What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-04 · 138 added, 75 removed, 189 unchanged (53% of the section changed)

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Our net lease assets associated with our Ground Lease businesses were not included in the sale.

In April 2022, we completed separate, privately-negotiated transactions with holders of $194 million aggregate principal amount of our 3.125% Convertible Notes (refer to Note 10 to the consolidated financial statements) in which the noteholders exchanged their convertible notes with us for 13.75 million newly issued shares of our common stock and aggregate cash payments of $14 million.

The 3.125% Convertible Senior Notes received by us were retired.

We recognized a net increase in shareholders’ equity of $180.6 million inclusive of a $118.1 million loss on extinguishment of debt in connection with these transactions.

The exchanges will strengthen our balance sheet and allow us to save interest expense, preserve cash on hand, reduce our outstanding debt and mitigate volatility on the trading price of our common stock as we approach the maturity of the remaining outstanding 3.125% Convertible Notes in September 2022.

Portfolio Overview

As of March 31, 2022, based on our book value, our total investment portfolio has the following property/collateral type and geographic characteristics ($ in thousands):

As of June 30, 2022, based on our book value, our total investment portfolio has the following property/collateral type and geographic characteristics ($ in thousands):

Property/Collateral

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Land and Development

Entertainment / Leisure

Other Property Types

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After the Net Lease Sale, the net lease segment includes our Ground Lease investments made primarily through SAFE and our Ground Lease adjacent businesses.

As of March 31, 2022, our net lease portfolio consisted primarily of our equity method investments in SAFE and the Ground Lease Plus Fund.

As of June 30, 2022, our net lease portfolio consisted primarily of our equity method investments in SAFE and the Ground Lease Plus Fund.

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

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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 March 31, 2022, we owned approximately 64.7% of SAFE’s common stock outstanding.

As of June 30, 2022, we owned approximately 64.7% of SAFE’s common stock outstanding.

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

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The tables below shows certain statistics for our real estate finance portfolio ($ in thousands):

March 31, 2022

June 30, 2022

Allowance for

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Other lending investments

(1) As of March 31, 2022, our performing loans had a weighted average maturity of 3.3 years and, excluding one performing loan with a maturity of September 2057, had a weighted average maturity of 0.4 years.

(1) As of June 30, 2022, our performing loans had a weighted average maturity of 5.5 years and, excluding one performing loan with a maturity of September 2057, had a weighted average maturity of 0.4 years.

December 31, 2021

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

March 31, 2022

June 30, 2022

December 31, 2021

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Yield - year to date (1)

(1) Yields presented are for the three months ended March 31, 2022 and 2021 and represent the yields on performing loans and other lending investments.

(1) Yields presented are for the six months ended June 30, 2022 and 2021 and represent the yields on performing loans and other lending investments.

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

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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 March 31, 2022 and December 31, 2021, we had one non-performing loan with a carrying value of $59.1 million.

As of June 30, 2022 and December 31, 2021, we had one non-performing loan with a carrying value of $59.5 million and $59.1 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 $4.9 million as of March 31, 2022, or 1.5% of total loans and other lending investments, compared to $4.8 million, or 1.4%, as of December 31, 2021.

Allowance for Loan Losses —The allowance for loan losses was $3.0 million as of June 30, 2022, or 1.5% of total loans and other lending investments, compared to $4.8 million, or 1.4%, as of December 31, 2021.

We expect that our level of Expected Losses will fluctuate from period to period.

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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 March 31, 2022 and December 31, 2021, asset-specific allowances were $0.6 million and $0.6 million, respectively.

As of June 30, 2022 and December 31, 2021, asset-specific allowances were $0.7 million and $0.6 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.

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

The Expected Loss increased to $4.3 million, or 1.6%, of performing loans and other lending investments as of March 31, 2022, compared to $4.2 million, or 1.5%, of performing loans and other lending investments as of December 31, 2021.

The increase was due primarily to the accretion on our held-to-maturity security.

The Expected Loss decreased to $2.3 million, or 1.6%, of performing loans and other lending investments as of June 30, 2022, compared to $4.2 million, or 1.5%, of performing loans and other lending investments as of December 31, 2021.

The decrease was due primarily to the repayment of loans during the six months ended June 30, 2022.

Operating Properties

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

As of March 31, 2022, the book value of our operating property portfolio, including the carrying value of our equity method investments, totaled $135.0 million.

As of June 30, 2022, the book value of our operating property portfolio, including the carrying value of our equity method investments, totaled $129.9 million.

Land and Development

The following table presents a land and development portfolio rollforward for the three months ended March 31, 2022.

The following table presents a land and development portfolio rollforward for the six months ended June 30, 2022.

Land and Development Portfolio Rollforward

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Ending balance (1)

(1) As of March 31, 2022, and December 31, 2021, Total Segment excludes $0.2 million and $1.1 million, respectively, of equity method investments.

(1) As of June 30, 2022, and December 31, 2021, Total Segment excludes $0.3 million and $1.1 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 March 31, 2022 compared to the Three Months Ended March 31, 2021

Results of Operations for the Three Months Ended June 30, 2022 compared to the Three Months Ended June 30, 2021

For the Three Months Ended

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Earnings from equity method investments

Income tax (expense) benefit

Income tax expense

Net income from discontinued operations

Revenue —Operating lease income, which primarily includes income from commercial operating properties, decreased to $3.1 million during the three months ended March 31, 2022 from $4.9 million for the same period in 2021.

Revenue —Operating lease income, which primarily includes income from commercial operating properties, decreased to $3.2 million during the three months ended June 30, 2022 from $4.8 million for the same period in 2021.

The decrease was primarily due to the sale of assets, partially offset by an increase in rent at certain of our properties.

Interest income decreased to $4.9 million during the three months ended March 31, 2022 from $9.8 million for the same period in 2021.

The decrease was due primarily to a decrease in the average balance of our performing loans and other lending investments, which was $279 million for the three months ended March 31, 2022 and $526 million for the three months ended March 31, 2021.

The weighted average yield on our performing loans and other lending investments was 7.1% and 7.5%, respectively, for the three months ended March 31, 2022 and 2021.

Interest income from sales-type leases was $0.4 million for the three months ended March 31, 2022 and resulted from the acquisition of a Ground Lease that was classified as a sales-type lease (refer to Note 5 to the consolidated financial statements).

Other income decreased to $8.6 million during the three months ended March 31, 2022 from $13.0 million for the same period in 2021.

Other income during the three months ended March 31, 2022 consisted primarily of management fees , income from our hotel properties and other ancillary income from our land and development projects and operating properties.

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 .

Land development revenue and cost of sales —During the three months ended March 31, 2022, we sold land parcels and residential lots and units and recognized land development revenue of $14.9 million which had associated cost of sales of $14.5 million.

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.

Costs and expenses —Interest expense increased to $29.2 million during the three months ended March 31, 2022 from $28.8 million for the same period in 2021.

Our weighted average cost of debt was 4.7% for the three months ended March 31, 2022 compared to 4.5% for the three months ended March 31, 2021.

The average balance of our outstanding debt was $2.51 billion for the three months ended March 31, 2022 and $2.61 billion for the same period in 2021.

Real estate expense increased to $10.1 million during the three months ended March 31, 2022 from $8.7 million for the same period in 2021.

Interest income decreased to $4.2 million during the three months ended June 30, 2022 from $8.1 million for the same period in 2021.

The decrease was due primarily to a decrease in the average balance of our performing loans and other lending investments, which was $242 million for the three months ended June 30, 2022 and $371 million for the three months ended June 30, 2021.

The weighted average yield on our performing loans and other lending investments was 7.0% and 8.4%, respectively, for the three months ended June 30, 2022 and 2021.

Interest income from sales-type leases increased to $0.4 million for the three months ended June 30, 2022 from $0.2 million for the same period in 2021.

The increase resulted from the acquisition of a Ground Lease that was classified as a sales-type lease (refer to Note 5 to the consolidated financial statements).

Other income increased to $15.9 million during the three months ended June 30, 2022 from $8.9 million for the same period in 2021.

Other income during the three months ended June 30, 2022 consisted primarily of income from our hotel properties, management fees and other ancillary income from our land and development projects and operating properties.

Other income during the three months ended June 30, 2021 consisted primarily of a management fees, income from our hotel properties, other ancillary income from our 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 June 30, 2022, we sold land parcels and residential lots and units and recognized land development revenue of $24.4 million which had associated cost of sales of $24.1 million.

During the three months ended June 30, 2021, we sold residential lots and units and recognized land development revenue of $32.3 million which had associated cost of sales of $30.8 million.

Costs and expenses —Interest expense decreased to $24.1 million during the three months ended June 30, 2022 from $28.6 million for the same period in 2021.

Our weighted average cost of debt was 5.0% for the three months ended June 30, 2022 compared to 4.4% for the three months ended June 30, 2021.

The average balance of our outstanding debt was $1.92 billion for the three months ended June 30, 2022 and $2.58 billion for the same period in 2021.

Real estate expense increased to $13.0 million during the three months ended June 30, 2022 from $11.3 million for the same period in 2021.

The increase was primarily due to an increase in expenses at certain of our hotel operating properties that have increased operations from the prior year, which was partially offset by asset sales.

Depreciation and amortization decreased to $1.4 million during the three months ended March 31, 2022 from $2.4 million for the same period in 2021.

Depreciation and amortization decreased to $1.3 million during the three months ended June 30, 2022 from $1.6 million for the same period in 2021.

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

General and administrative expenses decreased to $1.4 million during the three months ended March 31, 2022 from $21.4 million for the same period in 2021.

We recognized a net recovery of general and administrative expenses of ($5.2) million during the three months ended June 30, 2022 versus $30.4 million of expense for the same period in 2021.

The decrease in 2022 was due primarily to a $35.5 million decrease in performance-based compensation.

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In addition, illustrative examples of our iPIP Plans may be found in our 2021 definitive proxy statement which is publicly available on the SEC’s website.

The provision for loan losses was $0.1 million for the three months ended March 31, 2022 as compared to a recovery of loan losses of $3.6 million for the same period in 2021.

The provision for loan losses for the three months ended March 31, 2022 resulted from the accretion on our held-to-maturity security.

The recovery of loan losses for the three months ended March 31, 2021 resulted from the reversal of Expected Loss 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 losses on net investment in leases for the three months ended March 31, 2022 resulted from the macroeconomic forecast on commercial real estate markets.

Other expense was $0.9 million during the three months ended March 31, 2022 and $0.3 million for the same period in 2021.

Other expenses for the three months ended March 31, 2022 consisted primarily of legal costs.

Income from sales of real estate —During the three months ended March 31, 2022, we recorded $0.5 million of income from sales of real estate primarily from the sale of Ground Leases.

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, 2022, we incurred losses on early extinguishment of debt of $1.4 million resulting from the repayment of our senior term loan in connection with our Net Lease Sale (refer to Note 3 to the consolidated financial statements).

Earnings from equity method investments —Earnings from equity method investments increased to $25.0 million during the three months ended March 31, 2022 from $11.8 million for the same period in 2021.

During the three months ended March 31, 2022, we recognized $17.0 million of income from our equity method investment in SAFE and $8.0 million of net aggregate income from our remaining equity method investments.

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

Income tax (expense) benefit —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 .

The provision for loan losses was $22.6 million for the three months ended June 30, 2022 as compared to a recovery of loan losses of $2.2 million for the same period in 2021.

The provision for loan losses for the three months ended June 30, 2022 resulted primarily from a $25.0 million provision on our held-to-maturity security, which is now recorded at its expected repayment proceeds.

The recovery of loan losses for the three months ended June 30, 2021 resulted from the reversal of Expected Loss allowances on loans that repaid in full in the second quarter 2021 and from an improving macroeconomic forecast on commercial real estate markets since March 31, 2021.

The provision for losses on net investment in leases for the three months ended June 30, 2022 resulted from the macroeconomic forecast on commercial real estate markets.

The provision for losses on net investment in leases for the three months ended June 30, 2021 resulted from the acquisition of two Ground Leases in June 2021 (refer to Note 5 to the consolidated financial statements).

During the three months ended June 30, 2022, we recognized an impairment of $1.8 million on an operating property based on the expected cash flows to be received.

Other expense was $1.5 million during the three months ended June 30, 2022 and $0.2 million for the same period in 2021.

The increase in other expenses for the three months ended June 30, 2022 was due primarily to legal costs.

Income from sales of real estate —During the three months ended June 30, 2021, we recorded $0.1 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 June 30, 2022, we incurred losses on early extinguishment of debt of $116.6 million resulting from the redemption of our unsecured notes (refer to Note 10 to the consolidated financial statements).

Earnings from equity method investments —Earnings from equity method investments increased to $19.4 million during the three months ended June 30, 2022 from $11.1 million for the same period in 2021.

During the three months ended June 30, 2022, we recognized $14.7 million of income from our equity method investment in SAFE, $4.3 million primarily from the settlement of our interest in a venture and $0.4 million of net aggregate income from our remaining equity method investments.

During the three months ended June 30, 2021, we recognized $9.7 million of income from our equity method investment in SAFE and $1.4 million of net aggregate income from our remaining equity method investments.

Income tax (expense) benefit —Income tax expense of $0.6 million was recorded for the three months ended June 30, 2021 and related primarily to a reduction in the amount of expected refund of alternative minimum taxes due us resulting from amended tax returns from prior periods net operating loss carrybacks.

Net income from discontinued operations —In March 2022, we closed on the sale of the majority of our net lease properties owned directly and through ventures.

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Our net lease assets associated with our Ground Lease businesses were not included in the sale.

Net income from discontinued operations represents the operating results from the net lease assets that are not

associated with our Ground Lease businesses (refer to Note 3 to the consolidated financial statements - Net Lease Sale and Discontinued Operations).

Net income from discontinued operations represents the operating results from the net lease assets that are not associated with our Ground Lease businesses (refer to Note 3 to the consolidated financial statements - Net Lease Sale and Discontinued Operations).

Results of Operations for the Six Months Ended June 30, 2022 compared to the Six Months Ended June 30, 2021

For the Six Months Ended June 30,

(in thousands)

Operating lease income

Interest income

Interest income from sales-type leases

Land development revenue

Total revenue

Interest expense

Real estate expense

Land development cost of sales

Depreciation and amortization

General and administrative

Provision for (recovery of) loan losses

Provision for losses on net investment in leases

Impairment of assets

Other expense

Total costs and expenses

Income from sales of real estate

Loss on early extinguishment of debt, net

Earnings from equity method investments

Income tax benefit (expense)

Net income from discontinued operations

Net income (loss)

Revenue —Operating lease income, which primarily includes income from commercial operating properties, decreased to $6.3 million during the six months ended June 30, 2022 from $9.7 million for the same period in 2021.

The decrease was primarily due to the sale of assets, partially offset by an increase in rent at certain of our properties.

Interest income decreased to $9.2 million during the six months ended June 30, 2022 from $17.9 million for the same period in 2021.

The decrease was due primarily to a decrease in the average balance of our performing loans and other lending investments, which was $259 million for the six months ended June 30, 2022 and $445 million for the six months ended June 30, 2021.

The weighted average yield on our performing loans and other lending investments was 7.1% and 8.0%, respectively, for the six months ended June 30, 2022 and 2021.

Interest income from sales-type leases increased to $0.7 million for the six months ended June 30, 2022 from $0.2 million for the same period in 2021.

The increase resulted from the acquisition of a Ground Lease that was classified as a sales-type lease (refer to Note 5 to the consolidated financial statements).

Other income increased to $24.5 million during the six months ended June 30, 2022 from $21.9 million for the same period in 2021.

Other income during the six months ended June 30, 2022 consisted primarily of management fees , income from our hotel properties and other ancillary income from our land and development projects and operating properties.

Other income during the six months ended June 30, 2021 consisted primarily of a mark-to-market gain 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, lease termination fees and interest income on our cash .

Land development revenue and cost of sales —During the six months ended June 30, 2022, we sold land parcels and residential lots and units and recognized land development revenue of $39.3 million which had associated cost of sales of $38.6 million.

During the six months ended June 30, 2021, we sold residential lots and units and recognized land development revenue of $64.6 million which had associated cost of sales of $60.1 million.

Costs and expenses —Interest expense decreased to $53.4 million during the six months ended June 30, 2022 from $57.5 million for the same period in 2021.

Our weighted average cost of debt was 4.9% for the six months ended June 30, 2022 compared to 4.4% for the six months ended June 30, 2021.

The average balance of our outstanding debt was $2.20 billion for the six months ended June 30, 2022 and $2.60 billion for the same period in 2021.

Real estate expense increased to $23.1 million during the six months ended June 30, 2022 from $20.0 million for the same period in 2021.

The increase was primarily due to an increase in expenses at certain of our hotel operating properties that have increased operations from the prior year, which was partially offset by asset sales.

Depreciation and amortization decreased to $2.7 million during the six months ended June 30, 2022 from $4.0 million for the same period in 2021.

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

We recognized a net recovery of general and administrative expenses of ($3.9) million during the three months ended June 30, 2022 versus $51.8 million of expense for the same period in 2021.

The decrease in 2022 was due primarily to a $54.7 million decrease in performance-based compensation.

Our primary forms of performance-based compensation are our iPIP Plans and our annual bonus pool (refer to Note 14 to the consolidated financial statements for more information on the iPIP Plans).

In addition, illustrative examples of our iPIP Plans may be found in our 2021 definitive proxy statement which is publicly available on the SEC’s website.

The provision for loan losses was $22.7 million for the six months ended June 30, 2022 as compared to a recovery of loan losses of $5.8 million for the same period in 2021.

The provision for loan losses for the six months ended June 30, 2022 resulted primarily from a $25.0 million provision on our held-to-maturity security, which is now recorded at its expected repayment proceeds.

The recovery of loan losses for the six months ended June 30, 2021 resulted from the reversal of Expected Loss allowances on loans that repaid in full during the period and 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 six months ended June 30, 2022 resulted from the macroeconomic forecast on commercial real estate markets.

During the six months ended June 30, 2022, we recognized an impairment of $1.8 million on an operating property based on the expected cash flows to be received.

During the six months ended June 30, 2021, we recorded an aggregate impairment of $0.3 million in connection with the sale of residential condominiums.

Other expense was $2.5 million during the six months ended June 30, 2022 and $0.5 million for the same period in 2021.

The increase in other expenses for the six months ended June 30, 2022 was due primarily to legal costs.

Income from sales of real estate —During the six months ended June 30, 2022, we recorded $0.5 million of income from sales of real estate primarily from the sale of Ground Leases.

During the six months ended June 30, 2021, we recorded $0.7 million of income from sales of real estate from the sale of residential condominiums.

Loss on early extinguishment of debt, net— During the six months ended June 30, 2022, we incurred losses on early extinguishment of debt of $118.0 million resulting from the redemption of our unsecured notes (refer to Note 3 and Note 10 to the consolidated financial statements) and the repayment of our senior term loan in connection with our Net Lease Sale.

Earnings from equity method investments —Earnings from equity method investments increased to $44.4 million during the six months ended June 30, 2022 from $22.9 million for the same period in 2021.

During the six months ended June 30, 2022, we recognized $31.7 million of income from our equity method investment in SAFE, $5.0 million primarily from the settlement of our interest in a venture and $7.7 million of net aggregate income from our remaining equity method investments.

During the six months ended June 30, 2021, we recognized $21.1 million of income from our equity method investment in SAFE and $1.8 million of net aggregate income from our remaining equity method investments.

Income tax (expense) benefit —Income tax benefit of $0.1 million was recorded for the six months ended June 30, 2021 and related primarily to refunds due us for alternative minimum taxes paid in prior periods .

Net income from discontinued operations —In March 2022, we closed on the sale of the majority of our net lease properties owned directly and through ventures.

Our net lease assets were comprised of office, entertainment and industrial properties located in the United States.

Our net lease assets associated with our Ground Lease businesses were not included in the sale.

Adjusted Earnings

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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 March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

(in thousands)

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Depreciation and amortization

Stock-based compensation (income) expense

Stock-based compensation

Non-cash portion of loss on early extinguishment of debt

Adjusted earnings allocable to common shareholders

Adjusted earnings (loss) allocable to common shareholders

Liquidity and Capital Resources

During the three months ended March 31, 2022, we received net proceeds from the Net Lease Sale of approximately $1.2 billion.

We invested an aggregate $247 million in new investments, prior financing commitments and real estate development.

Investments included $231 million in our Ground Lease businesses (including $202 million in shares of SAFE common stock) and $16 million of loan fundings and capital expenditures on legacy and strategic assets.

These amounts are inclusive of fundings from our consolidated investments and our pro rata share from equity method investments.

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 for the three months ended March 31, 2022 and 2021, by segment ($ in thousands):

For the Three Months Ended March 31,

Operating Properties

Total capital expenditures on real estate assets

Land and Development

Total capital expenditures on land and development assets

As of March 31, 2022, we had unrestricted cash of $1.5 billion and $350 million of borrowing capacity available under the Revolving Credit Facility.

Our primary cash uses over the next 12 months are expected to be funding of investments in our Ground Lease and Ground Lease adjacent businesses, distributions to noncontrolling interests resulting from the Net Lease Sale (refer to Note 3 to the consolidated financial statements), repayment of debt obligations (refer to Note 10 to the consolidated financial statements), capital expenditures on legacy assets, distributions to shareholders through dividends and share repurchases and funding ongoing business operations, including operating lease payments (refer to Note 11 to the consolidated financial statements) .

As of June 30, 2022, we had unrestricted cash of $1.4 billion and $350.0 million of borrowing capacity available under the Revolving Credit Facility.

Our primary cash uses over the next 12 months are expected to be funding of investments in our Ground Lease and Ground Lease adjacent businesses, repayment of debt obligations (refer to Note 10 to the consolidated financial statements), capital expenditures on legacy assets, distributions to shareholders through dividends and share repurchases and funding ongoing business operations, including operating lease payments (refer to Note 11 to the consolidated financial statements) .

The amount we actually invest will depend on the closing of asset sales, the continuing impact of the COVID-19 pandemic, inflation, interest rate increases, market volatility and other macroeconomic factors on our business.

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Our remaining $94 million aggregate principal amount of our 3.125% convertible notes mature in September 2022, and we must repay them in a combination of cash and shares of our common stock.

We also had approximately $128.4 million of maximum unfunded commitments associated with our investments as of March 31, 2022, of which we expect to fund the majority of 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 had approximately $161.1 million of maximum unfunded commitments associated with our investments as of June 30, 2022, of which we expect to fund the majority of 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 $108.3 million principal amount of scheduled real estate finance maturities over the next 12 months, exclusive of any extension options that can be exercised by our borrowers.

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, including proceeds from the Net Lease Sale, Revolving Credit Facility borrowings, income from our portfolio, loan repayments from borrowers and proceeds from asset sales.

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.

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We currently estimate the total amount due under our iPIP Plans to be $133 million, assuming SAFE is valued at a price of $35.37 per share and our other assets perform with current underwriting expectations.

Of this amount, $114 million has been accrued in our financial statements (refer to Note 14 to the consolidated financial statements), of which $39 million will be paid in cash and shares of our common stock in the second quarter of 2022 resulting from the Net Lease Sale.

Of this amount, $60 million has been accrued in our financial

statements (refer to Note 14 to the consolidated financial statements).

Distributions on our iPIP Plans are expected to be 50% in cash and 50% in shares of our common stock;

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Additional information on our iPIP Plans can be found in our 2021 Annual Report and our 2021 Proxy Statement, both of which are available on our website.

The following table outlines our cash flows provided by operating activities, cash flows used in investing activities and cash flows provided by financing activities for the three months ended March 31, 2022 and 2021 ($ in thousands):

For the Three Months Ended March 31,

Cash flows used in operating activities

The following table outlines our cash flows provided by operating activities, cash flows used in investing activities and cash flows provided by financing activities for the six months ended June 30, 2022 and 2021 ($ in thousands):

For the Six Months Ended June 30,

Cash flows provided by (used in) operating activities

Cash flows provided by investing activities

Cash flows used in financing activities

The decrease in cash flows provided by operating activities during 2022 was due primarily to a decrease in the collection of deferred interest on loans.

The increase in cash flows provided by operating activities during 2022 was due primarily to an increase in distributions of earnings from other investments in 2022, which was partially offset by iPIP Plan payments and a decrease in the amount of deferred interest on loans collected in 2022 versus 2021.

The increases in cash flows provided by investing activities and cash flows used in financing activities during 2022 was due primarily to the Net Lease Sale (refer to Note 3 to the consolidated financial statements).

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Under 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 $8.7 million, or $0.125 per share, for the three months ended March 31, 2022.

We declared common stock dividends of $19.2 million, or $0.25 per share, for the six months ended June 30, 2022.

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.

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These arrangements are referred to as Strategic Investments.

As of March 31, 2022, 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):

As of June 30, 2022, 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

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

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 six months ended June 30, 2021, we repurchased 1.8 million shares of our outstanding common stock for $32.4 million, for an average cost of $17.57 per share.

We are generally authorized to repurchase up to $50.0 million in shares of our common stock and in February 2022, our board of directors authorized an increase to the stock repurchase program to $50.0 million.

As of March 31, 2022, we had remaining authorization to repurchase up to $50.0 million of common stock under our stock repurchase program.

As of June 30, 2022, we had remaining authorization to repurchase up to $50.0 million of common stock under our stock repurchase program.

Critical Accounting Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis