Annual report pursuant to Section 13 and 15(d)

Commercial Real Estate Assets Commercial Real Estate Assets (Notes)

v3.3.1.900
Commercial Real Estate Assets Commercial Real Estate Assets (Notes)
12 Months Ended
Dec. 31, 2015
Commercial Real Estate Assets [Abstract]  
Commercial Real Estate Assets [Text Block]
Commercial Real Estate Assets
The Company originates and purchases commercial real estate debt and related instruments generally to be held as long-term investments. These assets are classified as commercial real estate assets on the consolidated balance sheets. Additionally, the Company is the sole certificate holder of a trust entity that holds a commercial real estate loan. The underlying loan held by the trust is consolidated on the Company’s consolidated balance sheets and classified as commercial real estate assets. See Note 3 - Variable Interest Entities for additional information regarding consolidation of the trust. Commercial real estate assets are reported at cost, net of any unamortized acquisition premiums or discounts, loan fees and origination costs as applicable, unless the assets are deemed impaired.
The following tables summarize the Company’s commercial real estate assets by asset type, property type and geographic location as of December 31, 2015:
 
December 31,
2015
 
December 31,
2014
(in thousands)
Mezzanine Loans
 
First Mortgages
 
Total
 
Mezzanine Loans
 
First Mortgages
 
Total
Unpaid principal balance
$
153,913

 
$
513,433

 
$
667,346

 
$

 
$

 
$

Unamortized (discount) premium
(237
)
 

 
(237
)
 

 

 

Unamortized net deferred origination fees
(830
)
 
(5,326
)
 
(6,156
)
 

 

 

Carrying value
$
152,846

 
$
508,107

 
$
660,953

 
$

 
$

 
$

Unfunded commitments
$
1,900

 
$
50,334

 
$
52,234

 
$

 
$

 
$

Number of loans
6

 
12

 
18

 

 

 

Weighted average coupon
8.1
%
 
4.5
%
 
5.4
%
 
%
 
%
 
%
Weighted average years to maturity (1)
2.6

 
3.3

 
3.1

 

 

 

____________________
(1)
Based on contractual maturity date. Certain loans are subject to contractual extension options which may be subject to conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment penalty. The Company may also extend contractual maturities in connection with loan modifications.

(in thousands)
December 31,
2015
 
December 31,
2014
Property Type
Carrying Value
 
% of Commercial Portfolio
 
Carrying Value
 
% of Commercial Portfolio
Retail
$
185,883

 
28.1
%
 
$

 
%
Hotel
80,843

 
12.2
%
 

 
%
Multifamily
139,011

 
21.1
%
 

 
%
Office
255,216

 
38.6
%
 

 
%
Total
$
660,953

 
100.0
%
 
$

 
%

(in thousands)
December 31,
2015
 
December 31,
2014
Geographic Location
Carrying Value
 
% of Commercial Portfolio
 
Carrying Value
 
% of Commercial Portfolio
West
$
131,488

 
19.9
%
 
$

 
%
Southeast
240,839

 
36.4
%
 

 
%
Northeast
238,913

 
36.2
%
 

 
%
Midwest
49,713

 
7.5
%
 

 
%
Total
$
660,953

 
100.0
%
 
$

 
%


At December 31, 2015, the Company pledged commercial real estate assets with a carrying value of $361.1 million as collateral for repurchase agreements and FHLB advances. See Note 17 - Repurchase Agreements and Note 19 - Federal Home Loan Bank of Des Moines Advances. The Company did not hold any commercial real estate assets as of December 31, 2014.
The following table summarizes activity related to commercial real estate assets for the years ended December 31, 2015, 2014 and 2013:
 
Year Ended
 
December 31,
(in thousands)
2015
 
2014
 
2013
Balance at beginning of period
$

 
$

 
$

Originations and purchases
669,283

 

 

Sales
(1,979
)
 

 

Repayments
(344
)
 

 

Net discount accretion (premium amortization)
149

 

 

(Increase) decrease in net deferred origination fees
(6,656
)
 

 

Amortization of net deferred origination fees
319

 

 

Realized gains on sales
181

 

 

Allowance for loan losses

 

 

Balance at end of period
$
660,953

 
$

 
$



The Company evaluates each loan for impairment at least quarterly by assessing the risk factors of each loan and assigning a risk rating based on a variety of factors. Risk factors include property type, geographic and local market dynamics, physical condition, leasing and tenant profile, projected cash flow, loan structure and exit plan, loan-to-value ratio, project sponsorship, and other factors deemed necessary. Risk ratings are defined as follows:

1 –
Lower Risk
2 –
Average Risk
3 –
Acceptable Risk
4 –
Higher Risk: A loan that has exhibited material deterioration in cash flows and/or other credit factors, which, if negative trends continue, could be indicative of future loss.
5 –
Impaired/Loss Likely: A loan that has a significantly increased probability of default or principal loss.

The following table presents the number of loans, unpaid principal balance and carrying value (amortized cost) by risk rating for commercial real estate assets as of December 31, 2015 and December 31, 2014:
(dollars in thousands)
December 31,
2015
 
December 31,
2014
Risk Rating
Number of Loans
 
Unpaid Principal Balance
 
Carrying Value
 
Number of Loans
 
Unpaid Principal Balance
 
Carrying Value
1 – 3
18

 
$
667,346

 
$
660,953

 

 
$

 
$

4 – 5

 

 

 

 

 

Total
18

 
$
667,346

 
$
660,953

 

 
$

 
$



The Company has not recorded any allowances for losses as it is not deemed probable that the Company will not be able to collect all amounts due pursuant to the contractual terms of the loans.