UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________

FORM 10-Q

__________________________________

(Mark One)



x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~June 30, 2018~~March 31, 2019



¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-34452

__________________________________

Apollo Commercial Real Estate Finance, Inc.

(Exact name of registrant as specified in its charter)

__________________________________



Maryland		27-0467113
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification ~~Number)~~No.)

Apollo Commercial Real Estate Finance, Inc.

c/o Apollo Global Management, LLC

9 West 57th Street, 43rd Floor,

New York, New York 10019

(Address of ~~registrant’s~~ principal executive offices) (Zip Code)

(212) 515–3200

(Registrant’s telephone number, including area code)

__________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ~~“large~~"large accelerated filer,~~” “accelerated~~" "accelerated filer,~~” “smaller~~" "smaller reporting company,”" and ~~“emerging~~"emerging growth ~~company”~~company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	¨ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	¨

Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest ~~practical~~practicable date.

As of ~~July 24, 2018,~~April 23, 2019, there were ~~123,020,656~~136,281,597 shares, par value $0.01, of the registrant’s common stock issued and outstanding.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands—except share data)


	June 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Assets:
Cash	$	76,384		$	77,671
Commercial mortgage loans, net (includes $3,115,916 and $2,148,368 pledged as collateral under secured debt arrangements in 2018 and 2017, respectively)	3,724,221			2,653,826
Cash and cash equivalents							$	109,343		$	109,806
Commercial mortgage loans, net (includes $3,679,993 and $3,197,900 pledged as collateral under secured debt arrangements in 2019 and 2018, respectively)							4,003,089			3,878,981
Subordinate loans, net	1,142,514			1,025,932			1,183,910			1,048,612
Loan proceeds held by servicer	—			302,756			—			1,000
Other assets	27,584			28,420			36,540			33,720
Derivative assets, net	10,297			—			8,715			23,700
Total Assets	$	4,981,000		$	4,088,605		$	5,341,597		$	5,095,819
Liabilities and Stockholders' Equity
Liabilities:
Secured debt arrangements, net (net of deferred financing costs of $20,307 and $14,348 in 2018 and 2017, respectively)	$	1,960,874		$	1,330,847
Secured debt arrangements, net (net of deferred financing costs of $17,828 and $17,555 in 2019 and 2018, respectively)							$	2,141,939		$	1,879,522
Convertible senior notes, net	587,063			584,897			558,664			592,000
Derivative liabilities, net	—			5,644
Accounts payable, accrued expenses and other liabilities	81,397			70,906			91,557			104,746
Payable to related party	9,013			8,168			9,613			9,804
Total Liabilities	2,638,347			2,000,462			2,801,773			2,586,072
Commitments and Contingencies (see Note 15)
Commitments and Contingencies (see Note 14)
Stockholders’ Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized:
Series B preferred stock, 6,770,393 shares issued and outstanding ($169,260 aggregate liquidation preference) in 2018 and 2017	68			68
Series C preferred stock, 6,900,000 shares issued and outstanding ($172,500 aggregate liquidation preference) in 2018 and 2017	69			69
Common stock, $0.01 par value, 450,000,000 shares authorized, 123,020,301 and 107,121,235 shares issued and outstanding in 2018 and 2017, respectively	1,230			1,071
Series B preferred stock, 6,770,393 shares issued and outstanding ($169,260 liquidation preference)							68			68
Series C preferred stock, 6,900,000 shares issued and outstanding ($172,500 liquidation preference)							69			69
Common stock, $0.01 par value, 450,000,000 shares authorized, 136,254,352 and 133,853,565 shares issued and outstanding in 2019 and 2018, respectively							1,363			1,339
Additional paid-in-capital	2,447,973			2,170,078			2,671,100			2,638,441
Accumulated deficit	(106,687		)	(83,143		)	(132,776		)	(130,170		)
Total Stockholders’ Equity	2,342,653			2,088,143			2,539,824			2,509,747
Total Liabilities and Stockholders’ Equity	$	4,981,000		$	4,088,605		$	5,341,597		$	5,095,819

See notes to unaudited condensed consolidated financial statements.

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations (Unaudited)

(in thousands—except share and per share data)


	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2018			2017			2018			2017			2019			2018
Net interest income:
Interest income from commercial mortgage loans	$	65,141		$	37,089		$	117,255		$	71,487		$	78,286		$	52,114
Interest income from subordinate loans	34,075			39,640			67,928			74,030			40,839			33,853
Interest income from securities	—			4,700			—			10,754
Interest expense	(28,437		)	(19,205		)	(51,177		)	(36,235		)	(36,295		)	(22,740		)
Net interest income	70,779			62,224			134,006			120,036			82,830			63,227
Operating expenses:
General and administrative expenses (includes equity-based compensation of $4,014 and $7,356 in 2018 and $3,461 and $7,252 of equity-based compensation in 2017, respectively)	(5,652		)	(5,200		)	(10,650		)	(10,958		)
General and administrative expenses (includes equity-based compensation of $3,901 and $3,342 in 2019 and 2018, respectively)													(6,151		)	(4,998		)
Management fees to related party	(9,013		)	(7,742		)	(17,105		)	(15,175		)	(9,613		)	(8,092		)
Total operating expenses	(14,665		)	(12,942		)	(27,755		)	(26,133		)	(15,764		)	(13,090		)
Loss from unconsolidated joint venture	—			(3,305		)	—			(2,847		)
Other income	343			244			546			352			518			203
Provision for loan losses and impairments	(5,000		)	(5,000		)	(5,000		)	(5,000		)
Realized loss on sale of assets	—			—			—			(1,042		)
Unrealized loss on securities	—			(4,510		)	—			(1,658		)
Foreign currency gain (loss)	(29,649		)	6,913			(19,524		)	10,085
Gain (loss) on derivative instruments (includes unrealized gains (losses) of $24,796 and $15,941 in 2018 and $(7,435) and $(10,324) in 2017, respectively)	33,538			(7,389		)	22,506			(10,434		)
Foreign currency gain													6,894			10,125
Loss on derivative instruments (includes unrealized losses of $14,985 and $8,855 in 2019 and 2018, respectively)													(6,720		)	(11,032		)
Net income	55,346			36,235			104,779			83,359			$	67,758		$	49,433
Preferred dividends	$	(6,834	)	$	(9,310	)	$	(13,669	)	$	(18,620	)	(6,835		)	(6,835		)
Net income available to common stockholders	48,512			26,925			91,110			64,739			$	60,923		$	42,598
Net income per share of common stock	$	0.39		$	0.28		$	0.78		$	0.68
Basic weighted average shares of common stock outstanding	123,019,993			95,428,134			116,651,305			93,530,831
Diluted weighted average shares of common stock outstanding	124,629,317			96,796,289			118,281,153			94,907,762
Net income per share of common stock:
Basic													$	0.45		$	0.38
Diluted													$	0.43		$	0.38
Basic weighted-average shares of common stock outstanding													134,607,107			110,211,853
Diluted weighted-average shares of common stock outstanding													164,683,086			111,871,429
Dividend declared per share of common stock	$	0.46		$	0.46		$	0.92		$	0.92		$	0.46		$	0.46

See notes to unaudited condensed consolidated financial statements.

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Statement of ~~Comprehensive Income~~Changes in Stockholders’ Equity (Unaudited)

(in ~~thousands)~~thousands—except share and per share data)

Three months ended June 30, Six months ended June 30,
2018 2017 2018 2017
Net income available to common stockholders $ 48,512
$ 26,925
$ 91,110
$ 64,739
Foreign currency translation adjustment —
3,560
—
3,811
Comprehensive income $ 48,512
$ 30,485
$ 91,110
$ 68,550



	Preferred Stock			Common Stock			Additional Paid-In-Capital			Accumulated Deficit			Total
	Shares	Par		Shares	Par		Additional Paid-In-Capital			Accumulated Deficit			Total
Balance at January 1, 2018	13,670,393	$	137	107,121,235	$	1,071	$	2,170,078		$	(83,143	)	$	2,088,143
Capital increase (decrease) related to Equity Incentive Plan	—	—		345,996	4		(1,389		)	—			(1,385		)
Issuance of common stock	—	—		15,525,000	155		275,724			—			275,879
Offering costs	—	—		—	—		(377		)	—			(377		)
Net income	—	—		—	—		—			49,433			49,433
Dividends declared on preferred stock	—	—		—	—		—			(6,835		)	(6,835		)
Dividends declared on common stock - $0.46 per share	—	—		—	—		—			(57,328		)	(57,328		)
Balance at March 31, 2018	13,670,393	$	137	122,992,231	$	1,230	$	2,444,036		$	(97,873	)	$	2,347,530



	Preferred Stock			Common Stock			Additional Paid-In-Capital			Accumulated Deficit			Total
	Shares	Par		Shares	Par		Additional Paid-In-Capital			Accumulated Deficit			Total
Balance at January 1, 2019	13,670,393	$	137	133,853,565	$	1,339	$	2,638,441		$	(130,170	)	$	2,509,747
Capital decrease related to Equity Incentive Plan	—	—		433,426	4		(1,099		)	—			(1,095		)
Conversions of convertible senior notes for common stock	—	—		1,967,361	20		33,758			—			33,778
Net income	—	—		—	—		—			67,758			67,758
Dividends declared on preferred stock	—	—		—	—		—			(6,835		)	(6,835		)
Dividends declared on common stock - $0.46 per share	—	—		—	—		—			(63,529		)	(63,529		)
Balance at March 31, 2019	13,670,393	$	137	136,254,352	$	1,363	$	2,671,100		$	(132,776	)	$	2,539,824

See notes to unaudited condensed consolidated financial statements.

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Statement of ~~Changes in Stockholders’ Equity~~Cash Flows (Unaudited)

(in ~~thousands—except share and per share data)~~

thousands)

Preferred Stock Common Stock
Additional
Paid-In-Capital

Accumulated
Deficit
Total
Shares Par Shares Par
Balance at January 1, 2018 13,670,393
$ 137
107,121,235
$ 1,071
$ 2,170,078
$ (83,143 ) $ 2,088,143
Capital increase related to Equity Incentive Plan —
—
374,066
4
2,624
—
2,628
Issuance of common stock —
—
15,525,000
155
275,724
—
275,879
Offering costs —
—
—
—
(453 ) —
(453 )
Net income —
—
—
—
—
104,779
104,779
Dividends declared on preferred stock —
—
—
—
—
(13,669 ) (13,669 )
Dividends declared on common stock - $0.46 per share —
—
—
—
—
(114,654 ) (114,654 )
Balance at June 30, 2018 13,670,393 $ 137
123,020,301 $ 1,230
$ 2,447,973
$ (106,687 ) $ 2,342,653



	For the three months ended March 31,
	2019			2018
Cash flows (used in) provided by operating activities:
Net income	$	67,758		$	49,433
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of discount/premium and PIK	(19,611		)	(15,695		)
Amortization of deferred financing costs	3,461			2,545
Equity-based compensation	(1,095		)	(1,385		)
Foreign currency gain	(5,828		)	(9,853		)
Unrealized loss on derivative instruments	14,985			8,855
Changes in operating assets and liabilities:
Proceeds received from PIK	—			55,000
Other assets	(2,898		)	(2,620		)
Accounts payable, accrued expenses and other liabilities	620			2,075
Payable to related party	(191		)	(76		)
Net cash (used in) provided by operating activities	57,201			88,279
Cash flows used in investing activities:
New funding of commercial mortgage loans	(197,000		)	(476,951		)
Add-on funding of commercial mortgage loans	(105,452		)	(13,185		)
New funding of subordinate loans	(244,844		)	(11,687		)
Add-on funding of subordinate loans	(4,879		)	(5,208		)
Proceeds and payments received on commercial mortgage loans	191,317			90,547
Proceeds and payments received on subordinate loans	130,010			257,548
Origination and exit fees received on commercial mortgage and subordinate loans	6,069			19,085
Decrease in collateral held related to derivative contracts	(18,180		)	(15,220		)
Net cash (used in) provided by investing activities	(242,959		)	(155,071		)
Cash flows from financing activities:
Proceeds from issuance of common stock	—			275,879
Payment of offering costs	—			(38		)
Proceeds from secured debt arrangements	412,434			416,549
Repayments of secured debt arrangements	(156,747		)	(538,562		)
Exchanges and conversions of convertible senior notes	(704		)	—
Payment of deferred financing costs	(91		)	(2,234		)
Dividends on common stock	(62,762		)	(57,328		)
Dividends on preferred stock	(6,835		)	(6,835		)
Net cash (used in) provided by financing activities	185,295			87,431
Net increase (decrease) in cash and cash equivalents	(463		)	20,639
Cash and cash equivalents, beginning of period	109,806			77,671
Cash and cash equivalents, end of period	$	109,343		$	98,310
Supplemental disclosure of cash flow information:
Interest paid	$	32,428		$	26,517
Supplemental disclosure of non-cash financing activities:
Exchange of convertible senior notes for common stock	$	33,778		$	—
Dividend declared, not yet paid	$	70,364		$	63,598
Offering costs payable	$	—		$	339
Loan proceeds held by servicer	$	—		$	1,000
Deferred financing costs, not yet paid	$	3,643		$	—

See notes to unaudited condensed consolidated financial statements.

~~Apollo Commercial Real Estate Finance, Inc. and Subsidiaries~~

~~Condensed Consolidated Statement of Cash Flows (Unaudited)~~

~~(in thousands)~~

For the six months ended June 30,
2018 2017
Cash flows (used in) provided by operating activities:
     Net income $ 104,779
$ 83,359
Adjustments to reconcile net income to net cash provided by operating activities:
     Amortization of discount/premium and PIK (30,192 ) (7,934 )
     Amortization of deferred financing costs 5,355
2,761
     Equity-based compensation 2,628
4,921
     Unrealized loss on securities —
1,658
     Provision for loan losses and impairment 5,000
5,000
     Loss from unconsolidated joint venture —
2,259
     Foreign currency (gain) loss 17,371
(10,014 )
     Unrealized (gain) loss on derivative instruments (15,941 ) 10,433
     Realized loss on derivative instruments —
110
     Realized loss on sale of assets —
1,042
     Changes in operating assets and liabilities:
          Proceeds received from PIK 75,652
—
          Other assets (4,069 ) (17,734 )
          Accounts payable, accrued expenses and other liabilities 10,190
(5,127 )
          Payable to related party 845
728
Net cash (used in) provided by operating activities 171,618
71,462
Cash flows used in investing activities:
     New funding of commercial mortgage loans (1,275,507 ) (339,394 )
     Add-on funding of commercial mortgage loans (60,500 ) (61,296 )
     New funding of subordinate loans (201,966 ) (146,738 )
     Add-on funding of subordinate loans (43,284 ) (76,796 )
     Payments received on commercial mortgage loans 227,913
10,199
     Payments received on subordinate loans 367,143
58,615
     Funding of derivative instruments —
(201 )
     Origination and exit fees received on commercial mortgage and subordinate loans 28,362
7,129
     Funding of unconsolidated joint venture —
(726 )
     Funding of other assets —
(1,379 )
     (Increase) decrease in collateral held related to derivative contracts 4,930
(22 )
     Payments and proceeds received on securities —
217,708
     Proceeds from sale of investments in unconsolidated joint venture —
24,498
Net cash (used in) provided by investing activities (952,909 ) (308,403 )
Cash flows from financing activities:
     Proceeds from issuance of common stock 275,879
249,021
     Payment of offering costs (188 ) (359 )
     Proceeds from secured debt arrangements 1,367,211
464,153
     Repayments of secured debt arrangements (723,260 ) (272,878 )
     Repayments of participations sold —
(85,081 )
     Payment of deferred financing costs (11,314 ) (5,343 )
     Dividends on common stock (114,655 ) (85,724 )
     Dividends on preferred stock (13,669 ) (18,620 )
Net cash (used in) provided by financing activities 780,004
245,169
Net increase (decrease) in cash and cash equivalents (1,287 ) 8,228
Cash and restricted cash, beginning of period 77,671
263,453
Cash and restricted cash, end of period $ 76,384
$ 271,681
Supplemental disclosure of cash flow information:
     Interest paid $ 43,420
$ 11,916
Supplemental disclosure of non-cash financing activities:
     Dividend declared, not yet paid $ 64,162
$ 57,464
     Offering costs payable $ 265
$ 41

~~See notes to unaudited condensed consolidated financial statements.~~

Apollo Commercial Real Estate Finance Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 – Organization

Apollo Commercial Real Estate Finance, Inc. (together with its consolidated subsidiaries, is referred to throughout this report as the ~~“Company,” “ARI,” “we,” “us”~~"Company," "ARI," "we," "us" and ~~“our”~~"our") is a corporation that has elected to be taxed as a real estate investment trust ~~(“REIT”~~("REIT") for U.S. federal income tax purposes and primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments. These asset classes are referred to as ~~the Company’s~~our target assets.

~~The Company, organized~~We were formed in Maryland on June 29, 2009, commenced operations on September 29, 2009 and isare externally managed and advised by ACREFI Management, LLC (the ~~“Manager”~~"Manager"), an indirect subsidiary of Apollo Global Management, LLC (together with its subsidiaries, "Apollo").

~~The Company~~We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2009. To maintain ~~its~~our tax qualification as a REIT, ~~the Company is~~we are required to distribute at least 90% of ~~its~~our taxable income, excluding net capital gains, to stockholders and meet certain other asset, income, and ownership tests.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include ~~the Company’s~~our accounts and those of ~~its~~our consolidated subsidiaries. All intercompany amounts have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ~~(“GAAP”~~("GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. ~~The Company’s~~Our most significant estimates include loan loss reserves and impairment. Actual results could differ from those estimates.

These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto included in ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, as filed with the Securities and Exchange Commission (the ~~“SEC”~~"SEC"). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly ~~the Company’s~~our financial position, results of operations and cash flows have been included. ~~The Company's~~Our results of operations for the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 are not necessarily indicative of the results to be expected for the full year or any other future period.

~~The Company~~We currently ~~operates~~operate in one reporting segment.

Recent Accounting Pronouncements

In June 2018, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ASU 2018-07 "Compensation - Stock Compensation (Topic 718): Improvements to Nonemployees Share-Based Payment Accounting" ("ASU 2018-07"). The intention of ASU 2018-07 is to expand the scope of Topic 718 to include share-based payment transactions in exchange for ~~acquiring~~ goods and services from nonemployees. These share-based payments will now be measured at grant-date fair value of the equity instrument issued. Upon adoption, only liability-classified awards that have not been settled and equity-classified awards for which a measurement date has not been established should be remeasured through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. ASU 2018-07 is effective for fiscal years beginning after December 15, ~~2019~~2018 and is applied retrospectively. ~~The Company is currently assessing~~We adopted ASU 2018-07 in the first quarter of 2019 and it did not have any impact ~~if any, the guidance will have~~ on ~~the Company's~~our condensed consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12 "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” ("ASU 2017-12"). The intention of ASU 2017-12 is to align an entity’s financial reporting for hedging activities with the economic objectives of those activities. Upon adoption of ASU 2017-12, the cumulative ineffectiveness previously recognized on existing cash flow and net investment hedges will be adjusted and removed from beginning retained earnings and placed in accumulated other comprehensive income (loss). The Company notes that this guidance will not have a material impact on the Company's condensed consolidated financial statements. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018 and is applied retrospectively.

In November 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows (Topic 230): Restricted Cash” ("ASU 2016-18"). ASU 2016-18 is intended to clarify how entities present restricted cash in the statement of cash flows. The guidance

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

Balance at June 30, 2018 Balance at June 30, 2017
Cash $ 76,384
$ 214,016
Restricted cash —
57,665
Total cash and restricted cash shown in the condensed consolidated statement of cash flows $ 76,384
$ 271,681

In June 2016, the FASB issued ASU 2016-13 ~~“Financial~~"Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments (Topic 326)" ("ASU 2016-13"). ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance will replace the ~~“incurred loss”~~"incurred loss" approach under existing guidance with an ~~“expected loss”~~"expected loss" model for instruments measured at amortized cost and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. The guidance is effective for fiscal years beginning after December 15, 2019 and is to be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. While ~~the Company is~~we are currently evaluating the impact ASU 2016-13 will have on ~~its~~our condensed consolidated financial statements, we expect that the adoption will result in higher provisions for potential loan losses.

Note 3 – Fair Value Disclosure

GAAP establishes a hierarchy of valuation techniques based on the observability of the inputs utilized in measuring financial instruments at fair values. Market based, or observable inputs are the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy as noted in ASC 820 "Fair Value Measurements and ~~Disclosures~~Disclosures", are described below:

Level I — Quoted prices in active markets for identical assets or liabilities.

Level II — Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.

Level III — Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used.

While ~~the Company anticipates~~we anticipate that ~~its~~our valuation methods will be appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. ~~The Company~~We will use inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced.

The estimated fair values of ~~the Company’s~~our derivative instruments are determined using a discounted cash flow analysis on the

expected cash flows of each derivative. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The fair values of interest rate caps are determined using the market standard

methodology of discounting the future expected cash receipts (or payments) that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected cash flows are based on an

expectation of future interest rates derived from observable market interest rate curves and volatilities. The fair values of

foreign exchange forwards are determined by comparing the contracted forward exchange rate to the current market exchange

rate. The current market

exchange rates are determined by using market spot rates, forward rates and interest rate curves for

the underlying countries. ~~The Company’s~~Our derivative instruments are classified as Level II in the fair value hierarchy.

The following table summarizes the levels in the fair value hierarchy into which ~~the Company’s~~our financial instruments were categorized as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 ($ in thousands):

Fair Value as of June 30, 2018 Fair Value as of December 31, 2017
Level I Level II Level III Total Level I Level II Level III Total
Derivative assets (liabilities), net $ —
$ 10,297
$ —
$ 10,297
$ —
$ (5,644 ) $ —
$ (5,644 )



	Fair Value as of March 31, 2019								Fair Value as of December 31, 2018
	Level I		Level II		Level III		Total		Level I		Level II		Level III		Total
Derivative assets, net	$	—	$	8,715	$	—	$	8,715	$	—	$	23,700	$	—	$	23,700
Total	$	—	$	8,715	$	—	$	8,715	$	—	$	23,700	$	—	$	23,700

~~Note 4 – Securities~~

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

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

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

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

Note 54 – Commercial Mortgage and Subordinate Loans, Net

~~The Company’s~~Our loan portfolio was comprised of the following at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 ($ in thousands):


Loan Type	June 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Commercial mortgage loans, net	$	3,724,221	$	2,653,826	$	4,003,089	$	3,878,981
Subordinate loans, net	1,142,514		1,025,932		1,183,910		1,048,612
Total loans, net	$	4,866,735	$	3,679,758	$	5,186,999	$	4,927,593

~~The Company's~~Our loan portfolio consisted of ~~91%~~93% and ~~88%~~91% floating rate loans, based on amortized cost, as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

Activity relating to our loan investment portfolio, for the three months ended March 31, 2019, was as follows ($ in thousands):

Principal Balance
Deferred Fees/Other Items ⁽¹⁾

Provision for Loan Loss ⁽²⁾
Carrying Value
December 31, 2017 $ 3,706,169
$ (9,430 ) $ (16,981 ) $ 3,679,758
New loan fundings 1,477,473
—
—
1,477,473
Add-on loan fundings ⁽³⁾
103,784
—
—
103,784
Loan repayments (375,708 ) —
—
(375,708 )
Unrealized gain (loss) on foreign currency translation (25,539 ) 216
—
(25,323 )
Provision for loan loss ⁽²⁾
—
—
(5,000 ) (5,000 )
Deferred fees and other items ⁽¹⁾
—
(20,607 ) —
(20,607 )
PIK interest, amortization of fees and other items ⁽¹⁾
19,695
12,663
—
32,358
June 30, 2018 $ 4,905,874
$ (17,158 ) $ (21,981 ) $ 4,866,735



	Principal Balance			Deferred Fees/Other Items ⁽¹⁾			Provision for Loan Loss ⁽²⁾			Carrying Value
December 31, 2018	$	4,982,514		$	(17,940	)	$	(36,981	)	$	4,927,593
New loan fundings	441,844			—			—			441,844
Add-on loan fundings ⁽³⁾	110,331			—			—			110,331
Loan repayments	(322,354		)	—			—			(322,354		)
Gain (loss) on foreign currency translation	15,033			(136		)	—			14,897
Deferred fees	—			(6,069		)	—			(6,069		)
PIK interest and amortization of fees	14,321			6,436			—			20,757
March 31, 2019	$	5,241,689		$	(17,709	)	$	(36,981	)	$	5,186,999

———————

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

(2) In addition to the ~~$22.0~~$37.0 million provision for loan loss, ~~the Company~~we recorded an impairment of $3.0 million against an investment previously recorded under other assets on ~~the Company's~~our condensed consolidated balance sheet.

(3) Represents fundings for loans closed prior to ~~2018.~~2019.

The following table details overall statistics for our loan portfolio at the dates indicated ($ in thousands):


	June 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Number of loans	70			59			69			69
Principal balance	$	4,905,874		$	3,706,169		$	5,241,689		$	4,982,514
Carrying value	$	4,866,735		$	3,679,758		$	5,186,999		$	4,927,593
Unfunded loan commitments⁽¹⁾	$	818,095		$	435,627		$	1,039,089		$	1,095,598
Weighted-average cash coupon ⁽²⁾	8.1		%	8.4		%	8.4		%	8.4		%
Weighted-average remaining term ⁽³⁾							2.9 years			2.8 years

———————


(1)	Unfunded loan commitments are primarily funded to finance property improvements or lease-related expenditures by the borrowers. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.


(2)	For floating rate loans, based on applicable benchmark rates as of the specified dates.


(3)	Assumes all extension options are exercised.

The table below details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):


	June 30, 2018		December 31, 2017		March 31, 2019				December 31, 2018
Property Type	Carrying Value	% of Portfolio	Carrying Value	% of Portfolio	Carrying Value		% of Portfolio		Carrying Value		% of Portfolio
Hotel	$1,137,737	23.4%	$645,056	17.6%	$	1,330,842	25.7	%	$	1,286,590	26.1	%
Residential-for-sale: inventory ⁽¹⁾	616,608	12.7%	92,438	2.5%
Residential-for-sale: construction ⁽¹⁾	333,884	6.8%	349,739	9.5%
Residential-for-sale: construction					631,501		12.1	%	528,510		10.7	%
Residential-for-sale: inventory					421,815		8.1	%	577,053		11.7	%
Office					956,989		18.5	%	832,620		16.9	%
Urban Predevelopment	724,366	14.9%	654,736	17.8%	610,888		11.8	%	683,886		13.9	%
Office	603,947	12.4%	513,830	14.0%
Multifamily	449,414	9.2%	465,057	12.6%	521,087		10.0	%	448,899		9.1	%
Industrial					227,206		4.4	%	32,000		0.6	%
Retail Center					156,008		3.0	%	156,067		3.2	%
Healthcare					144,310		2.8	%	156,814		3.2	%
Mixed Use	356,703	7.3%	354,640	9.6%	114,284		2.2	%	73,957		1.5	%
Healthcare	256,372	5.3%	173,870	4.7%
Retail Center	201,551	4.1%	198,913	5.4%
Other	154,153	3.2%	154,141	4.2%	72,069		1.4	%	151,197		3.1	%
Industrial	32,000	0.7%	77,338	2.1%
Total	$4,866,735	100.0%	$3,679,758	100.0%	$	5,186,999	100.0	%	$	4,927,593	100.0	%


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

The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):


	June 30, 2018		December 31, 2017		March 31, 2019				December 31, 2018
Geographic Location	Carrying Value	% of Portfolio	Carrying Value	% of Portfolio	Carrying Value		% of Portfolio		Carrying Value		% of Portfolio
Manhattan, NY	$1,445,389	29.7%	$1,173,833	31.9%	$	1,825,136	35.2	%	$	1,669,145	33.9	%
Brooklyn, NY	388,814	8.0%	357,611	9.7%	547,139		10.5	%	346,056		7.0	%
Northeast	37,956	0.8%	100,536	2.7%	18,751		0.4	%	23,479		0.5	%
West					635,733		12.3	%	614,160		12.5	%
Midwest	718,600	14.8%	683,380	18.6%	617,599		11.9	%	631,710		12.8	%
Southeast	608,884	12.5%	531,582	14.4%	567,794		10.9	%	559,043		11.3	%
West	500,102	10.2%	227,024	6.2%
Southwest					120,127		2.3	%	96,345		2.0	%
Mid Atlantic	214,521	4.4%	191,976	5.2%	110,754		2.1	%	211,775		4.3	%
Southwest	115,639	2.4%	33,615	0.9%
United Kingdom	711,324	14.6%	303,488	8.3%	668,507		12.9	%	700,460		14.2	%
Other International					75,459		1.5	%	75,420		1.5	%
Total					$	5,186,999	100.0	%	$	4,927,593	100.0	%

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

~~The Company assesses~~We assess the risk factors of each loan and ~~assigns~~assign a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio ("LTV"), debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. This review is performed quarterly. Based on a 5-point scale, our loans are rated ~~“1”~~"1" through ~~“5,”~~"5," from less risk to greater risk, which ratings are defined as follows:

1. Very low risk

2. Low risk

3. Moderate/average risk

4. High risk/potential for loss: a loan that has a risk of realizing a principal loss

5. Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or has been impaired

The following table allocates the carrying value of our loan portfolio based on ~~the Company's~~our internal risk ratings at the dates indicated ($ in thousands):


	June 30, 2018					December 31, 2017						March 31, 2019					December 31, 2018
Risk Rating	Number of Loans	Carrying Value		% of Loan Portfolio		Number of Loans	Carrying Value		% of Loan Portfolio			Number of Loans	Carrying Value		% of Loan Portfolio		Number of Loans	Carrying Value		% of Loan Portfolio
1	—	$	—	—	%	—	$	—	—	%		—	$	—	—	%	—	$	—	—	%
2	4	263,216		5	%	5	399,326		10	%		2	58,847		1	%	3	138,040		3	%
3	63	4,367,766		90	%	51	3,034,358		83	%		64	4,915,843		95	%	63	4,573,930		93	%
4	1	170,685		4	%	1	168,208		5	%		—	—		—	%	—	—		—	%
5	2	65,068		1	%	2	77,866		2	%		3	212,309		4	%	3	215,623		4	%
	70	$	4,866,735	100	%	59	$	3,679,758	100	%		69	$	5,186,999	100	%	69	$	4,927,593	100	%

Weighted-average risk rating											Weighted-average risk rating				3.1					3.1

~~The Company evaluates its~~We evaluate our loans for possible impairment on a quarterly basis. ~~The Company~~We regularly ~~evaluates~~evaluate the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan by loan basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash from operations is sufficient to cover the debt service

requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the property’s liquidation value. ~~The Company~~We also ~~evaluates~~evaluate the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the properties. In addition, ~~the Company considers~~we consider the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. Such loan loss analysis is completed and reviewed by asset management and finance personnel who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants. An allowance for loan loss is established when it is deemed probable that ~~the Company~~we will not be able to collect all amounts due according to the contractual terms of the loan.

We evaluate modifications to our loan portfolio to determine if the modifications constitute a troubled debt restructuring ("TDR") and/or substantial modification, under ASC Topic 310, "Receivables." During the second quarter of 2018, we determined that a modification of one commercial mortgage loan, secured by a retail center in Cincinnati, OH, with a principal balance of $169.0 million constituted a TDR as the interest rate spread was reduced from 5.5% over LIBOR to 3.0% over LIBOR. The ~~Company~~entity in which we own an interest and which owns the underlying property was deemed to be a variable interest entity ("VIE") and it was determined that we are not the primary beneficiary of that VIE. During the fourth quarter of 2018, we recorded a $15.0 million loan loss provision against this loan. After the loan loss provision, the amortized cost of the loan was $156.0 million as of March 31, 2019 and December 31, 2018. The loan loss provision was based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision). Fair value of the collateral was determined using the direct capitalization method. The significant unobservable inputs used in determining the collateral value were in-place net operating income and capitalization rate which were $10.5 million and 6.8%, respectively. The loan is on accrual status and we continue to receive contractual interest due. As of March 31, 2019 and 2018, this loan was assigned a risk rating of 5.

We recorded a $10.0 million loan loss provision and impairment against a commercial mortgage loan secured by a fully-built, for-sale residential condominium units located in Bethesda, MD. This was comprised of (i) $5.0 million loan loss recorded during the second quarter of 2018, and (ii) $2.0 million loan loss provision and $3.0 million of impairment recorded during the second quarter of 2017. The impairment was recorded on an investment previously recorded under other assets on ~~the Company's~~our condensed consolidated balance sheet. After the loan loss provisions and related impairment, the amortized cost balance of the loan was $24.2 million and $27.2 million as of March 31, 2019 and December 31, 2018, respectively. The loan loss provision and impairment were based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision and related impairment). Fair value of the collateral was determined using a discounted cash flow analysis. The significant unobservable inputs used in determining the collateral value were sales price per square foot and discount rate which were an average of $662 ~~dollars~~ per square foot across properties and 15%, respectively. Effective April 1, 2017, ~~the Company~~we ceased accruing all interest associated with the loan and ~~accounts~~account for the loan on a cost-recovery basis (all proceeds are applied

towards the loan balance). As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, this loan was assigned a risk rating of 5.

During 2016, ~~the Company~~we recorded a loan loss provision of $10.0 million on a commercial mortgage loan and $5.0 million on a contiguous subordinate loan secured by a multifamily property located in Williston, ND. After the loan loss provisions, the amortized cost of the loan was $32.1 million and $32.4 million as of March 31, 2019 and December 31, 2018, respectively. The loan loss provision was based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision). Fair value of the collateral was determined using a discounted cash flow analysis. The significant unobservable inputs used in determining the collateral value were terminal capitalization rate and discount rate which were 11% and 10%, respectively. The ~~Company~~entity in which we own an interest and which owns the underlying property was deemed to be a VIE and it was determined that we are not the primary beneficiary of the VIE. We ceased accruing ~~payment in kind ("PIK")~~ interest associated with the loan and ~~recognizing~~only recognize interest income upon receipt of cash. As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, this loan was assigned a risk rating of 5.

~~The Company evaluates modifications~~During the year ended December 31, 2018, we sold a $75.0 million ($17.7 million funded) subordinate position of our $265.0 million loans for the construction of an office campus in Renton, Washington. As of March 31, 2019, our exposure to ~~its loan portfolio~~the property is limited to ~~determine if the modifications constitute~~ a ~~troubled debt restructuring ("TDR"),~~$190.0 million ($96.1 million funded) mortgage loan. This transaction was evaluated under ASC ~~Topic 310, “Receivables." During the second quarter of 2018, the Company~~860 - Transfers and Servicing and we determined that it qualifies as a ~~modification of one commercial mortgage loan with a principal balance of $169.0 million constituted a TDR~~sale and accounted for as ~~the interest rate spread was reduced from 5.5% over LIBOR to 3.0% over LIBOR.~~ such.

As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017, this loan was assigned a risk rating of 4.~~

~~As of June 30,~~ 2018, ~~and December 31, 2017,~~ the aggregate loan loss provision was ~~$17.0 million and $5.0~~$37.0 million for commercial mortgage loans and subordinate ~~loans, respectively.~~loans.

~~The Company~~We recognized ~~PIK~~payment-in-kind ("PIK") interest of ~~$9.1~~$14.5 million and ~~$19.7~~$10.6 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, ~~respectively, and $6.1 million and $14.0 million for the three and six months ended June 30, 2017,~~ respectively.

~~The Company~~

We recognized pre-payment penalties and accelerated fees of ~~$1.6~~$3.7 million for the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019. There were no pre-payment penalties and ~~$0.6 million~~accelerated fees for the three ~~and six~~ months ended ~~June 30, 2017.~~March 31, 2018.

Note 65 – Loan Proceeds Held by Servicer

Loan proceeds held by servicer represents principal payments held by ~~the Company's~~our third-party loan servicer as of the balance sheet date which were remitted to us subsequent to the balance sheet date. Loan proceeds held by servicer was ~~$302.8~~$1.0 million as of December 31, ~~2017.~~2018. There were no loan proceeds held by servicer as of ~~June 30, 2018.~~March 31, 2019.

Note 76 – Other Assets

The following table details the components of ~~the Company's~~our other assets at the dates indicated ($ in thousands):


	June 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Interest receivable	$	27,195	$	23,101	$	36,085	$	33,399
Collateral deposited under derivative agreements	—		4,930
Other	389		389		455		321
Total	$	27,584	$	28,420	$	36,540	$	33,720

Note 87 – Secured Debt Arrangements, Net

At ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017, the Company’s~~2018, our borrowings had the following secured debt arrangements, maturities and ~~weighted average~~weighted-average interest rates ($ in thousands):

June 30, 2018 ⁽²⁾
December 31, 2017
Maximum Amount of Borrowings Borrowings Outstanding
Maturity ⁽¹⁾
Maximum Amount of Borrowings Borrowings Outstanding
Maturity ⁽¹⁾

Weighted
Average
Rate ⁽²⁾
JPMorgan Facility (USD) ⁽³⁾
$ 1,331,780
$ 950,634
June 2021 $ 1,393,000
$ 944,529
March 2020 USD L + 2.30%
JPMorgan Facility (GBP) ⁽³⁾
50,220
50,220
June 2021 N/A
N/A
N/A N/A
DB Repurchase Facility (USD) ⁽⁴⁾
698,824
469,200
March 2021 472,090
225,367
March 2020 USD L + 2.56%
DB Repurchase Facility (GBP) ⁽⁴⁾
156,176
156,176
March 2021 93,919
93,919
March 2020 GBP L + 2.60%
Goldman Facility 300,000
209,014
November 2020 331,130
81,380
November 2020 USD L + 2.73%
CS Facility 145,937
145,937
December 2018 N/A
N/A
N/A N/A
Sub-total 2,682,937
1,981,181
2,290,139
1,345,195

less: deferred financing costs N/A
(20,307 ) N/A
(14,348 ) N/A
Total / Weighted Average $ 2,682,937
$ 1,960,874
$ 2,290,139
$ 1,330,847
USD L + 2.37% /
GBP L + 2.60%



	March 31, 2019 ⁽²⁾						December 31, 2018 ⁽²⁾
	Maximum Amount of Borrowings		Borrowings Outstanding			Maturity ⁽¹⁾	Maximum Amount of Borrowings		Borrowings Outstanding			Maturity ⁽¹⁾
JPMorgan Facility (USD)	$	1,305,435	$	873,771		June 2021	$	1,333,503	$	680,141		June 2021
JPMorgan Facility (GBP)	49,565		49,565			June 2021	48,497		48,497			June 2021
DB Repurchase Facility (USD)	858,919		475,871			March 2021	904,181		419,823			March 2021
DB Repurchase Facility (GBP)	141,081		141,081			March 2021	150,819		150,819			March 2021
Goldman Facility	500,000		233,312			November 2021	300,000		210,072			November 2020
CS Facility (USD)	188,037		188,037			September 2019	187,117		187,117			June 2019
CS Facility (GBP)	148,219		148,219			September 2019	151,773		151,773			June 2019
HSBC Facility (GBP)	49,911		49,911			December 2019	48,835		48,835			December 2019
Sub-total	3,241,167		2,159,767				3,124,725		1,897,077
less: deferred financing costs	N/A		(17,828		)		N/A		(17,555		)
Total / Weighted-Average	$	3,241,167	$	2,141,939			$	3,124,725	$	1,879,522
Total / Weighted-Average	$	3,241,167	$	2,141,939			$	3,124,725	$	1,879,522

———————

(1) Maturity date assumes extensions at ~~the Company's~~our option are exercised.

(2) ~~Weighted average rate~~Weighted-average rates as of ~~June 30,~~March 31, 2019 and December 31, 2018 ~~was~~were USD L + ~~2.27%~~2.19% / GBP L + 2.30%. and USD L + 2.17% / GBP L + 2.28%, respectively.

~~(3)As of June 30, 2018, the Company's secured debt arrangements with JPMorgan Chase Bank, National Association (the "JPMorgan Facility") provided~~

~~for maximum total borrowings comprised of a $1.3 billion repurchase facility and $132.0 millionof an asset specific financing.~~

~~(4)~~As of June 30, 2018, the Company's secured debt arrangements with Deutsche Bank AG, Cayman Islands Branch and Deutsche Bank AG, London Branch (the "DB Repurchase Facility") provided for maximum total borrowings comprised of a $800.0 million repurchase facility and a $55.0 million asset specific financing.

~~At June 30, 2018, the Company’s borrowings had the following remaining maturities ($ in thousands):~~

Less than
1 year⁽¹⁾

1 to 3
years⁽¹⁾
3 to 5
years More than
5 years Total
JPMorgan Facility $ 115,615
$ 885,239
$ —

$ —
$ 1,000,854
DB Repurchase Facility 123,816
501,560
—

—
625,376
Goldman Facility —
209,014
—
—
209,014
CS Facility 145,937
—
—
—
145,937
Total $ 385,368
$ 1,595,813
$ —
$ —
$ 1,981,181

~~———————~~

~~(1)Assumes underlying assets are financed through the fully extended maturity date of the facility.~~

The table below summarizes the outstanding balances at June 30, 2018, as well as the maximum and average month-end balances for the six months ended June 30, 2018 for the Company's borrowings under secured debt arrangements ($ in thousands).

For the six months ended June 30, 2018
Balance at
June 30, 2018 Amortized Cost of Collateral at June 30, 2018 Maximum Month-End
Balance Average Month-End
Balance
JPMorgan Facility $ 1,000,854
$ 1,601,812
$ 1,000,854
$ 865,101
DB Repurchase Facility 625,376
1,010,503
632,990
446,571
Goldman Facility 209,014
280,699
236,764
135,123
CS Facility 145,937
222,902
145,937

24,323
Total $ 1,981,181
$ 3,115,916

JPMorgan Facility

In ~~June 2018, the Company,~~May 2017, through two indirect ~~wholly owned~~wholly-owned subsidiaries, we entered into ~~an amendment to the~~a Fifth Amended and Restated Master Repurchase Agreement ~~for~~with JPMorgan Chase Bank, National Association (as amended, the ~~JPMorgan Facility, which extended the term to June 2020, plus a one-year extension option available at the Company's option, subject to certain conditions.~~"JPMorgan Facility"). The JPMorgan Facility provides for maximum total borrowing capacity of $1.4 billion, comprised of a $1.25 billion repurchase facility and a ~~$132.0~~$105.0 million asset specific financing and enables ~~the Company~~us to elect to receive advances in either U.S. dollars, British pounds ("GBP"), or Euros ("EUR"). The repurchase facility matures in June 2020, plus a one-year extension available at our option, subject to certain conditions. The asset specific financing matures in ~~February~~May 2019. Margin calls may occur any time at specified aggregate margin deficit thresholds. ~~The Company has~~We have agreed to provide a limited guarantee of the obligations of ~~its~~our indirect wholly-owned subsidiaries under the JPMorgan Facility.

As of ~~June 30, 2018, the Company~~March 31, 2019, we had ~~$1.0 billion~~$923.3 million (including £38.0 million assuming conversion into U.S. dollars) of borrowings outstanding under the JPMorgan Facility secured by certain of ~~the Company's~~our commercial mortgage loans.

DB Repurchase Facility

In April 2018, ~~the Company,~~ through an indirect wholly-owned subsidiary, we entered into a Second Amended and Restated Master Repurchase Agreement ~~(the "Second Amendment and Restatement")~~ with Deutsche Bank AG, Cayman Islands Branch and Deutsche Bank AG, London ~~Branch. The Second Amendment~~Branch (as amended, the "DB Repurchase Facility"), which was upsized in September 2018, and ~~Restatement~~ provides for advances of up to ~~$800.0 million~~$1.0 billion for the sale and repurchase of eligible first mortgage loans secured by commercial or multifamily properties located in the United States, United Kingdom and the European Union, and enables ~~the Company~~us to elect to receive advances in either U.S. dollars, British pounds, or Euros. ~~Additionally, the Company has $55.0 million of asset specific financings with Deutsche Bank~~The repurchase facility matures in ~~connection with financing first mortgage loans secured by real estate. The Second Amendment and Restatement has a maturity date of~~ March ~~31,~~ 2020, plus ~~one~~a one-year extension available at ~~the Company's~~our option, subject to certain conditions. ~~The asset specific financings mature in September 2018.~~ Margin calls may occur any time at specified aggregate margin deficit thresholds. ~~The Company has~~We have agreed to provide a limited guarantee of the obligations of ~~its~~our indirect wholly-owned subsidiaries under this facility.

As of ~~June 30, 2018, the Company~~March 31, 2019, we had ~~$625.4~~$617.0 million (including ~~£118.3~~£108.2 million assuming conversion into U.S. dollars) of borrowings outstanding under the DB Repurchase Facility secured by certain of ~~the Company's~~our commercial mortgage loans.

Goldman Facility

In November 2017, ~~the Company,~~ through an indirect wholly-owned subsidiary, we entered into a master repurchase and securities contract agreement with Goldman Sachs Bank USA (the "Goldman ~~Facility)~~Facility"), which ~~provides for advances of up~~was upsized in March 2019 from $300.0 million to ~~$300.0~~$500.0 million and matures in November ~~2020.~~2019, plus two one-year extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified margin deficit thresholds. ~~The Company has~~We have agreed to provide a limited guarantee of the obligations of the seller under the Goldman Facility.

As of ~~June 30, 2018, the Company~~March 31, 2019, we had ~~total borrowings of $209.0~~$233.3 million of borrowings outstanding under the Goldman Facility.

CS Facility - USD

In ~~June~~July 2018, ~~the Company,~~ through an indirect wholly-owned subsidiary, we entered into a ~~master repurchase agreement~~Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS ~~Facility"~~Facility - USD"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - USD matures six months after either party notifies the other party of intention to terminate. Margin calls may occur any time at specified aggregate margin deficit thresholds. ~~The Company has~~We have agreed to provide a guarantee of the obligations of ~~its~~our indirect wholly-owned subsidiaries under this facility.

As of March 31, 2019, we had $188.0 million of borrowings outstanding under the CS Facility - USD secured by certain of our commercial mortgage loans.

CS Facility - GBP

In June ~~30,~~ 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS Facility - GBP"), which provides for advances for the ~~Company~~sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - GBP matures six months after either party notifies the other party of intention to terminate. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of March 31, 2019, we had ~~total borrowings of $145.9~~$148.2 million (£~~110.5~~113.7 million assuming conversion into U.S. dollars) of borrowings outstanding under the CS Facility - GBP secured by one of ~~the Company's~~our commercial mortgage loans.

HSBC Facility

In September 2018, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility"), which provides for a single asset financing. The ~~Company was~~facility matures in December 2019 and unless terminated by either party, automatically extends for further periods prior to maturity. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of March 31, 2019, we had $49.9 million (£38.3 million assuming conversion into U.S. dollars) of borrowings outstanding under the HSBC Facility secured by one of our commercial mortgage loans.

At March 31, 2019, our borrowings had the following remaining maturities ($ in thousands):



	Less than 1 year⁽¹⁾		1 to 3 years⁽¹⁾		3 to 5 years		More than 5 years		Total
JPMorgan Facility	$	159,854	$	763,482	$	—	$	—	$	923,336
DB Repurchase Facility	109,142		507,810		—		—		616,952
Goldman Facility	—		233,312		—		—		233,312
CS Facility - USD	188,037		—		—		—		188,037
CS Facility - GBP	148,219		—		—		—		148,219
HSBC Facility	49,911		—		—		—		49,911
Total	$	655,163	$	1,504,604	$	—	$	—	$	2,159,767

———————

(1)Assumes underlying assets are financed through the fully extended maturity date of the facility.

The table below summarizes the outstanding balances at March 31, 2019, as well as the maximum and average month-end balances for the three months ended March 31, 2019 for our borrowings under secured debt arrangements ($ in thousands).



	As of March 31, 2019				For the three months ended March 31, 2019
	Balance		Amortized Cost of Collateral		Maximum Month-End Balance		Average Month-End Balance
JPMorgan Facility	$	923,336	$	1,612,510	$	929,496	$	925,679
DB Repurchase Facility	616,952		1,013,662		672,477		636,283
Goldman Facility	233,312		517,122		259,167		250,286
CS Facility - USD	188,037		254,090		188,037		187,424
CS Facility - GBP	148,219		211,468		150,811		145,814
HSBC Facility	49,911		71,141		50,784		50,296
Total	$	2,159,767	$	3,679,993

We were in compliance with the ~~financial~~ covenants under each of ~~its~~our secured debt arrangements at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

Note 98 – Convertible Senior Notes, Net

~~On March 17,~~In two separate offerings during 2014, ~~the Company~~we issued ~~$143.8 million~~an aggregate principal amount of $254.8 million of 5.50% Convertible Senior Notes due 2019 (the ~~"March 2019~~"2019 Notes"), for which ~~the Company~~we received ~~net proceeds,~~$248.6 million, after deducting the underwriting discount and ~~estimated~~ offering ~~expense payable by the Company, of approximately $139.0 million. At~~ ~~June 30, 2018, the March~~expenses. The 2019 Notes ~~had a carrying value~~were exchanged or converted for shares of ~~$143.0 million~~our common stock and ~~an unamortized discount of $0.8 million.~~cash as follows:

(i) On August ~~18, 2014,~~2, 2018, we entered into privately negotiated exchange agreements with a limited number of holders of the ~~Company~~2019 Notes pursuant to which we exchanged $206.2 million of the 2019 Notes for an aggregate of (a) 10,020,328 newly issued shares of our common stock, and (b) $39.3 million in cash. We recorded $166.0 million of additional paid-in-capital in the condensed consolidated statement of changes in stockholders' equity in connection with these transactions,

(ii) Certain holders elected to convert $47.9 million of the 2019 Notes, which were settled for an aggregate of (a) 2,775,509 newly issued shares of our common stock, and (b) $0.2 million in cash. We recorded $13.9 million of additional ~~$111.0~~paid-in-capital in the condensed consolidated statement of changes in stockholders' equity in connection with these transactions. These conversions occurred from August 2018 through maturity.

The remaining $0.7 million ~~aggregate~~in principal amount of ~~5.50% Convertible Senior~~the 2019 Notes ~~due 2019 (the "August 2019 Notes," and together~~were repaid at maturity on March 15, 2019.

During the year ended December 31, 2018, we recorded a loss on early extinguishment of debt of $2.6 million, in connection with the ~~March~~exchanges and conversions of the 2019 ~~Notes, the "2019 Notes"), for which the~~Notes. This includes fees and accelerated amortization of

1715

~~Company received net proceeds, after deducting~~capitalized costs. There was no such loss related to the ~~underwriting discount and estimated offering expense payable by the Company, of approximately $109.6 million. At~~ ~~June 30, 2018, the August~~ 2019 Notes ~~had a carrying value of $110.0 million and an unamortized discount of $1.0 million.~~during the three months ended March 31, 2019.

~~On August 21,~~In two separate offerings during 2017, ~~the Company~~we issued an aggregate principal amount of ~~$230.0~~$345.0 million of 4.75% Convertible Senior Notes due 2022 (the ~~"August 2022~~"2022 Notes"), for which ~~the Company~~we received ~~net proceeds,~~$337.5 million, after deducting the underwriting discount and ~~estimated~~ offering ~~expense payable by~~expenses. At March 31, 2019, the ~~Company, of approximately $224.8 million. At June 30, 2018, the August~~ 2022 Notes had a carrying value of ~~$221.8~~$335.9 million and an unamortized discount of ~~$8.2~~$9.1 million.

~~On November 9, 2017,~~During the ~~Company~~fourth quarter of 2018, we issued ~~an aggregate principal amount of $115.0~~$230.0 million of ~~4.75%~~5.375% Convertible Senior Notes due ~~2022 (the "November 2022~~2023 ("2023 Notes," and together with the ~~August~~2019 Notes and 2022 Notes, the ~~"2022 Notes" and the 2022 Notes together with the 2019 Notes, "the Notes"~~"Notes"), for which ~~the Company~~we received ~~net proceeds,~~$223.7 million after deducting the underwriting discount and ~~estimated~~ offering ~~expense payable by~~expenses. At March 31, 2019, the ~~Company of approximately $112.7 million. At June 30, 2018, the November 2022~~2023 Notes had a carrying value of ~~$112.3~~$222.8 million and an unamortized discount of ~~$2.7~~$7.2 million.

The following table summarizes the terms of the Notes ($ in thousands):


	Principal Amount		Coupon Rate		Effective Rate ⁽¹⁾		Conversion Rate ⁽²⁾	Maturity Date	Remaining Period of Amortization	Principal Amount		Coupon Rate		Effective Rate ⁽¹⁾		Conversion Rate ⁽²⁾	Maturity Date	Remaining Period of Amortization
2019 Notes	$	254,750	5.50	%	6.36	%	57.8613	3/15/2019	0.70 years
2022 Notes	345,000		4.75	%	5.61	%	50.2260	8/23/2022	4.15 years	$	345,000	4.75	%	5.60	%	50.226	8/23/2022	3.4
2023 Notes										230,000		5.38	%	6.16	%	48.7187	10/15/2023	4.55
Total	$	599,750								$	575,000

———————


(1)	Effective rate includes the effect of the adjustment for the conversion option (See endnote (2) below), the value of which reduced the initial liability and was recorded in additional paid-in-capital.

(2)

~~The Company has~~We have the option to settle any conversions in cash, shares of common stock or a combination thereof. The conversion rate represents the number of shares of common stock issuable per ~~$1.0 million~~one thousand principal amount of the Notes converted, and includes adjustments relating to cash dividend payments made by ~~the Company~~us to stockholders that have been deferred and carried-forward in accordance with, and are not yet required to be made pursuant to, the terms of the applicable supplemental indenture.

The Company may not redeem the Notes prior to maturity. The closing price of the Company's common stock on June 27, 2018 of $18.58 was greater than the per share conversion price of the 2019 Notes and less than the per share conversion price of the 2022 Notes. The Company has the intent and ability to settle the Notes in cash and, as a result, the Notes did not have any impact on the Company's diluted earnings per share.

In accordance with ASC 470 - Debt, the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) is to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. GAAP requires that the initial proceeds from the sale of the Notes be allocated between a liability component and an equity component in a manner that reflects interest expense at the interest rate of similar nonconvertible debt that could have been issued by ~~the Company~~us at such time. ~~The Company~~We measured the fair value of the debt components of the Notes as of their issuance date based on effective interest rates. As a result, ~~the Company~~we attributed approximately ~~$22.4~~$15.4 million of the proceeds to the equity component of the Notes ($~~11.4~~11.0 million to the ~~2019~~2022 Notes and ~~$11.0~~$4.4 million to the ~~2022~~2023 Notes), which represents the excess proceeds received over the fair value of the liability component of the Notes at the date of issuance. The equity component of the Notes has been reflected within additional paid-in capital in the condensed consolidated balance sheet as of ~~June 30, 2018.~~March 31, 2019. The resulting debt discount is being amortized over the period during which the Notes are expected to be outstanding (the maturity date) as additional non-cash interest expense. The additional non-cash interest expense attributable to each of the Notes will increase in subsequent reporting periods through the maturity date as the Notes accrete to their par value over the same period.

The aggregate contractual interest expense was approximately $7.6 million and ~~$15.2~~$7.6 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, ~~respectively, as compared to approximately $3.5 million and $7.0 million for the three and six months ended June 30, 2017,~~ respectively. With respect to the amortization of the discount on the liability component of the Notes as well as the amortization of deferred financing costs, ~~the Company~~we reported additional non-cash interest expense of approximately ~~$1.8 million and $3.7 million for the three and six months ended June 30, 2018, respectively, as compared to approximately $0.9~~$1.7 million and $1.8 million for the three ~~and six~~ months ended ~~June 30, 2017,~~March 31, 2019 and 2018, respectively.

Note 109 – Derivatives, Net

~~The Company uses~~We use forward currency contracts to economically hedge interest and principal payments due under ~~its~~our loans denominated in currencies other than U.S. dollars.

~~The Company has~~We have entered into a series of forward contracts to sell an amount of foreign currency (British pound and Euro) for an agreed upon amount of U.S. dollars at various dates through ~~November 2020.~~December 2021. These forward contracts were executed to economically fix the U.S. dollar amounts of foreign denominated cash flows expected to be received by ~~the Company~~us related to foreign denominated loan investments.

~~The following table summarizes the Company's non-designated foreign exchange (“Fx”) forwards as of June 30, 2018:~~

Type of Derivative June 30, 2018
Number of Contracts Aggregate Notional Amount (in thousands) Notional Currency Maturity
Fx Contracts - GBP 40 314,226 GBP July 2018 - November 2020
Fx Contracts - EUR 1 42,247 EUR October 2018

The following table summarizes ~~the Company's~~our non-designated foreign exchange ("Fx") forwards as of March 31, 2019:



	March 31, 2019
	Number of Contracts	Aggregate Notional Amount (in thousands)	Notional Currency	Maturity	Weighted-Average Years to Maturity
Fx Contracts - GBP	78	259,604	GBP	April 2019- December 2021	1.07

The following table summarizes our non-designated Fx forwards as of December 31, ~~2017:~~2018:

Type of Derivative December 31, 2017
Number of Contracts Aggregate Notional Amount (in thousands) Notional Currency Maturity
Fx Contracts - GBP 24 177,077 GBP January 2018- November 2020



	December 31, 2018
	Number of Contracts	Aggregate Notional Amount (in thousands)	Notional Currency	Maturity	Weighted-Average Years to Maturity
Fx Contracts - GBP	43	270,161	GBP	January 2019 - November 2020	0.69

~~The Company has~~We have not designated any of ~~its~~our derivative instruments as hedges as defined in ASC 815 "Derivatives and ~~Hedging~~Hedging" and, therefore, changes in the fair value of ~~the Company's~~our derivative instruments are recorded directly in earnings. The following table summarizes the amounts recognized on the condensed consolidated statements of operations related to ~~the Company’s~~our derivatives for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~ ($ in thousands):


		Amount of gain (loss) recognized in income						Amount of gain (loss) recognized in income						Amount of gain (loss) recognized in income
		Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	Location of Gain (Loss) Recognized in Income	2018			2017			2018		2017			Location of Gain (Loss) Recognized in Income	2019			2018
Forward currency contracts	Gain (loss) on derivative instruments - unrealized	$	24,800		$	(7,438	)	$	15,941	$	(10,321	)	Loss on derivative instruments - unrealized	$	(14,985	)	$	(8,859	)
Forward currency contracts	Gain (loss) on derivative instruments - realized	8,742			46			6,565		(110		)	Gain (loss) on derivative instruments - realized	8,265			(2,177		)
Interest rate caps ⁽¹⁾	Gain (loss) on derivative instruments - unrealized	(4		)	3			—		(3		)	Gain on derivative instruments - unrealized	—			4
Total		$	33,538		$	(7,389	)	$	22,506	$	(10,434	)		$	(6,720	)	$	(11,032	)

———————


(1)	With a notional amount of ~~$37.5~~$33.6 million and ~~$42.8~~$38.9 million at ~~June 30,~~March 31, 2019, and 2018, ~~and 2017,~~ respectively.

The following table summarizes the gross asset and liability amounts related to ~~the Company’s~~our derivatives at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 ($ in thousands).



	March 31, 2019							December 31, 2018
	Gross Amount of Recognized Assets		Gross Amounts Offset in the Condensed Consolidated Balance Sheet			Net Amounts of Assets Presented in the Condensed Consolidated Balance Sheet		Gross Amount of Recognized Assets		Gross Amounts Offset in the Condensed Consolidated Balance Sheet			Net Amounts of Assets Presented in the Condensed Consolidated Balance Sheet
Forward currency contracts	9,852		(1,137		)	8,715		23,753		(53		)	23,700
Total derivative instruments	$	9,852	$	(1,137	)	$	8,715	$	23,753	$	(53	)	$	23,700

1917

June 30, 2018 December 31, 2017
Gross
Amount of
Recognized
Assets Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet Net Amounts
of Assets
Presented in
the Condensed Consolidated Balance Sheet Gross
Amount of
Recognized
Liabilities Gross
Amounts
Offset in the Condensed
Consolidated Balance Sheet Net Amounts of Assets (Liabilities) Presented in the Condensed Consolidated Balance Sheet
Interest rate caps $ 1
$ —
$ 1
$ —
$ 1
$ 1
Forward currency contracts 11,409
(1,113 ) 10,296
(5,645 ) —
(5,645 )
Total derivative instruments $ 11,410
$ (1,113 ) $ 10,297
$ (5,645 )
$ 1

$ (5,644 )

Note 1110 – Accounts Payable, Accrued Expenses and Other Liabilities

The following table details the components of ~~the Company's~~our accounts payable, accrued expense and other liabilities ($ in thousands):


	June 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Accrued dividends payable	$	63,604	$	56,576	$	69,799	$	69,033
Collateral deposited under derivative agreements					1,820		20,000
Accrued interest payable	14,339		12,796		13,488		14,208
Accounts payable and other liabilities	3,454		1,534		6,450		1,505
Total	$	81,397	$	70,906	$	91,557	$	104,746

Note 1211 – Related Party Transactions

Management Agreement

In connection with ~~the Company’s~~our initial public offering in September 2009, ~~the Company~~we entered into a management agreement (the ~~“Management Agreement”~~"Management Agreement") with the Manager, which describes the services to be provided by the Manager and its compensation for those services. The Manager is responsible for managing ~~the Company’s~~our day-to-day operations, subject to the direction and oversight of ~~the Company’s~~our board of directors.

Pursuant to the terms of the Management Agreement, the Manager is paid a base management fee equal to 1.5% per annum of ~~the Company’s~~our stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears.

The current term of the Management Agreement was renewed during the period and expires on September 29, ~~2018~~2019 and is automatically renewed for successive one-year terms on each anniversary thereafter. The Management Agreement may be terminated upon expiration of the one-year extension term only upon the affirmative vote of at least two-thirds of ~~the Company’s~~our independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to ~~the Company~~ARI or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair fees by accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of ~~the Company’s~~our independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual base management fee during the 24-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. Following a meeting by ~~the Company’s~~our independent directors in February ~~2018,~~2019, which included a discussion of the Manager’s performance and the level of the management fees thereunder, ~~the Company~~we determined not to seek termination of the Management Agreement.

~~The Company~~We incurred approximately ~~$9.0 million and $17.1~~$9.6 million in base management fees under the Management Agreement for the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019 as compared to approximately ~~$7.7 million and $15.2~~$8.1 million for the three ~~and six~~ months ended ~~June 30, 2017, respectively.~~March 31, 2018.

In addition to the base management fee, ~~the Company is~~we are also responsible for reimbursing the Manager for certain expenses paid by the Manager on our behalf ~~of the Company~~ or for certain services provided by the Manager to ~~the Company.~~us.

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, ~~the Company~~we paid expenses totaling ~~$0.6~~$0.7 million and ~~$1.2 million,~~

respectively, related to reimbursements for certain expenses paid by the Manager on behalf of the Company under the Management Agreement. For the three and six months ended June 30, 2017, the Company paid expenses totaling $0.1 million and $0.2$0.6 million, respectively, related to reimbursements for certain expenses paid by the Manager on our behalf ~~of the Company~~ under the Management Agreement. Expenses incurred by the Manager and reimbursed by ~~the Company~~us are reflected in the respective condensed consolidated statement of operations expense category or the condensed consolidated balance sheet based on the nature of the item.

Included in payable to related party on the condensed consolidated balance sheet at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 are approximately ~~$9.0~~$9.6 million and ~~$8.2~~$9.8 million, respectively, for base management fees incurred but not yet paid under the Management Agreement.

~~Unconsolidated Joint Venture~~

In September 2014, the Company, through a wholly owned subsidiary, acquired a 59% ownership interest in Champ Limited Partnership ("Champ LP") following which a wholly-owned subsidiary of Champ LP then acquired a 35% ownership interest in Bremer Kreditbank AG ("BKB"). In May 2017, the Company sold its remaining ownership interest in Champ LP, to unaffiliated third parties. As such, in 2018 the Company no longer held any interest in Champ LP.

Loans receivable

In June 2017, ~~the Company~~we increased ~~its~~our outstanding loan commitment through the acquisition of an additional $25.0 million of interests in an existing subordinate loan from a fund managed by an affiliate of the Manager, increasing ~~the Company's~~our total outstanding loan commitment to $100.0 million. Furthermore, in September 2017 ~~the Company~~we funded an additional $25.0 million to acquire a portion of the same pre-development subordinate loan from a fund managed by an affiliate of the Manager, increasing ~~the Company's~~our total outstanding loan commitment to $125.0 million. In May 2018, ~~the Company~~we increased ~~its~~our outstanding principal balance through the

acquisition of an additional $28.2 million interest in the same subordinate loan from a fund managed by an affiliate of the Manager. The pre-development subordinate loan is for the construction of a residential condominium building in New York, New York and is part of a $300.0 million subordinate loan.

In June 2018, ~~the Company~~we increased ~~its~~our outstanding loan commitment through the acquisition of £4.8 million ($6.4 million assuming conversion into U.S. dollars) pari-passu interest in an existing subordinate loan from a fund managed by an affiliate of the Manager. The subordinate loan is secured by a healthcare portfolio located in the United Kingdom.

Note 1312 – Share-Based Payments

On September 23, 2009, ~~the Company’s~~our board of directors approved the Apollo Commercial Real Estate Finance, Inc., 2009 Equity Incentive Plan (as amended from time to time, the ~~“LTIP”~~"LTIP"). The LTIP provides for grants of restricted common stock, restricted stock units ~~(“RSUs”~~("RSUs") and other equity-based awards up to an aggregate of 7.5% of the issued and outstanding shares of ~~the Company’s~~our common stock (on a fully diluted basis). The LTIP is administered by the compensation committee of ~~the Company’s~~our board of directors (the ~~“Compensation Committee”~~"Compensation Committee") and all grants under the LTIP must be approved by the Compensation Committee.

~~The Company~~We recognized stock-based compensation expense of ~~$4.0~~$3.9 million and ~~$7.4~~$3.3 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, respectively, related to restricted stock and RSU ~~vesting, as compared~~vesting. We adopted ASU 2018-07 on January 1, 2019 and the stock-based compensation expense for grants before the adoption of ASU 2018-07 is based on the closing price of our common stock of $16.66 on December 31, 2018, which was the last business day before we adopted ASU 2018-07. Refer to ~~$3.5 million and $7.3 million~~"Note 2 - Summary of Significant Accounting Policies" for ~~the three and six months ended June 30, 2017, respectively, related to restricted stock and RSU vesting.~~further discussion on our adoption of ASU 2018-07.

The following table summarizes the grants, vesting and forfeitures of restricted common stock and RSUs during the ~~six~~three months ended ~~June 30, 2018:~~March 31, 2019:

Type Restricted Stock RSUs Grant Date Fair Value ($ in thousands)
Outstanding at December 31, 2017 105,561
1,632,746

Grant 28,070
—
500
Vested (10,394 ) —
N/A
Forfeiture —
(29,410 ) N/A
Outstanding at June 30, 2018 123,237
1,603,336



	Type	Restricted Stock		RSUs		Grant Date Fair Value ($ in thousands)
Outstanding at December 31, 2018		65,697		1,852,957
	Vested	(1,419	)	—		N/A
	Forfeiture	—		(4,174	)	N/A
Outstanding at March 31, 2019		64,278		1,848,783

Below is a summary of restricted stock and RSU vesting dates as of ~~June 30, 2018~~March 31, 2019:


Vesting Year	Restricted Stock	RSU	Total Awards	Restricted Stock	RSU	Total Awards
2018	57,540	744,497	802,037
2019	60,803	560,138	620,941	40,671	887,222	927,893
2020	4,894	298,701	303,595	14,251	626,738	640,989
2021				9,356	334,823	344,179
Total	123,237	1,603,336	1,726,573	64,278	1,848,783	1,913,061

At ~~June 30, 2018~~March 31, 2019, ~~the Company~~we had unrecognized compensation expense of approximately ~~$1.4~~$0.6 million and ~~$22.6~~$27.1 million, respectively, related to the vesting of restricted stock awards and RSUs noted in the table above.

RSU Deliveries

During the ~~six~~three months ended ~~June 30,~~March 31, 2019 and 2018, ~~the Company~~we delivered ~~345,996~~433,426 and 354,996 shares of common stock for 730,717 and 603,677 vested ~~RSUs. The Company did not deliver any common stock for the three months ended June 30, 2018. The Company allows~~RSUs, respectively. We allow RSU participants to settle their tax liabilities with a reduction of their share delivery from the originally granted and vested RSUs. The amount, when agreed to by the participant, results in a cash payment to the Manager related to this tax liability and a corresponding adjustment to additional paid in capital on the condensed consolidated statement of changes in stockholders' equity. The adjustment was $5.0 million and $4.7 million for the ~~six~~three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and~~respectively. The adjustment is ~~included as~~ a reduction of capital related to ~~the Company's~~our equity incentive plan and is presented net of increases of capital related to our equity incentive plan in the condensed consolidated statement of changes in stockholders' equity. ~~There was no adjustment for the three months ended June 30, 2018.~~

Note 1413 – Stockholders’ Equity

~~The Company’s~~Our authorized capital stock consists of 450,000,000 shares of common stock, $0.01 par value per share and 50,000,000 shares of preferred stock, $0.01 par value per share. As of ~~June 30, 2018~~March 31, 2019, ~~123,020,301~~136,254,352 shares of common stock were issued and outstanding, 6,770,393 shares of 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock ("Series B Preferred Stock") were issued and outstanding and ~~6,900,000~~$6,900,000 shares of 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock ("Series C Preferred Stock") were issued and outstanding.

Dividends. During ~~2018, the Company~~2019, we declared the following dividends:


	Three months ended		Three months ended
Dividend declared per share of:	June 30, 2018	March 31, 2018	March 31, 2019	March 31, 2018
Common Stock	$0.46	$0.46	$0.46	$0.46
Series B Preferred Stock	0.50	0.50	0.50	0.50
Series C Preferred Stock	0.50	0.50	0.50	0.50

Common Stock Offerings. During the first quarter of 2018, ~~the Company~~we completed a follow-on public offering of 15,525,000 shares of ~~its~~our common stock, at a price of $17.77 per share. The aggregate net proceeds from the offering, including proceeds from the sale of the additional shares, were ~~approximately~~ $275.9 million after deducting ~~estimated~~ offering expenses.

During the first quarter of 2019, we issued 1,967,361 shares of our common stock, at a per share conversion price of $17.17, related to conversions of the 2019 Notes, the remainder of which matured on March 15, 2019. We recorded a $33.8 million increase in additional paid in capital in the condensed consolidated statement of changes in stockholders' equity. Refer to "Note 8 - Convertible Senior Notes, Net" for a further discussion on the conversions of the 2019 Notes.

Note 1514 – Commitments and Contingencies

Legal Proceedings. From time to time, ~~the Company~~we may be involved in various claims and legal actions arising in the ordinary course of business. On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57th Investment LLC commenced an action captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No. 653251/2018) in New York Supreme Court. The complaint names as defendants (i) ACREFI Mortgage Lending, LLC, a subsidiary of the Company, (ii) the Company, and (iii) certain funds managed by Apollo, who are co-lenders on a mezzanine loan against the development of a residential condominium building in Manhattan, New York. The plaintiffs allege that the defendants tortiously interfered with the contractual equity put right in the plaintiffs’ joint venture agreement with the developers of the project, and that the defendants aided and abetted breaches of fiduciary duty by the developers of the project. The plaintiffs allege the loss of a $70.0 million investment as part of total damages of $700.0 million, which includes punitive damages. The ~~Company believes~~defendants moved to dismiss the complaint on August 17, 2018, and the motion was fully briefed in October 2018. Oral argument took place on March 12, 2019, and the court’s decision is pending. We believe the claims are without merit and ~~will~~plan to vigorously defend the case.

~~On January 4, 2017, the United States Department of Justice served~~ We do not believe this will have a ~~Request for Information and Documents (the “Request”)~~material adverse effect on the Company, in connection with a preliminary investigation into certain aspects of the Company's former residential real estate portfolio, which the Company acquired in connection with the merger of Apollo Residential Mortgage, Inc. with and into the Company and subsequently sold in 2016. The Request sought a range of information in connection with the residential real estate portfolio, including, among other things, information concerning policies, procedures, and practices related to advertising, marketing, identifying, or acquiring residential properties for sale or rent, and various data for all rental and sales contracts executed since January 1, 2012. The Company fully cooperated with the Department of Justice, and was advised, by a letter dated May 2, 2018, that the Department of Justice did not intend to take any further actions in this matter as it relates to the Company.our condensed consolidated financial statements.

Loan Commitments. As described in "Note 54 - Commercial Mortgage and Subordinate Loans, Net," at ~~June 30, 2018, the Company~~March 31, 2019, we had ~~$818.1~~$1,039.1 million of unfunded commitments related to ~~its~~our commercial mortgage and subordinate loan portfolios.

Note 1615 – Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value of ~~the Company’s~~our financial instruments not carried at fair value on the condensed consolidated balance sheet at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 ($ in thousands):


	June 30, 2018						December 31, 2017						March 31, 2019						December 31, 2018
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Cash	$	76,384		$	76,384		$	77,671		$	77,671
Cash and cash equivalents													$	109,343		$	109,343		$	109,806		$	109,806
Commercial first mortgage loans, net	3,724,221			3,722,116			2,653,826			2,657,262			4,003,089			4,025,760			3,878,981			3,894,947
Subordinate loans, net	1,142,514			1,140,501			1,025,932			1,029,390			1,183,910			1,187,128			1,048,612			1,047,854
Secured debt arrangements	(1,981,181		)	(1,981,181		)	(1,345,195		)	(1,345,195		)	(2,159,767		)	(2,159,767		)	(1,897,077		)	(1,897,077		)
2019 Notes	(252,952		)	(270,753		)	(251,935		)	(267,506		)	—			—			(34,278		)	(35,276		)
2022 Notes	(334,111		)	(345,000		)	(332,962		)	(350,175		)	(335,894		)	(337,762		)	(335,291		)	(326,025		)
2023 Notes													(222,770		)	(225,770		)	(222,431		)	(221,964		)

To determine estimated fair values of the financial instruments listed above, market rates of interest, which include credit assumptions, are used to discount contractual cash flows. The estimated fair values are not necessarily indicative of the amount ~~the Company~~we could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. Estimates of fair value for cash and convertible senior notes, net are measured using observable Level I inputs as defined in "Note 3 - Fair Value Disclosure." Estimates of fair value for all other financial instruments in the table above are measured using significant estimates, or unobservable Level III inputs as defined in "Note 3 - Fair Value Disclosure."

Note 1716 – Net Income ~~(Loss)~~ per Share

ASC 260 ~~Earnings~~"Earnings per ~~share~~,share" requires the use of the two-class method of computing earnings per share for all periods presented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for dividends declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for dividends declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.

The remaining earnings are allocated to common stockholders and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. Each total is then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding shares of common stock and all potential shares of common stock assumed issued if they are dilutive. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of these potential shares of common stock.

2321

The table below presents the computation of basic and diluted net income ~~(loss)~~ per share of common stock ~~using the two-class method~~ for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~ ($ in thousands except per share data):

For the three months ended June 30, For the six months ended June, 30
2018 2017 2018 2017
Numerator:
Net income $ 55,346
$ 36,235
$ 104,779
$ 83,359
Preferred dividends (6,834 ) (9,310 ) (13,669 ) (18,620 )
Net income available to common stockholders 48,512
26,925
91,110
64,739
Dividends declared on common stock (56,588 ) (48,501 ) (113,165 ) (90,647 )
Dividends on participating securities (738 ) (630 ) (1,489 ) (1,259 )
Net loss attributable to common stockholders $ (8,814 ) $ (22,206 ) $ (23,544 ) $ (27,167 )
Denominator:
Basic weighted average shares of common stock outstanding 123,019,993
95,428,134
116,651,305
93,530,831
Diluted weighted average shares of common stock outstanding 124,629,317
96,796,289
118,281,153
94,907,762
Net income per weighted average share of common stock

Distributable earnings per share of common stock $ 0.46
$ 0.51
$ 0.98
$ 0.97
Undistributed loss per share of common stock $ (0.07 ) $ (0.23 ) $ (0.20 ) $ (0.29 )
Basic and diluted net income per share of common stock $ 0.39
$ 0.28
$ 0.78
$ 0.68



	For the three months ended March 31,
	2019			2018
Basic Earnings
Net Income	$	67,758		$	49,433
Less: Preferred dividends	(6,835		)	(6,835		)
Net income available to common stockholders	$	60,923		$	42,598
Less: Dividends on participating securities	(851		)	(751		)
Basic Earnings	$	60,072		$	41,847

Diluted Earnings
Net Income	$	67,758		$	49,433
Less: Preferred dividends	(6,835		)	(6,835		)
Net income available to common stockholders	$	60,923		$	42,598
Add: Interest expense on Notes	9,262			N/A
Diluted Earnings	$	70,185		$	42,598

Number of Shares:
Basic weighted-average shares of common stock outstanding	134,607,107			110,211,853
Diluted weighted-average shares of common stock outstanding	164,683,086			111,871,429

Earnings Per Share Attributable to Common Stockholders
Basic	$	0.45		$	0.38
Diluted	$	0.43		$	0.38

Prior to the three months ended September 30, 2018, we asserted our intent and ability to settle the principal amount of the Notes in cash and, as a result, the Notes did not have any impact on our diluted earnings per share. As of September 30, 2018, we no longer asserted our intent to fully settle the principal amount of the Notes in cash upon conversion. Accordingly, the dilutive effect to earnings per share for the current year periods is determined using the "if-converted" method whereby interest expense on the outstanding Notes is added back to the diluted earnings per share numerator and all of the potentially dilutive shares are included in the diluted earnings per share denominator. For the three months ended March 31, 2019, 30,093,312 weighted-average potentially issuable shares from the Notes were included in the dilutive earnings per share denominator. Refer to "Note 8 - Convertible Senior Notes, Net" for further discussion.

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, ~~1,609,324~~1,849,564 and 1,629,848 weighted average unvested RSUs, respectively, were excluded from the calculation of diluted net income per share because the effect was anti-dilutive. For the three and six months ended June 30, 2017, 1,368,155 and 1,376,930 weighted average1,659,576 weighted-average unvested RSUs, respectively, were excluded from the calculation of diluted net income per share because the effect was anti-dilutive.

Note 1817 – Subsequent Events

Investment ~~activity~~activity.. Subsequent to the ~~end of the~~ quarter ~~the Company~~ended March 31, 2019, we committed capital of ~~$87.0~~$75.6 million ~~all of which was funded at closing, of~~(£58.0 million) to a first mortgage ~~loans.~~loan.

In addition, ~~the Company~~we funded approximately ~~$18.9~~$41.3 million for loans closed prior to the quarter.

Loan Repayments. Subsequent to the end of the quarter, ~~the Company~~we received approximately ~~$52.3~~$13.1 million from loan repayments.

2422

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING INFORMATION

~~The Company makes~~We make forward-looking statements herein and will make forward-looking statements in future filings with the SEC, press releases or other written or oral communications within the meaning of Section 27A of the Securities Act of

1933, as amended (the ~~“Securities Act”~~"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”~~"Exchange Act"). For these statements, ~~the Company claims~~we claim the protections of the safe harbor for forward-looking statements contained in such Sections. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond ~~the Company’s~~our control. These forward-looking statements include information about possible or assumed future results of ~~the Company’s~~our business, financial condition, liquidity, results of operations, plans and objectives. When ~~the Company uses~~we use the words ~~“believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may”~~"believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions, it intends to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: market trends in ~~the Company’s~~our industry, interest rates, real estate values, the debt securities markets or the general economy; the demand for commercial real estate loans; ~~the Company’s~~our business and investment strategy; ~~the Company’s~~our operating results; actions and initiatives of the U.S. government and governments outside of the United States, changes to government policies and the execution and impact of these actions, initiatives and policies; the state of the economy generally or in specific geographic regions; economic trends and economic recoveries; ~~the Company’s~~our ability to obtain and maintain financing arrangements, including secured debt arrangements and securitizations; the availability of debt financing from traditional lenders; the volume of short-term loan extensions; the demand for new capital to replace maturing loans; expected leverage; general volatility of the securities markets in which ~~the Company participates;~~we participate; changes in the value of ~~the Company’s~~our assets; the scope of ~~the Company’s~~our target assets; interest rate mismatches between ~~the Company’s~~our target assets and any borrowings used to fund such assets; changes in interest rates and the market value of ~~the Company’s~~our target assets; changes in prepayment rates on ~~the Company’s~~our target assets; effects of hedging instruments on ~~the Company’s~~our target assets; rates of default or decreased recovery rates on ~~the Company’s~~our target assets; the degree to which hedging strategies may or may not protect ~~the Company~~us from interest rate volatility; impact of and changes in governmental regulations, tax law and rates, accounting, legal or regulatory issues or guidance and similar matters; ~~the Company’s~~our continued maintenance of ~~its~~our qualification as a REIT for U.S. federal income tax purposes; ~~the Company’s~~our continued exclusion from registration under the Investment Company Act of 1940, as amended; the availability of opportunities to acquire commercial mortgage-related, real estate-related and other securities; the availability of qualified personnel; estimates relating to ~~the Company’s~~our ability to make distributions to ~~its~~our stockholders in the future; ~~the Company's~~our present and potential future competition; and unexpected costs or unexpected liabilities, including those related to litigation.

The forward-looking statements are based on ~~the Company’s~~our beliefs, assumptions and expectations of ~~its~~our future performance, taking into account all information currently available to ~~it.~~us. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to ~~the Company.~~us. See ~~“Item~~"Item 1A. Risk ~~Factors”~~Factors" of ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. These and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that ~~the Company files~~we file with the SEC, could cause ~~its~~our actual results to differ materially from those included in any forward-looking statements ~~the Company makes.~~we make. All forward-looking statements speak only as of the date they are made. New risks and uncertainties arise over time and it is not possible to predict those events or how they may affect us. Except as required by law, ~~the Company is~~we are not obligated to, and ~~does~~do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

~~The Company is~~We are a Maryland corporation ~~that has~~and have elected to be taxed as a REIT for U.S. federal income tax purposes. ~~The Company~~We primarily ~~originates, acquires, invests~~originate, acquire, invest in and ~~manages~~manage performing commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments. These asset classes are referred to as ~~the Company’s~~our target assets.

~~The Company is~~We are externally managed and advised by the Manager, an indirect subsidiary of Apollo, a leading global alternative investment manager with a contrarian and value-oriented investment approach in private equity, credit and real estate with assets under management of approximately ~~$247.4~~$280.3 billion as of ~~March~~December 31, 2018.

The Manager is led by an experienced team of senior real estate professionals who have significant expertise in underwriting and structuring commercial real estate financing transactions. ~~The Company benefits~~We benefit from Apollo’s global infrastructure and operating platform, through which ~~the Company is~~we are able to source, evaluate and manage potential investments in ~~the Company’s~~our target assets.

Market Overview

Based on the current market dynamics, including significant upcoming commercial real estate debt maturities, we believe there remains compelling opportunities for ~~the Company~~us to invest capital in ~~its~~our target assets at attractive risk adjusted returns. ~~The Company continues~~We continue to focus on underlying real estate value, and transactions that benefit from ~~the Company’s~~our ability to execute complex and sophisticated transactions.

~~The Company believes~~

We believe the challenges faced by conduit lenders and the general uncertainty around value and pricing could create attractive risk adjusted investment opportunities for ~~the Company.~~us. As a result, ~~the Company expects~~we expect to continue to see opportunities to originate first mortgage and subordinate financings in transactions which benefit from ~~the Company’s~~our ability to source, structure and execute complex transactions.

Critical Accounting Policies

A summary of ~~the Company’s~~our critical accounting policies is set forth in ~~its~~our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 under ~~“Item~~"Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Use of Estimates.”" There have been no material changes to ~~the Company's~~our critical accounting policies described in ~~the Company's~~our Annual Report on Form 10-K filed with the SEC on February ~~14, 2018.~~13, 2019.

Results of Operations

All non-U.S. dollar denominated assets and liabilities are translated to U.S. dollars at the exchange rate prevailing at the reporting date and income, expenses, gains, and losses are translated at the prevailing exchange rate on the dates that they were recorded.

~~Investments~~Loan Portfolio Overview

The following table sets forth certain information regarding ~~the Company’s~~our commercial real estate debt portfolio as of ~~June 30, 2018~~March 31, 2019 ($ in thousands):


Description	Amortized Cost		Weighted Average Coupon ⁽¹⁾		Weighted Average All-in Yield ⁽¹⁾⁽²⁾		Secured Debt ⁽³⁾		Cost of Funds		Equity at cost⁽⁴⁾		Amortized Cost		Weighted-Average Coupon ⁽¹⁾		Weighted Average All-in Yield ⁽¹⁾⁽²⁾		Secured Debt ⁽³⁾		Cost of Funds		Equity at cost⁽⁴⁾
Commercial mortgage loans, net	$	3,724,221	6.9	%	7.8	%	$	1,981,181	4.1	%	$	1,743,040	$	4,003,089	7.0	%	7.8	%	$	2,159,767	4.1	%	$	1,843,322
Subordinate loans, net	1,142,514		12.1	%	13.4	%	—		—		1,142,514		1,183,910		12.9	%	14.3	%	—		—		1,183,910
Total/Weighted Average	$	4,866,735	8.1	%	9.1	%	$	1,981,181	4.1	%	$	2,885,554
Total/Weighted-Average													$	5,186,999	8.4	%	9.3	%	$	2,159,767	4.1	%	$	3,027,232

———————


(1)	Weighted-Average Coupon and ~~Weighted Average All-in-Yield~~Weighted-Average All-in Yield are based on the applicable benchmark rates as of ~~June 30, 2018~~March 31, 2019 on the floating rate loans.


(2)	Weighted-Average ~~All-in-Yield~~All-in Yield includes the amortization of deferred origination fees, loan origination costs and accrual of both extension and exit fees.


(3)	Gross of deferred financing costs of ~~$20.3~~$17.8 million.


(4)	Represents loan portfolio at amortized cost less secured debt outstanding.

~~Loan Portfolio Overview~~

The following table provides details of our commercial mortgage and subordinate loan portfolios, on a loan-by-loan basis, as of ~~June 30, 2018~~March 31, 2019 ($ in millions):

Commercial Mortgage Loan Portfolio

Property Type

Risk Rating

Origination Date

Amortized Cost

Unfunded Commitment

Construction Loan

Fully-extended Maturity

Location

Risk Rating

Origination Date

Amortized Cost

Unfunded Commitment

Construction Loan⁽⁴⁾

Fully-extended Maturity

Location

Urban Predevelopment

01/2016

$213

—

07/2019

Miami, FL

Residential-for-sale: inventory

3/2018

$223

—

3/2021

London, UK

03/2018

211

—

03/2021

London, UK

Hotel

09/2016

210

—

01/2022

Manhattan, NY

Industrial

01/2019

195

02/2024

Brooklyn, NY

Urban Predevelopment

1/2016

221

—

7/2019

Miami, FL

04/2017

182

—

09/2019

London, UK

Office

10/2018

178

10/2021

Manhattan, NY

Office

11/2017

169

—

01/2023

Chicago, IL

Office

11/2017

157

12/2022

Manhattan, NY

Retail Center ⁽³⁾

11/2014

156

—

09/2020

Cincinnati, OH

Hotel

9/2016

215

—

8/2021

Manhattan, NY

04/2018

151

04/2023

Honolulu, HI

Urban Predevelopment

4/2017

183

—

3/2019

London, UK

03/2017

144

12/2020

Brooklyn, NY

Office

11/2017

176

—

1/2023

Chicago, IL

Hotel ⁽¹⁾

09/2015

140

—

06/2023

Manhattan, NY

Hotel

05/2018

139

—

06/2023

Miami, FL

2624


Retail Center	4	11/2014	171	—		9/2018	Cincinnati, OH
Hotel	3	4/2018	151	2		4/2023	Honolulu, HI
Hotel⁽¹⁾	3	9/2015	140	—		6/2023	Manhattan, NY
Hotel	3	5/2018	139	—		6/2023	Miami, FL
Mixed Use	3	9/2016	133	—		10/2020	Chicago, IL
Urban Predevelopment	3	3/2017	128	—		9/2018	Brooklyn, NY
Mixed Use	2	7/2017	125	—		6/2019	Manhattan, NY
Office	3	11/2017	120	127	Y	12/2022	Manhattan, NY
Residential-for-sale: inventory	3	6/2018	113	—		6/2020	Manhattan, NY
Multifamily	3	4/2014	80	—		7/2023	Various
Other	2	10/2016	80	—		8/2019	Manassas, VA
Hotel	3	3/2017	77	—		3/2022	Atlanta, GA	3	03/2017	105	—		03/2022	Atlanta, GA
Office	3	12/2017	76	59		3/2022	London, UK	3	10/2018	101	84	Y	10/2023	Manhattan, NY
Hotel								3	11/2018	99	—		12/2023	Vail, CO
Office								3	01/2018	94		Y	01/2022	Renton, WA
Hotel								3	12/2017	90	—		12/2022	Manhattan, NY
Hotel								3	07/2018	86	—		08/2021	Detroit, MI
Residential-for-sale: construction								3	05/2018	78	5	Y	06/2020	Brooklyn, NY
Office								3	12/2017	76	57		03/2022	London, UK
Multifamily								3	04/2014	76	—		07/2023	Various
Residential-for-sale: inventory	3	5/2018	75	4		6/2020	Brooklyn, NY	3	06/2018	76	—		06/2020	Manhattan, NY
Residential-for-sale: inventory	3	6/2018	71	—		6/2020	London, UK
Urban Predevelopment								3	12/2016	73	—		12/2020	Los Angeles, CA
Multifamily	3	10/2017	67	—		11/2021	Brooklyn, NY	3	06/2018	71	—		06/2020	London, UK
Urban Predevelopment	3	11/2016	65	—		12/2018	Manhattan, NY
Urban Predevelopment	3	7/2017	64	16		4/2019	London, UK
Multifamily								3	10/2017	67	—		11/2021	Brooklyn, NY
Hotel	3	4/2018	63	—		5/2023	Scottsdale, AZ	3	04/2018	63	—		05/2023	Scottsdale, AZ
Urban Predevelopment	3	12/2016	62	19		12/2020	Los Angeles, CA
Office								3	03/2018	63	25		04/2023	Chicago, IL
Residential-for-sale: construction								3	12/2018	60	92	Y	12/2023	Manhattan, NY
Hotel	2	1/2017	60	—		1/2022	Miami, FL	2	01/2017	60	—		01/2022	Miami, FL
Multifamily	3	11/2014	59	—		11/2021	Various	3	11/2014	57	—		11/2021	Various
Office	3	3/2018	58	29		4/2023	Chicago, IL
Hotel	3	12/2017	57	32	Y	12/2022	Manhattan, NY
Office⁽²⁾	3	1/2018	55	158	Y	1/2022	Renton, WA
Multifamily								3	05/2016	50	2		06/2019	Brooklyn, NY
Residential-for-sale: inventory	3	5/2018	50	—		4/2021	Manhattan, NY	3	05/2018	50	—		04/2021	Manhattan, NY
Multifamily	3	5/2016	44	8		6/2019	Brooklyn, NY
Multifamily	3	10/2017	43	—		10/2022	London, UK	3	10/2017	43	—		10/2022	London, UK
Hotel	3	12/2015	42	1		12/2020	St. Thomas, USVI	3	12/2015	42	2		12/2020	St. Thomas, USVI
Multifamily	3	12/2017	39	1		1/2020	Manhattan, NY	3	12/2017	42	—		01/2020	Manhattan, NY
Hotel	3	2/2018	38	—		3/2023	Pittsburgh, PA	3	02/2018	38	—		03/2023	Pittsburgh, PA
Residential-for-sale: construction								3	01/2018	33	47	Y	01/2023	Manhattan, NY
Multifamily⁽³⁾	5	11/2014	37	—		11/2019	Williston, ND	5	11/2014	32	—		11/2019	Williston, ND
Mixed Use	3	7/2017	36	—		2/2019	Manhattan, NY
Retail Center	3	2/2017	31	3		9/2020	Miami, FL
Residential-for-sale: inventory⁽³⁾	5	2/2014	28	—		4/2019	Bethesda, MD	5	02/2014	24	—		04/2020	Bethesda, MD
Residential-for-sale: construction	3	1/2018	16	64	Y	1/2023	Manhattan, NY
Mixed Use	3	7/2017	14	—		2/2019	Manhattan, NY	3	07/2017	14	—		08/2019	Manhattan, NY
Residential-for-sale: construction	2	3/2018	(1)	115	Y	3/2023	San Francisco, CA	3	12/2018	(1)	103	Y	01/2024	Hallandale Beach, FL
Commercial mortgage loans			$3,724	$638	7%	2.7 Years
Residential-for-sale: construction								2	03/2018	(1)	115	Y	03/2023	San Francisco, CA
Office								3	08/2018	(2)	201	Y	12/2022	London, UK
Sub-total / Weighted Average Commercial mortgage loans								3.1		$4,003	$968	13%	2.7 Years



Subordinate Loan Portfolio
Property Type	Risk Rating	Origination Date	Amortized Cost	Unfunded Commitment	Construction Loan⁽⁴⁾	Fully-extended Maturity	Location
Residential-for-sale: construction ⁽²⁾	3	06/2015	$189	—	Y	02/2021	Manhattan, NY
Office	3	01/2019	99	—		12/2025	Manhattan, NY
Healthcare	3	01/2019	95	—		01/2024	Various
Residential-for-sale: construction	3	12/2017	86	24	Y	06/2022	Manhattan, NY
Residential-for-sale: construction	3	01/2016	83	—	Y	02/2021	Manhattan, NY
Other	3	09/2017	72	—		09/2022	Various
Multifamily	3	10/2015	63	—		07/2019	Manhattan, NY
Residential-for-sale: construction	3	12/2017	61	—	Y	04/2023	Los Angeles, CA
Healthcare	3	01/2015	49	—		12/2019	Various


Subordinate Loan Portfolio
Property Type	Risk Rating	Origination Date	Amortized Cost	Unfunded Commitment	Construction Loan	Fully-extended Maturity	Location
Residential-for-sale: construction⁽⁴⁾	3	6/2015	$171	—	Y	7/2020	Manhattan, NY
Healthcare	3	10/2016	112	—		10/2021	Various
Healthcare	3	6/2018	94	—		5/2019	Various
Residential-for-sale: construction	3	2/2016	77	—	Y	2/2021	Manhattan, NY
Office	3	3/2017	75	—		10/2018	Brooklyn, NY
Other	3	9/2017	74	—		9/2022	Various
Multifamily	3	10/2015	60	4		7/2019	Manhattan, NY
Healthcare	3	1/2015	50	—		12/2019	Various
Hotel	3	6/2018	48	—		2/2023	Various
Residential-for-sale: construction ⁽²⁾								3	11/2017	43	—	Y	02/2021	Manhattan, NY
Mixed Use	3	1/2017	42	—		2/2027	Cleveland, OH	3	01/2017	42	—		02/2027	Cleveland, OH
Residential-for-sale: construction⁽⁴⁾	3	11/2017	37	—	Y	7/2020	Manhattan, NY
Mixed Use								3	02/2019	38	—	Y	12/2022	London, UK
Residential-for-sale: inventory	3	10/2016	34	—		11/2020	Manhattan, NY	3	10/2016	36	—		10/2020	Manhattan, NY
Industrial	3	5/2013	32	—		5/2023	Various	3	05/2013	32	—		05/2023	Various
Residential-for-sale: construction	3	12/2017	31	25	Y	4/2023	Los Angeles, CA
Residential-for-sale: inventory								3	06/2017	25	—		12/2020	Manhattan, NY
Hotel	3	6/2015	25	—		7/2025	Phoenix, AZ	3	06/2015	25	—		07/2025	Phoenix, AZ
Residential-for-sale: inventory	3	6/2017	23	—		12/2020	Manhattan, NY
Multifamily	3	5/2018	21	—		5/2028	Cleveland, OH	3	05/2018	20	—		05/2028	Cleveland, OH
Hotel	3	6/2015	20	—		7/2019	Washington, DC	3	06/2015	20	—		12/2022	Washington, DC
Hotel	3	2/2015	20	—		1/2020	Burbank, CA	3	06/2018	20	—		06/2023	Las Vegas, NV
Hotel	3	6/2018	20	—		6/2023	Las Vegas, NV	3	02/2015	20	—		01/2020	Burbank, CA
Hotel⁽¹⁾	3	9/2015	15	9		6/2023	Manhattan, NY	3	09/2015	15	9		06/2023	Manhattan, NY
Office	3	7/2013	14	—		7/2022	Manhattan, NY	3	07/2013	14	—		07/2022	Manhattan, NY
Office⁽²⁾	3	1/2018	13	36	Y	1/2022	Renton, WA
Office	3	9/2012	9	—		10/2022	Kansas City, MO
Mixed Use								3	12/2018	14	38	Y	12/2023	Brooklyn, NY
Hotel	3	5/2017	8	—		6/2027	Anaheim, CA	3	05/2017	8	—		06/2027	Anaheim, CA
Office	3	8/2017	8	—		9/2024	Troy, MI	3	08/2017	8	—		09/2024	Troy, MI
Mixed Use	3	7/2012	7	—		8/2022	Chapel Hill, NC	3	07/2012	7	—		08/2022	Chapel Hill, NC
Residential-for-sale: construction	3	12/2017	3	106	Y	6/2022	Manhattan, NY
Sub total- Subordinate loans			$1,143	$180	29%	3.0 Years
Sub total / Weighted-Average- Subordinate loans								3.0		$1,184	$71	43%	3.4 Years

Total Loan Portfolio			$4,867	$818	12%	2.8 Years
Total / Weighted-Average Loan Portfolio								3.1		$5,187	$1,039	20%	2.9 Years

———————

(1) Both loans are secured by the same property.

(2) Both loans are secured by the same ~~property~~property.

(3) Amortized cost for these loans is net of the recorded provisions for loan losses and ~~impairments~~impairments.

(4) ~~Both loans are secured by~~Weighted-average construction loan % is based on the ~~same property~~amortized cost of the loans.

~~The Company's~~Our average asset and debt balances for the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, were ($ in thousands):


	Average month-end balances for the six months ended June 30, 2018				Average month-end balances for the three months ended March 31, 2019
Description	Assets		Related debt		Assets		Related debt
Commercial mortgage loans, net	$	3,149,629	$	1,471,118	$	4,038,172	$	2,195,782
Subordinate loans, net	1,026,702		—		1,169,429		—

Investment Activity

During the ~~six~~three months ended ~~June 30, 2018, the Company~~March 31, 2019, we committed ~~$1.9 billion~~$448.7 million of capital to loans ($~~1.5 billion~~441.8 million of which was funded during the ~~six~~three months ended ~~June 30, 2018)~~March 31, 2019). In addition, during the ~~six~~three months ended ~~June 30, 2018, the Company~~March 31, 2019, we funded ~~$103.8~~$110.3 million for loans closed prior to ~~2018,~~2019, and received ~~$375.7~~$322.4 million in repayments.

Net Income Available to Common Stockholders

For the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and June 30, 2017,~~ respectively, ~~the Company’s~~our net income available to common stockholders was ~~$48.5~~$60.9 million, or ~~$0.39~~$0.43 per diluted share of common stock, and ~~$26.9~~$42.6 million, or ~~$0.28~~$0.38 per ~~share. For the six months ended June 30, 2018 and June 30, 2017, respectively, the Company’s net income available to~~diluted share of common ~~stockholders was $91.1 million, or $0.78 per share, and $64.7 million, or $0.68 per share.~~stock.

Operating Results

The following table sets forth information regarding our consolidated results of operations and certain key operating metrics ($ in thousands):


	Three months ended June 30,						2018 vs. 2017			Six months ended June 30,						2018 vs. 2017			Three months ended March 31,						2019 vs 2018
	2018			2017						2018			2017						2019			2018
Net interest income:
Interest income from commercial mortgage loans	$	65,141		$	37,089		$	28,052		$	117,255		$	71,487		$	45,768		$	78,286		$	52,114		$	26,172
Interest income from subordinate loans	34,075			39,640			(5,565		)	67,928			74,030			(6,102		)	40,839			33,853			6,986
Interest income from securities	—			4,700			(4,700		)	—			10,754			(10,754		)
Interest expense	(28,437		)	(19,205		)	(9,232		)	(51,177		)	(36,235		)	(14,942		)	(36,295		)	(22,740		)	(13,555		)
Net interest income	70,779			62,224			8,555			134,006			120,036			13,970			82,830			63,227			19,603
Operating expenses:
General and administrative expenses	(5,652		)	(5,200		)	(452		)	(10,650		)	(10,958		)	308			(6,151		)	(4,998		)	(1,153		)
Management fees to related party	(9,013		)	(7,742		)	(1,271		)	(17,105		)	(15,175		)	(1,930		)	(9,613		)	(8,092		)	(1,521		)
Total operating expenses	(14,665		)	(12,942		)	(1,723		)	(27,755		)	(26,133		)	(1,622		)	(15,764		)	(13,090		)	(2,674		)
Loss from unconsolidated joint venture	—			(3,305		)	3,305			—			(2,847		)	2,847
Other income	343			244			99			546			352			194			518			203			315
Provision for loan losses and impairments	(5,000		)	(5,000		)	—			(5,000		)	(5,000		)	—
Realized loss on sale of assets	—			—			—			—			(1,042		)	1,042
Unrealized loss on securities	—			(4,510		)	4,510			—			(1,658		)	1,658
Foreign currency gain (loss)	(29,649		)	6,913			(36,562		)	(19,524		)	10,085			(29,609		)
Gain (loss) on derivative instruments	33,538			(7,389		)	40,927			22,506			(10,434		)	32,940
Foreign currency gain																			6,894			10,125			(3,231		)
Loss on derivative instruments																			(6,720		)	(11,032		)	4,312
Net income	$	55,346		$	36,235		$	19,111		$	104,779		$	83,359		$	21,420		$	67,758		$	49,433		$	18,325

Net Interest Income

Net interest income increased by ~~$8.6 million and $14.0~~$19.6 million during the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019 as compared to the same ~~periods~~period in ~~2017.~~2018. The increase was primarily due to (i) a net increase in the principal balance of ~~the Company's~~our loan portfolio by ~~$1.6~~$1.1 billion, ~~partially offset by~~and (ii) a ~~decrease in the principal balance of the Company's securities by $300.1 million, and a 0.87%~~0.79% increase in average one-month LIBOR ~~as of June 30, 2018~~for the three months ended March 31, 2019 compared to ~~June 30, 2017.~~March 31, 2018. This

was offset by (i) an increase in interest expense due to an increase in ~~the Company's~~our net debt balance of ~~$985.9~~$907.9 million as of ~~June 30, 2018~~March 31, 2019 compared to ~~June 30, 2017,~~March 31, 2018, and (ii) ~~a 0.87%~~the increase in average one-month LIBOR asdiscussed above.

We recognized payment-in-kind ("PIK") interest of ~~June 30,~~$14.5 million and $10.6 million for the three months ended March 31, 2019 and 2018, ~~compared to June 30, 2017.~~respectively.

~~The Company~~We recognized pre-payment penalties and accelerated fees of ~~$1.6~~$3.7 million for the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019. There were no pre-payment penalties and ~~$0.6 million~~accelerated fees for the three ~~and six~~ months ended ~~June 30, 2017.~~March 31, 2018.

Operating Expenses

General and administrative expenses

General and administrative expenses increased by ~~$0.5~~$1.2 million for the three months ended ~~June 30, 2018~~March 31, 2019 compared to the same period in ~~2017.~~2018. The increase was primarily driven by an increase of $0.6 million of non-cash restricted stock and RSU amortization related to shares of common stock awarded under ~~the Company's long-term incentive plans offset by $0.1~~LTIP and a $0.6 million ~~decrease~~increase in general operating expenses.

General and administrative expenses decreased by $0.3 million for the six months ended June 30, 2018 compared to the same period in 2017. The decrease was primarily driven by a $0.4 million decrease in general operating expenses offset by an increase of $0.1 million of non-cash restricted stock and RSU amortization related to shares of common stock awarded under the Company's long-term incentive plans.

Management fees to related party

Management fee expense increased by ~~$1.3 million and $1.9~~$1.5 million during the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019 as compared to the same ~~periods~~period in ~~2017.~~2018. The increase is primarily attributable to an increase in ~~the Company’s~~our stockholders’ equity (as defined in the Management Agreement) as a result of the ~~Company completing follow-on public offerings~~issuance of ~~13,800,000 and 15,525,000~~2,775,509 shares of ~~its~~our common stock related to exchanges and conversions of the 2019 Notes, which are described in ~~June 2017 and March 2018, respectively. This increase was partially offset due~~"Note 8 - Convertible Senior Notes, Net" to the ~~redemption of our 8.625% Series A Cumulative Redeemable Perpetual Preferred Stock ("Series A Preferred Stock") in~~accompanying condensed consolidated financial statements, from August ~~2017.~~2018 through March 2019.

Management fees and the relationship between ~~the Company~~us and the Manager under the Management Agreement are discussed further in the accompanying condensed consolidated financial statements, in ~~“Note 12—~~"Note 11 - Related Party Transactions.”

~~Income from unconsolidated joint venture~~

Income from unconsolidated joint ventures consists of activity related to our ownership interest in Champ LP. In September 2014, the Company, through a wholly owned subsidiary, acquired a 59% ownership interest in Champ LP following which a wholly-owned subsidiary of Champ LP then acquired a 35% ownership interest in BKB. In May 2017, the Company sold its remaining ownership interest in Champ LP, to unaffiliated third parties. As such, in 2018 the Company no longer held any interest in Champ LP.

~~Net unrealized and realized gain (loss) on sale of assets~~"

During the three and six months ended June 30, 2017, the Company sold securities resulting in a net realized loss of $0 and $1.0 million, respectively. The Company has not held any securities since December 2017.

Foreign currency gain and (loss) on derivative instruments

~~The Company uses~~We use forward currency contracts to economically hedge interest and principal payments due under ~~its~~our loans denominated in currencies other than U.S. dollars. ~~The Company~~We also ~~uses~~use interest rate swaps and caps to manage exposure to variable cash flows on portions of ~~its~~our borrowings under secured debt arrangements. Interest rate swap and cap agreements allow ~~the Company~~us to receive a variable rate cash flow based on LIBOR and pay a fixed rate cash flow, mitigating the impact of this exposure. When foreign currency gain and (loss) on derivative instruments are evaluated on a combined basis, the net impact for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018 were ~~$3.9~~$0.2 million and ~~$3.0 million, respectively, and the net impact for the three and six months ended June 30, 2017 were $(0.5) million and $(0.3)~~$(0.9) million, respectively.

Dividends

~~The Company has~~We have declared the following dividends in ~~2018:~~2019:


	Three months ended				Three months ended
Dividends declared per share of:	June 30, 2018		March 31, 2018
Dividend declared per share of:					March 31, 2019	March 31, 2018
Common Stock	$	0.46	$	0.46	$0.46
Series B Preferred Stock	0.50		0.50		0.50
Series C Preferred Stock	0.50		0.50		0.50

Subsequent Events

Refer to "Note 1817 - Subsequent Events" to the ~~unaudited~~accompanying condensed consolidated financial statements for disclosure regarding significant transactions that occurred subsequent to ~~June 30, 2018.~~March 31, 2019.

Liquidity and Capital Resources

Liquidity is a measure of ~~the Company’s~~our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain ~~its~~our assets and operations, make distributions to ~~its~~our stockholders and other general business needs. ~~The Company’s~~Our cash is used to purchase or originate target assets, repay principal and interest on borrowings, make distributions to stockholders and fund operations. ~~The Company’s~~We closely monitor our liquidity position ~~is closely monitored~~ and ~~the Company believes it has~~we believe we have sufficient current liquidity and access to additional liquidity to meet financial obligations for at least the next 12 months.

Debt-to-Common Equity Ratio

The following table presents our debt-to-common equity ratio:



	~~June 30, 2018~~March 31, 2019	December 31, ~~2017~~2018
~~Debt-to-Common~~Debt to Equity Ratio ⁽¹⁾	~~1.2x~~1.0x	0.9x

———————

(1) Represents total secured debt arrangements and convertible senior notes, less cash and loan proceeds held by servicer to ~~common~~total stockholders' equity.

~~The Company’s~~Our primary sources of liquidity are as follows:

Cash Generated from Operations

Cash from operations is generally comprised of interest income from ~~the Company’s~~our investments, net of any associated financing expense, principal repayments from ~~the Company’s~~our investments, net of associated financing repayments, proceeds from the sale of investments, and changes in working capital balances. See ~~“Results~~"Results of Operations – Investments" above for a summary of interest rates related to ~~the Company’s~~our investment portfolio as of ~~June 30, 2018.~~March 31, 2019.

Borrowings Under Various Financing Arrangements

JPMorgan Facility

In ~~June 2018, the Company,~~May 2017, through two indirect ~~wholly owned~~wholly-owned subsidiaries, we entered into ~~an amendment to the~~a Fifth Amended and Restated Master Repurchase Agreement ~~for the~~with JPMorgan ~~Facility, which extended the term to June 2020, plus a one-year extension option available at the Company's option, subject to certain conditions.~~Chase Bank, National Association. The JPMorgan Facility provides for maximum total borrowing capacity of $1.4 billion, comprised of a $1.25 billion repurchase facility and a ~~$132.0~~$105.0 million asset specific financing

and enables ~~the Company~~us to elect to receive advances in either U.S. dollars, British pounds ("GBP"), or Euros ("EUR"). The repurchase facility matures in June 2020, plus a one-year extension available at our option, subject to certain conditions. The asset specific financing matures in ~~February~~May 2019. Margin calls may occur any time at specified aggregate margin deficit thresholds. ~~The Company has~~We have agreed to provide a limited guarantee of the obligations of ~~its~~our indirect wholly-owned subsidiaries under the JPMorgan Facility.

DB Repurchase Facility

and Deutsche Bank AG, London ~~Branch. The Second Amendment~~Branch, which was upsized in September 2018, and ~~Restatement~~ provides for advances of up to ~~$800.0 million~~$1.0 billion for the sale and repurchase of eligible first mortgage loans secured by commercial or multifamily properties located in the United States, United Kingdom and the European Union, and enables ~~the Company~~us to elect to receive advances in either U.S. dollars, British pounds, or Euros. ~~Additionally, the Company has $55.0 million of asset specific financings with Deutsche Bank~~The repurchase facility matures in ~~connection with financing first mortgage loans secured by real estate. The Second Amendment and Restatement has a maturity date of~~ March ~~31,~~ 2020, plus ~~one~~a one-year extension available at ~~the Company's~~our option, subject to certain conditions. ~~The asset specific financings mature in September 2018.~~ Margin calls may occur any time at specified aggregate margin deficit thresholds. ~~The Company has~~We have agreed to provide a limited guarantee of the obligations of ~~its~~our indirect wholly-owned subsidiaries under this facility.

Goldman Facility

In November 2017, ~~the Company,~~ through an indirect wholly-owned subsidiary, we entered into a master repurchase and securities contract agreement with Goldman Sachs Bank USA, ~~(the "Goldman Facility),~~ which ~~provides for advances of up~~was upsized in March 2019 from $300.0 million to ~~$300.0~~$500.0 million and matures in November ~~2020.~~2019, plus two one-year extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified margin deficit thresholds. ~~The Company has~~We have agreed to provide a limited guarantee of the obligations of the seller under the Goldman Facility.

As of ~~June 30, 2018, the Company~~March 31, 2019, we had ~~total borrowings of $209.0~~$233.3 million of borrowings outstanding under the Goldman Facility.

CS Facility - USD

In ~~June~~July 2018, ~~the Company,~~ through an indirect wholly-owned subsidiary, we entered into a ~~master repurchase agreement~~Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd, ~~(the "CS Facility"),~~ which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - USD matures six months after either party notifies the other party of intention to terminate. Margin calls may occur any time at specified aggregate margin deficit thresholds. ~~The Company has~~We have agreed to provide a guarantee of the obligations of ~~its~~our indirect wholly-owned subsidiaries under this facility.

As of March 31, 2019, we had $188.0 million of borrowings outstanding under the CS Facility - USD secured by certain of our commercial mortgage loans.

CS Facility - GBP

In June ~~30,~~ 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd, which provides for advances for the ~~Company~~sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - GBP matures six months after either party notifies the other party of intention to terminate. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

HSBC Facility

In September 2018, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc, which provides for a single asset financing. The facility matures in December 2019 and unless terminated by either party, automatically extends for further periods prior to maturity. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of March 31, 2019, we had $49.9 million (£38.3 million assuming conversion into U.S. dollars) of borrowings outstanding under the HSBC Facility secured by one of our commercial mortgage loans.

Debt Covenants

Each of the guarantees related to our secured debt arrangements contain the following uniform financial covenants (i) tangible net worth must be greater than $1.25 billion plus 75% of the net cash proceeds of any equity issuance after March 31, 2017 (ii) our ratio of total indebtedness to tangible net worth cannot be greater than 3:1; and (iii) our liquidity cannot be less than an amount equal to the greater of 5% of total recourse indebtedness or $30.0 million.

Convertible Senior Notes

~~The Company has~~In two separate offerings during 2014, we issued ~~in two offerings in 2014,~~ an aggregate principal amount of $254.8 million of 5.50% Convertible Senior Notes due 2019, for which ~~the Company~~we received ~~aggregate net proceeds,~~$248.6 million, after deducting the underwriting discount and ~~estimated~~ offering ~~expenses payable by~~expenses. The 2019 Notes were exchanged or converted for shares of our common stock and cash as follows:

(i) On August 2, 2018, we entered into privately negotiated exchange agreements with a limited number of holders of the ~~Company,~~2019 Notes pursuant to which we exchanged $206.2 million of ~~approximately $248.6 million.~~the 2019 Notes for an aggregate of (a) 10,020,328 newly issued shares of our common stock, and (b) $39.3 million in cash. We recorded $166.0 million of additional paid-in-capital in the condensed consolidated statement of changes in stockholders' equity in connection with these transactions,

(ii) Certain holders elected to convert $47.9 million of the 2019 Notes, which were settled for an aggregate of (a) 2,775,509 newly issued shares of our common stock, and (b) $0.2 million in cash. We recorded $13.9 million of additional paid-in-capital in the condensed consolidated statement of changes in stockholders' equity in connection with these transactions. These conversions occurred from August 2018 through maturity.

The ~~Company has~~remaining $0.7 million in principal amount of the 2019 Notes were repaid at maturity on March 15, 2019.

During the year ended December 31, 2018, we recorded a loss on early extinguishment of debt of $2.6 million, in connection with the exchanges and conversions of the 2019 Notes. This includes fees and accelerated amortization of capitalized costs. There was no such loss related to the 2019 Notes during the three months ended March 31, 2019.

In two separate offerings during 2017, we issued ~~in two offerings in 2017,~~ an aggregate principal amount of $345.0 million of 4.75% Convertible Senior Notes due 2022, for which ~~the Company~~we received ~~aggregate net proceeds,~~$337.5 million, after deducting the underwriting discount and ~~estimated~~ offering ~~expenses payable by~~expenses. At March 31, 2019, the ~~Company,~~2022 Notes had a carrying value of ~~approximately $337.5~~$335.9 million and an unamortized discount of $9.1 million.

~~Cash Generated from Offerings~~

During the ~~first~~fourth quarter of 2018, ~~the Company completed a follow-on public offering~~we issued $230.0 million of 15,525,000 shares of its common stock, at a price of $17.77 per share. The aggregate net proceeds from the offering, including proceeds from the sale of the additional shares, were approximately $275.95.375% Convertible Senior Notes due 2023, for which we received $223.7 million after deducting ~~estimated~~the underwriting discount and offering expenses. At March 31, 2019, the 2023 Notes had a carrying value of $222.8 million and an unamortized discount of $7.2 million.

Other Potential Sources of Financing

~~The Company’s~~Our primary sources of cash currently consist of cash available, which was ~~$76.4~~$109.3 million as of ~~June 30, 2018,~~March 31, 2019, principal and interest payments ~~the Company receives~~we receive on ~~its~~our portfolio of assets, and available borrowings under ~~its~~our secured debt arrangements. ~~The Company expects its~~We expect our other sources of cash to consist of cash generated from operations and prepayments of principal received on ~~the Company’s~~our portfolio of assets. Such prepayments are difficult to estimate in advance. Depending on market conditions, ~~the Company~~we may utilize additional borrowings as a source of cash, which may also include additional secured debt arrangements as well as other borrowings such as credit facilities, or conduct additional public and private debt and equity offerings.

~~The Company maintains~~We maintain policies relating to ~~its~~our borrowings and use of leverage. See ~~“Leverage Policies”~~"Leverage Policies" below. In the future, ~~the Company~~we may seek to raise further equity or debt capital or engage in other forms of borrowings in order to fund future investments or to refinance expiring indebtedness.

~~The Company~~We generally ~~intends~~intend to hold ~~its~~our target assets as long-term investments, although itwe may sell certain of ~~its~~our investments in order to manage ~~its~~our interest rate risk and liquidity needs, meet other operating objectives and adapt to market conditions.

To maintain ~~its~~our qualification as a REIT under the Internal Revenue Code, ~~the Company~~we must distribute annually at least 90% of ~~its~~our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain. These distribution requirements limit ~~the Company’s~~our ability to retain earnings and ~~thereby~~ replenish or increase capital for operations.

Leverage Policies

~~The Company uses~~We use leverage for the sole purpose of financing ~~its~~our portfolio and not for the purpose of speculating on changes in interest rates. In addition to ~~its~~our secured debt arrangements, in the future ~~the Company~~we may access additional sources of borrowings. ~~The Company’s~~Our charter and bylaws do not limit the amount of indebtedness ~~the Company~~we can incur; however, ~~the Company is~~we are limited by certain financial covenants under ~~its~~our secured debt arrangements. Consistent with ~~the Company’s~~our strategy of keeping leverage within a ~~conservative~~prudent range, ~~the Company expects that~~we expect to, depending upon the composition of ~~its~~our portfolio, maintain our debt-to-common equity ratio ~~will be~~at less than 2.0x.

Investment Guidelines

~~The Company's~~Our current investment guidelines, approved by ~~the Company's~~our board of directors, are comprised of the following:

no investment will be made that would cause ~~the Company~~us to fail to qualify as a REIT for U.S. federal income tax purposes;

no investment will be made that would cause ~~the Company~~us to register as an investment company under the 1940 Act;

investments will be predominantly in ~~the Company’s~~our target assets;

no more than 20% of ~~the Company’s~~our cash equity (on a consolidated basis) will be invested in any single investment at the time of the investment; and

until appropriate investments can be identified, the Manager may invest the proceeds of any offering in interest bearing, short-term investments, including money market accounts and/or funds, that are consistent with ~~the Company’s~~our intention to qualify as a REIT.

The board of directors must approve any change in these investment guidelines.

Contractual Obligations and Commitments

~~The Company’s~~Our contractual obligations including expected interest payments as of ~~June 30, 2018~~March 31, 2019 are summarized as follows ($ in thousands):

Less than 1
year ⁽³⁾

1 to 3
years ⁽³⁾

3 to 5
years ⁽³⁾

More
than 5
years ⁽³⁾
Total
JPMorgan Facility ⁽¹⁾
$ 247,219
$ 814,126
$ —
$ —
$ 1,061,345
DB Repurchase Facility ⁽¹⁾
150,218
533,258
—
—
683,476
Goldman Facility ⁽¹⁾
9,524
222,530
—
—
232,054
CS Facility ⁽¹⁾
149,026
—
—
149,026
Convertible Senior Notes 281,062
32,775
363,906
—
677,743
Unfunded loan commitments ⁽²⁾
414,919
402,164
1,012
—
818,095
Total $ 1,251,968
$ 2,004,853
$ 364,918
$ —
$ 3,621,739



	Less than 1 year ⁽³⁾		1 to 3 years ⁽³⁾		3 to 5 years ⁽³⁾		More than 5 years ⁽³⁾		Total
Secured debt arrangements ⁽¹⁾	$	743,438	$	1,709,875	$	—	$	—	$	2,453,313
Convertible senior notes, net	28,750		57,500		601,190		—		687,440
Unfunded loan commitments ⁽²⁾	505,512		533,578		—		—		1,039,090
Total	$	1,277,700	$	2,300,953	$	601,190	$	—	$	4,179,843

———————


(1)	Based on the applicable benchmark rates as of ~~June 30, 2018~~March 31, 2019 on the floating rate debt for interest payments due.


(2)	Based on ~~the Company's~~our expected funding schedule, which is based upon the Manager’s estimates based upon the best information available to the Manager at the time. There is no assurance that the payments will occur in accordance with these estimates or at all, which could affect ~~the Company’s~~our operating results.


(3)	Assumes underlying assets are financed through the fully extended maturity date of the facility.

Loan Commitments. As of ~~June 30, 2018~~March 31, 2019, ~~the Company~~we had ~~$818.1 million~~$1.0 billion of unfunded loan commitments, comprised of ~~$637.8~~$968.0 million related to ~~its~~our commercial mortgage loan portfolio, and ~~$180.3~~$71.1 million related to ~~its~~our subordinate loan portfolio.

Management Agreement. On September 23, 2009, ~~the Company~~we entered into the Management Agreement with the Manager pursuant to which the Manager is entitled to receive a management fee and the reimbursement of certain expenses. The table above does not include amounts due under the Management Agreement as those obligations do not have fixed and determinable payments. Pursuant to the Management Agreement, the Manager is entitled to a base management fee calculated and payable quarterly in arrears in an amount equal to 1.5% of ~~the Company’s~~our stockholders’ equity (as defined in the Management Agreement), per annum. The Manager will use the proceeds from its management fee in part to pay compensation to its officers and personnel. ~~The Company does~~We do not reimburse ~~its~~the Manager or its affiliates for the salaries and other compensation of their personnel, except for the allocable share of the compensation of (1) ~~the Company’s~~our Chief Financial Officer based on the percentage of time spent on ~~the Company’s~~our affairs and (2) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment professional personnel of the Manager or its affiliates who spend all or a portion of their time managing ~~the Company’s~~our affairs based on the percentage of time devoted by such personnel to ~~the Company’s~~our affairs. ~~The Company is~~We are also required to reimburse ~~its~~the Manager for operating expenses related to ~~the Company~~us incurred by ~~its~~the Manager, including expenses relating to legal, accounting, due diligence and other services. Expense reimbursements to the Manager are made in cash on a monthly basis following the end of each month. ~~The Company’s~~Our reimbursement obligation is not subject to any dollar limitation.

The current term of the Management Agreement currently runs through September 29, ~~2018.~~2019. Absent certain action by the independent directors of ~~the Company’s~~our board of directors, as described below, the Management Agreement will automatically renew on each anniversary for a ~~one year~~one-year term. The Management Agreement may be terminated upon expiration of the one-year term only upon the affirmative vote of at least two-thirds of ~~the Company’s~~our independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to ~~the Company~~us or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair fees by accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of ~~the Company’s~~our independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual base management fee during the 24-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. Amounts payable under the ~~Company’s~~ Management Agreement are not fixed and determinable. Following a meeting by ~~the Company’s~~our independent directors in February 2018, which included a discussion of the Manager’s performance and the level of the management fees thereunder, ~~the Company~~we determined not to terminate the Management Agreement.

Forward Currency Contracts. We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than U.S. dollars. We have entered into a series of forward contracts to sell an amount of foreign currency (British pounds) for an agreed upon amount of U.S. dollars at various dates through December 2021. These forward contracts were executed to economically fix the U.S. dollar amounts of foreign denominated cash flows expected to be received by us related to foreign denominated loan investments. Refer to "Note 9 - Derivatives, Net" to the accompanying condensed consolidated financial statements for details regarding our forward contracts.

Off-balance Sheet Arrangements

~~The Company does~~We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, or special purpose or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. Further, ~~the Company has~~we have not guaranteed any obligations of unconsolidated entities or entered into any commitment to provide additional funding to any such entities.

Dividends

~~The Company intends~~We intend to continue to make regular quarterly distributions to holders of ~~its~~our common stock. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of ~~its~~our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that itwe pay tax at regular corporate rates to the extent that itwe annually ~~distributes~~distribute less than 100% of ~~its~~our net taxable income. ~~The Company~~We generally ~~intends~~intend over time to pay dividends to ~~its~~our stockholders in an amount equal to ~~its~~our net taxable income, if and to the extent authorized by ~~its~~our board of directors. Any distributions ~~the Company makes~~we make are at the discretion of ~~its~~our board of directors and depend upon, among other things, ~~the Company's~~our actual results of operations. These results and ~~the Company’s~~our ability to pay distributions are affected by various factors, including the net interest and other income from ~~its~~our portfolio, ~~its~~our operating expenses and any other expenditures. If ~~the Company’s~~our cash available for distribution is less than ~~its~~our net taxable income, ~~the Company~~we could be required to sell assets or borrow funds to make cash distributions or ~~the Company~~we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

~~The Company has~~As of March 31, 2019, we had 6,770,393 shares of Series B Preferred Stock outstanding, which entitles holders to receive dividends that are payable quarterly in arrears. The Series B Preferred Stock pay cumulative cash ~~dividends:~~dividends, which are payable quarterly in equal amounts in arrears on the 15th day of each January, April, July and October: (i) from, and including, the original date of issuance of the Series B Preferred Stock to, but excluding, September 20, 2020, at an initial rate of 8.00% per annum of the $25.00 per share liquidation preference; and (ii) from, and including, September 20, 2020, at the rate per annum equal to the greater of (a) 8.00% and (b) a floating rate equal to the 3-month LIBOR rate as calculated on each applicable date of determination plus 6.46% of the $25.00 liquidation preference. Except under certain limited circumstances, the Series B Preferred Stock is generally not convertible into or exchangeable for any other property or any other ~~securities~~ of ~~the Company~~our securities at the election of the holders. On or after September 21, 2020, ~~the Company~~we may, at ~~its~~our option, redeem the shares at a redemption price of $25.00, plus any accrued unpaid distribution through the date of the redemption.

~~The Company has~~As of March 31, 2019, we had 6,900,000 shares of Series C Preferred Stock outstanding, which entitles holders to receive dividends that are payable quarterly in arrears. The Series C Preferred Stock pay cumulative cash dividends, which are payable quarterly in equal amounts in arrears on the last day of each January, April, July, and October, at the rate of 8.00% per annum of the $25.00 per share liquidation preference (equivalent to $2.00 per annum per share) from, and including July 29, 2016 (the “Series C Initial Dividend Date”) and are payable quarterly in equal amounts in arrears on the last day of each April, July, October and January, at the then applicable annual rate.. Except under certain limited circumstances, the Series C Preferred Stock is generally not convertible into or exchangeable for any other property or any other ~~securities~~ of ~~the Company~~our securities at the election of the holders. ~~On or after September 20, 2017, the Company~~We may, at ~~its~~our option, redeem the shares at a redemption price of $25.00, plus any accrued unpaid distribution through the date of the redemption.

Non-GAAP Financial Measures

Operating Earnings

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, ~~the Company’s~~our Operating Earnings were ~~$54.9~~$68.4 million, or ~~$0.44~~$0.50 per share, and ~~$102.7~~$47.9 million, or ~~$0.87~~$0.43 per share, respectively. ~~For the three and six months ended June 30, 2017, the Company’s Operating Earnings were $44.6 million, or $0.46 per share and $84.3 million, or $0.88 per share.~~ Operating Earnings is a non-GAAP financial measure that ~~is defined by the Company~~we define as net income available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity-based compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share settlement to satisfy income tax withholding), (ii) any unrealized gains or losses or other non-cash items included in net income available to common stockholders, (iii) unrealized income from unconsolidated joint ventures, (iv) foreign currency gains (losses), other than (a) realized gains/(losses) related to interest income, and (b) forward point gains/(losses) realized on our foreign currency hedges, (v) the non-cash amortization expense related to the reclassification of a portion of the ~~convertible senior notes~~Notes to stockholders’ equity in accordance with GAAP, and (vi) provision for loan losses and impairments. Beginning with the quarter ended September 30, 2016, ~~the Company~~we slightly modified ~~its~~our definition of Operating Earnings to include realized gains (losses) on currency swaps related to interest income on investments denominated in a currency other than U.S. dollars. In addition, beginning with the quarter ended December 31, 2018, we further modified our definition of Operating Earnings to include the impact from forward points on our foreign currency hedges, which reflect the interest rate differentials between the applicable base rate for our foreign currency investments and USD LIBOR. These forward contracts effectively convert the rate exposure to USD LIBOR, resulting in additional interest income earned in U.S. dollar terms. These amounts are not included in GAAP net income. In order to conform to the 2018 year-end presentation, which incorporates this modification, prior-year Operating Earnings results presented below have been modified accordingly. Operating Earnings may also be adjusted to exclude certain other non-cash items, as determined by the Manager and approved by a majority of ~~the Company's~~our independent directors.

The weighted-average diluted shares outstanding used for Operating Earnings per weighted-average diluted share has been adjusted from weighted-average diluted shares under GAAP to exclude shares issued from a potential conversion of the Notes. Consistent with the treatment of other unrealized adjustments to Operating Earnings, these potentially issuable shares are excluded until a conversion occurs, which we believe is a useful presentation for investors. We believe that excluding shares issued in connection with a potential conversion of the Notes from our computation of Operating Earnings per weighted-average diluted share is useful to investors for various reasons, including the following: (i) conversion of Notes to shares requires both the holder of a Note to elect to convert the Note and for us to elect to settle the conversion in the form of shares; (ii) future conversion decisions by Note holders will be based on our stock price in the future, which is presently not determinable; (iii) the exclusion of shares issued in connection with a potential conversion of the Notes from the computation of Operating Earnings per weighted-average diluted share is consistent with how we treat other unrealized items in our computation of Operating Earnings per weighted-average diluted share; and (iv) we believe that when evaluating our operating performance, investors and potential investors consider our Operating Earnings relative to our actual distributions, which are based on shares outstanding and not shares that might be issued in the future. The table below summarizes the reconciliation from weighted-average diluted shares under GAAP to the weighted-average diluted shares used for Operating Earnings ($ in thousands, except Price):



	Three months ended March 31, 2019 ⁽¹⁾

Weighted-Averages	Face		Price	Shares
Weighted-average diluted shares - GAAP				164,683,086
2019 Notes ⁽²⁾	$	26,487	$17.17	(1,542,708	)
2022 Notes	$	345,000	$19.91	(17,327,970	)
2023 Notes	$	230,000	$20.53	(11,205,301	)
Unvested RSUs	—		—	1,849,564
Weighted-average diluted shares - Operating Earnings				136,456,671

———————

(1) This reconciliation only applies to the three months ended March 31, 2019 because in the reporting period for the three months ended March 31, 2018 we used the treasury stock method when determining the potential share dilution from the Notes in the computation of earnings per share.

(2) Face represents the weighted-average balances during the period.



Computation of Share Count for Operating Earnings
	Three months ended March 31,
	2019	2018
Basic weighted-average shares of common stock outstanding	134,607,107	110,211,853
Weighted-average unvested RSUs	1,849,564	1,659,576
Weighted-average diluted shares - Operating Earnings	136,456,671	111,871,429

In order to evaluate the effective yield of the portfolio, ~~the Company uses~~we use Operating Earnings to reflect the net investment income of ~~the Company’s~~our portfolio as adjusted to include the net interest expense related to ~~the Company’s~~our derivative instruments. Operating Earnings allows ~~the Company~~us to isolate the net interest expense associated with ~~the Company’s~~our swaps in order to monitor and project ~~the Company’s~~our full cost of borrowings. ~~The Company~~We also ~~believes~~believe that ~~its~~our investors use Operating Earnings, or a comparable supplemental performance measure, to evaluate and compare the performance of ~~the Company~~our company and ~~its~~our peers and, as such, ~~the Company believes~~we believe that the disclosure of Operating Earnings is useful to ~~its~~our investors. ~~In addition,~~Forward points effectively convert our foreign rate exposure to USD LIBOR, which we believe is a better reflection of our operating results and we believe the ~~Company has previously disclosed that it has disposed~~inclusion of ~~all of its CMBS as of December 31, 2017. Accordingly,~~ the ~~Company has disclosed~~resulting gain or loss in Operating Earnings ~~excluding realized loss and costs from sale of CMBS because the Company believes it~~ is useful to ~~investors to present the results of the Company's ongoing operations while excluding the effects associated with the disposal of its CMBS.~~our investors.

A significant limitation associated with Operating Earnings as a measure of ~~the Company's~~our financial performance over any period is that it excludes unrealized gains (losses) from investments. In addition, ~~the Company’s~~our presentation of Operating Earnings may not be comparable to similarly-titled measures of other companies, who may use different calculations. As a result, Operating Earnings should not be considered as a substitute for ~~the Company’s~~our GAAP net income as a measure of ~~its~~our financial performance or any measure of ~~its~~our liquidity under GAAP.

The table below summarizes the reconciliation from net income available to common stockholders to Operating Earnings ($ in thousands):



	Three months ended March 31,
	2019			2018
Net income available to common stockholders	$	60,923		$	42,598
Adjustments:
Equity-based compensation expense	3,901			3,342
Loss on derivative instruments	6,720			11,032
Foreign currency gain, net	(6,894		)	(10,125		)
Net realized gains relating to interest income on foreign currency hedges, net ⁽¹⁾	418			(237		)
Net realized gains relating to forward points on foreign currency hedges, net	2,431			174
Amortization of the convertible senior notes related to equity reclassification	909			1,140
Total adjustments:	7,485			5,326
Operating Earnings	$	68,408		$	47,924
Diluted Operating Earnings per share of common stock ⁽²⁾	$	0.50		$	0.43
Weighted-average diluted shares - Operating Earnings	136,456,671			111,871,429

(1) In order to conform to the 2019 presentation of the reconciliation from net income available to common stockholders to Operating Earnings, $0.2 million was reclassified from Foreign currency gain, net for the three months ended March 31, 2018.

(2) For the computation of diluted Operating Earnings per share of common stock, for the three months ended March 31, 2019, $8.4 million of interest expense related to the Notes is not deducted from the numerator and the potentially dilutive shares related to the Notes are excluded from the denominator.

Book Value Per Share

The table below calculates our book value per share ($ in thousands, except per share data):

3534

For the three months ended June 30, For the six months ended June 30,
2018 2017 2018 2017
Net income available to common stockholders $ 48,512
$ 26,925
$ 91,110
$ 64,739
Adjustments:

Equity-based compensation expense 4,014
3,461
7,356
7,252
Unrealized loss on securities —
4,510
—
1,658
(Gain) loss on derivative instruments (33,538 ) 7,389
(22,506 ) 10,434
Foreign currency (gain) loss, net 29,797
(6,958 ) 19,435
(10,284 )
Amortization of the convertible senior notes related to equity reclassification 1,156
618
2,296
1,226
Loss from unconsolidated joint venture —
3,305
—
2,847
Provision for loan losses and impairments 5,000
5,000
5,000
5,000
Realized gain from unconsolidated joint venture —
346
—
346
Total adjustments: 6,429
17,671
11,581
18,479
Operating Earnings $ 54,941
$ 44,596
$ 102,691
$ 83,218

Realized loss and costs from sale of CMBS —
—
—
1,042
Operating Earnings excluding realized loss and costs from sale of CMBS 54,941
44,596
102,691
84,260
Basic and diluted Operating Earnings per share of common stock $ 0.44
$ 0.46
$ 0.87
$ 0.88
Basic and diluted Operating Earnings excluding realized loss and costs from sale of CMBS per share of common stock $ 0.44
$ 0.46
$ 0.87
$ 0.89
Basic weighted average shares of common stock outstanding 123,019,993
95,428,134
116,651,305
93,530,831
Diluted weighted average shares of common stock outstanding 124,629,317
96,796,289
118,281,153
94,907,762



	March 31, 2019			December 31, 2018
Stockholders' Equity	$	2,539,824		$	2,509,747
Series B Preferred Stock (Liquidation Preference)	(169,260		)	(169,260		)
Series C Preferred Stock (Liquidation Preference)	(172,500		)	(172,500		)
Common Stockholders' Equity	$	2,198,064		$	2,167,987
Common Stock	136,254,352			133,853,565
Book value per share	$	16.13		$	16.20

3635

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~The Company seeks~~We seek to manage ~~its~~our risks related to the credit quality of ~~its~~our assets, interest rates, liquidity, prepayment speeds and market value, while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns through ownership of ~~its~~our capital stock. While risks are inherent in any business enterprise, ~~the Company seeks~~we seek to quantify and justify risks in light of available returns and to maintain capital levels consistent with the risks ~~the Company undertakes.~~we undertake.

Credit Risk

One of ~~the Company’s~~our strategic focuses is acquiring assets that ~~it believes~~we believe to be of high credit quality. ~~The Company believes~~We believe this strategy will generally keep ~~its~~our credit losses and financing costs low. However, ~~the Company is~~we are subject to varying degrees of credit risk in connection with ~~its~~our other target assets. ~~The Company seeks~~We seek to mitigate this risk by seeking to acquire high quality assets, at appropriate prices given anticipated and unanticipated losses, and by deploying a value-driven approach to underwriting and diligence, consistent with the Manager’s historical investment strategy, with a focus on current cash flows and potential risks to cash flow. The Manager seeks to enhance its due diligence and underwriting efforts by accessing the Manager’s knowledge base and industry contacts. Nevertheless, unanticipated credit losses could occur, which could adversely impact ~~the Company’s~~our operating results.

Interest Rate Risk

Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond ~~the Company’s~~our control. ~~The Company is~~We are subject to interest rate risk in connection with ~~its~~our target assets and ~~its~~our related financing obligations.

To the extent consistent with maintaining ~~the Company’s~~our REIT qualification, ~~the Company seeks~~we seek to manage risk exposure to protect ~~its~~our portfolio of financial assets against the effects of major interest rate changes. ~~The Company~~We generally ~~seeks~~seek to manage this risk by:

attempting to structure ~~its~~our financing agreements to have a range of different maturities, terms, amortizations and interest rate adjustment periods;

using hedging instruments, interest rate swaps and interest rate caps; and

to the extent available, using securitization financing to better match the maturity of ~~the Company’s~~our financing with the duration of ~~its~~our assets.

The following table ~~projects~~estimates the hypothetical impact on ~~the Company's~~our net interest income for the twelve-month period following ~~June 30, 2018,~~March 31, 2019, assuming an immediate increase or decrease of 50 basis points in the applicable interest rate benchmark by currency ($ in ~~thousands)~~thousands, except per share data):


			50 basis point increase						50 basis point increase				50 basis point decrease
Currency	Net floating rate assets subject to interest rate sensitivity		Increase to net interest income ⁽¹⁾		Increase to net interest income (per Share) ⁽¹⁾		Net floating rate assets subject to interest rate sensitivity		Increase to net interest income ⁽¹⁾		Increase to net interest income (per share) ⁽¹⁾		Decrease to net interest income ⁽¹⁾⁽²⁾			Decrease to net interest income (per share) ⁽¹⁾⁽²⁾
USD	$	2,075,348	$	10,377	$	0.08	$	2,349,599	$	11,748	$	0.09	$	(10,073	)	$	(0.07	)
GBP	363,955		1,820		0.02		284,758		1,424		0.01		(789		)	(0.01		)
EUR	48,586		243		—
Total:	$	2,487,889	$	12,440	$	0.10	$	2,634,357	$	13,172	$	0.10	$	(10,862	)	$	(0.08	)

———————

(1) Any such hypothetical impact on interest rates on ~~the Company’s~~our variable rate borrowings does not consider the effect of any change in overall economic activity that could occur in a rising or falling interest rate environment. Further, in the event of a change in interest rates of that magnitude, ~~the Company~~we may take actions to further mitigate ~~the Company’s~~our exposure to such a change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, this analysis assumes no changes in ~~the Company’s~~our financial structure.

(2) Certain of our floating rate loans are subject to a LIBOR floor.

Prepayment Risk

Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, causing the return on an asset to be less than expected. In certain cases, ~~the Company adapts~~we adapt to prepayment risk by stating prepayment penalties in loan agreements.

Market Risk

Commercial mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and

other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans or loans, as the case may be, which could also cause ~~the Company~~us to suffer losses.

Inflation

Virtually all of ~~the Company’s~~our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence ~~the Company’s~~our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. ~~The Company’s~~Our financial statements are prepared in accordance with GAAP and distributions are determined by ~~the Company's~~our board of directors consistent with ~~the Company's~~our obligation to distribute to ~~its~~our stockholders at least 90% of ~~its~~our REIT taxable income, excluding net capital gains and determined without regard to the dividends paid deduction, on an annual basis in order to maintain ~~the Company’s~~our REIT qualification. In each case, ~~the Company’s~~our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.

Currency Risk

38Some of our loans and secured debt arrangements are denominated in a foreign currency and subject to risks related to

fluctuations in currency rates. We mitigate this exposure through foreign currency forward contracts, which match the net

principal and interest of our foreign currency loans and secured debt arrangements.

Item 4. Controls and Procedures.

~~The Company’s~~Our Chief Executive Officer and Chief Financial Officer, based on their evaluation of ~~the Company’s~~

our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) required by

paragraph (b) of Rule 13a-15 or Rule 15d-15, have concluded that as of the end of the period covered by this report, ~~the~~

~~Company’s~~our disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation

and disclosure of information relating to ~~the Company~~ARI that would potentially be subject to disclosure under the Exchange Act,

and the rules and regulations promulgated thereunder.

During the period ended ~~June 30, 2018,~~March 31, 2019, there was no change in ~~the Company’s~~our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within ~~the Company~~ARI to disclose material information otherwise required to be set forth in ~~the Company’s~~our periodic reports.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, ~~the Company~~we may be involved in various claims and legal actions arising in the ordinary course of business. On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57th Investment LLC commenced an action captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No. 653251/2018) in New York Supreme Court. The complaint names as defendants (i) ACREFI Mortgage Lending, LLC, a subsidiary of the Company, (ii) the Company, and (iii) certain funds managed by Apollo, who are co-lenders on a mezzanine loan against the development of a residential condominium building in Manhattan, New York. The plaintiffs allege that the defendants tortiously interfered with the contractual equity put right in the plaintiffs’ joint venture agreement with the developers of the project, and that the defendants aided and abetted breaches of fiduciary duty by the developers of the project. The plaintiffs allege the loss of a $70.0 million investment as part of total damages of $700.0 million, which includes punitive damages. The ~~Company believes~~defendants moved to dismiss the complaint on August 17, 2018, and the motion was fully briefed in October 2018. Oral argument took place on March 12, 2019, and the court’s decision is pending. We believe the claims are without merit and ~~will~~plan to vigorously defend the case.

On January 4, 2017, the United States Department of Justice served a Request for Information and Documents (the "Request") on the Company, in connection with a preliminary investigation into certain aspects of the Company's former residential real estate portfolio, which the Company acquired in connection with the merger of Apollo Residential Mortgage, Inc. with and into the Company and subsequently sold in 2016. The Request sought a range of information in connection with the residential real estate portfolio, including, among other things, information concerning policies, procedures, and practices related to advertising, marketing, identifying, or acquiring residential properties for sale or rent, and various data for all rental and sales contracts executed since January 1, 2012. The Company fully cooperated with the Department of Justice, and was advised, by a letter dated May 2, 2018, that the Department of Justice did not intend to take any further actions in this matter as it relates to the Company.

Item 1A. Risk Factors

See ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. There have been no material changes to ~~the Company’s~~our risk factors during the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits



3.1		Articles of Amendment and Restatement of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 3.1 of the Registrant’s Form S-11, as amended (Registration No. 333-160533).

3.2		Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.’s 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on September 23, 2015 (File No.: 001-34452).

3.3		Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.’s 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on September 1, 2016 (File No.: 001-34452).

3.4		By-laws of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 3.2 of the Registrant’s Form S-4 (Registration No. 333-210632).

4.1		Specimen Stock Certificate of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 4.1 of the Registrant’s Form S-11, as amended (Registration No. 333-160533).

4.2		Specimen Stock Certificate of Apollo Commercial Real Estate Finance, Inc.’s 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on September 23, 2015.

4.3		Form of stock certificate evidencing the 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A filed on August 26, 2016 (File No.: 001-34452).

4.4		Indenture, dated as of March 17, 2014, between the ~~Company~~Registrant and Wells Fargo Bank, National Association, as Trustee, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on March 21, 2014 (File No.: 001-34452).

4.5		First Supplemental Indenture, dated as of March 17, 2014, between the ~~Company~~Registrant and Wells Fargo Bank, National Association, as Trustee (including the form of 5.50% Convertible Senior Note due 2019), incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on March 21, 2014 (File No.: 001-34452).

4.6		Second Supplemental Indenture, dated as of August 21, 2017, between the ~~Company~~Registrant and Wells Fargo Bank, National Association, as Trustee (including the form of 4.75% Convertible Senior Note due 2022), incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on August 21, 2017 (File No.: 001-34452)..

4.7		Third Supplemental Indenture, dated as of October 5, 2018 between the Registrant and Wells Fargo Bank, National Association, as Trustee (including the form of 5.375% Convertible Senior Notes due 2023), incorporated by reference to Exhibit 4.2 of the Registrant's Form 8-K filed on October 5, 2018 (File No.: 001-34452).

31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley Act of 2002.

101.INS*		XBRL Instance Document



101.SCH*		XBRL Taxonomy Extension Schema

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase

101.DEF*		XBRL Taxonomy Extension Definition Linkbase

101.LAB*		XBRL Taxonomy Extension Label Linkbase




101.PRE*		XBRL Taxonomy Extension Presentation Linkbase



*	Filed herewith.

4140

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.

~~July 25, 2018~~April 24, 2019

	By:	/s/ Stuart A. Rothstein
		Stuart A. Rothstein
		President and Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Jai Agarwal
		Jai Agarwal
		Chief Financial Officer, Treasurer and Secretary
		(Principal Financial Officer and Principal Accounting Officer)

4241



	Page
Part I — Financial Information
Item 1. Financial Statements	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2523
Item 3. Quantitative and Qualitative Disclosures about Market Risk	3736
Item 4. Controls and Procedures	3938
Part II — Other Information
Item 1. Legal Proceedings	3938
Item 1A. Risk Factors	3938
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3938
Item 3. Defaults Upon Senior Securities	3938
Item 4. Mine Safety Disclosures	4038
Item 5. Other Information	4038
~~Item~~ Item��6. Exhibits	4039



	For the six months ended June 30,
	2018			2017
Cash flows (used in) provided by operating activities:
Net income	$	104,779		$	83,359
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of discount/premium and PIK	(30,192		)	(7,934		)
Amortization of deferred financing costs	5,355			2,761
Equity-based compensation	2,628			4,921
Unrealized loss on securities	—			1,658
Provision for loan losses and impairment	5,000			5,000
Loss from unconsolidated joint venture	—			2,259
Foreign currency (gain) loss	17,371			(10,014		)
Unrealized (gain) loss on derivative instruments	(15,941		)	10,433
Realized loss on derivative instruments	—			110
Realized loss on sale of assets	—			1,042
Changes in operating assets and liabilities:
Proceeds received from PIK	75,652			—
Other assets	(4,069		)	(17,734		)
Accounts payable, accrued expenses and other liabilities	10,190			(5,127		)
Payable to related party	845			728
Net cash (used in) provided by operating activities	171,618			71,462
Cash flows used in investing activities:
New funding of commercial mortgage loans	(1,275,507		)	(339,394		)
Add-on funding of commercial mortgage loans	(60,500		)	(61,296		)
New funding of subordinate loans	(201,966		)	(146,738		)
Add-on funding of subordinate loans	(43,284		)	(76,796		)
Payments received on commercial mortgage loans	227,913			10,199
Payments received on subordinate loans	367,143			58,615
Funding of derivative instruments	—			(201		)
Origination and exit fees received on commercial mortgage and subordinate loans	28,362			7,129
Funding of unconsolidated joint venture	—			(726		)
Funding of other assets	—			(1,379		)
(Increase) decrease in collateral held related to derivative contracts	4,930			(22		)
Payments and proceeds received on securities	—			217,708
Proceeds from sale of investments in unconsolidated joint venture	—			24,498
Net cash (used in) provided by investing activities	(952,909		)	(308,403		)
Cash flows from financing activities:
Proceeds from issuance of common stock	275,879			249,021
Payment of offering costs	(188		)	(359		)
Proceeds from secured debt arrangements	1,367,211			464,153
Repayments of secured debt arrangements	(723,260		)	(272,878		)
Repayments of participations sold	—			(85,081		)
Payment of deferred financing costs	(11,314		)	(5,343		)
Dividends on common stock	(114,655		)	(85,724		)
Dividends on preferred stock	(13,669		)	(18,620		)
Net cash (used in) provided by financing activities	780,004			245,169
Net increase (decrease) in cash and cash equivalents	(1,287		)	8,228
Cash and restricted cash, beginning of period	77,671			263,453
Cash and restricted cash, end of period	$	76,384		$	271,681
Supplemental disclosure of cash flow information:
Interest paid	$	43,420		$	11,916
Supplemental disclosure of non-cash financing activities:
Dividend declared, not yet paid	$	64,162		$	57,464
Offering costs payable	$	265		$	41



	Balance at June 30, 2018		Balance at June 30, 2017
Cash	$	76,384	$	214,016
Restricted cash	—		57,665
Total cash and restricted cash shown in the condensed consolidated statement of cash flows	$	76,384	$	271,681



	Fair Value as of June 30, 2018								Fair Value as of December 31, 2017
	Level I		Level II		Level III		Total		Level I		Level II			Level III		Total
Derivative assets (liabilities), net	$	—	$	10,297	$	—	$	10,297	$	—	$	(5,644	)	$	—	$	(5,644	)



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



	June 30, 2018 ⁽²⁾						December 31, 2017
	Maximum Amount of Borrowings		Borrowings Outstanding			Maturity ⁽¹⁾	Maximum Amount of Borrowings		Borrowings Outstanding			Maturity ⁽¹⁾	Weighted Average Rate ⁽²⁾
JPMorgan Facility (USD) ⁽³⁾	$	1,331,780	$	950,634		June 2021	$	1,393,000	$	944,529		March 2020	USD L + 2.30%
JPMorgan Facility (GBP) ⁽³⁾	50,220		50,220			June 2021	N/A		N/A			N/A	N/A
DB Repurchase Facility (USD) ⁽⁴⁾	698,824		469,200			March 2021	472,090		225,367			March 2020	USD L + 2.56%
DB Repurchase Facility (GBP) ⁽⁴⁾	156,176		156,176			March 2021	93,919		93,919			March 2020	GBP L + 2.60%
Goldman Facility	300,000		209,014			November 2020	331,130		81,380			November 2020	USD L + 2.73%
CS Facility	145,937		145,937			December 2018	N/A		N/A			N/A	N/A
Sub-total	2,682,937		1,981,181				2,290,139		1,345,195
less: deferred financing costs	N/A		(20,307		)		N/A		(14,348		)		N/A
Total / Weighted Average	$	2,682,937	$	1,960,874			$	2,290,139	$	1,330,847			USD L + 2.37% /
Total / Weighted Average	$	2,682,937	$	1,960,874			$	2,290,139	$	1,330,847			GBP L + 2.60%



					For the six months ended June 30, 2018
	Balance at June 30, 2018		Amortized Cost of Collateral at June 30, 2018		Maximum Month-End Balance		Average Month-End Balance
JPMorgan Facility	$	1,000,854	$	1,601,812	$	1,000,854	$	865,101
DB Repurchase Facility	625,376		1,010,503		632,990		446,571
Goldman Facility	209,014		280,699		236,764		135,123
CS Facility	145,937		222,902		145,937		24,323
Total	$	1,981,181	$	3,115,916



Type of Derivative	June 30, 2018
	Number of Contracts	Aggregate Notional Amount (in thousands)	Notional Currency	Maturity
Fx Contracts - GBP	40	314,226	GBP	July 2018 - November 2020
Fx Contracts - EUR	1	42,247	EUR	October 2018



	For the three months ended June 30,						For the six months ended June, 30
	2018			2017			2018			2017
Numerator:
Net income	$	55,346		$	36,235		$	104,779		$	83,359
Preferred dividends	(6,834		)	(9,310		)	(13,669		)	(18,620		)
Net income available to common stockholders	48,512			26,925			91,110			64,739
Dividends declared on common stock	(56,588		)	(48,501		)	(113,165		)	(90,647		)
Dividends on participating securities	(738		)	(630		)	(1,489		)	(1,259		)
Net loss attributable to common stockholders	$	(8,814	)	$	(22,206	)	$	(23,544	)	$	(27,167	)
Denominator:
Basic weighted average shares of common stock outstanding	123,019,993			95,428,134			116,651,305			93,530,831
Diluted weighted average shares of common stock outstanding	124,629,317			96,796,289			118,281,153			94,907,762
Net income per weighted average share of common stock
Distributable earnings per share of common stock	$	0.46		$	0.51		$	0.98		$	0.97
Undistributed loss per share of common stock	$	(0.07	)	$	(0.23	)	$	(0.20	)	$	(0.29	)
Basic and diluted net income per share of common stock	$	0.39		$	0.28		$	0.78		$	0.68