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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR TRANSITION PERIOD FROM __________ TO __________

COMMISSION FILE NUMBER: 001-35657

https://cdn.kscope.io/6cd9e02e5bdbbc1697deb5df862a06a9-aamc-20200630_g1.jpg
Front Yard Residential Corporation
(Exact name of registrant as specified in its charter)
Maryland46-0633510
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

c/o Altisource Asset Management Corporation
5100 Tamarind Reef
Christiansted, U.S. Virgin Islands 00820
(Address of principal executive office)

(340) 692-0525
(Registrant’s telephone number, including area code)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.01 per shareRESINew York Stock Exchange

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated FilerAccelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging Growth Company

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

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

As of August 3, 2020, 58,747,146 shares of our common stock were outstanding.



Front Yard Residential Corporation
June 30, 2020
Table of Contents

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References in this report to “we,” “our,” “us” or the “Company” refer to Front Yard Residential Corporation and its consolidated subsidiaries, unless otherwise indicated. References in this report to “AAMC” refer to Altisource Asset Management Corporation and its consolidated subsidiaries, unless otherwise indicated.

Special note on forward-looking statements

Our disclosure and analysis in this Quarterly Report on Form 10-Q contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts” or “potential” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.

The forward-looking statements contained in this report reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. Factors that may materially affect such forward-looking statements include, but are not limited to:

our ability to implement our business strategy;
our ability to make distributions to our stockholders;
the potential for the COVID-19 pandemic to adversely affect our business, financial position, operations, business prospects, customers, employees and third-party service providers;
the effect of the termination of the Agreement and Plan of Merger (the “Merger Agreement”) with BAF Holdings, LLC, a Delaware limited liability company (“Parent”), and BAF Sub, LLC, a Maryland limited liability company (“Merger Sub”) on our relationships with our customers, financing sources, third-party service providers, operating results and business generally;
the impact of the costs of the merger transaction that were borne by the Company despite the merger transaction being terminated;
the effect of management’s attention being diverted from our ongoing business operations and costs associated with shareholder activism;
the impact of defending any litigation;
our ability to successfully implement our strategic initiatives and achieve their anticipated impact;
our ability to acquire single-family rental assets for our portfolio, including difficulties in identifying assets to acquire;
the impact of changes to the supply of, value of and the returns on single-family rental assets;
our ability to successfully integrate newly acquired properties into our portfolio of single-family rental properties;
our ability to successfully operate HavenBrook Partners, LLC (“HavenBrook”) as a property manager and perform property management services for our single-family rental assets at the standard and/or the cost that we anticipate;
our ability to predict our costs;
our ability to effectively compete with our competitors;
our ability to apply the proceeds from financing activities or non-rental real estate owned asset sales to target single-family rental assets in a timely manner;
our ability to sell non-rental real estate owned properties on favorable terms and on a timely basis or at all;
the failure to identify unforeseen expenses or material liabilities associated with asset acquisitions through the due diligence process prior to such acquisitions;
changes in the market value of our single-family rental properties and real estate owned;
changes in interest rates;
our ability to obtain and access financing arrangements on favorable terms or at all;
our ability to maintain adequate liquidity;
risks related to our engagement of AAMC as our asset manager;
the failure of our third party vendors to effectively perform their obligations under their respective agreements with us;
our failure to maintain our qualification as a REIT;
our failure to maintain our exemption from registration under the Investment Company Act;
the impact of adverse real estate, mortgage or housing markets;
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the impact of adverse legislative, regulatory or tax changes; and
general economic and market conditions.

While forward-looking statements reflect our good faith beliefs, assumptions and expectations, they are not guarantees of future performance. Such forward-looking statements speak only as of their respective dates, and we assume no obligation to update them to reflect changes in underlying assumptions or factors, new information or otherwise. For a further discussion of these and other factors that could cause our future results to differ materially from any forward-looking statements, please see Part II, Item 1A in this Quarterly Report on Form 10-Q and “Item 1A. Risk factors” in our Annual Report on Form 10-K for the year ended December 31, 2019.

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Part I
Item 1. Financial Statements (Unaudited)

Front Yard Residential Corporation
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)

June 30, 2020December 31, 2019
(unaudited)
Assets:
Real estate held for use:
Land$397,878  $398,840  
Rental residential properties1,718,513  1,707,043  
Real estate owned12,684  16,328  
Total real estate held for use2,129,075  2,122,211  
Less: accumulated depreciation(244,183) (206,464) 
Total real estate held for use, net1,884,892  1,915,747  
Real estate assets held for sale4,699  14,395  
Cash and cash equivalents109,018  43,727  
Restricted cash31,994  34,282  
Accounts receivable5,199  9,235  
Goodwill13,376  13,376  
Prepaid expenses and other assets23,431  22,360  
Total assets$2,072,609  $2,053,122  
Liabilities:
Repurchase and loan agreements$1,629,283  $1,644,230  
Accounts payable and accrued liabilities67,309  64,619  
Payable to AAMC3,886  5,014  
Total liabilities1,700,478  1,713,863  
Commitments and contingencies (Note 7)
    
Equity:
Common stock, 0.01 par value, 200,000,000 authorized shares; 58,747,146 shares issued and outstanding as of June 30, 2020 and 53,933,575 shares issued and outstanding as of December 31, 2019
587  539  
Additional paid-in capital1,245,493  1,189,236  
Accumulated deficit(855,085) (830,602) 
Accumulated other comprehensive loss(18,864) (19,914) 
Total equity
372,131  339,259  
Total liabilities and equity
$2,072,609  $2,053,122  

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Front Yard Residential Corporation
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)

Three months ended June 30,Six months ended June 30,
2020201920202019
Revenues:
Rental revenues$55,128  $51,553  $109,456  $104,178  
Total revenues55,128  51,553  109,456  104,178  
Expenses:
Residential property operating expenses18,826  18,968  37,687  37,405  
Property management expenses3,627  3,538  7,798  7,213  
Depreciation and amortization20,242  19,936  40,608  42,321  
Acquisition and integration costs73  651  142  2,862  
Impairment654  1,576  889  2,596  
Mortgage loan servicing costs  194    581  
Interest expense18,916  21,165  38,412  42,675  
Share-based compensation936  1,811  2,423  2,930  
General and administrative9,052  7,992  16,643  13,758  
Management fees to AAMC3,584  3,556  7,168  7,131  
Total expenses75,910  79,387  151,770  159,472  
Net (loss) gain on real estate and mortgage loans(163) 3,842  1,370  12,619  
Operating loss(20,945) (23,992) (40,944) (42,675) 
Casualty losses(345) (184) (632) (577) 
Insurance recoveries12  11  75  538  
Other income (loss)25,301  (846) 25,309  (797) 
Net income (loss) before income taxes4,023  (25,011) (16,192) (43,511) 
Income tax expense28  6  28  14  
Net income (loss)$3,995  $(25,017) $(16,220) $(43,525) 
Earnings (loss) per share of common stock - basic:
Earnings (loss) per basic share$0.07  $(0.47) $(0.29) $(0.81) 
Weighted average common stock outstanding - basic56,272,446  53,714,998  55,107,940  53,672,835  
Earnings (loss) per share of common stock - diluted:
Earnings (loss) per diluted share$0.07  $(0.47) $(0.29) $(0.81) 
Weighted average common stock outstanding - diluted56,796,936  53,714,998  55,107,940  53,672,835  
Dividends declared per common share$  $0.15  $0.15  $0.30  

See accompanying notes to condensed consolidated financial statements.

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Front Yard Residential Corporation
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
(Unaudited)

Three months ended June 30,Six months ended June 30,
2020201920202019
Net income (loss)$3,995  $(25,017) $(16,220) $(43,525) 
Other comprehensive income (loss):
Change in fair value of interest rate caps104  (3,482) (1,711) (11,091) 
Losses from interest rate caps reclassified into earnings from accumulated other comprehensive income (loss)1,393  1,248  2,761  2,235  
Net other comprehensive income (loss)1,497  (2,234) 1,050  (8,856) 
Comprehensive income (loss)$5,492  $(27,251) $(15,170) $(52,381) 

See accompanying notes to condensed consolidated financial statements.

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Front Yard Residential Corporation
Condensed Consolidated Statements of Stockholders' Equity
(In thousands, except share and per share amounts)
(Unaudited)

Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Comprehensive LossTotal Equity
Number of SharesAmount
December 31, 201953,933,575  $539  $1,189,236  $(830,602) $(19,914) $339,259  
Common shares issued under share-based compensation plans243,089  3  62  —  —  65  
Shares withheld for taxes upon vesting of restricted stock(64,290) (1) (767) —  —  (768) 
Dividends on common stock ($0.15 per share)
—  —  —  (8,263) —  (8,263) 
Share-based compensation—  —  1,487  —  —  1,487  
Change in fair value of cash flow hedging derivatives in other comprehensive loss—  —  —  —  (447) (447) 
Net loss—  —  —  (20,215) —  (20,215) 
March 31, 202054,112,374  541  1,190,018  (859,080) (20,361) 311,118  
Issuance of common stock, including shares under share-based compensation plans4,693,383  47  54,953  —  —  55,000  
Shares withheld for taxes upon vesting of restricted stock(58,611) (1) (414) —  —  (415) 
Share-based compensation—  —  936  —  —  936  
Change in fair value of cash flow hedging derivatives in other comprehensive income—  —  —  —  1,497  1,497  
Net loss—  —  —  3,995  —  3,995  
June 30, 202058,747,146  $587  $1,245,493  $(855,085) $(18,864) $372,131  



See accompanying notes to condensed consolidated financial statements.

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Front Yard Residential Corporation
Condensed Consolidated Statements of Stockholders' Equity (continued)
(In thousands, except share and per share amounts)
(Unaudited)

Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Comprehensive LossTotal Equity
Number of SharesAmount
December 31, 201853,630,204  $536  $1,184,132  $(700,623) $(12,653) $471,392  
Adoption of ASC 842—  —  —  96  —  96  
Dividends on common stock ($0.15 per share)
—  —  —  (8,158) —  (8,158) 
Share-based compensation—  —  1,119  —  —  1,119  
Change in fair value of cash flow hedging derivatives in other comprehensive loss—  —  —  —  (6,622) (6,622) 
Net loss—  —  —  (18,508) —  (18,508) 
March 31, 201953,630,204  536  1,185,251  (727,193) (19,275) 439,319  
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes234,389  2  59  —  —  61  
Shares withheld for taxes upon vesting of restricted stock(38,135)   (438) —  —  (438) 
Dividends on common stock ($0.15 per share)
—  —  —  (8,258) —  (8,258) 
Share-based compensation—  —  1,811  —  —  1,811  
Change in fair value of cash flow hedging derivatives in other comprehensive loss—  —  —  —  (2,234) (2,234) 
Net loss—  —  —  (25,017) —  (25,017) 
June 30, 201953,826,458  $538  $1,186,683  $(760,468) $(21,509) $405,244  

See accompanying notes to condensed consolidated financial statements.

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Front Yard Residential Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six months ended June 30,
20202019
Operating activities:
Net loss$(16,220) $(43,525) 
Adjustments to reconcile net loss to net cash used in operating activities:
Net gain on real estate and mortgage loans(1,370) (12,619) 
Depreciation and amortization40,608  42,321  
Impairment889  2,596  
Share-based compensation2,423  2,930  
Amortization of deferred financing costs3,657  2,528  
Casualty losses632  577  
Insurance recoveries(75) (538) 
Change in fair value of interest rate cap derivatives in profit or loss2,761  2,235  
Changes in operating assets and liabilities:
Accounts receivable859  2,630  
Deferred leasing costs(1,477) (1,418) 
Prepaid expenses and other assets(2,913) (30) 
Accounts payable and accrued liabilities3,366  (6,557) 
Payable to AAMC(1,128) 24  
Net cash provided by (used in) operating activities32,012  (8,846) 
Investing activities:
Investment in real estate(543) (7,374) 
Investment in renovations(16,205) (13,707) 
Payment of real estate tax advances  (29) 
Proceeds from mortgage loan resolutions and dispositions  1,690  
Receipt of mortgage loan payments  138  
Proceeds from dispositions of real estate21,456  144,432  
Proceeds from casualty insurance75  1,550  
Net cash provided by investing activities4,783  126,700  
Financing activities:
Proceeds from issuance of common stock, including stock option exercises55,086  137  
Payment of tax withholdings on share-based compensation plan awards(21) (76) 
Shares withheld for taxes upon vesting of restricted stock(1,183) (438) 
Dividends on common stock(8,557) (16,237) 
Proceeds from repurchase and loan agreements42,568  32,068  
Repayments of repurchase and loan agreements(57,530) (131,983) 
Payment of financing costs(3,642) (463) 
Principal repayments of finance leases(513) (632) 
Net cash provided by (used in) financing activities26,208  (117,624) 
Net change in cash, cash equivalents and restricted cash63,003  230  
Cash, cash equivalents and restricted cash as of beginning of the period78,009  81,160  
Cash, cash equivalents and restricted cash as of end of the period$141,012  $81,390  
See accompanying notes to condensed consolidated financial statements.

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Front Yard Residential Corporation
Condensed Consolidated Statements of Cash Flows (continued)
(In thousands)
(Unaudited)

Six months ended June 30,
20202019
Supplemental disclosure of cash flow information:
Cash paid for:
Interest$32,687  $38,911  
Non-cash transactions:
Transfer of mortgage loans to real estate owned, net$  $3,740  
Changes in accrued capital expenditures(202) (2,064) 
Changes in receivables from mortgage loan resolutions and dispositions, payments and real estate tax advances to borrowers, net  (68) 
Changes in receivables from real estate owned dispositions(3,205) (8,767) 
Change in other comprehensive loss from cash flow hedges1,050  (8,856) 
Right-of-use lease assets recognized - operating leases  1,485  
Right-of-use lease assets recognized - finance leases333  1,103  
Operating lease liabilities incurred  1,437  
Finance lease liabilities incurred333  1,109  
Dividends declared but not paid405  8,376  

See accompanying notes to condensed consolidated financial statements.

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Front Yard Residential Corporation
Notes to Condensed Consolidated Financial Statements
June 30, 2020
(Unaudited)

1. Organization and Basis of Presentation

Front Yard Residential Corporation (“we,” “our,” “us,” or the “Company”) is a Maryland real estate investment trust (“REIT”) focused on acquiring, owning and managing single-family rental (“SFR”) properties throughout the United States. We conduct substantially all of our activities through our wholly owned subsidiary, Front Yard Residential, L.P., and its subsidiaries.

On August 8, 2018, we acquired a property management firm and commenced the internalization of our property management function. During the first quarter of 2019, we completed the transition of property management for our SFR properties that were previously externally managed to our internal property management platform. We anticipate that all SFR properties acquired in the future will also be managed internally.

As of June 30, 2020, we had a core rental portfolio of 14,512 homes. In addition, we had 120 rental homes that are identified for future sale, and we had a small portfolio of non-rental real estate owned (“REO”) properties remaining from our previous mortgage loan portfolio acquisitions. We have engaged third-party service providers to manage REO and certain other properties. We are currently preparing these non-core assets for future disposition in order to create additional liquidity and purchasing power to continue building our core rental portfolio.

We are managed by Altisource Asset Management Corporation (“AAMC” or our “Manager”). AAMC provides us with dedicated personnel to administer certain aspects of our business and perform certain of our corporate governance functions. AAMC also provides oversight of our acquisition and management of SFR properties and the ongoing management of our remaining REO properties. See Note 8 for a description of this related-party relationship.

On February 17, 2020, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with BAF Holdings, LLC, a Delaware limited liability company (“Parent”), and BAF Sub, LLC, a Maryland limited liability company (“Merger Sub”), each affiliates of Amherst Single Family Residential Partners VI, LP (collectively, “Amherst”), providing for the acquisition of the Company by Parent. Following the approval of the merger, the parties ultimately determined that it was not feasible to proceed with the transaction, and on May 4, 2020, we entered into a Termination and Settlement Agreement to terminate the Merger Agreement. Pursuant to the Termination and Settlement Agreement, Amherst agreed to pay the Company a $25 million cash termination fee, purchase from the Company 4.4 million shares of Front Yard common stock for an aggregate cash purchase price of $55 million ($12.50 per share) pursuant to an Investment Agreement and provide the Company with a $20 million committed Non-Negotiable Promissory Note.

We have included the $25 million termination fee received from Amherst within other income in our condensed consolidated statements of operations for the three and six months ended June 30, 2020.

Since the termination of the Merger Agreement, we have continued to operate our business in the ordinary course as a stand-alone company.

Basis of presentation and use of estimates

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). All wholly owned subsidiaries are included, and all intercompany accounts and transactions have been eliminated.

The unaudited interim condensed consolidated financial statements and accompanying unaudited condensed consolidated financial information, in our opinion, contain all adjustments that are of a normal recurring nature and are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. The interim results are not necessarily indicative of results for a full year. We have omitted certain notes and other information from the interim condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q as permitted by Securities and Exchange Commission (“SEC”) rules and regulations. These condensed consolidated financial statements should be read in conjunction with our annual consolidated financial statements included within our 2019 Annual Report on Form 10-K, which was filed with the SEC on February 28, 2020.

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Use of estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.

Recently issued accounting standards

Adoption of recent accounting standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, which amends the guidance on measuring credit losses on financial assets held at amortized cost. The amendment is intended to address the issue that the previous “incurred loss” methodology was restrictive for an entity's ability to record credit losses based on not yet meeting the “probable” threshold. The new language requires these assets to be valued at amortized cost presented at the net amount expected to be collected with a valuation provision. This ASU is effective for fiscal years beginning after December 15, 2019. The amendments in ASU 2016-13 should be applied on a modified retrospective transition basis. We adopted this standard on January 1, 2020, and our adoption of this standard did not have a material impact on our consolidated financial statements because the standard, as amended, excludes receivables arising from operating leases, which represent the majority of our receivables.

Recently issued accounting standards not yet adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. While we are currently evaluating the impact of the adoption of this standard, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

2. Asset Acquisitions and Dispositions

Real estate assets

Real estate acquisitions

During the three months ended June 30, 2020, we acquired no SFR properties. During the three months ended June 30, 2019, we acquired 43 SFR properties for an aggregate purchase price of $5.5 million.

During the six months ended June 30, 2020 and 2019, we acquired 4 and 57 SFR properties, respectively, for an aggregate purchase price of $0.5 million and $7.4 million, respectively.

Real estate dispositions

During the three months ended June 30, 2020 and 2019, we sold 30 and 160 properties, respectively. Net proceeds of these sales were $5.9 million and $27.9 million, respectively.

During the six months ended June 30, 2020 and 2019, we sold 112 and 736 properties, respectively. Net proceeds of these sales were $18.8 million and $153.2 million, respectively.

Mortgage loan dispositions and resolutions

On October 7, 2019, we sold the last of our remaining mortgage loans. During the three and six months ended June 30, 2019, we resolved 5 and 13 mortgage loans, respectively, primarily through short sales, refinancing and foreclosure sales. Net proceeds of these resolutions were $0.6 million and $1.6 million, respectively.

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Net gain (loss) on real estate and mortgage loans

The following table presents the components of net gain (loss) on real estate and mortgage loans during the three and six months ended June 30, 2020 and 2019 ($ in thousands):

Three months ended June 30,Six months ended June 30,
2020201920202019
Conversion of mortgage loans to REO, net$  $137  $  $752  
Change in fair value of mortgage loans, net  176    292  
Net realized gain on mortgage loans  204    727  
Net realized (loss) gain on sales of real estate (163) 3,325  1,370  10,848  
Net (loss) gain on real estate and mortgage loans$(163) $3,842  $1,370  $12,619  

3. Real Estate Assets, Net

The following table presents the number of real estate assets held by the Company by status as of the dates indicated:
June 30, 2020Held for UseHeld for SaleTotal Portfolio
Rental Properties:
Leased 14,221    14,221  
Listed and ready for rent94    94  
Unit turn160    160  
Renovation37    37  
Total rental properties14,512  
Previous rentals identified for sale91  29  120  
Legacy REO5  3  8  
14,608  32  14,640  
December 31, 2019
Rental Properties:
Leased 13,711    13,711  
Listed and ready for rent371    371  
Unit turn369    369  
Renovation94    94  
Total rental properties14,545  
Previous rentals identified for sale94  87  181  
Legacy REO10  12  22  
14,649  99  14,748  

For properties held for sale or identified for future sale, management has determined to divest these properties because they do not meet our residential rental property investment criteria.

Impairment of real estate

During the three months ended June 30, 2020 and 2019, we recognized $0.7 million and $1.6 million, respectively, of impairment on our real estate assets held for sale.

During the six months ended June 30, 2020 and 2019, we recognized $0.9 million and $2.6 million, respectively, of impairment on our real estate assets held for sale.

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4. Fair Value of Financial Instruments

The following table sets forth the carrying value and fair value of our financial assets and liabilities by level within the fair value hierarchy as of June 30, 2020 and December 31, 2019 ($ in thousands):
Level 1Level 2Level 3
Carrying ValueQuoted Prices in Active Markets Observable Inputs Other Than Level 1 Prices Unobservable Inputs
June 30, 2020
Recurring basis (assets)
Interest rate cap derivatives (1)$359  $  $359  $  
Not recognized on condensed consolidated balance sheets at fair value (liabilities)
Repurchase and loan agreements 1,629,283    1,639,390