What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-04-29 compared with 2020-11-03 · 117 added, 298 removed, 225 unchanged (65% of the section changed)

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We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

In assessing all forward-looking statements, readers are urged to read carefully all cautionary statements contained in this Form 10-Q and the uncertainties and risks described in Item 1A—"Risk Factors" in our Annual Report and in this Report, all of which could affect our future results of operations, financial condition and liquidity.

In assessing all forward-looking statements, readers are urged to read carefully all cautionary statements contained in this Form 10-Q and the uncertainties and risks described in Item 1A—"Risk Factors" in our Annual Report on Form 10-K, all of which could affect our future results of operations, financial condition and liquidity.

For purposes of Management's Discussion and Analysis of Financial Condition and Results of Operations, the terms "we," "our" and "us" refer to iStar Inc.

and its consolidated subsidiaries, unless the context indicates otherwise.

The discussion below should be read in conjunction with our consolidated financial statements and related notes in this quarterly report on Form 10-Q and our Annual Report.

The discussion below should be read in conjunction with our consolidated financial statements and related notes in this quarterly report on Form 10-Q and our Annual Report on Form 10-K.

These historical financial statements may not be indicative of our future performance.

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Executive Overview

In August 2020, we took advantage of favorable interest rate and liquidity conditions to refinance debt through the issuance of $400 million of unsecured notes due February 2026.

Proceeds from the issuance were used to repay unsecured notes due September 2022.

We have no corporate debt maturities through September 2022 (refer to Note 11).

The coronavirus (COVID-19) outbreak has continued to impact the US and global economies.

The US financial markets have experienced disruption, with heightened stock market volatility and constrained credit conditions within most sectors, including real estate.

We are focused on ensuring the health and safety of our personnel and the continuity of business activities at iStar and SAFE, monitoring the effects of the crisis on our and SAFE's customers, marshalling available liquidity at both companies, implementing appropriate cost containment measures and preparing for the eventual resumption of more normalized activities.

At this time, we cannot predict the full extent of the impacts of the COVID-19 crisis on our or SAFE's business.

We will continue to monitor its effects on a daily basis and will adjust operations as necessary.

Our portfolio is well diversified by business, property type and geography.

Our portfolio includes investments in the entertainment/leisure (20.2% of gross book value) and hotel (5.6% of gross book value) sectors, which have been particularly stressed by the pandemic.

SAFE reported that it received 100% of the ground rent due under its leases for the third quarter.

We collected 98% of the rent due from our net lease tenants during the quarter (excluding one net lease tenant with whom we entered into lease modifications in the second and third quarter 2020 - refer to Note 5), 92% of the interest payments due in our real estate finance portfolio and 80% of the rent due in our operating properties portfolio.

We may continue to experience disruptions and collections of rent and interest payments until more normalized business conditions resume.

We increased our allowance for loan losses and may continue to do so in future quarters while the COVID-19 pandemic continues to materially affect the US economy.

The COVID-19 crisis has adversely affected our strategies of monetizing legacy assets and materially scaling SAFE's portfolio for the time being.

Equity and debt financing for real estate transactions generally is constrained.

In addition, the crisis has made it more difficult to execute transactions as people are reluctant to visit properties, local governmental offices have reduced operations and third parties such as survey, insurance, environmental and similar services have more limited capacities.

Our portfolio includes investments in the entertainment/leisure (21.4% of gross book value) and hotel (4.9% of gross book value) sectors, which have been particularly stressed by the COVID-19 pandemic.

We may experience disruptions and collections of rent and interest payments until more normalized business conditions resume.

In 2020, we increased our general allowance for loan losses reflecting the uncertainty related to the COVID-19 pandemic.

While we have seen conditions gradually improve, there can be no assurance that we will not increase our allowances in the future.

The COVID-19 pandemic has continued to impact the U.S.

and global economies.

financial markets have experienced disruption, with heightened stock market volatility and constrained credit conditions within most sectors, including real estate.

We are focused on ensuring the health and safety of our personnel and the continuity of business activities at iStar and SAFE, monitoring the effects of the pandemic on our and SAFE's customers, marshalling available liquidity at both companies, implementing appropriate cost containment measures and preparing for the eventual resumption of more normalized activities.

We will continue to monitor its effects on a daily basis and will adjust operations as necessary.

The COVID-19 pandemic has adversely affected our strategies of monetizing legacy assets and materially scaling SAFE's portfolio for the time being, primarily because of reduced levels of real estate transactions and constrained conditions for equity and debt financing for real estate transactions.

At this time, we cannot predict the full extent of the impacts of the COVID-19 pandemic on our or SAFE's business.

These conditions will adversely affect our strategy while they persist.

See the Risk Factors section of this report for additional discussion of certain potential risks to our business arising from the COVID-19 crisis.

See the Risk Factors section of our Annual Report on Form 10-K for additional discussion of certain potential risks to our business arising from the COVID-19 pandemic.

Portfolio Overview

As of September 30, 2020, based on our gross book value, our total investment portfolio has the following property/collateral type and geographic characteristics ($ in thousands):

As of March 31, 2021, based on our gross book value, our total investment portfolio has the following property/collateral type and geographic characteristics ($ in thousands):

Property/Collateral Types Net

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Ground Leases 982,573 — — — — 982,573 21.3 %

Land and Development — 83,777 — 399,123 — 482,900 10.1 %

Industrial 291,586 — 97,663 — 75,402 464,651 9.9 %

Land and Development — 11,886 — 323,329 — 335,215 7.3 %

Condominium — 138,479 15,707 98,045 — 252,231 5.5 %

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(1) For net lease, operating properties and land and development, gross book value is defined as the basis assigned to physical real estate property (land and building), net of any impairments taken after acquisition date and net of basis reductions associated with unit/parcel sales, plus our basis in equity method investments, plus lease related intangibles, capitalized leasing costs and excluding accumulated depreciation and amortization, and for equity method investments, excluding the effect of our share of accumulated depreciation and amortization.

For real estate finance, gross book value is defined as principal funded including any deferred capitalized interest receivable, plus protective advances, exit fee receivables and any unamortized origination/modification costs, less purchase discounts and specific reserves.

This amount is not reduced for CECL allowances.

Real estate finance includes our $45 million pro rata share of loans held within an equity method investment.

Our net lease business seeks to create stable cash flows through long-term net leases primarily to single tenants on our properties.

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The net lease segment includes our Ground Lease investments made primarily through SAFE and our traditional net lease investments.

As of September 30, 2020, our consolidated net lease portfolio totaled $2.1 billion.

Our net lease portfolio, including the carrying value of our equity method investments in SAFE and Net Lease Venture II, exclusive of accumulated depreciation, totaled $3.1 billion.

As of March 31, 2021, the gross book value of our consolidated net lease portfolio totaled $2.2 billion.

Our net lease portfolio, including the carrying value of our equity method investments in SAFE and Net Lease Venture II gross of accumulated depreciation, totaled $3.3 billion.

The table below provides certain statistics for our net lease portfolio.

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(1) We own 51.9% of the Net Lease Venture which is consolidated in our GAAP financial statements (refer to Note 4).

(2) Gross book value represents the acquisition cost of real estate and any additional capital invested into the property by us.

(2) Consolidated Real Estate includes amounts recorded as net investment in leases (refer to Note 5) and financing receivables in loans and other lending investments (refer to Note 7).

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We have an equity interest in the new venture of approximately 51.9%, which is accounted for as an equity method investment, and are responsible for managing the venture in exchange for a management fee and incentive fee.

The Net Lease Venture II's investment period expires on June 30, 2021.

SAFE —SAFE is a publicly-traded company that originates and acquires Ground Leases in order to generate attractive long-term risk-adjusted returns from its investments.

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We believe that these features offer us the opportunity through our ownership in SAFE to realize superior risk-adjusted total returns when compared to certain alternative highly-rated investments.

As of September 30, 2020, we owned approximately 65.8% of SAFE's common stock outstanding.

As of March 31, 2021, we owned approximately 65.4% of SAFE's common stock outstanding.

We account for our investment in SAFE as an equity method investment (refer to Note 8).

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Our real estate finance business targets sophisticated and innovative owner/operators of real estate and real estate related projects by providing one-stop capabilities that encompass financing alternatives ranging from full envelope senior loans to mezzanine and preferred equity capital positions.

Our real estate finance portfolio consists of senior mortgage loans that are secured by commercial and residential real estate assets where we are the first lien holder, subordinated mortgage loans that are secured by second lien or junior interests in commercial and residential real estate assets, leasehold loans to Ground Lease

tenants, including tenants of SAFE, and corporate/partnership loans, which represent mezzanine or subordinated loans to entities for which we do not have a lien on the underlying asset, but may have a pledge of underlying equity ownership of such assets.

entities for which we do not have a lien on the underlying asset, but may have a pledge of underlying equity ownership of such assets.

Our real estate finance portfolio includes loans on stabilized and transitional properties, Ground Leases and ground-up construction projects.

In addition, we have preferred equity investments and debt securities classified as other lending investments.

As of September 30, 2020, our real estate finance portfolio, including securities and other lending investments, totaled $775.9 million, exclusive of general loan loss allowance.

As of March 31, 2021, the gross book value of our consolidated real estate finance portfolio, including securities and other lending investments, totaled $542.1 million, gross of general loan loss allowances.

The portfolio, excluding securities and other lending investments, included $322.8 million of performing loans with a weighted average maturity of 1.7 years.

The tables below summarize our loans and the allowance for loan losses associated with our loans ($ in thousands):

September 30, 2020

Number of Loans Gross Carrying Value Allowance for

Loan Losses Carrying Value % of Total Allowance for Loan Losses as a % of Gross Carrying Value

March 31, 2021

Number of Loans Gross Book Value Allowance for

Loan Losses Net Book Value % of Total Allowance for Loan Losses as a % of Gross Book Value

Performing loans 13 $ 322,783 (4,708) $ 318,075 59.6% 1.5%

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December 31, 2020

Number of Loans Gross Carrying Value Allowance for

Loan Losses Carrying Value % of Total Allowance for Loan Losses as a % of Gross Carrying Value

Number of Loans Gross Book Value Allowance for

Loan Losses Net Book Value % of Total Allowance for Loan Losses as a % of Gross Book Value

Performing loans 16 $ 529,657 $ (8,184) $ 521,473 71.2% 1.5%

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Performing Loans —The table below summarizes our performing loans exclusive of allowances ($ in thousands):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Senior mortgages $ 270,668 $ 432,350

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Weighted average LTV 59 % 57 %

Yield - quarter to date (1)

Yield - year to date (1)

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(1) Yields presented are for the three and nine months ended September 30, 2020 and 2019.

(1) Yields presented are for the three months ended March 31, 2021 and 2020.

Non-Performing Loans —We designate loans as non-performing at such time as:

(1) the loan becomes 90 days delinquent;

(1) interest payments become 90 days delinquent;

(2) the loan has a maturity default;

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All non-performing loans are placed on non-accrual status and income is only recognized in certain cases upon actual cash receipt.

As of September 30, 2020 and December 31, 2019, we had two non-performing loans with a carrying value of $64.7 million and one non-performing loan with a carrying value of $16.1 million, respectively.

As of March 31, 2021 and December 31, 2020, we had one non-performing loan with a carrying value of $55.7 million and $52.6 million, respectively.

We expect that our level of non-performing loans will fluctuate from period to period.

Allowance for Loan Losses —The allowance for loan losses was $33.4 million as of September 30, 2020, or 4.2% of total loans, compared to $28.6 million, or 3.3%, as of December 31, 2019.

Allowance for Loan Losses —The allowance for loan losses was $9.1 million as of March 31, 2021, or 1.7% of total loans and other lending investments, compared to $13.2 million, or 1.8%, as of December 31, 2020.

We expect that our level of allowance for loan losses will fluctuate from period to period.

Due to the volatility of the commercial real estate market, the process of estimating collateral values and allowances requires the use of significant judgment.

We currently believe there is adequate collateral and allowances to support the carrying values of the loans.

Due to the volatility of the commercial real estate market, the

process of estimating collateral values and allowances requires the use of significant judgment.

We currently believe there is adequate collateral and allowances to support the carrying values of the loans and other lending investments.

The allowance for loan losses includes an asset-specific component and a formula-based component.

An asset-specific allowance is established for an impaired loan when the estimated fair value of the loan's collateral less costs to sell is lower than the carrying value of the loan.

As of September 30, 2020 and December 31, 2019, asset-specific allowances were $22.6 million and $21.7 million, respectively.

As of March 31, 2021 and December 31, 2020, asset-specific allowances were $0.7 million and $0.7 million, respectively.

We estimate the formula-based component based on historical realized losses experienced within our portfolio and take into account current economic conditions affecting the commercial real estate market.

We estimate the formula-based component on our construction loan portfolio based on historical realized losses experienced within our portfolio and third-party market data that includes historical loss rates on commercial real estate loans and forecasted economic trends, including interest and unemployment rates.

We estimate the formula-based component on our other loans using a loan loss forecasting tool developed by Trepp LLC that utilizes loan level data including each loans position in the capital structure, interest rates, maturity dates, unfunded commitments, debt service coverage ratios, etc.

which also utilizes forward looking macroeconomic variables and pool-level mean loss rates to produce an expected loss over the life each loan.

The general allowance increased to $10.8 million or 1.5% of performing loans and other lending investments as of September 30, 2020, compared to $6.9 million or 1.0% of performing loans and other lending investments as of December 31, 2019.

The increase was due to a $0.7 million general allowance recorded upon the adoption of ASU 2016-13 on January 1, 2020 (refer to Note 3) and an increase in the general allowance of $3.2 million during the nine months ended September 30, 2020.

In addition, we use third-party market data that includes forecasted economic trends, including unemployment rates.

The general allowance decreased to $8.4 million, or 1.7%, of performing loans and other lending investments as of March 31, 2021, compared to $12.4 million, or 1.8%, of performing loans and other lending investments as of December 31, 2020.

The decrease was due primarily to the repayment of loans during the three months ended March 31, 2021 and an improving macroeconomic forecast on commercial real estate markets since December 31, 2020.

Operating Properties

Our operating properties represent a pool of assets across a broad range of geographies and property types including office, retail, hotel and residential properties.

As of September 30, 2020, our operating property portfolio, including the carrying value of our equity method investments gross of accumulated depreciation, totaled $315.7 million.

Our operating properties represent a pool of assets across a broad range of geographies and property types including industrial, hotel, multifamily, retail, condominium, entertainment/leisure and office properties.

As of March 31, 2021, the gross book value of our operating property portfolio, including the carrying value of our equity method investments gross of accumulated depreciation, totaled $306.7 million.

Land and Development

The following table presents a land and development portfolio rollforward for the nine months ended September 30, 2020.

The following table presents a land and development portfolio rollforward for the three months ended March 31, 2021.

Land and Development Portfolio Rollforward

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(1) As of September 30, 2020 and December 31, 2019, Total Segment excludes $30.4 million and $42.9 million, respectively, of equity method investments.

(1) As of March 31, 2021 and December 31, 2020, Total Segment excludes $12.1 million and $31.2 million, respectively, of equity method investments.

(2) Represents gross book value of the assets sold, rather than proceeds received.

Results of Operations for the Three Months Ended September 30, 2020 compared to the Three Months Ended September 30, 2019

For the Three Months Ended September 30,

2020 2019 $ Change

(in thousands)

Operating lease income $ 46,370 $ 44,110 $ 2,260

Interest income 14,270 19,701 (5,431)

Interest income from sales-type leases 8,360 8,339 21

Other income 25,552 18,270 7,282

Land development revenue 20,502 54,918 (34,416)

Total revenue 115,054 145,338 (30,284)

Interest expense 42,407 46,522 (4,115)

Real estate expense 16,935 23,187 (6,252)

Land development cost of sales 21,358 48,101 (26,743)

Depreciation and amortization 14,621 14,199 422

General and administrative 19,868 24,110 (4,242)

Recovery of loan losses (1,976) (3,805) 1,829

Provision for losses on net investment in leases 175 — 175

Other expense 73 407 (334)

Total costs and expenses 113,461 152,721 (39,260)

Income from sales of real estate 6,055 3,476 2,579

Loss on early extinguishment of debt, net (7,924) — (7,924)

Earnings from equity method investments 6,805 7,617 (812)

Income tax expense (78) (84) 6

Net income $ 6,451 $ 3,626 $ 2,825

Revenue —Operating lease income, which primarily includes income from net lease assets and commercial operating properties, increased $2.3 million, or 5%, to $46.4 million during the three months ended September 30, 2020 from $44.1 million for the same period in 2019.

The following table summarizes our operating lease income by segment ($ in millions).

Three Months Ended September 30,

2020 2019 Change

Net Lease (1)

$ 41.1 $ 38.0 $ 3.1

Operating Properties (2)

5.2 6.0 (0.8)

Land and Development 0.1 0.1 —

Total $ 46.4 $ 44.1 $ 2.3

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(1) Change primarily due to new acquisitions, partially offset by asset sales.

(2) Change primarily due to a decrease in percentage rent at certain properties.

The following table shows certain same store statistics for our consolidated Net Lease segment.

Same store assets are defined as assets we owned on or prior to July 1, 2019 and were in service through September 30, 2020 (Operating lease income in millions).

Three Months Ended September 30,

Operating lease income (1)

$ 44.7 $ 42.7

Rent per square foot $ 11.79 $ 11.12

Occupancy (2)

98.6 % 99.3 %

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(1) For the three months ended September 30, 2020 and 2019, includes $9.3 million and $9.5 million, respectively, of lease income from one net lease tenant that was recorded to "Interest income from sales-type leases" in our consolidated statements of operations.

(2) Occupancy as of September 30, 2020 and 2019.

Interest income decreased $5.4 million, or 28%, to $14.3 million during the three months ended September 30, 2020 from $19.7 million for the same period in 2019.

The decrease was due primarily to a decrease in the average balance of our performing loans and other lending investments, which was $703 million for the three months ended September 30, 2020 and $866 million for the three months ended September 30, 2019.

The weighted average yield on our performing loans and other lending investments was 7.6% and 8.7%, respectively, for the three months ended September 30, 2020 and 2019.

On January 1, 2019, we adopted new accounting standards and classified certain of our leases in 2019 as sales-type leases.

Under sales-type leases, we accrue interest income from sales-type leases under the effective interest method as opposed to recognition of operating lease income under the straight-line rent method for our leases that do not qualify as sales-type leases.

Interest income from sales-type leases increased to $8.4 million for the three months ended September 30, 2020 from $8.3 million for the same period in 2019.

Other income increased $7.3 million, or 40%, to $25.6 million during the three months ended September 30, 2020 from $18.3 million for the same period in 2019.

Other income during the three months ended September 30, 2020 consisted primarily of mark-to-market gains on an equity investment, management fees, other ancillary income from our land and development projects and loan portfolio, income from our hotel properties and interest income on our cash.

Other income during the three months ended September 30, 2019 consisted primarily of income from our hotel properties, lease termination fees, other ancillary income from our operating properties and land and development projects and interest income on our cash.

The increase in 2020 was primarily due to a $14.0 million mark-to-market gain on an equity investment (refer to Note 8) and an increase in management fees from SAFE, partially offset by a decrease in income from our hotel properties and other operating properties.

Land development revenue and cost of sales —During the three months ended September 30, 2020, we sold residential lots and units and recognized land development revenue of $20.5 million which had associated cost of sales of $21.4 million.

During the three months ended September 30, 2019, we sold residential lots and units and recognized land development revenue of $54.9 million which had associated cost of sales of $48.1 million.

Costs and expenses —Interest expense decreased $4.1 million, or 9%, to $42.4 million during the three months ended September 30, 2020 from $46.5 million for the same period in 2019, due primarily to a decrease in our weighted average cost of debt, which was 4.8% for the three months ended September 30, 2020 compared to 5.3% for the three months ended September 30, 2019.

The balance of our average outstanding debt, inclusive of loan participations and lease liabilities associated with finance-type leases, decreased to $3.47 billion for the three months ended September 30, 2020 from $3.50 billion for the same period in 2019.

Real estate expenses decreased $6.3 million, or 27%, to $16.9 million during the three months ended September 30, 2020 from $23.2 million for the same period in 2019.

The following table summarizes our real estate expenses by segment ($ in millions).

Three Months Ended September 30,

2020 2019 Change

Operating Properties (1)

$ 4.4 $ 9.4 $ (5.0)

Land and Development (2)

5.4 7.4 (2.0)

Net Lease (3)

Total $ 16.9 $ 23.2 $ (6.3)

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(1) Change primarily due to a decrease in expenses at certain operating properties due to COVID-19.

(2) Change primarily due to asset sales and a decrease in expenses at some of our properties.

(3) Change primarily due to new acquisitions and an increase in expenses at certain properties, partially offset by asset sales.

Depreciation and amortization increased $0.4 million, or 3%, to $14.6 million during the three months ended September 30, 2020 from $14.2 million for the same period in 2019, primarily due to new acquisitions, partially offset by asset sales.

General and administrative expense includes payroll and related costs, performance based compensation, public company costs and occupancy costs.

General and administrative expenses decreased $4.2 million, or 18%, to $19.9 million during the three months ended September 30, 2020 from $24.1 million for the same period in 2019.

The decrease in 2020 from 2019 was due primarily to a $3.6 million decrease in performance based compensation.

The recovery of loan losses was $2.0 million for the three months ended September 30, 2020 as compared to a recovery of loan losses of $3.8 million for the same period in 2019.

The recovery of loan losses for the three months ended September 30, 2020 resulted from the reversal of CECL allowances on loans that repaid in full in the third quarter 2020 and a more favorable economic outlook on commercial real estate markets in the third quarter 2020 as compared to the second quarter 2020.

The recovery of loan losses for the three months ended September 30, 2019 was due to a decrease in the general reserve.

The provision for losses on net investment in leases for the three months ended September 30, 2020 included an allowance resulting from the macroeconomic impact of COVID-19 on commercial real estate markets.

Other expense decreased to $0.1 million during the three months ended September 30, 2020 from $0.4 million for the same period in 2019.

Income from sales of real estate —During the three months ended September 30, 2020, we recorded $6.1 million of income from sales of real estate from the sale of a Ground Lease to SAFE (refer to Note 8).

During the three months ended September 30, 2019, we recorded $3.5 million of income from sales of real estate from the sale of net lease assets.

Loss on early extinguishment of debt, net— During the three months ended September 30, 2020, we incurred losses on early extinguishment of debt of $7.9 million resulting from the repayment of senior notes prior to maturity.

Earnings from equity method investments —Earnings from equity method investments decreased to $6.8 million during the three months ended September 30, 2020 from $7.6 million for the same period in 2019.

During the three months ended September 30, 2020, we recognized $9.3 million of income from our equity method investment in SAFE and $0.8 million from our equity method investment in Net Lease Venture II, which was partially offset by $3.3 million of net aggregate losses from our remaining equity method investments.

During the three months ended September 30, 2019, we recognized $8.2 million resulting from the sale of an asset in an operating property venture, $2.9 million of income from our equity method investment in SAFE and $3.5 million of net aggregate losses from our remaining equity method investments.

Income tax expense —Income tax expense of $0.1 million was recorded during both the three months ended September 30, 2020 and 2019 and related primarily to state margins taxes and other minimum state taxes.

Results of Operations for the Nine Months Ended September 30, 2020 compared to the Nine Months Ended September 30, 2019

For the Nine Months

Ended September 30,

Results of Operations for the Three Months Ended March 31, 2021 compared to the Three Months Ended March 31, 2020

For the Three Months Ended March 31,

2021 2020 $ Change

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General and administrative 21,439 34,271 (12,832)

Provision for (recovery of) loan losses 4,093 (3,792) 7,885

Provision for losses on net investment in leases 2,001 — 2,001

(Recovery of) provision for loan losses (3,794) 4,003 (7,797)

(Recovery of) provision for losses on net investment in leases (1,601) 1,292 (2,893)

Impairment of assets 1,785 1,708 77

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Earnings from equity method investments 12,769 16,612 (3,843)

Selling profit from sales-type leases — 180,416 (180,416)

Income tax expense (165) (323) 158

Income tax benefit (expense) 665 (60) 725

Net income (loss) $ 7,989 $ (12,885) $ 20,874

Revenue —Operating lease income, which primarily includes income from net lease assets and commercial operating properties, decreased $17.7 million to $140.5 million during the nine months ended September 30, 2020 from $158.2 million for the same period in 2019.

Revenue —Operating lease income, which primarily includes income from net lease assets and commercial operating properties, increased $0.1 million to $47.4 million during the three months ended March 31, 2021 from $47.3 million for the same period in 2020.

The following table summarizes our operating lease income by segment ($ in millions).

Nine Months Ended September 30,

Three Months Ended March 31,

2021 2020 Change

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(1) Change primarily due to the reclassification of certain operating leases to sales-type leases in May 2019 (refer to Note 5) and asset sales, partially offset by new acquisitions.

(2) Change primarily due to asset sales.

(1) Change primarily due to an increase in recovery income from tenants at certain of our properties.

(2) Change primarily due to rent abatements and a decrease in percentage rent at certain of our properties.

The following table shows certain same store statistics for our consolidated Net Lease segment.

Same store assets are defined as assets we owned on or prior to January 1, 2019 and were in service through September 30, 2020 (Operating lease income in millions).

Nine Months Ended September 30,

Same store assets are defined as assets we owned on or prior to January 1, 2020 and were in service through March 31, 2021 (Operating lease income in millions).

Three Months Ended March 31,

Operating lease income (1)

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(1) For the nine months ended September 30, 2020 and 2019, includes $24.1 million and $11.2 million, respectively, of lease income from one net lease tenant that was recorded to "Interest income from sales-type leases" in our consolidated statements of operations.

(2) Occupancy as of September 30, 2020 and 2019.

Interest income decreased $13.5 million to $46.9 million during the nine months ended September 30, 2020 from $60.4 million for the same period in 2019.

The decrease was due primarily to a decrease in the average balance of our performing loans and other lending investments, which was $716 million for the nine months ended September 30, 2020 and $880 million for the nine months ended September 30, 2019.

The weighted average yield on our performing loans and other lending investments for the nine months ended September 30, 2020 and 2019 was 7.9% and 9.0%, respectively.

On January 1, 2019, we adopted new accounting standards and classified certain of our leases in 2019 as sales-type leases.

Interest income from sales-type leases increased to $25.0 million for the nine months ended September 30, 2020 from $12.2 million for the same period in 2019.

The increase was due primarily to a full period of interest income for sales-type leases during the nine months ended September 30, 2020 (refer to Note 5).

Other income increased $13.1 million to $56.2 million during the nine months ended September 30, 2020 from $43.1 million for the same period in 2019.

Other income during the nine months ended September 30, 2020 consisted primarily of mark-to-market gains on an equity investment, management fees, other ancillary income from our operating properties, land and development projects and loan portfolio, income from our hotel properties and interest income on our cash.

Other income during the nine months ended September 30, 2019 consisted primarily of income from our hotel properties, other ancillary income from our operating properties and land and development projects and interest income on our cash.

The increase in 2020 was primarily due to $23.9 million of mark-to-market gains on an equity investment (refer to Note 8) and an increase in management fees from SAFE, partially offset by a decrease in income from our hotel properties and other operating properties.

Land development revenue and cost of sales —During the nine months ended September 30, 2020, we sold residential lots and units and recognized land development revenue of $116.3 million which had associated cost of sales of $114.7 million.

During the nine months ended September 30, 2019, we sold residential lots and units and recognized land development revenue of $76.7 million which had associated cost of sales of $71.8 million.

The increase in 2020 was due primarily to the sale of a 430 acre site in California for $36.0 million which had associated cost of sales of $35.4 million.

Costs and expenses —Interest expense decreased $9.1 million to $127.7 million during the nine months ended September 30, 2020 from $136.9 million for the same period in 2019 due primarily to a decrease in our weighted average cost of debt, which was 4.8% for the nine months ended September 30, 2020 compared to 5.4% for the nine months ended September 30, 2019.

The balance of our average outstanding debt, inclusive of loan participations and lease liabilities associated with finance-type leases, decreased to $3.51 billion for the nine months ended September 30, 2020 from $3.52 billion for the same period in 2019.

Real estate expenses decreased $17.5 million to $53.7 million during the nine months ended September 30, 2020 from $71.2 million for the same period in 2019.

(1) For the three months ended March 31, 2021 and 2020, includes $9.5 million and $9.2 million, respectively, of lease income from one net lease tenant that was recorded to "Interest income from sales-type leases" and "Interest income" in our consolidated statements of operations.

(2) Occupancy as of March 31, 2021 and 2020.

Interest income decreased $6.6 million, or 38%, to $10.7 million during the three months ended March 31, 2021 from $17.2 million for the same period in 2020.

The decrease was due primarily to a decrease in the average balance of our performing loans and other lending investments, which was $526 million for the three months ended March 31, 2021 and $792 million for the three months ended March 31, 2020.

The weighted average yield on our performing loans and other lending investments was 7.5% and 8.2%, respectively, for the three months ended March 31, 2021 and 2020.

Interest income from sales-type leases increased to $8.6 million for the three months ended March 31, 2021 from $8.4 million for the same period in 2020.

Other income decreased $6.1 million, or 30%, to $14.3 million during the three months ended March 31, 2021 from $20.4 million for the same period in 2020.

Other income during the three months ended March 31, 2021 consisted primarily of a mark-to-market gain on an equity investment, management fees, other ancillary income from our land and development projects and loan portfolio, income from our hotel properties, lease termination fees and interest income on our cash.

Other income during the three months ended March 31, 2020 consisted primarily of a mark-to-market gain on an equity investment, income from our hotel properties, other ancillary income from our operating properties, land and development projects and loan portfolio and interest income on our cash.

Land development revenue and cost of sales —During the three months ended March 31, 2021, we sold residential lots and units and recognized land development revenue of $32.2 million which had associated cost of sales of $29.3 million.

During the three months ended March 31, 2020, we sold residential lots and units and recognized land development revenue of $80.2 million which had associated cost of sales of $77.1 million.

Costs and expenses —Interest expense decreased $3.8 million, or 9%, to $39.6 million during the three months ended March 31, 2021 from $43.4 million for the same period in 2020, due primarily to a decrease in our weighted average cost of debt, which was 4.6% for the three months ended March 31, 2021 compared to 4.9% for the three months ended March 31, 2020.

The balance of our average outstanding debt, inclusive of loan participations and lease liabilities associated with finance-type leases, decreased to $3.47 billion for the three months ended March 31, 2021 from $3.57 billion for the same period in 2020.

Real estate expense decreased $5.6 million, or 25%, to $16.9 million during the three months ended March 31, 2021 from $22.5 million for the same period in 2020.

The following table summarizes our real estate expenses by segment ($ in millions).

Nine Months Ended September 30,

Three Months Ended March 31,

2021 2020 Change

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Net Lease (3)

19.5 18.2 1.3

Total $ 16.9 $ 22.5 $ (5.6)

______________________________________________________________

(1) Change primarily due to asset sales and a decrease in expenses at certain operating properties, partially offset by an asset beginning operations during 2019.

(2) Change primarily due to a decrease in legal and marketing costs at some properties and asset sales.

(3) Change primarily due to new acquisitions, partially offset by asset sales.

Depreciation and amortization decreased $0.2 million to $43.4 million during the nine months ended September 30, 2020 from $43.6 million for the same period in 2019, primarily due to asset sales and the reclassification of certain operating leases to sales-type lease (refer to Note 5), partially offset by new acquisitions.

(1) Change primarily due to a decrease in expenses at certain operating properties due to COVID-19.

(2) Change primarily due to a decrease in real estate taxes and insurance costs at one property and asset sales.

(3) Change primarily due to an increase in recoverable common area maintenance expenses at certain properties.

Depreciation and amortization increased $1.0 million, or 7%, to $15.5 million during the three months ended March 31, 2021 from $14.5 million for the same period in 2020, primarily due to the full amortization of intangible assets associated with terminated leases.

General and administrative expense includes payroll and related costs, performance based compensation, public company costs and occupancy costs.

General and administrative expenses increased $0.6 million to $73.1 million during the nine months ended September 30, 2020 from $72.5 million for the same period in 2019.

The increase in 2020 was due primarily to an increase in performance based compensation, which was partially offset by a decrease in payroll and related costs and a decrease in travel and entertainment costs.

The provision for loan losses was $4.1 million for the nine months ended September 30, 2020 as compared to a recovery of loan losses of $3.8 million for the same period in 2019.

The provision for loan losses for the nine months ended September 30, 2020 resulted from the macroeconomic impact of COVID-19 on commercial real estate markets.

The recovery of loan losses for the nine months ended September 30, 2019 was due to a decrease in the general reserve of $4.3 million offset by an increase in the specific reserve of $0.5 million.

The provision for losses on net investment in leases for the nine months ended September 30, 2020 included an allowance resulting from the macroeconomic impact of COVID-19 on commercial real estate markets.

During the nine months ended September 30, 2020, we recorded an aggregate impairment of $6.5 million in connection with the sale of net lease assets and impairments on a real estate asset held for sale and a land and development asset.

During the nine months ended September 30, 2019, we recorded an aggregate impairment of $5.0 million which included an impairment of $3.3 million on a commercial operating property based on an executed purchase and sale agreement, a $1.1 million impairment on a land and development asset due to a change in business strategy and $0.6 million of impairments in connection with the sale of residential condominium units.

Other expense decreased to $0.4 million during the nine months ended September 30, 2020 from $12.8 million for the same period in 2019.

The decrease was due primarily to expenses associated with derivative contracts that were terminated during the nine months ended September 30, 2019.

Income from sales of real estate —During the nine months ended September 30, 2020, we recorded $6.1 million of income from sales of real estate from the sale of a Ground Lease to SAFE (refer to Note 8).

During the nine months ended September 30, 2019, we recorded $233.4 million of income from sales of real estate, primarily from the sale of a portfolio of net lease assets and operating properties.

Loss on early extinguishment of debt, net— During the nine months ended September 30, 2020 and 2019, we incurred losses on early extinguishment of debt of $12.0 million and $0.5 million, respectively, resulting from the repayment of senior notes prior to maturity.

Earnings from equity method investments —Earnings from equity method investments increased to $26.0 million during the nine months ended September 30, 2020 from $16.6 million for the same period in 2019.

During the nine months ended September 30, 2020, we recognized $36.9 million of income from our equity method investment in SAFE, which included a dilution gain of $7.9 million resulting from a SAFE equity offering in March 2020, $1.6 million from our equity investment in Net Lease Venture II, which were partially offset by $12.5 million of net aggregate losses from our remaining equity method

During the nine months ended September 30, 2019, we recognized $14.1 million from our equity method investment in SAFE and $8.2 million from the sale of an asset in an operating property venture, partially offset by $5.7 million of net aggregate losses from our remaining equity method investments.

Selling profit from sales-type leases —During the nine months ended September 30, 2019, we entered into a transaction with an operator of bowling entertainment venues, consisting of the purchase of nine bowling centers for $56.7 million and a commitment to purchase up to $55.0 million of additional bowling centers over the next several years (refer to Note 5).

The new centers were added to our existing master leases with the tenant.

In connection with this transaction, the maturities of the leases were extended by 15 years to 2047.

As a result of the modifications to the leases, we accounted for the leases as sales-type leases and recognized $180.4 million in "Selling profit from sales-type leases" as a result of the transaction.

Income tax expense —Income tax expense of $0.2 million was recorded during the nine months ended September 30, 2020 as compared to an income tax expense of $0.3 million for the same period in 2019.

The income tax expense for the nine months ended September 30, 2020 and 2019 related primarily to state margins taxes and other minimum state taxes.

General and administrative expenses decreased $12.8 million, or 37%, to $21.4 million during the three months ended March 31, 2021 from $34.3 million for the same period in 2020.

The decrease in 2021 was due primarily to a $11.9 million decrease in performance based compensation.

The recovery of loan losses was $3.8 million for the three months ended March 31, 2021 as compared to a provision for loan losses of $4.0 million for the same period in 2020.

The recovery of loan losses for the three months ended March 31, 2021 resulted from the reversal of CECL allowances on loans that repaid in full in the first quarter 2021 and from an improving macroeconomic forecast on commercial real estate markets since December 31, 2020.

The provision for loan losses for the three months ended March 31, 2020 resulted from the adoption of a new accounting standard.

The recovery of losses on net investment in leases for the three months ended March 31, 2021 resulted from an improving macroeconomic forecast on commercial real estate markets since December 31, 2020.

The provision for losses on net investment in leases for the three months ended March 31, 2020 resulted from the adoption of a new accounting standard.

During the three months ended March 31, 2020, we recorded an impairment of $1.7 million in connection with the sale of net lease assets.

Other expense increased to $0.3 million during the three months ended March 31, 2021 from $0.1 million for the same period in 2020.

Income from sales of real estate —During the three months ended March 31, 2021, we recorded $0.6 million of income from sales of real estate from the sale of residential condominiums.

Loss on early extinguishment of debt, net— During the three months ended March 31, 2020, we incurred losses on early extinguishment of debt of $4.1 million resulting from the repayment of senior notes prior to maturity.

Earnings from equity method investments —Earnings from equity method investments decreased to $12.8 million during the three months ended March 31, 2021 from $16.6 million for the same period in 2020.

During the three months ended March 31, 2021, we recognized $11.4 million of income from our equity method investment in SAFE, $1.0 million from our equity method investment in Net Lease Venture II and $0.4 million of net aggregate income from our remaining equity method investments.

During the three months ended March 31, 2020, we recognized $19.3 million of income from our equity method investment in SAFE, inclusive of a dilution gain of $7.9 million resulting from the dilution of our ownership in SAFE in connection with a SAFE equity offering in March 2020, offset by $2.7 million of aggregate losses from our remaining equity method investments.

Income tax benefit (expense) —Income tax benefit of $0.7 million was recorded for the three months ended March 31, 2021 and related primarily to refunds due us for alternative minimum taxes paid in prior periods.

Income tax expense of $0.1 million was recorded for the three months ended March 31, 2020 and related primarily to state margins taxes and other minimum state taxes.

Adjusted Earnings

In 2019, we announced a new business strategy that would focus our management personnel and our investment resources primarily on scaling our Ground Lease platform.

As part of this strategy, we accelerated the monetization of legacy assets, reducing our legacy portfolio to approximately 17% of our overall portfolio as of September 30, 2020, and deployed a substantial portion of the proceeds into additional investments in SAFE and new loan and net lease originations relating to the Ground Lease business.

Management has determined that, effective for the first quarter 2020, a modified non-GAAP earnings metric, designated "adjusted earnings," is the metric it uses to assess our execution of this strategy and the performance of our operations.

As part of this strategy, we accelerated the monetization of legacy assets, reducing our legacy portfolio to approximately 15% of our overall portfolio as of March 31, 2021, and deployed a substantial portion of the proceeds into additional investments in SAFE and new loan and net lease originations relating to the Ground Lease business.

Effective for the first quarter 2020, management determined that a modified non-GAAP earnings metric, designated "adjusted earnings," is the metric it uses to assess our execution of this strategy and the performance of our operations.

Adjusted earnings reflects impairment charges and loan provisions in the same period in which they are recognized in net income (loss) prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP"), rather than in a later period when the asset is sold.

We believe this change is appropriate as legacy asset sales become less central to our business, even though sales may be material to particular periods when they occur.

We believe this change is appropriate as legacy asset sales have become less central to our business, even though sales may be material to particular periods when they occur.

Adjusted earnings is used internally as a supplemental performance measure adjusting for certain items to give management a view of income more directly derived from operating activities in the period in which they occur.

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It should be noted that our manner of calculating Adjusted Earnings may differ from the calculations of similarly-titled measures by other companies.

For the Three Months Ended September 30,

2020 2019 2018

For the Three Months Ended March 31,

(in thousands)

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Stock-based compensation expense

5,661 6,740 3,651

Non-cash portion of loss on early extinguishment of debt — 799

Adjusted earnings allocable to common shareholders $ 22,732 $ 10,675

For the Nine Months Ended September 30,

2020 2019 2018

(in thousands)

Adjusted Earnings

Net income (loss) allocable to common shareholders $ (46,850) $ 337,807 $ 50,698

Depreciation and amortization

46,526 44,008 52,153

Stock-based compensation expense

26,675 20,694 16,245

Non-cash portion of loss on early extinguishment of debt 3,470 468 3,447

Adjusted earnings allocable to common shareholders $ 29,821 $ 402,977 $ 122,543

Liquidity and Capital Resources

During the three months ended September 30, 2020, we invested an aggregate $148 million into new investments, prior financing commitments and real estate development.

Investments included $117 million in net lease, loan, and strategic investments, $14 million in the repurchase of our common stock, $9 million of capital expenditures on legacy assets and $8 million in SAFE common stock.

These amounts are inclusive of fundings from consolidated investments and our pro rata share from equity method investments and includes $83 million of investments made within the Net Lease Venture II, of which we own 51.9%.

During the three months ended March 31, 2021, we invested an aggregate $105 million in new investments, prior financing commitments and real estate development.

Investments included $88 million in net lease, loan, and strategic investments, $12 million in the repurchase of our common stock and $5 million of capital expenditures on legacy assets.

These amounts are inclusive of fundings from our consolidated investments and our pro rata share from equity method investments and includes $5 million of investments made within the Net Lease Venture II, of which we own 51.9%.

The following table outlines our capital expenditures on operating properties, net lease and land and development assets as reflected in our consolidated statements of cash flows, by segment ($ in thousands):

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Operating Properties $ 96 $ 716

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Total capital expenditures on land and development assets $ 4,134 $ 15,035

As of September 30, 2020, we had unrestricted cash of approximately $88 million and $330 million of borrowing capacity available under the Revolving Credit Facility.

The COVID-19 crisis has for the time being adversely affected our strategies of monetizing legacy assets and materially scaling SAFE's portfolio as its Manager.

These conditions will adversely affect our

strategies while they persist.

As of March 31, 2021, we had unrestricted cash of $194 million and $350 million of borrowing capacity available under the Revolving Credit Facility.

The COVID-19 pandemic has for the time being adversely affected our strategies of monetizing legacy assets and materially scaling SAFE's portfolio as its Manager.

These conditions will adversely affect our strategies while they persist.

Our primary cash uses over the next 12 months are expected to be funding of investments, capital expenditures, distributions to shareholders through dividends and share repurchases and funding ongoing business operations.

In the near term we plan to limit non-investment cash expenditures to the extent practicable.

The amount we actually invest will depend on the full impact of COVID-19 on our business and the pace of the economic recovery.

We also had approximately $136 of maximum unfunded commitments associated with our investments of which we expect to fund the majority over the next two years, assuming borrowers and tenants meet all milestones, performance hurdles and all other conditions to fundings (see "Unfunded Commitments" below).

The amount we actually invest will depend on the full impact of the COVID-19 pandemic on our business and the pace of the economic recovery.

We had approximately $232 of maximum unfunded commitments associated with our investments as of March 31, 2021, of which we expect to fund the majority over the next two years, assuming borrowers and tenants meet all milestones, performance hurdles and all other conditions to fundings (see "Unfunded Commitments" below).

We also have approximately $308 million principal amount of scheduled real estate finance asset maturities over the next 12 months, exclusive of any extension options that can be exercised by our borrowers.

Our capital sources to meet cash uses through the next 12 months and beyond are expected to include cash on hand, Revolving Credit Facility borrowings, income from our portfolio, loan repayments from borrowers and proceeds from asset sales.

We expect that we will be able to meet our liquidity requirements over the next 12 months and for the reasonably foreseeable future.

Our capital sources to meet such cash requirements are expected to include cash on hand, Revolving Credit Facility borrowings, income from our portfolio, loan repayments from borrowers and proceeds from asset sales.

We cannot predict with certainty the specific transactions we will undertake to generate sufficient liquidity to meet our obligations as they come due.

We will adjust our plans as appropriate in response to changes in our expectations and changes in market conditions.

Contractual Obligations —The following table outlines the contractual obligations related to our long-term debt obligations, loan participations payable and operating lease obligations as of September 30, 2020 (refer to Note 11 to our consolidated financial statements).

Amounts Due By Period

Total Less Than 1

Years After 10

(in thousands)

Long-Term Debt Obligations :

Unsecured notes $ 2,012,500 $ — $ 287,500 $ 1,325,000 $ 400,000 $ —

Secured credit facilities 491,875 — 491,875 — — —

Revolving credit facility 20,000 — 20,000 — — —

Mortgages 724,836 72,439 162,037 160,408 323,856 6,096

Trust preferred securities 100,000 — — — — 100,000

Total principal maturities 3,349,211 72,439 961,412 1,485,408 723,856 106,096

Interest Payable (1)

620,462 132,344 243,831 184,724 50,143 9,420

Loan Participations Payable (2)

41,941 41,941 — — — —

Lease Obligations (3)

1,628,887 8,570 24,570 24,365 33,465 1,537,917

Total $ 5,640,501 $ 255,294 $ 1,229,813 $ 1,694,497 $ 807,464 $ 1,653,433

_______________________________________________________________________________

(1) Variable-rate debt assumes one-month LIBOR of 0.15% and three-month LIBOR of 0.23% that were in effect as of September 30, 2020.

Interest payable does not include payments that may be required under our interest rate derivatives.

(2) Refer to Note 10 to the consolidated financial statements.

(3) We are obligated to pay ground rent under certain operating leases;

however, our tenants at the properties pay this expense directly under the terms of various subleases and these amounts are excluded from lease obligations.

Credit Metrics —The following table presents metrics that management reviews as indicators of the strength of our balance sheet and credit profile.

Metrics are shown both excluding ("Without SAFE MTM") and including ("With SAFE MTM") our unrealized gain on the shares of common stock of SAFE that we own.

Readers are cautioned that there can be no assurance that the asset values used to calculate these metrics could be realized on the sale of such assets in a liquidation or otherwise.

September 30, 2020 December 31, 2019

SAFE MTM With

($ in millions)

Unencumbered assets (2)

$ 3,399 $ 4,633 $ 3,585 $ 4,112

Unencumbered assets / Unsecured debt (3)

1.6x 2.2x 1.6x 1.8x

2.2x 1.2x 2.0x 1.5x

Unsecured debt / Total debt (5)

68 % 68 % 69 % 69 %

_______________________________________________________________________________

(1) As of September 30, 2020 and December 31, 2019, we owned 33.7 million shares and 31.2 million shares, respectively, of SAFE common stock.

SAFE mark-to-market is calculated using the SAFE share price of $62.10 as of September 30, 2020 and the SAFE share price of $40.30 as of December 31, 2019.

(2) Unencumbered assets represents the gross book value of our assets, including the gross book value of our equity method investments, that are not pledged as collateral to any of our debt obligations plus intangible assets/liabilities for all other assets pledged as collateral.

As of September 30, 2020, unencumbered assets includes $610.8 million gross book value of assets held by entities whose equity interests are pledged as collateral for the Revolving Credit Facility that had $20.0 million outstanding as of September 30, 2020.

(3) Represents the amount of unencumbered assets as a percentage of our unsecured debt obligations.

(4) Leverage represents our total debt obligations, net of cash, divided by our adjusted total equity.

Adjusted total equity equals total equity, adjusted to add the following, each as determined under GAAP:

accumulated depreciation and amortization, CECL allowances and our proportionate share of accumulated depreciation and amortization from our equity method investments.

(5) Represents the principal amount of our unsecured debt as a percentage of the principal amount of our total debt and excludes debt attributable to noncontrolling interests.

Debt Covenants —Our outstanding unsecured debt securities contain corporate level covenants that include a covenant to maintain a ratio of unencumbered assets to unsecured indebtedness, as such terms are defined in the indentures governing the debt securities, of at least 1.2x and a covenant restricting certain incurrences of debt based on a fixed charge coverage ratio.

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To satisfy this covenant, we have the option to pay down outstanding borrowings or substitute assets in the borrowing base.

Under both the Senior Term Loan and the Revolving Credit Facility we are permitted to pay dividends provided that no material default (as defined in the relevant agreement) has occurred and is continuing or would result therefrom and we remain in compliance with our financial covenants after giving effect to the dividend.

We declared common stock dividends of $24.6 million, or $0.32 per share, for the nine months ended September 30, 2020.

Derivatives —Our use of derivative financial instruments is primarily limited to the utilization of interest rate swaps, interest rate caps or other instruments to manage interest rate risk exposure and foreign exchange contracts to manage our risk to changes in foreign currencies.

would result therefrom and we remain in compliance with our financial covenants after giving effect to the dividend.

We declared common stock dividends of $8.2 million, or $0.11 per share, for the three months ended March 31, 2021.

Derivatives —Our use of derivative financial instruments, if necessary, has primarily been limited to the utilization of interest rate swaps, interest rate caps or other instruments to manage interest rate risk exposure and foreign exchange contracts to manage our risk to changes in foreign currencies.

Refer to Note 13 to the consolidated financial statements.

Off-Balance Sheet Arrangements —We are not dependent on the use of any off-balance sheet financing arrangements for liquidity.

We have made investments in various unconsolidated ventures.

Refer to Note 8 to the consolidated financial statements for further details of our unconsolidated investments.

Our maximum exposure to loss from these investments is limited to the carrying value of our investments and any unfunded commitments (see below).

Unfunded Commitments —We generally fund construction and development loans and build-outs of space in net lease assets over a period of time if and when the borrowers and tenants meet established milestones and other performance criteria.

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These arrangements are referred to as Strategic Investments.

As of September 30, 2020, the maximum amount of fundings we may be obligated to make under each category, assuming all performance hurdles and milestones are met under the Performance-Based Commitments and assuming that 100% of our capital committed to Strategic Investments is drawn down, are as follows (in thousands):

Loans and Other Lending Investments (1)

Real Estate Other

As of March 31, 2021, the maximum amount of fundings we may be obligated to make under each category, assuming all performance hurdles and milestones are met under the Performance-Based Commitments and assuming that 100% of our capital committed to Strategic Investments is drawn down, are as follows (in thousands):

Loans and Other Lending Investments Real Estate Other

Investments Total

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Total $ 110,398 $ 69,734 $ 52,059 $ 232,191

_______________________________________________________________________________

(1) Excludes $8.0 million of commitments on loan participations sold that are not our obligation.

Stock Repurchase Program —We may repurchase shares in negotiated transactions or open market transactions, including through one or more trading plans.

During the nine months ended September 30, 2020, we repurchased 3.7 million shares of our outstanding common stock for $41.4 million, for an average cost of $11.32 per share.

During the nine months ended September 30, 2019, we repurchased 6.2 million shares of our outstanding common stock for $58.8 million, for an average cost of $9.44 per share.

In August 2020, our board of directors authorized an increase to the stock repurchase program to $50.0 million.

As of September 30, 2020, we had remaining authorization to repurchase up to $40.8 million of common stock under our stock repurchase program.

During the three months ended March 31, 2021, we repurchased 0.7 million shares of our outstanding common stock for $12.4 million, for an average cost of $17.20 per share.

During the three months ended March 31, 2020, we repurchased 1.0 million shares of our outstanding common stock for $12.0 million, for an average cost of $12.51 per share.

In February 2021, our board of directors authorized an increase to the stock repurchase program to $50.0 million.

As of March 31, 2021, we had remaining authorization to repurchase up to $40.1 million of common stock under our stock repurchase program.

Critical Accounting Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis