purchaser, an affiliate ofStarwood Capital Group Global II, L.P. , under which we agreed to issue and sell to the Purchaser up to 13 million shares of Series B Preferred Stock and Warrants to purchase, in the aggregate, up to 15 million shares (subject to adjustment) of our Common Stock, for an aggregate cash purchase price of up to$325.0 million . Such purchases were permitted to occur in up to three tranches prior toDecember 31, 2020 . The Investment Agreement contained market standard provisions regarding board representation, voting agreements, rights to information, and a standstill agreement and registration rights agreement regarding common stock acquired via exercise of Warrants. The Purchaser acquired the first tranche of the Investment Agreement, consisting of 9.0 million shares of Series B Preferred Stock and Warrants to purchase up to 12.0 million shares of Common Stock, for an aggregate price of$225.0 million . We allowed the option to issue additional shares of Series B Preferred Stock to expire unused. 65
-------------------------------------------------------------------------------- OnJune 16, 2021 , we redeemed all 9,000,000 outstanding shares of the Series B Preferred Stock at an aggregate redemption price of$247.5 million . Dividends on all shares of Series B Preferred Stock were paid in full as of the redemption date. As a result of the redemption, dividends will no longer accrue or be declared on any shares of Series B Preferred Stock, and no shares of Series B Preferred Stock remain outstanding. In connection with the redemption, we made a make-whole payment to the holder of the Series B Preferred Stock of$22.5 million , the amount equal to the present value of all remaining dividend payments due on such shares of Series B Preferred Stock from and after the redemption date (and not including any declared or paid dividends or accrued dividends prior to such redemption date) through the second anniversary of the original issue date, computed in accordance with the terms of the Articles Supplementary. This make-whole payment is recorded as Series B Preferred Stock Redemption Make-Whole Payment on our consolidated statements of changes in equity and treated similarly to a dividend on preferred stock for GAAP purposes. Additionally, we accelerated the accretion of approximately$22.5 million related to the remaining unamortized discount, which was included in Series B Preferred Stock Accretion and Write-off of Discount, including Allocated Warrant Fair Value and Transaction Costs on our consolidated statements of changes in equity and treated similarly to a dividend on preferred stock for GAAP purposes.
None of the Warrants had been exercised as of
Offering of Common Stock
OnMarch 7, 2019 , we and our Manager entered into an equity distribution agreement with each ofCitigroup Global Markets Inc. ,J.P. Morgan Securities LLC ,JMP Securities LLC ,Wells Fargo Securities, LLC andTPG Capital BD, LLC (each a "Sales Agent" and, collectively, the "Sales Agents") relating to the issuance and sale of shares of our common stock pursuant to a continuous offering program. In accordance with the terms of the equity distribution agreement, we may, at our discretion and from time to time, offer and sell shares of our common stock having an aggregate gross sales price of up to$125.0 million through the Sales Agents, each acting as our agent. The offering of shares of our common stock pursuant to the equity distribution agreement will terminate upon the earlier of (1) the sale of shares of our common stock subject to the equity distribution agreement having an aggregate gross sales price of$125.0 million and (2) the termination of the equity distribution agreement by the Sales Agents or us at any time as set forth in the equity distribution agreement. As ofMarch 31, 2021 , cumulative gross proceeds issued under the equity distribution agreement totaled$50.9 million , leaving$74.1 million available for future issuance subject to the direction of management, and market conditions. Each Sales Agent will be entitled to commissions in an amount not to exceed 1.75% of the gross sales prices of shares of our common stock sold through it, as our agent. No shares of common stock were sold during the three months endedJune 30, 2021 . For the six months endedJune 30, 2020 , we sold 0.6 million shares of common stock pursuant to the equity distribution agreement at a weighted average price per share of$20.53 , generating gross proceeds of$12.9 million . We paid commissions totaling$0.2 million .
Dividends
Upon the approval of our Board of Directors, we accrue dividends. Dividends are paid first to the holders of our Series A preferred stock at the rate of 12.5% of the total$0.001 million liquidation preference per annum plus all accumulated and unpaid dividends thereon, then to the holder of our Series B Preferred Stock at the rate of 11.0% per annum of the$25.00 per share liquidation preference and to the holders of our Series C Preferred Stock at the rate of 6.25% per annum of the$25.00 per share liquidation preference, and then to the holders of our common stock, in each case, to the extent outstanding. We intend to distribute each year substantially all our taxable income to our stockholders to comply with the REIT provisions of the Internal Revenue Code of 1986, as amended. The Board of Directors will determine whether to pay future dividends, entirely in cash, or in a combination of stock and cash based on facts and circumstances at the time such decisions are made. OnJune 14, 2021 , our Board of Directors declared and approved a cash dividend for the second quarter of 2021 in the amount of$0.20 per share of common stock, or$15.5 million in the aggregate, which was paid onJuly 23, 2021 to holders of record of our common stock as ofJune 28, 2021 . OnJune 14, 2021 , our Board of Directors declared a cash dividend for the second quarter of 2021 in the amount of$0.69 per share of Series B Preferred Stock, or$6.2 million in the aggregate, which dividend was paid onJune 16, 2021 to the holder of record of the Series B Preferred Stock as ofJune 15, 2021 . OnJune 16, 2020 , our Board of Directors declared and approved a cash dividend for the second quarter of 2020 in the amount of$0.20 per share of common stock, or$15.4 million in the aggregate, which was paid onJuly 24, 2020 to holders of record of our common stock as ofJune 26, 2020 . OnMarch 23, 2020 , we announced the deferral untilJuly 14, 2020 of the payment of our declared first quarter cash dividend to stockholders of record as ofJune 15, 2020 , which was paid onJuly 14, 2020 . OnJune 16, 2020 , our Board of Directors declared a cash dividend for the second quarter of 2020 in the amount of$0.25 per share of Series B Preferred Stock, or$2.3 million in the aggregate, which dividend was paid onJune 30, 2020 to the holder of record of the Series B Preferred Stock as ofJune 15, 2020 . 66 --------------------------------------------------------------------------------
For the six months ended
As of
Critical Accounting Policies
The preparation of our consolidated financial statements in accordance with GAAP requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities, interest income and other revenue recognition, allowance for loan losses, expense recognition, tax liability, future impairment of our investments, valuation of our investment portfolio and disclosure of contingent assets and liabilities, among other items. Our management bases these estimates and judgments about current, and for some estimates, future economic and market conditions and their effects on available information, historical experience and other assumptions that we believe are reasonable under the circumstances. However, these estimates, judgments and assumptions are often subjective and may be impacted negatively based on changing circumstances or changes in our analyses. If conditions change from those expected, it is possible that our judgments, estimates and assumptions could change, which may result in a change in our interest income and other revenue recognition, allowance for loan losses, expense recognition, tax liability, future impairment of our investments, and valuation of our investment portfolio, among other effects. If actual amounts are ultimately different from those estimated, judged or assumed, revisions are included in the consolidated financial statements in the period in which the actual amounts become known. We believe our critical accounting policies could potentially produce materially different results if we were to change underlying estimates, judgments or assumptions.
For a discussion of our critical accounting policies, see Note 2 to our consolidated financial statements included in this Form 10-Q.
Recent Accounting Pronouncements
For a discussion of recently issued accounting pronouncements, see Note 2 to our consolidated financial statements included in this Form 10-Q.
Subsequent Events
The following events occurred subsequent to
• We have closed, or are in the process of closing, five first mortgage loans
with a total loan commitment amount of
of
• From
related to two of our first mortgage loans with a total loan commitment and
unpaid principal balance of
respectively. As of
weighted average risk rating of 2.8 and were include in the Company's
office and multifamily property categories.
• In
secured credit facility with Goldman Sachs from
19, 2022, with two additional one-year extensions at our option, provided
the secured credit facility is not in default.
67
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Loan Portfolio Details
The following table provides details with respect to our loan investment
portfolio on a loan-by-loan basis as of
Origination
Form of / Acquisition Total Principal Amortized Credit All-in Fixed / Extended Property Loan Loan Per Risk
Loan # Investment Date(2) Loan Balance Cost(3) Spread(4) Yield(5) Floating Maturity(6) City, State Type Type SQFT / Unit LTV(7) Rating(8)
First Mortgage
Loans(1)
1 Senior Loan 8/21/2019$ 300.8 $ 290.2
65.2 % (12) 3 2 Senior Loan 8/7/2018 223.0 173.0
172.4 L+ 3.4 % L +3.6% Floating
61.4 % 3 3 Senior Loan 5/5/2021 215.0 120.7
120.0 L+ 3.9 % L +4.1% Floating
63.1 % 3 4 Senior Loan 12/19/2018 210.0 185.3
185.3 L+ 3.6 % L +4.0% Floating
59.8 % 3 5 Senior Loan 12/21/2018 206.5 205.0
205.0 L+ 2.9 % L +3.2% Floating
Various, FL Multifamily Light Transitional
76.6 % 2 6 Senior Loan (11) 9/18/2019 200.0 197.0
196.8 L+ 2.9 % L +3.2% Floating
65.2 % 3 7 Senior Loan 6/28/2018 190.0 185.8
185.8 L+ 2.7 % L +3.0% Floating
Philadelphia, PA Office Bridge$177 Sq ft 73.6 % 3 8 Senior Loan 9/29/2017 173.3 167.2
167.2 L+ 4.3 % L +4.7% Floating
72.2 % 3 9 Senior Loan 10/12/2017 165.0 165.0
165.0 L+ 3.8 % L +4.0% Floating
Charlotte, NC Hotel Bridge$235,714 Unit 65.5 % 4 10 Senior Loan 2/14/2018 165.0 161.9
161.9 L+ 3.8 % L +4.0% Floating
Various, NJ Multifamily Bridge$132,850 Unit 78.4 % 3 11 Senior Loan 9/28/2018 160.0 156.0
156.0 L+ 2.8 % L +3.0% Floating
61.9 % 3 12 Senior Loan 5/15/2019 143.0 132.1
132.1 L+ 2.6 % L +2.9% Floating
61.0 % 3 13 Senior Loan 5/7/2021 122.5 118.0
118.0 L+ 2.9 % L +3.1% Floating
Towson, MD Multifamily Bridge$147,947 Unit 70.2 % 3 14 Senior Loan6/14/2021 114.0 86.0 86.0 L+ 3.1 % L +3.4% Floating7/9/2026 Hayward, CA Office Moderate Transitional$308 Sq ft 49.7 % 3 15 Senior Loan 11/26/2019 113.0 113.7
113.7 L+ 3.0 % L +3.3% Floating
Burbank, CA Hotel Bridge$231,557 Unit 70.4 % 4 16 Senior Loan12/20/2018 105.9 98.5 98.5 L+ 3.3 % L +3.4% Floating1/9/2024 Torrance, CA Mixed-Use Moderate Transitional$254 Sq ft 61.1 % 3 17 Senior Loan12/18/2019 101.0 82.2 82.2 L+ 2.6 % L +2.8% Floating1/9/2025 Arlington, VA Office Light Transitional$319 Sq ft 71.1 % 3 18 Senior Loan 1/27/2020 94.0 44.4 44.0 L+ 3.3 % L +3.6% Floating 2/9/2025
61.6 % 3 19 Senior Loan8/28/2019 90.0 77.2 76.7 L+ 3.1 % L +3.3% Floating9/9/2024 San Diego, CA Office Moderate Transitional$382 Sq ft 67.7 % 3 20 Senior Loan6/29/2021 90.0 81.4 81.4 L+ 3.0 % L +3.2% Floating7/9/2026 Columbus, OH Multifamily Light Transitional$109,756 Unit 79.0 % 3 21 Senior Loan 9/29/2017 89.5 89.2 89.2 L+ 3.9 % L +4.2% Floating 10/9/2022
50.7 % 3 22 Senior Loan9/25/2020 88.9 78.8 78.8 L+ 3.0 % L +3.1% Floating4/9/2025 Brooklyn, NY Office Light Transitional$200 Sq ft 78.4 % 3 23 Senior Loan3/27/2019 88.2 88.5 88.2 L+ 3.5 % L +3.8% Floating4/9/2024 Aurora, IL Multifamily Bridge$211,394 Unit 74.8 % 3 24 Senior Loan 3/28/2019 88.1 87.1 87.0 L+ 3.7 % L +4.0% Floating 4/9/2024
Various, Various Hotel Moderate Transitional
69.6 % 4 25 Senior Loan3/7/2019 81.3 81.3 81.3 L+ 3.1 % L +3.4% Floating3/9/2024 Rockville, MD Mixed-Use Bridge$256 Sq ft 67.2 % 3 26 Senior Loan 2/1/2017 80.7 80.7 80.7 L+ 4.7 % L +5.0% Floating 2/9/2023
St. Pete Beach, FL Hotel Light Transitional
60.7 % 3 27 Senior Loan 8/8/2019 76.5 61.7 61.6 L+ 3.0 % L +3.2% Floating 8/9/2024
64.2 % 3 28 Senior Loan12/10/2019 75.8 57.2 57.2 L+ 2.6 % L +2.8% Floating12/9/2024 San Mateo, CA Office Moderate Transitional$368 Sq ft 65.8 % 3 29 Senior Loan4/29/2019 70.0 70.0 69.8 L+ 3.3 % L +3.5% Floating5/9/2024 Clayton, MO Multifamily Bridge$280,000 Unit 74.9 % 3 30 Senior Loan 6/28/2019 63.9 58.5 58.5 L+ 2.5 % L +2.7% Floating 7/9/2024
70.9 % 3 31 Senior Loan 11/8/2019 62.1 60.1 60.0 L+ 3.9 % L +4.0% Floating 11/9/2021
38.4 % 3 32 Senior Loan6/25/2019 62.0 57.7 57.6 L+ 3.1 % L +3.3% Floating7/9/2024 Calistoga, CA Hotel Moderate Transitional$696,629 Unit 48.6 % 3 33 Senior Loan6/20/2018 61.0 57.7 57.7 L+ 3.0 % L +3.3% Floating7/9/2023 Houston, TX Office Light Transitional$162 Sq ft 74.9 % 3 34 Senior Loan 1/8/2019 60.2 36.7 36.6 L+ 3.8 % L +4.1% Floating 2/9/2024
74.3 % 4 35 Senior Loan12/18/2019 58.8 56.0 55.7 L+ 2.7 % L +3.0% Floating1/9/2025 Houston, TX Multifamily Light Transitional$80,109 Unit 73.6 % 3 36 Senior Loan 3/12/2020 55.0 49.5 49.2 L+ 2.7 % L +2.9% Floating 3/9/2025
75.4 % 3 37 Senior Loan1/22/2019 54.0 54.0 54.0 L+ 3.9 % L +4.1% Floating2/9/2023 Manhattan, NY Office Light Transitional$441 Sq ft 61.1 % 3 38 Senior Loan1/23/2018 53.7 52.6 52.6 L+ 3.4 % L +3.6% Floating2/9/2023 Walnut Creek, CA Office Bridge$120 Sq ft 66.9 % 2 39 Senior Loan6/15/2018 53.6 50.9 50.8 L+ 3.1 % L +3.3% Floating6/9/2023 Brisbane, CA Office Moderate Transitional$514 Sq ft 72.4 % 2 40 Senior Loan 10/10/2019 52.9 49.1 48.9 L+ 2.8 % L +3.1% Floating 11/9/2024
69.5 % 3 41 Senior Loan (13)6/3/2021 51.4 47.5 47.0 L+ 4.7 % L +4.8% Floating6/9/2026 Durham, NC Multifamily Bridge$102,787 Unit 86.3 % 3 42 Senior Loan12/20/2017 51.0 51.7 51.7 L+ 4.0 % L +4.3% Floating1/9/2023 New Orleans, LA Hotel Bridge$217,949 Unit 59.9 % 4 43 Senior Loan 3/12/2020 50.2 45.0 44.8 L+ 2.7 % L +2.9% Floating 3/9/2025
75.6 % 3 44 Senior Loan 6/2/2021 48.5 42.5 42.1 L+ 3.8 % L +4.0% Floating 6/9/2026
71.0 % 3
45 Senior Loan 4/6/2021 47.0 45.9 45.7 L+ 3.7 % L +4.0% Floating 4/9/2026 St. Petersburg, FL Multifamily Bridge $222,749 Unit 74.8 % 3
46 Senior Loan 11/29/2018 47.0 47.0 46.9 L+ 3.3 % L +3.5% Floating 12/9/2023 Brooklyn, NY Multifamily Moderate Transitional $166,619 Unit 58.0 % 4
47 Senior Loan 3/17/2021 45.4 37.5 37.1 L+ 3.3 % L +3.6% Floating 4/9/2026 Indianapolis, IN Multifamily Light Transitional $62,209 Unit 63.7 % 3
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Origination
Form of / Acquisition Total Principal Amortized Credit All-in Fixed / Extended Property Loan Loan Per Risk
Loan # Investment Date(2) Loan Balance Cost(3) Spread(4) Yield(5) Floating Maturity(6) City, State Type
Type SQFT / Unit LTV(7) Rating(8)
48 Senior Loan 3/30/2018 43.8 41.9 41.9 L+ 3.7 % L +3.9% Floating
3
49 Senior Loan 1/28/2019 43.1 40.3 40.2 L+ 3.0 % L +3.2% Floating 2/9/2024 Dallas, TX Office Light Transitional $222 Sq ft 64.3 % 3
50 Senior Loan 3/7/2019 39.2 40.2 40.1 L+ 3.8 % L +8.0% Floating
4
51 Senior Loan 3/11/2019 39.0 39.4 39.4 L+ 3.4 % L +3.6% Floating 4/9/2024 Miami Beach, FL Hotel Bridge $295,455 Unit 59.3 % 4
52 Senior Loan 3/10/2020 37.5 36.5 36.5 L+ 2.7 % L +3.0% Floating 3/9/2025 Austin, TX Multifamily Bridge $94,458 Unit 73.5 % 3
53 Senior Loan 6/3/2021 36.4 33.7 33.3 L+ 3.6 % L +3.8% Floating 6/9/2026 Riverside, CA Mixed-Use Bridge $103 Sq ft 62.2 % 2
54 Senior Loan 1/4/2018 35.2 30.0 30.0 L+ 3.4 % L +3.7% Floating 1/9/2023 Santa Ana, CA Office Light Transitional $178 Sq ft 71.8 % 3
55 Senior Loan 5/27/2018 33.0 31.2 31.2 L+ 3.7 % L +3.9% Floating 6/9/2023 Woodland Hills, CA Retail Bridge $498 Sq ft 63.6 % 5
56 Senior Loan 5/14/2021 27.6 21.6 21.3 L+ 3.2 % L +3.5% Floating 6/9/2026 Pensacola, FL Multifamily Moderate Transitional $137,752 Unit 72.8 % 3
57 Senior Loan 9/13/2019 26.7 26.3 26.2 L+ 2.8 % L +3.0% Floating 10/9/2024 Austin, TX Multifamily Bridge $135,051 Unit 77.5 % 3
58 Senior Loan 10/19/2016 9.6 9.6 9.6 L+ 5.1 % L +5.4% Floating 5/9/2022 Manhattan, NY Condominium Moderate Transitional $641 Sq ft 49.8 % 3
59 Senior Loan 10/19/2016 7.3 7.3 7.3 L+ 5.1 % L +5.4% Floating 5/9/2022 Manhattan, NY Condominium Moderate Transitional $725 Sq ft 43.3 % 3
60 Senior Loan 10/19/2016 4.4 4.4 4.4 L+ 5.1 % L +5.4% Floating 5/9/2022 Manhattan, NY Condominium Moderate Transitional $715 Sq ft 40.7 % 3
61 Senior Loan 10/19/2016 1.8 1.8 1.8 L+ 5.1 % L +5.4% Floating 5/9/2022 Manhattan, NY Condominium Moderate Transitional $478 Sq ft 46.6 % 3
Subtotal / Weighted
Average $ 5,283.3 $ 4,799.2 $ 4,791.7 L +3.2% (9) L +3.5% 2.9 yrs 66.9 % 3.1
Mezzanine Loans:
62 Mezzanine Loan 6/28/2019 35.0 (10) 34.3 34.2 L+ 10.3 % L +10.8% Floating 6/28/2025 Napa, CA Hotel Construction $818,195 Unit 41.0 % 3
Subtotal / Weighted
Average$ 35.0 $ 34.3 $ 34.2 L +10.3% L +10.8% 4.0 yrs 41.0 % 3
Total / Weighted
Average$ 5,318.3 $ 4,833.5 $ 4,825.9 L +3.2% L +3.5% 2.9 yrs 66.7 % 3.1
(1) First mortgage loans are whole mortgage loans unless otherwise noted. Loans
numbered 58, 59, 60 and 61 represent 24% pari passu participation interests
in whole mortgage loans.
(2) Date loan was originated or acquired by us, which date has not been updated
for subsequent loan modifications.
(3) Represents unpaid principal balance net of unamortized costs.
(4) Represents the formula pursuant to which our right to receive a cash coupon
on a loan is determined.
(5) In addition to credit spread, all-in yield includes the amortization of
deferred origination fees, purchase price premium and discount, loan
origination costs and accrual of both extension and exit fees. All-in yield
for the total portfolio assumes the applicable floating benchmark rate as of
(6) Extended maturity assumes all extension options are exercised by the
borrower; provided, however, that our loans may be repaid prior to such date.
As of
were subject to yield maintenance or other prepayment restrictions and 79.4%
were open to repayment by the borrower without penalty.
(7) Except for construction loans, LTV is calculated for loan originations and
existing loans as the total outstanding principal balance of the loan or
participation interest in a loan (plus any financing that is pari passu with
or senior to such loan or participation interest) divided by the as-is
appraised value of our collateral at the time of origination or acquisition
of such loan or participation interest. For construction loans only, LTV is
calculated as the total commitment amount of the loan divided by the
as-stabilized value of the real estate securing the loan. The as-is or
as-stabilized (as applicable) value reflects our Manager's estimates, at the
time of origination or acquisition of the loan or participation interest in a
loan, of the real estate value underlying such loan or participation interest
determined in accordance with our Manager's underwriting standards and
consistent with third-party appraisals obtained by our Manager.
(8) For a discussion of risk ratings, please see Notes 2 and 3 to our
consolidated financial statements included in this Form 10-Q.
(9) Represents the weighted average of the credit spread as of
the loans, all of which are floating rate.
(10) Reflects the total loan amount, including non-consolidated senior interest,
allocable to the property's 135 hotel rooms. Excludes other improvements
planned for the remainder of the project site.
(11) This loan is comprised of a first mortgage loan of
contiguous mezzanine loan of
carries the same interest rate.
(12) Calculated as the ratio of unpaid principal balance as of
the as-is appraised value at origination, to reflect the sale by us in
August 2020 of the contiguous mezzanine loan with an unpaid principal
balance of $46.4 million and a commitment amount of $50.0 million .
(13) On
million (Loan # 41). This loan is comprised of a first mortgage loan of
own both. The interest rate on the first mortgage loan is 3.9% and the
interest rate on the contiguous mezzanine loan is 12.0%. The weighted
average interest rate is 4.7%.
69
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