10q10k10q10k.net

What changed in Claros Mortgage Trust, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Claros Mortgage Trust, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+544 added−469 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-16)

Top changes in Claros Mortgage Trust, Inc.'s 2023 10-K

544 paragraphs added · 469 removed · 383 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

43 edited+18 added−4 removed29 unchanged
Biggest changeWe believe our current loan portfolio, comprised of loans that we view as representative of our target assets and investment philosophy, validates our ability to execute on our investment strategy, including lending to experienced and well‑capitalized sponsors against high‑quality transitional CRE assets primarily in major U.S. markets with attractive fundamental characteristics supported by macroeconomic tailwinds.
Biggest changeWe believe our current loan portfolio, comprised of loans that we view as representative of our target assets and investment philosophy, validates our ability to execute on our investment strategy, including lending to experienced and well‑capitalized sponsors against high‑quality transitional CRE assets primarily in major U.S. markets with attractive fundamental characteristics supported by macroeconomic tailwinds. 7 The below table summarizes our loans receivable held-for-investment as of December 31, 2023 ($ in thousands): Weighted Average (3) Number of Loans Loan Commitment (1) Unpaid Principal Balance Carrying Value (2) Yield to Maturity (4) Term to Initial Maturity (in years) Term to Fully Extended Maturity (in years) (5) LTV (6) Senior and subordinate loans 65 $ 8,121,436 $ 7,044,524 $ 6,947,796 9.1 % 1.2 2.6 69.2 % (1) Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
In addition, in the future we may invest in assets other than our target assets, in each case subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and our exclusion from registration under 1940 Act.
In addition, in the future we may invest in assets other than our target assets, in each case subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and our exclusion from registration under the 1940 Act.
We operate our business in a manner that permits us to maintain our exclusion from registration under the Investment Company Act of 1940, as amended (the “1940 Act”). Our principal executive offices are located at c/o Mack Real Estate Credit Strategies, L.P., 60 Columbus Circle, 20th Floor, New York, New York 10023. Our website is www.clarosmortgage.com .
We operate our business in a manner that permits us to maintain our exclusion from registration under the Investment Company Act of 1940, as amended (the “1940 Act”). Our principal executive offices are located at c/o Mack Real Estate Credit Strategies, L.P., 60 Columbus Circle, 20th Floor, New York, NY 10023. Our website is www.clarosmortgage.com .
In performing its duties to us, our Manager is at all times subject to the supervision, direction and management of our board of directors. Our Investment Strategy We seek primarily to originate, co-originate and acquire senior and subordinate loans on transitional CRE assets located in major U.S. markets and generally intend to hold our loans to maturity.
In performing its duties to us, our Manager is at all times subject to the supervision, direction and management of our board of directors. 6 Our Investment Strategy We seek primarily to originate, co-originate and acquire senior and subordinate loans on transitional CRE assets located in major U.S. markets and generally intend to hold our loans to maturity.
We believe that this experience of our Sponsor and its affiliates enables our Manager to 7 underwrite, originate and manage loans that facilitate the successful transition of CRE assets, with an appropriate level of execution risk and, in its judgment, relatively limited basis risk. Neither we nor our Manager employs personnel directly.
We believe that this experience of our Sponsor and its affiliates enables our Manager to underwrite, originate and manage loans that facilitate the successful transition of CRE assets, with an appropriate level of execution risk and, in its judgment, relatively limited basis risk. Neither we nor our Manager employs personnel directly.
Some of our loan commitments include a mixture of up‑front and future funding obligations, with future fundings subject to the borrower achieving conditions precedent specified in the loan documents, such as meeting certain construction milestones and leasing thresholds. Participations in Mortgage Loans.
Some of our loan commitments include a mixture of up‑front and future funding obligations, with future fundings subject to the borrower achieving conditions precedent specified in the loan documents, such as meeting certain construction milestones and/or leasing thresholds. Participations in Mortgage Loans.
(6) LTV represents “loan-to-value” or “loan-to-cost”, which is calculated as our total loan commitment from time to time, as if fully funded, plus any financings that are pari passu with or senior to our loan, divided by our estimate of either (1) the value of the underlying real estate, determined in accordance with our underwriting process (typically consistent with, if not less than, the value set forth in a third-party appraisal) or (2) the borrower’s projected, fully funded cost basis in the asset, in each case as we deem appropriate for the relevant loan and other loans with similar characteristics.
(6) LTV represents “loan-to-value” or “loan-to-cost,” which is calculated as our total loan commitment from time to time, as if fully funded, plus any financings that are pari passu with or senior to our loan, divided by our estimate of either (1) the value of the underlying real estate, determined in accordance with our underwriting process (typically consistent with, if not less than, the value set forth in a third-party appraisal) or (2) the borrower’s projected, fully funded cost basis in the asset, in each case as we deem appropriate for the relevant loan and other loans with similar characteristics.
In originating, acquiring and managing our target assets, we compete with other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies and other entities.
In originating, acquiring and managing our target loans, we compete with other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies and other entities.
In addition, there are numerous REITs and non-banking commercial lending platforms with similar asset origination, acquisition and management objectives and others may be organized in the future. These lenders will increase competition for the available supply of CRE debt on transitional assets suitable for purchase, origination and management.
In addition, there are numerous REITs and non-banking commercial lending platforms with similar loan origination, acquisition and management objectives and others may be organized in the future. These lenders will increase competition for the available supply of CRE debt on transitional assets suitable for origination, acquisition, and management.
We believe that our investment strategy currently provides significant opportunities for us to generate attractive risk‑adjusted returns over time for our stockholders. However, to capitalize on the investment opportunities at different points in the economic and real estate investment cycle, we may modify or expand our investment strategy without our stockholders’ consent.
We believe that our investment strategy currently provides significant opportunities for us to generate attractive risk‑adjusted returns over time for our stockholders. However, to capitalize on the investment opportunities at different points in the economic and real estate investment cycle, we may modify or expand our investment strategy.
The SEC maintains a website that contains these reports at www.sec.gov.
The SEC maintains a website that contains these reports at www.sec.gov . 11
In addition to our primary focus on major U.S. markets, we are also seeking to originate senior and subordinate loans on transitional CRE assets located in other markets that we be believe demonstrate favorable demographic trends as a result of, among other factors, de‑urbanization, migration to states with lower tax rates, and perceived higher quality of life.
In addition to our primary focus on major U.S. markets, we also seek to originate senior and subordinate loans on transitional CRE assets located in other markets that we believe demonstrate favorable demographic trends as a result of, among other factors, de‑urbanization, migration to states with lower tax rates, and perceived higher quality of life.
(2) Net of specific CECL reserve of $60.3 million. (3) Weighted averages are based on unpaid principal balance. (4) All-in yield represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon, and fees received, based on the applicable floating benchmark rate/floors (if applicable), in place as of December 31, 2022.
(2) Net of specific CECL reserve of $72.6 million. (3) Weighted averages are based on unpaid principal balance. (4) Represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon, and fees received, based on the applicable floating benchmark rate/floors (if applicable), in place as of December 31, 2023.
We leverage our Sponsor’s platform to originate, underwrite, structure and asset manage a portfolio of loan assets that align with our differentiated investment strategy.
We leverage our Sponsor’s platform to originate, underwrite, structure and asset manage a portfolio of loans that align with our differentiated investment strategy.
To date, we have only invested in the U.S. Operating and Regulatory Structure REIT Qualification We have elected and believe we have qualified to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2015.
Operating and Regulatory Structure REIT Qualification We have elected and believe we have qualified to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2015.
We believe our Manager benefits from access to individuals with extensive experience in identifying, analyzing, acquiring, financing, hedging, managing and operating real estate investments across investment cycles, geographies, property types, investment types and strategies, including debt and equity interests, controlling and non‑controlling investments, corporate and securities investments (including CMBS) and a variety of joint ventures.
We believe our Manager benefits from access to individuals with extensive experience in identifying, analyzing, acquiring, developing, constructing, financing, hedging, managing and operating real estate investments across investment cycles, geographies, property types, investment types and strategies, including debt and equity interests, controlling and non-controlling interests in investments, corporate and securities investments (including commercial mortgage-backed securities (“CMBS”)) and a variety of joint ventures.
Many of our anticipated competitors are significantly larger than we are and have considerably greater financial, technical, marketing and other resources than we do. Some competitors may have a lower cost of funds and access to financing sources that are not available to us, such as the U.S. Government and the FHLB system.
Many of our anticipated competitors and their external managers are significantly larger than we are and have considerably greater financial, technical, marketing and other resources than we do. Some competitors may have a lower cost of funds and access to financing sources that are not available to us, such as the U.S. Government and the Federal Home Loan Banks system.
Subordinate Loans : We also invest in mezzanine loans, which are primarily originated or co‑originated by us, and are usually secured by a pledge of equity ownership interests in the direct or indirect property owner rather than directly by the underlying commercial properties. These loans are subordinate to a mortgage loan but senior to the property owner’s equity ownership interests.
Subordinate Loans : We also invest in mezzanine loans, which are primarily originated or co‑originated by us and are usually secured by a pledge of equity ownership interests in the direct or indirect property owner rather than directly by the underlying commercial properties.
To qualify as a REIT, we must meet on a continuing basis, through our organization and actual investment and operating results, various requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our dividend levels and the diversity of ownership of shares of our stock.
To qualify as a REIT, we must meet on a continuing basis various requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our dividend levels and the diversity of ownership of shares of our capital stock.
For additional information concerning these competitive risks, refer to “Item 1A: Risk Factors—Risks Related to Our Investments—We operate in a competitive market for the origination and acquisition of attractive investment opportunities and competition may limit our ability to originate or acquire attractive risk‑adjusted investments in our target assets, which could have a material adverse effect on us.” Staffing We are externally managed and advised by our Manager pursuant to the Management Agreement between our Manager and us.
We operate in a competitive market for the origination and acquisition of attractive investment opportunities and competition may limit our ability to originate or acquire attractive risk‑adjusted investments in our target assets, which could have a material adverse effect on us.” Staffing We are externally managed and advised by our Manager pursuant to the Management Agreement between our Manager and us.
Our Portfolio We began operations in August 2015 and, as of December 31, 2022, had a $7.4 billion diversified loan portfolio, based on carrying value, of senior and subordinate loans.
Our Portfolio We began operations in August 2015 and, as of December 31, 2023, had a $6.9 billion diversified loan portfolio, based on carrying value, of senior and subordinate loans.
In performing its duties to us, our Manager benefits from the resources, relationships, fundamental real estate underwriting and management expertise of our Sponsor’s broad group of real estate professionals. Our Manager is led by Richard Mack, Michael McGillis, Kevin Cullinan, Priyanka Garg, Jai Agarwal and other members of our Sponsor’s senior management team.
In performing its duties to us, our Manager benefits from the resources, relationships, and fundamental real estate underwriting and management expertise of our Sponsor’s broad group of real estate professionals. Our Manager is led by Richard Mack, Michael McGillis, Kevin Cullinan, Priyanka Garg, and J.D. Siegel.
Federal Income Tax Risks.” 11 Competition Our success depends, in part, on our ability to originate, acquire or manage assets at favorable spreads over our borrowing costs.
Federal Income Tax Risks.” 10 Competition Our success depends, in part, on our ability to originate, acquire or manage loans at favorable spreads over our financing costs.
As of December 31, 2022, our net debt‑to‑equity ratio was 2.2x. As of December 31, 2022, our total leverage ratio was 2.6x, and we expect that, going forward, our Total Leverage Ratio will range from 2.5x and 3.0x.
As of December 31, 2023, our net debt‑to‑equity ratio was 2.4x. As of December 31, 2023, our total leverage ratio was 2.8x, and we expect that, going forward, our Total Leverage Ratio will range from 2.0x and 3.0x.
These loans may be tranched into senior and junior mezzanine loans. Rights under these loans are generally governed by intercreditor agreements which typically include the right to cure defaults under senior loans.
These loans are subordinate to a mortgage loan but senior to the property owner’s equity ownership interests and may be tranched into senior and junior mezzanine loans. Rights under these loans are generally governed by intercreditor agreements which typically include the right to cure defaults under the senior loans.
Subordinate loans may also include subordinated mortgage interests, which are mortgage loan interests that are subordinate to senior mortgage loans but senior to the property owner’s equity interests. 8 The allocation of our capital among our target assets will depend on prevailing market conditions at the time we invest and may change over time in response to changes in prevailing market conditions, including with respect to interest rates and general economic and credit market conditions as well as local economic conditions in markets where we are active.
The allocation of our capital among our target assets will depend on prevailing market conditions at the time we invest and may change over time in response to changes in prevailing market conditions, including with respect to interest rates and general economic and capital market conditions as well as local economic conditions in markets where we are active.
In addition to these types of financings, we may also use other forms of leverage, such as secured and unsecured credit facilities, structured financings such as CMBS and CLOs, derivative instruments and public and private secured and unsecured debt issuances by us or our subsidiaries, as well as issuances of public and private equity and equity-related securities.
As of December 31, 2023, our secured term loan and debt related to real estate owned had unpaid principal balances of $725.5 million and $290.0 million, respectively. 9 In addition to these types of financings, we may also use other forms of leverage, such as secured and unsecured credit facilities, structured financings such as CMBS and collateralized loan obligations (“CLOs”), derivative instruments, and public and private secured and unsecured debt issuances by us or our subsidiaries, as well as issuances of public and private equity and equity-related securities.
However, we may not be able to achieve our business goals or expectations due to the competitive risks that we face.
However, we may not be able to achieve our business goals or expectations due to the competitive risks that we face. For additional information concerning these competitive risks, refer to “Item 1A: Risk Factors - Risks Related to Our Investments.
Investment Guidelines Our Board has established the following investment guidelines: • No investment will be made that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes; • No investment will be made that would require us to register as an investment company under the 1940 Act; Prior to the deployment of capital into investments, our Manager may cause our capital to be invested in any interest‑bearing short‑term investments, including money market funds, bank accounts, overnight repurchase agreements with primary federal reserve bank dealers collateralized by direct U.S. government obligations and other instruments or investments reasonably determined by our Manager to be of high quality.
Prior to the deployment of capital into investments, our Manager may cause our capital to be invested in any interest‑bearing short‑term investments, including money market funds, treasury bills, overnight repurchase agreements with primary federal reserve bank dealers collateralized by direct U.S. government obligations, and other instruments or investments reasonably determined by our Manager to be of high quality.
The asset‑specific financing structures we utilize include notes payable arrangements and syndications of senior participations in the whole loans we originate. Under certain circumstances, we utilize asset‑specific financing structures that are considered non‑consolidated senior interests, and therefore not reflected on our balance sheet. As of December 31, 2022, we had 10 $1.0 billion of non‑consolidated senior interests.
Under certain circumstances, we utilize asset‑specific financing structures that are considered non-consolidated senior interests, and therefore not reflected on our balance sheet. As of December 31, 2023, we had $887.3 million of non-consolidated senior interests.
Such financing structures typically arise as a result of a subordinate, or mezzanine, loan held by us, and a first mortgage loan held by a third party. As of December 31, 2022, we had amounts outstanding under our Secured Term Loan totaling $755.1 million.
Such financing structures typically arise as a result of a subordinate, or mezzanine, loan held by us, and a first mortgage loan held by a third party.
At December 31, 2022, the outstanding balance of our debt related to real estate owned was $290.0 million. 9 The following charts illustrate the diversification of our loan portfolio based on location and underlying property type, excluding our real estate owned investment, as of December 31, 2022, based on carrying value: For additional information about our loan portfolio, refer to Item 7 – “Management's Discussion and Analysis of Financial Condition and Results of Operations – II.
Neither the loans receivable classified as held-for-sale nor the real estate owned properties discussed above are included in the summary of our loan portfolio table above. 8 The following charts illustrate the diversification of our loan portfolio based on location and underlying property type, excluding our real estate owned investments, as of December 31, 2023, based on carrying value: For additional information about our loan portfolio, refer to Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – II.
We seek to minimize the risks associated with recourse borrowings and generally seek fund our investments on a match-term and reference rate matched basis by minimizing the differences between the durations and indices of our investments and those of our liabilities, respectively, including in certain cases the potential use of derivatives; however, under certain circumstances, we may determine not to do so or we may otherwise be unable to do so.
We seek to minimize the risks associated with recourse borrowings and generally seek to fund our loans on a term and benchmark index matched basis which seeks to minimize the differences between the durations and indices of our loans and those of the related financings, respectively, including in certain cases the potential use of derivatives.
We were organized as a Maryland corporation on April 29, 2015 and commenced operations on August 25, 2015, and our common stock is traded on the New York Stock Exchange, or NYSE, under the symbol “CMTG”.
We were organized as a Maryland corporation on April 29, 2015 and commenced operations on August 25, 2015, and our common stock is traded on the New York Stock Exchange, or NYSE, under the symbol “CMTG.” We have elected and believe we have qualified to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2015.
Loans with specific CECL reserves are reflected as 100% LTV. In February 2021, we foreclosed on a portfolio of seven limited-service hotel properties located in New York, New York that secured a mezzanine loan with an unpaid principal balance of $103.9 million as of February 8, 2021 that we originated in February 2018.
Loans with specific CECL reserves are reflected as 100% LTV. On February 8, 2021, we acquired legal title to a portfolio of seven limited service hotels located in New York, NY through a foreclosure.
On June 2, 2021, the terms of the securitized senior mortgage were modified, which included the repayment of $10.0 million of principal and extension of its maturity date by an additional three years to February 9, 2024, among other items.
On June 2, 2021, the terms of the securitized senior mortgage were modified to include an extension of the maturity date to February 9, 2024 and a principal repayment of $10.0 million. At December 31, 2023, the outstanding balance of our debt related to real estate owned was $290.0 million.
These loans are non‑amortizing, require a balloon payment of principal at maturity (and in some cases, earlier pay downs in the case of loans that provide for partial releases of collateral upon the occurrence of specified events, such as the sale of condominium units) and are typically structured to be floating rate.
In some cases, there may be earlier pay downs of loans, including as a result of partial releases of collateral upon the occurrence of specified events, such as the sale of condominium units.
We also utilize multiple asset-specific financing structures, with certain terms that are typically matched to the underlying loan asset. As of December 31, 2022, we had total capacity and unpaid principal balance of $760.2 million and $418.9 million, respectively, related to asset‑specific financing structures.
The weighted average remaining term to initial maturity and fully extended maturity of our outstanding borrowings was 1.2 years and 2.7 years, respectively, based on unpaid principal balance as of December 31, 2023 and assuming all conditions to extend are met. We also utilize multiple asset-specific financing structures, with certain terms that are typically matched to the underlying loan.
We also seek to diversify our financing counterparties. As of December 31, 2022, we had $6.0 billion of capacity under our repurchase facilities and term participation facility, of which $4.2 billion was drawn.
As of December 31, 2023, we had $5.7 billion of capacity under our repurchase agreements and term participation facility, of which $4.3 billion was outstanding. We currently have master repurchase agreements with six counterparties.
Our Portfolio” in this Annual Report on Form 10-K. Our Financing Strategy We use diverse financing sources as part of a disciplined financing strategy.
Our Portfolio” in this Annual Report on Form 10-K. Our Financing Strategy We use diverse financing sources as part of a disciplined financing strategy. To date, we have financed our business through a combination of common stock issuances, repurchase agreements, a term participation facility, asset-specific financings, debt related to real estate owned, and a secured term loan.
We have elected and believe we have qualified to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2015. We are externally managed and advised by our Manager, an investment adviser registered with the SEC pursuant to the Investment Advisers Act of 1940, as amended, (the "Advisers Act").
We are externally managed and advised by our Manager, an investment adviser registered with the Securities and Exchange Commission (“SEC”) pursuant to the Investment Advisers Act of 1940, as amended, (the “Advisers Act”).
Mortgage loans secured by a first priority or subordinate mortgage on transitional CRE assets.
Mortgage loans secured by a first priority or subordinate mortgage on transitional CRE assets. These loans are generally non-amortizing, require a balloon payment of principal at maturity, and are typically structured to be floating rate.
Neither the prior mezzanine loan nor the portfolio of hotel properties is included in the table above. Our real estate owned investment at the time of foreclosure was encumbered by a securitized senior mortgage, which we assumed on February 8, 2021 with a principal balance of $300.0 million.
Prior to the foreclosure, the hotel portfolio represented the collateral for a mezzanine loan held by us with an unpaid principal balance of $103.9 million and a securitized senior mortgage with an unpaid principal balance of $300.0 million held by third parties. Upon foreclosure, we assumed the securitized senior mortgage, which is non-recourse to us.
Removed
The below table summarizes our loan portfolio as of December 31, 2022 ($ in thousands): Weighted Average (3) Number of Loans Loan Commitment (1) Carrying Value (2) Yield to Maturity (4) Term to Fully Extended Maturity (in years) (5) LTV (6) Senior and subordinate loans 77 $ 9,433,951 $ 7,428,774 8.6 % 3.2 68.2 % (1) Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
Added
Our loan origination and repayment volume may fluctuate based on market conditions or other conditions inherent in our portfolio.
Removed
To date, we have financed our business through a combination of common stock issuances, repurchase facilities, asset-specific financing structures, borrowings under our $755.1 million secured term loan (the “Secured Term Loan”) as of December 31, 2022, and borrowings under our term participation facility (the “Term Participation Facility”).
Added
As such, we may modify our investment strategy from time to time by shifting focus to optimizing outcomes within our existing portfolio, which may include actions such as selling a loan or syndicating a portion of a loan, and working with our borrowers to enhance the value of underlying properties that constitute our collateral.
Removed
The weighted average remaining term to fully extended maturity of our outstanding borrowings (assuming we exercise all extension options and our counterparty agrees to such extension options), was 3.5 years based on unpaid principal balance as of December 31, 2022. We currently have master repurchase agreements with six counterparties.
Added
Subordinate loans may also include subordinated mortgage interests, which are mortgage loan interests that are subordinate to senior mortgage loans but senior to the property owner’s equity interests.
Removed
At December 31, 2022, the outstanding balance of our debt related to real estate owned was $290.0 million.
Added
On February 7, 2024, we modified this loan agreement to provide for, among other things, an extension of the contractual maturity date to November 9, 2024, a $10.0 million principal paydown, and partial recourse to us.
Added
Concurrent with this modification, we purchased an interest rate cap for $0.5 million which provides for a strike rate of 5.00% through the extended contractual maturity date. On June 30, 2023, we acquired legal title to a mixed-use property located in New York, NY and the equity interests therein through an assignment-in-lieu of foreclosure.
Added
The mixed-use property contains office, retail and signage components. Prior to the assignment-in-lieu of foreclosure, the mixed-use property and a pledge of equity interests therein represented the collateral for a senior loan with an unpaid principal balance of $208.8 million.
Added
Our loans receivable held-for-sale as of December 31, 2023 were comprised of the following loans ($ in thousands): Property Type Location Loan Commitment Unpaid Principal Balance Carrying Value Before Principal Charge-Off Principal Charge-Off Held-For-Sale Carrying Value For Sale Condo FL $ 160,000 $ 158,180 $ 157,346 $ - $ 157,346 Multifamily FL 77,115 76,580 76,275 - 76,275 Mixed-Use FL 141,791 36,773 35,556 (7,468 ) 28,088 Total $ 378,906 $ 271,533 $ 269,177 $ (7,468 ) $ 261,709 In January of 2024, we sold these three senior loans to an unaffiliated purchaser.
Added
The principal charge-off follows the recognition of an incremental specific CECL reserve in the same amount and is allocated and attributable to the construction status of one loan’s collateral asset and such loan’s $105.0 million of remaining unfunded commitments. As of September 30, 2023, the loans were ascribed loan risk ratings ranging from 2 to 3.
Added
As of December 31, 2023, we determined that these loans met the held-for-sale criteria and were not considered in determining our general CECL reserve.
Added
However, under certain circumstances, we may determine not to do so or we may otherwise be unable to do so. We also seek to diversify our financing counterparties. During 2023 and in cooperation with our various financing counterparties, we proactively de-levered specific assets and may continue to do so on an as-needed basis.
Added
As of December 31, 2023, we had total capacity and unpaid principal balance of $540.5 million and $407.5 million, respectively, related to asset‑specific financings. The asset‑specific financing structures we utilize include notes payable arrangements and syndications of senior participations in the whole loans we originate.
Added
Investment Guidelines Our Board has established the following investment guidelines: • No investment will be made that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes; • No investment will be made that would require us to register as an investment company under the 1940 Act.
Added
To date, we have only invested in the U.S. Asset Management Our Manager proactively manages the loans in our portfolio from closing to final repayment and our Sponsor has dedicated asset management employees to perform asset management services.
Added
Following the closing of an investment, the asset management team rigorously monitors the loan, with an emphasis on ongoing analyses of both quantitative and qualitative matters, including financial, legal, and market conditions.
Added
Through the final repayment of a loan, the asset management team maintains regular contact with borrowers, servicers and local market experts monitoring performance of the collateral, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.
Added
Some of our borrowers may experience delays in the execution of their business plans or changes in market conditions which may impact the performance of the underlying collateral asset, borrower, or sponsor.
Added
As a transitional lender, we may from time to time execute loan modifications with borrowers when and if appropriate, which may include additional equity contributions from them, repurposing of reserves, pledge of additional collateral or other forms of credit support, provide additional guarantees, temporary deferrals of interest or principal, and/or partial deferral of coupon interest as payment-in-kind interest.
Added
To the extent warranted by ongoing conditions specific to our borrowers or overall market conditions, we may make additional modifications when and if appropriate, and depending on the business plans, financial condition, liquidity and results of operations of our borrowers, among other factors.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

192 edited+43 added−34 removed472 unchanged
Biggest changeA significant amount of debt subjects us to many risks that, if realized, would materially and adversely affect us, including the risk that: • our cash flow from operating activities could become insufficient to make required payments of principal and interest on our debt, which would likely result in (a) acceleration of the debt (and any other debt containing a cross-default or cross-acceleration provision), increasing the likelihood of further distress if refinancing is not available on favorable terms or at all, (b) our inability to borrow undrawn amounts under other existing financing arrangements, even if we have timely made all required payments under such arrangements, further compromising our liquidity, and/or (c) the loss of some or all of our assets that are pledged as collateral in connection with our financing arrangements (including assets transferred to lenders under repurchase facilities); • our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that such debt will increase our investment yields in an amount sufficient to offset the associated risks relating to leverage; • we may be required to dedicate a substantial portion of our cash flow from operating activities to payments on our debt, thereby reducing funds available for operations, future business opportunities, stockholder distributions and/or other purposes; and • to the extent the maturity of certain debt ( e.g. , credit or repurchase facilities) occurs prior to the maturity of a related asset pledged or transferred as collateral for such debt ( e.g. , an underlying senior or subordinate loan made by us), we may not be able to refinance that debt on favorable terms or at all, which may reduce available liquidity and/or cause significant losses to us.
Biggest changeA significant amount of debt subjects us to many risks that, if realized, would materially and adversely affect us, including the risk that: • our cash flow from operating activities could become insufficient to make required payments of principal and interest on our debt, which would likely result in (a) acceleration of the debt (and any other debt containing a cross-default or cross-acceleration provision), increasing the likelihood of further distress if refinancing is not available on favorable terms or at all, (b) our inability to borrow undrawn amounts under other existing financing arrangements, even if we have timely made all required payments under such arrangements, further compromising our liquidity, and/or (c) the loss of some or all of our assets that are pledged as collateral in connection with our financing arrangements (including assets transferred to lenders under repurchase agreements); • our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that such debt will increase our investment yields in an amount sufficient to offset the associated risks relating to leverage; • we may be required to dedicate a substantial portion of our cash flow from operating activities to payments on our debt, thereby reducing funds available for operations, future business opportunities, stockholder distributions and/or other purposes; • to the extent the maturity of certain debt ( e.g. , credit or repurchase agreements) occurs prior to the maturity of a related asset pledged or transferred as collateral for such debt ( e.g. , an underlying senior or subordinate loan made by us), we may not be able to refinance that debt on favorable terms or at all, which may reduce available liquidity and/or cause significant losses to us; and • in certain instances, we may be required to de-lever our financing specifically related to, or otherwise impacted by, a non-performing or defaulted loan, modify our financing facility or find replacement financing, if available, which could be on less favorable terms, or pledge additional collateral to our financing facility, all of which may reduce available liquidity.
In addition, our repurchase agreements and credit facilities contain, and any new repurchase agreements or credit agreements we may enter into are likely to contain, cross-default and/or cross acceleration provisions. Such provisions allow a lender to declare a default under its facility with us on the basis of a default under a facility with a different lender.
In addition, our repurchase agreements and credit facilities contain, and any new repurchase agreements or credit agreements we may enter into are likely to contain, cross-default and/or cross acceleration provisions. Such provisions allow a lender to declare a default under its facility with us on the basis of a default or acceleration under a facility with a different lender.
Our charter authorizes our Board, without stockholder approval, to authorize the issuance of up to 500,000,000 shares of common stock, $0.01 par value per share, and up to 10,000,000 shares of preferred stock, $0.01 par value per share, of which 125 shares are classified as 12.5% Series A Redeemable Cumulative Preferred Stock.
Issuance of Stock Without Stockholder Approval . Our charter authorizes our Board, without stockholder approval, to authorize the issuance of up to 500,000,000 shares of common stock, $0.01 par value per share, and up to 10,000,000 shares of preferred stock, $0.01 par value per share, of which 125 shares are classified as 12.5% Series A Redeemable Cumulative Preferred Stock.
We believe that a change in any one of the following factors could adversely impair our ability to pay dividends to our stockholders: • our ability to make investments that generate attractive risk-adjusted returns; • margin calls, obligations to accelerate repayment of financings or other expenses that reduce our cash flow; • defaults in our portfolio or decreases in the value of our portfolio • the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.
We believe that a change in any one of the following factors could adversely impair our ability to pay dividends to our stockholders: • our ability to make investments that generate attractive risk-adjusted returns; • margin calls, obligations to accelerate repayment of financings or other expenses that reduce our cash flow; • defaults in our portfolio or decreases in the value of our portfolio; and • the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.
(“Ping An”) and Fuyou, together with other affiliates of Ping An, owns 4.9% or more of the outstanding shares of common stock, respectively, if a vacancy on our Board occurs at any time with respect to any director that was designated for nomination by either Almanac or Fuyou, then a new designee of Almanac or Fuyou, as the case may be, will be nominated for election to serve, and will be elected, as a new director in accordance with our organizational documents.
(“Ping An”) and Fuyou, together with other affiliates of Ping An, owns 4.9% or more of the outstanding shares of common stock, respectively, if a vacancy on our Board occurs at any time with respect to any director that was designated for nomination by either Almanac or Fuyou, then a new designee of Almanac or Fuyou, as the case may be, will be nominated 41 for election to serve, and will be elected, as a new director in accordance with our organizational documents.
The securities issued by any wholly-owned or 44 majority-owned subsidiaries that we may form in the future that are excepted from the definition of “investment company” based on Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, together with any other investment securities we may own, may not have a value in excess of 40% of the value of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
The securities issued by any wholly-owned or majority-owned subsidiaries that we may form in the future that are excepted from the definition of “investment company” based on Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, together with any other investment securities we may own, may not have a value in excess of 40% of the value of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
Set forth below are some (but not all) of the risk factors that could adversely affect our business, financial condition, liquidity, results of operations and prospects and our ability to service our debt and pay dividends to our stockholders (which we refer to collectively as “materially and adversely affecting us” or having “a material adverse 12 effect on us,” and comparable phrases) and the market price of our common stock.
Set forth below are some (but not all) of the risk factors that could adversely affect our business, financial condition, liquidity, results of operations and prospects and our ability to service our debt and pay dividends to our stockholders (which we refer to collectively as “materially and adversely affecting us” or having “a material adverse effect on us,” and comparable phrases) and the market price of our common stock.
In addition, to the extent that our common stock is owned by tax-exempt “disqualified organizations,” such as certain government-related entities and charitable remainder trusts that are not subject to tax on unrelated business taxable income, or UBTI, we may incur a corporate level tax on a portion of any excess inclusion income.
In addition, to the extent that our common stock is owned by tax-exempt “disqualified organizations,” 45 such as certain government-related entities and charitable remainder trusts that are not subject to tax on unrelated business taxable income, or UBTI, we may incur a corporate-level tax on a portion of any excess inclusion income.
Also, because repurchase agreements and similar credit facilities are generally short-term commitments of capital, changes in conditions in the financing markets may make it more difficult for us to secure continued financing during times of market stress. During certain periods of a credit cycle, lenders may lose their ability or curtail their willingness to provide financing.
Also, because repurchase agreements and similar credit facilities are generally short-term commitments of capital, changes in conditions in the financing markets may make it more difficult for us to maintain or secure continued financing during times of market stress. During certain periods of a credit cycle, lenders may lose their ability or curtail their willingness to provide financing.
No assurance can be given that we will be able to obtain financing on favorable terms or at all. In addition, although we plan to seek to reduce our exposure to lender concentration-related risk by entering into financings with various counterparties, we are not required to observe specific lending counterparty diversification criteria.
No assurance can be given that we will be able to obtain or maintain financing on favorable terms or at all. In addition, although we plan to seek to reduce our exposure to lender concentration-related risk by entering into financings with various counterparties, we are not required to observe specific lending counterparty diversification criteria.
Under these standards, we may fail to qualify for, or choose not to elect, hedge accounting treatment for a number of reasons, including if we use instruments that do not meet the FASB ASC 815 definition of a derivative (such as short sales), if we fail to satisfy the FASB ASC 815 hedge documentation and hedge effectiveness assessment requirements, or if our instruments are not highly effective.
Under these standards, we may fail to qualify for, or choose not to elect, hedge accounting treatment for a number of reasons, including if we use instruments that do not meet the ASC 815 definition of a derivative (such as short sales), if we fail to satisfy the ASC 815 hedge documentation and hedge effectiveness assessment requirements, or if our instruments are not highly effective.
Therefore, we and/or our Manager may not have access to material non-public information in the possession of our Sponsor or its other affiliates which might be relevant to an investment decision to be made by our Manager on our behalf, and our Manager may initiate a transaction or purchase or sell an investment which, if the information had been known to it, may not have been undertaken.
Therefore, we and/or our Manager may not have access to material non-public information in the possession of our Sponsor or its 36 other affiliates which might be relevant to an investment decision to be made by our Manager on our behalf, and our Manager may initiate a transaction or purchase or sell an investment which, if the information had been known to it, may not have been undertaken.
If we are unable to adequately address such ESG matters or if we fail to achieve progress with respect to our goals within the scope of ESG on a timely basis, or at all, or if we or our borrowers fail or are perceived to fail to comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results.
If we are unable to adequately address such ESG matters or if we fail to achieve progress with respect to our goals within the 23 scope of ESG on a timely basis, or at all, or if we or our borrowers fail or are perceived to fail to comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results.
We depend or may depend on bank credit agreements and facilities, repurchase facilities and structured financing arrangements, public and private debt issuances and derivative instruments, in addition to transaction- or asset-specific financing arrangements and other sources of financing to execute our business plan, and our inability to access financing on favorable terms could have a material adverse effect on us.
We depend or may depend on bank credit agreements and facilities, repurchase agreements and structured financing arrangements, public and private debt issuances and derivative instruments, in addition to transaction- or asset-specific financing arrangements and other sources of financing to execute our business plan, and our inability to maintain or access financing on favorable terms could have a material adverse effect on us.
With respect to the management and servicing of those loans, the related special servicer or collateral manager may take actions that could materially and adversely affect our interests. We may be subject to losses arising from future guarantees of debt and contingent obligations of our subsidiaries, joint venture or co-investment partners or our borrowers.
With respect to the management and servicing of those loans, the related special servicer or collateral manager may take actions that could materially and adversely affect our interests. 30 We may be subject to losses arising from future guarantees of debt and contingent obligations of our subsidiaries, joint venture or co-investment partners or our borrowers.
Our Manager manages our loan portfolio pursuant to very broad investment guidelines and is not required to seek the approval of our Board for investment decisions where certain criteria are met, which may result in riskier 40 decisions that could cause investment returns to be substantially below expectations including the potential for material losses.
Our Manager manages our loan portfolio pursuant to very broad investment guidelines and is not required to seek the approval of our Board for investment decisions where certain criteria are met, which may result in riskier decisions that could cause investment returns to be substantially below expectations including the potential for material losses.
Our charter does not permit any person to own more than (a) 9.6%, in value or in number of shares, whichever is more restrictive, of the aggregate of the outstanding shares of our common stock, or (b) 9.6% in value of the aggregate of the outstanding shares of our common stock, and any attempt to acquire shares of our common stock or any of our common stock in excess of these ownership limits will not be effective without a prior exemption by our Board.
Our charter does not permit any person to own more than (a) 9.6%, in value or in number of shares, whichever is more restrictive, of the aggregate of the outstanding shares of our common stock, or (b) 9.6% in value of the aggregate of the outstanding shares of our capital stock, and any attempt to acquire shares of our common stock or any of our capital stock in excess of these ownership limits will not be effective without a prior exemption by our Board.
In addition, the exclusive forum provisions described above do not apply to any actions brought under the Exchange Act. Some provisions of our charter and bylaws and Maryland law may delay, deter or prevent takeover attempts, which may limit the opportunity of our stockholders to sell their shares at a favorable price.
In addition, the exclusive forum provisions described above do not apply to any actions brought under the Exchange Act. 42 Some provisions of our charter and bylaws and Maryland law may delay, deter or prevent takeover attempts, which may limit the opportunity of our stockholders to sell their shares at a favorable price.
This and any other type of default could make it difficult for us to satisfy the requirements necessary to maintain our qualification as a REIT for U.S. federal income tax purposes, as liquidity generated from operating cash 27 flow is transferred to our lenders rather than distributed to our stockholders.
This and any other type of default could make it difficult for us to satisfy the requirements necessary to maintain our qualification as a REIT for U.S. federal income tax purposes, as liquidity generated from operating cash flow is transferred to our lenders rather than distributed to our stockholders.
Attacks on us and our Sponsor’s and service providers’ systems could involve attempts that are intended to obtain unauthorized access to our proprietary information or personal identifying information of our stockholders or borrowers (and their beneficial owners), destroy data or disable, degrade or sabotage our systems, including through the introduction of computer viruses and other malicious code.
Attacks on us and our Sponsor’s and service providers’ systems could involve attempts that are intended to obtain unauthorized access to our proprietary information or personal information of our stockholders or borrowers (and their beneficial owners), destroy data or disable, degrade or sabotage our systems, including through the introduction of computer viruses and other malicious code.
In certain circumstances, compliance with Rule 3a-7 may require, among other things, that the indenture governing the subsidiary include limitations on the types of assets the subsidiary may sell or acquire out of the proceeds 45 of assets that mature, are refinanced or otherwise sold, on the period of time during which such transactions may occur, and on the level of transactions that may occur.
In certain circumstances, compliance with Rule 3a-7 may require, among other things, that the indenture governing the subsidiary include limitations on the types of assets the subsidiary may sell or acquire out of the proceeds of assets that mature, are refinanced or otherwise sold, on the period of time during which such transactions may occur, and on the level of transactions that may occur.
Excluded from the term “investment securities,” among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of “investment company” set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.
Excluded from the term “investment securities,” among other things, are U.S. government 38 securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of “investment company” set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.
The illiquidity of the assets in our portfolio and our target assets may make it more difficult for us to dispose of these assets in the event that we no longer intend to hold them until maturity or in the event of a defaulted loan, as the case may be, at advantageous times or in a timely manner.
The illiquidity of the assets in our portfolio and our target assets may make it more difficult for us to dispose of these assets in the event that we no longer intend to hold them until maturity or in the event of a defaulted loan, as the case may be, at advantageous times or prices, or in a timely manner.
Construction lending generally is considered to involve a higher degree of risk than other types of lending due to a variety of factors, including the difficulties in estimating construction costs and anticipating construction delays and, generally, the dependency on timely, successful project completion and the lease-up or sale of units and commencement of operations post-completion of construction.
Construction lending generally is considered to involve a higher degree of risk than other types of lending due to a variety of factors, including the difficulties 15 in estimating construction costs and anticipating construction delays and, generally, the dependency on timely, successful project completion and the lease-up or sale of units and commencement of operations post-completion of construction.
We also would be subject to the risk that we would not be able to obtain short-term credit 34 facilities or would not be able to renew any short-term credit facilities after they expire should we find it necessary to extend our short-term credit facilities to allow more time to seek and acquire sufficient eligible investments for a long-term financing.
We also would be subject to the risk that we would not be able to obtain short-term credit facilities or would not be able to renew any short-term credit facilities after they expire should we find it necessary to extend our short-term credit facilities to allow more time to seek and acquire sufficient eligible investments for a long-term financing.
We expect that the aggregate value of our interests in subsidiaries that may in the future seek to rely on Rule 3a-7, if any, will comprise less than 20% of our total assets on an unconsolidated basis. We intend to conduct our operations so that we will not be deemed to be an investment company.
We expect that the aggregate value of our interests in subsidiaries that may in the future seek to rely on Rule 3a-7, if any, will comprise less than 20% of our total assets on an unconsolidated basis. 39 We intend to conduct our operations so that we will not be deemed to be an investment company.
For the purpose of preserving our qualification as a REIT for federal income tax purposes, our charter prohibits beneficial or constructive ownership by any person of more than a certain percentage, currently 9.6%, in value or in number of shares, whichever is more restrictive, of the aggregate of the outstanding shares of our common stock or more than a certain percentage, currently 9.6%, in value of the aggregate of the outstanding shares of our common stock.
For the purpose of preserving our qualification as a REIT for federal income tax purposes, our charter prohibits beneficial or constructive ownership by any person of more than a certain percentage, currently 9.6%, in value or in number of shares, whichever is more restrictive, of the aggregate of the outstanding shares of our common stock or more than a certain percentage, currently 9.6%, in value of the aggregate of the outstanding shares of our capital stock.
We cannot assure you that such claims will not arise or that we will not be subject to significant liability and losses if a claim of this type did arise. Liability relating to environmental matters may impact the value of our loans or of properties that we may acquire upon foreclosure of the properties underlying our investments.
We cannot assure you that such claims will not arise or that we will not be subject to significant liability and losses if a claim of this type did arise. 22 Liability relating to environmental matters may impact the value of our loans or of properties that we may acquire upon foreclosure of the properties underlying our investments.
This may result in us having to expend significant funds, which will reduce the available cash for distribution to our stockholders. 47 Our charter contains provisions that are designed to reduce or eliminate duties of our non-employee directors with respect to corporate opportunities and competitive activities.
This may result in us having to expend significant funds, which will reduce the available cash for distribution to our stockholders. Our charter contains provisions that are designed to reduce or eliminate duties of our non-employee directors with respect to corporate opportunities and competitive activities.
The prices of derivative instruments, including swaps, futures, forwards and options, are highly volatile and such instruments may subject us to significant losses. The value of such derivatives also depends upon the price of the underlying instrument or commodity. Derivatives and other customized instruments also are subject to the risk of non-performance by the relevant counterparty.
The prices of derivative instruments, including swaps, futures, forwards and options, are highly volatile and such instruments may subject us to significant losses. The value of such derivatives also depends upon the price of the underlying instrument or commodity. Derivatives and other customized instruments may also be subject to the risk of non-performance by the relevant counterparty.
In addition, significant disparities may exist between “bid” and “asked” prices for derivative instruments that are traded over-the-counter and not on an exchange. Such over-thecounter derivatives are also typically not subject to the same type of investor protections or governmental regulation as exchange-traded instruments.
In addition, significant disparities may exist between “bid” and “asked” prices for derivative instruments that are traded over-the-counter and not on an exchange. Such over-the-counter derivatives are also typically not subject to the same type of investor protections or governmental regulation as exchange-traded instruments.
Consequently, such prepayment rates cannot be predicted with certainty and no strategy can completely insulate us from prepayment or other such risks. Difficulty in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to investors to suffer.
Consequently, such prepayment rates cannot be predicted with certainty and no strategy can completely insulate us from prepayment or other such risks. 19 Difficulty in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to investors to suffer.
In addition, hedging instruments involve risk since they often are not traded on regulated 32 exchanges or guaranteed by an exchange or its clearing house. In general, derivative transactions entered into directly with counterparties, rather than through an exchange, receive fewer regulatory protections than transactions entered into on an exchange.
In addition, hedging instruments involve risk since they often are not traded on regulated exchanges or guaranteed by an exchange or its clearing house. In general, derivative transactions entered into directly with counterparties, rather than through an exchange, receive fewer regulatory protections than transactions entered into on an exchange.
There can be no assurance that the IRS would not successfully challenge our estimate of the value of the real property and our treatment 17 of the construction loans for purposes of the REIT income and assets tests, which may cause us to fail to qualify as a REIT.
There can be no assurance that the IRS would not successfully challenge our estimate of the value of the real property and our treatment of the construction loans for purposes of the REIT income and assets tests, which may cause us to fail to qualify as a REIT.
Changes in accounting interpretations or assumptions could impact our consolidated financial statements and our ability to timely prepare consolidated financial statements that accurately reflect our financial condition, cash flows and results of operations in accordance with prevailing accounting standards. Our inability to timely prepare our consolidated financial statements in the future could materially and adversely affect us.
Changes in accounting interpretations or assumptions 34 could impact our consolidated financial statements and our ability to timely prepare consolidated financial statements that accurately reflect our financial condition, cash flows and results of operations in accordance with prevailing accounting standards. Our inability to timely prepare our consolidated financial statements in the future could materially and adversely affect us.
While we intend to diversify our loan portfolio of investments in the manner described in this report, we are not required to observe specific diversification criteria, and we have criteria outlined in our investment guidelines that can 14 only be changed with approval of our Board.
While we intend to diversify our loan portfolio of investments in the manner described in this report, we are not required to observe specific diversification criteria, and we have criteria outlined in our investment guidelines that can only be changed with approval of our Board.
In acquiring 16 a real estate owned investment, we may agree or otherwise become subject to restrictions that prohibit the sale of that real estate owned investment for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that real estate owned investment.
In acquiring a real estate owned investment, we may agree or otherwise become subject to restrictions that prohibit the sale of that real estate owned investment for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that real estate owned investment.
If we are involved with assets or entities associated with certain industries or activities 25 that are perceived to be causing or exacerbating climate change or other ESG-related issues, it may adversely impact our ability to raise capital from certain investors or harm our reputation.
If we are involved with assets or entities associated with certain industries or activities that are perceived to be causing or exacerbating climate change or other ESG-related issues, it may adversely impact our ability to raise capital from certain investors or harm our reputation.
The coupons earned by the floating rate loans fluctuate based upon interest rate reference indices (again, typically one-month LIBOR or SOFR) and, in a declining and/or low interest rate environment, these loans will earn lower rates of interest and this will impact our operating performance.
The coupons earned by the floating rate loans fluctuate based upon interest rate reference indices (again, typically one-month SOFR) and, in a declining and/or low interest rate environment, these loans will earn lower rates of interest and this will impact our operating performance.
As a result, the acquisition of less than 9.6% of our outstanding shares of common stock or our common stock by an individual or entity could cause another individual or entity to own constructively in excess of 9.6% of our outstanding shares of common stock or our common stock, respectively, and thus violate one of the ownership limits.
As a result, the acquisition of less than 9.6% of our outstanding shares of common stock or our capital stock by an individual or entity could cause another individual or entity to own constructively in excess of 9.6% of our outstanding shares of common stock or our capital stock, respectively, and thus violate one of the ownership limits.
As a result, we may be required to liquidate from our portfolio, or contribute to a TRS, otherwise attractive investments, and may be unable to pursue investments that would be otherwise advantageous to us in order 51 to satisfy the income or asset requirements for qualifying as a REIT.
As a result, we may be required to liquidate from our portfolio, or contribute to a TRS, otherwise attractive investments, and may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the income or asset requirements for qualifying as a REIT.
If we are unable to refinance such debt at appropriate times, we may be required to sell assets at a loss or on terms that are not advantageous to us or take action that could result in other negative consequences.
If we are unable to maintain or refinance such debt at appropriate times, we may be required to sell assets at a loss or on terms that are not advantageous to us or take action that could result in other negative consequences.
In addition, our investments in senior loans may be effectively subordinated to the extent we borrow under a warehouse line (which can be in the form of a repurchase facility) or similar facility and pledge the senior loan as collateral.
In addition, our investments in senior loans may be effectively subordinated to the extent we borrow under a warehouse line (which can be in the form of a repurchase agreement) or similar facility and pledge the senior loan as collateral.
Additionally, as a result of economic headwinds, certain of our borrowers may request term extensions, and we may not be able to obtain corresponding match-term financing or in certain cases obtain required approvals from our financing counterparties.
Additionally, as a result of economic headwinds, certain of our borrowers may request term extensions, and we may not be able to maintain or obtain corresponding match-term financing or in certain cases obtain required approvals from our financing counterparties.
Foreclosure of a loan can be an expensive and lengthy process and could result in significant losses. Prepayment rates may adversely affect the yield on our loans and the value of our portfolio of assets. The value of our assets may be affected by prepayment rates on loans.
Foreclosure of a loan can be an expensive and lengthy process and could result in significant losses. Prepayment rates may adversely affect the yield on our loans, the value of our portfolio of assets, and our liquidity. The value of our assets may be affected by prepayment rates on loans.
Our Board will periodically review our investment guidelines and our loan and investment portfolio but will not, and will not be required to, review and approve in advance all of our proposed loans and investments or the Manager’s financing, asset allocation or hedging decisions.
Our Board will periodically review our investment guidelines and our loan and investment portfolio but will not, and will not be required to, review and approve in advance all of our proposed loans and investments or our Manager’s financing, asset allocation or hedging decisions.
If the SEC or its staff take a position contrary to our view with respect to the characterization of any of the assets or securities we invest in, we may be deemed an unregistered 46 investment company.
If the SEC or its staff take a position contrary to our view with respect to the characterization of any of the assets or securities we invest in, we may be deemed an unregistered investment company.
We may employ various hedging strategies to limit the effects of changes in interest rates (and in some cases credit spreads), including engaging in interest rate swaps, caps, floors and other interest rate derivative products.
We may employ various hedging strategies to limit the effects of changes in interest rates (and in some cases credit spreads), including engaging in interest rate swaps, caps, floors 29 and other interest rate derivative products.
We have experienced and expect to continue to experience increased operating costs and taxes in connection with our real estate owned investment, including costs related to owning the real estate owned investment in a taxable REIT subsidiary (“TRS”).
We have experienced and expect to continue to experience increased operating costs and taxes in connection with our real estate owned investment, including costs related to owning a real estate owned investment in a taxable REIT subsidiary (“TRS”).
Our access to sources of financing will depend upon a number of factors, over which we have little or no control, including: • general economic or market conditions; • the market’s view of the quality of our assets; • the market’s view of performance of other companies executing a strategy comparable to ours; 29 • the market’s perception of our growth potential; • our current and potential earnings liquidity and cash distributions; • regulatory capital reform rules or other regulatory changes; and • the market price of shares of our common stock.
Our access to sources of financing will depend upon a number of factors, over which we have little or no control, including: • general economic or market conditions; • the market’s view of the quality of our assets; • the market’s view of performance of other companies executing a strategy comparable to ours; • the market’s perception of our growth potential; 26 • our current and potential earnings liquidity and cash distributions; • regulatory capital reform rules or other regulatory changes; and • the market price of shares of our common stock.
Our Manager generally seeks to structure credit and repurchase facilities that do not allow our lenders or counterparties to make margin calls or require additional collateral solely as a result of a disruption in the CMBS market, capital markets or credit markets, or a general increase or decrease of interest rate spreads or other similar benchmarks (as opposed to allowing such counterparties to make margin calls upon the occurrence of adverse “credit events” related to the collateral).
Our Manager generally seeks to structure credit and repurchase agreements that do not allow our lenders or counterparties to make margin calls or require additional collateral solely as a result of a disruption in the CMBS market, capital markets or credit markets, or a general increase or decrease of interest rate spreads or other similar benchmarks (as opposed to allowing such counterparties to make margin calls upon the occurrence of adverse “credit events” related to the collateral).
In these circumstances, we may not be successful in entering into replacement repurchase agreements or credit facilities on the same terms as the repurchase agreements or credit facilities that were terminated or at all.
In these circumstances, we may not be successful in entering into replacement repurchase agreements or credit facilities on the same or similar terms as the repurchase agreements or credit facilities that were terminated or at all.
We have in the past pursued, and may continue to pursue, standstill agreements, pursuant to which we may agree to voluntary repayments in exchange for the lender agreeing not to exercise margin calls for a period of time, with our repurchase facility counterparties if or when we deem appropriate, although there is no assurance that such efforts will be successful.
We have in the past pursued, and may continue to pursue, standstill agreements, pursuant to which we may agree to voluntary repayments in exchange for the lender agreeing not to exercise margin calls for a period of time, with our repurchase agreement counterparties if or when we deem appropriate, although there is no assurance that such efforts will be successful.
Our Secured Term Loan, Debt Related to Real Estate Owned, current financing facilities, and secured loans contain, and additional financing facilities may contain, various customary covenants, including requiring us to meet or maintain certain financial ratios or other requirements that restrict our operational flexibility, including restrictions on dividends, distributions or other payments from our subsidiaries, and impede certain investments that we might otherwise make.
Our secured term loan, debt related to real estate owned, current financing facilities, derivative instruments, and secured loans contain, and additional financing facilities may contain various customary covenants, including requiring us to meet or maintain certain financial ratios or other requirements that restrict our operational flexibility, including restrictions on dividends, distributions or other payments from our subsidiaries, and impede certain investments that we might otherwise make.
Economically, certain investors may have more or less opportunity to profit or exposure to losses with respect to each investment. 41 • Variation in Financial and Other Benefits .
Economically, certain investors may have more or less opportunity to profit or exposure to losses with respect to each investment. • Variation in Financial and Other Benefits .
The Exchange Act requires that we file annual, quarterly and current reports with the SEC. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal control over financial reporting. These reporting and other obligations place significant demands on our Manager’s senior management team, administrative, operational and accounting resources and will cause us to incur significant expenses.
The Exchange Act requires that we file annual, quarterly and current reports with the SEC. The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting. These reporting and other obligations place significant demands on our Manager’s senior management team, administrative, operational and accounting resources and cause us to incur significant expenses.
The Dodd-Frank Act also subjects non-bank financial companies that have been designated as “systemically important” by the Financial Stability Oversight Council to increased capital requirements and quantitative limits for engaging in such activities, as well as consolidated supervision by the Board of Governors of the Federal Reserve System.
The Dodd-Frank Act also subjects non-bank financial companies that have been designated as “systemically important” by the Financial Stability Oversight Council to increased capital requirements and quantitative limits for engaging in such activities, as well as consolidated supervision by the Board of Governors of the U.S. Federal Reserve System.
Risks Related to Sources of Financing and Hedging We have a significant amount of debt outstanding and may incur a significant amount of additional debt in the future, which subjects us to increased risk of loss, which could materially and adversely affect us. As of December 31, 2022, we had approximately $5.7 billion in consolidated indebtedness outstanding.
Risks Related to Sources of Financing and Hedging We have a significant amount of debt outstanding and may incur a significant amount of additional debt in the future, which subjects us to increased risk of loss, which could materially and adversely affect us. As of December 31, 2023, we had approximately $5.7 billion in consolidated indebtedness outstanding.
However, some of our repurchase facilities contain, and certain of our future repurchase facilities or other financing facilities may contain, provisions allowing our lenders to make margin calls or require additional collateral solely upon the occurrence of adverse changes in the markets or interest rate or spread fluctuations, subject to minimum thresholds, among other factors.
However, some of our repurchase agreements contain, and certain of our future repurchase agreements or other financing facilities may contain, provisions allowing our lenders to make margin calls or require additional collateral solely 25 upon the occurrence of adverse changes in the markets or interest rate or spread fluctuations, subject to minimum thresholds, among other factors.
In addition, as regulatory capital requirements imposed on our lenders are increased, they may be required to limit or increase the cost of financing they provide to us. In general, this could potentially increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price.
In addition, as regulatory capital requirements imposed on our lenders are increased, they may be required to limit or reduce the amount of, or increase the cost of financing they provide to us. In general, this could increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price.
Changes in accounting interpretations or assumptions could impact our ability to timely prepare consolidated financial statements, which could materially and adversely affect us. Accounting rules for transfers of financial assets, securitization transactions, loan loss reserves and other potential aspects of our operations are highly complex and involve significant judgment and assumptions.
Changes in accounting interpretations or assumptions could impact our ability to timely prepare consolidated financial statements, which could materially and adversely affect us. Accounting rules for transfers of financial assets, securitization transactions, credit loss reserves and other potential aspects of our operations are highly complex and involve significant judgment and assumptions.
Additionally, Title 3, Subtitle 8 of the MGCL permits our Board, without stockholder approval and regardless of what currently is provided in our charter or bylaws, to implement certain takeover defenses, such as a classified board, some of which we do not have. 50 U.S.
Additionally, Title 3, Subtitle 8 of the MGCL permits our Board, without stockholder approval and regardless of what currently is provided in our charter or bylaws, to implement certain takeover defenses, such as a classified board, some of which we do not have. 43 U.S.
These markets have also experienced significant disruptions in the past, during which times global credit markets collapsed, borrowers defaulted on their loans at historically high levels, banks and other lending institutions suffered heavy losses and the value of certain classes of real estate declined.
These markets have also experienced significant disruptions in the past, during which times global capital markets collapsed, borrowers defaulted on their loans at historically high levels, banks and other lending institutions suffered heavy losses and the value of certain classes of real estate declined.
If rising interest rates cause us to be unable to originate or acquire a sufficient volume of our target assets with a yield that is above our borrowing cost, our ability to satisfy our investment objectives to generate income and pay dividends may be materially and adversely affected.
If high interest rates cause us to be unable to originate or acquire a sufficient volume of our target assets with a yield that is above our borrowing cost, our ability to satisfy our investment objectives to generate income and pay dividends may be materially and adversely affected.
Our ability to fund our investments may be impacted by our ability to secure bank credit facilities (including term loans and revolving facilities), repurchase facilities and structured financing arrangements, public and private debt issuances and derivative instruments, in addition to asset-specific financing arrangements and other sources of financing on acceptable terms.
Our ability to fund our investments may be impacted by our ability to secure and maintain bank credit facilities (including term loans and revolving facilities), repurchase agreements and structured financing arrangements, public and private debt issuances and derivative instruments, in addition to asset-specific financing arrangements and other sources of financing on acceptable terms.
Our financing strategy may cause us to incur significant losses, which could materially and adversely affect us. Our Secured Term Loan, Debt Related to Real Estate Owned, current financing facilities, and secured loans impose, and additional lending facilities may impose, financial and other covenants that restrict our operational flexibility, which could materially and adversely affect us.
Our financing strategy may cause us to incur significant losses, which could materially and adversely affect us. Our secured term loan, debt related to real estate owned, current financing facilities, derivative instruments, and secured loans impose, and additional lending facilities may impose, financial and other covenants that restrict our operational flexibility, which could materially and adversely affect us.
For instance, if interest rates rise, it is likely that the market price of our common stock will decrease as market rates on interest-bearing securities increase. 57 Future offerings of debt or equity securities, which would rank senior to our common stock, may adversely affect the market price of our common stock.
For instance, if interest rates rise, it is likely that the market price of our common stock will decrease as market rates on interest-bearing securities increase. 49 Future offerings of debt or equity securities, which would rank senior to our common stock, may adversely affect the market price of our common stock.
Obtaining and maintaining state licenses will cause us to incur expenses and failure to be properly licensed under state law or otherwise may have a material adverse effect on us. 37 Actions of the U.S. government, including the U.S. Congress, Federal Reserve, U.S.
Obtaining and maintaining state licenses will cause us to incur expenses and failure to be properly licensed under state law or otherwise may have a material adverse effect on us. 32 Actions of the U.S. government, including the U.S. Congress, U.S. Federal Reserve, U.S.
In the event of borrower distress or a default, we may lack the liquidity necessary to protect our investment or avoid a corresponding default on any obligations we may have in connection with our own financing specifically related to, or otherwise impacted by, such investment.
In the event of borrower distress or a default, we may lack the liquidity necessary to protect our investment or avoid a corresponding default on any obligations we may have with respect to our own financing specifically related to, or otherwise impacted by, such investment.
Subject to compliance with the leverage covenants contained in our repurchase facilities and other financing arrangements, the amount of leverage we employ will vary depending on our available capital, our ability to obtain financing, the type of assets we are financing, whether the financing is match-funded, whether the financing is recourse or non-recourse, the debt restrictions and other covenants sought to be imposed by prospective and existing lenders and the stability of our loan portfolio’s cash flow, as well as general business conditions affecting lenders and the 26 broader debt capital markets, including overall supply and demand of credit.
Subject to compliance with the leverage covenants contained in our repurchase agreements and other financing arrangements, the amount of leverage we employ will vary depending on our available capital, our ability to obtain and maintain financing, the type of assets we are financing, whether the financing is match-funded, whether the financing is recourse or non-recourse, the debt restrictions and other covenants sought to be imposed by prospective and existing lenders and the stability of our loan portfolio’s cash flow, as well as general business conditions affecting lenders and the broader debt capital markets, including overall supply and demand of credit.
As of December 31, 2022, based on unpaid principal balance, over 50% of our loans were open to repayment by the borrower without penalty. In periods of declining interest rates, prepayment rates on loans will generally increase.
As of December 31, 2023, based on unpaid principal balance, over 50% of our loans were open to repayment by the borrower without penalty. In periods of declining interest rates, prepayment rates on loans will generally increase.
We may only be able to partly refinance such debt if underwriting standards, including loan-to-value ratios and yield requirements, among other requirements, are stricter than when we originally financed our loans.
We may only be able to partly replace or refinance such debt if underwriting standards, including loan-to-value ratios and yield requirements, among other requirements, are stricter than when we originally financed our loans.
If we do not or cannot sell a foreclosed property, we would then come to own and operate it as “real estate owned.” Owning and operating real 24 property, such as our real estate owned investment, involves risks that are different (and in many ways more significant) than the risks faced in lending against a CRE asset.
If we do not or cannot sell a foreclosed property, we would then come to own and operate it as “real estate owned.” Owning and operating real property, such as our real estate owned investments, involves risks that are different (and in many ways more significant) than the risks faced in lending against a CRE asset.
From time to time, we may not have the 28 funds available to meet such a margin call, which would likely result in one or more defaults unless we are able to raise the requisite funds from alternative sources such as selling assets at a time when we would not otherwise choose to do so (which we may not be able to achieve on favorable terms or at all).
From time to time, we may not have the funds or assets available to satisfy such a margin call, which would likely result in one or more defaults unless we are able to raise the requisite funds from alternative sources such as selling assets at a time when we would not otherwise choose to do so (which we may not be able to achieve on favorable terms or at all).
Additionally, any future loan modifications for our loans that have been financed with repurchase facilities will require the consent from the applicable lender prior to us entering into any such loan modification.
Additionally, any future loan modifications for our loans that have been financed with repurchase agreements will require the consent from the applicable lender prior to us entering into any such loan modification.
Prospective investors should be aware that changes in the regulatory and business landscape as a result of the Dodd-Frank Act and as a result of other current or future legislation and regulation may decrease the restrictions on banks and other financial institutions and allow them to compete with us for investment opportunities that were previously not available or attractive to, or otherwise pursued by, them, which could have a material adverse impact on us.
Prospective investors should be aware that changes in the regulatory and business landscape as a result of the Dodd-Frank Act and as a result of other current or future legislation and regulation may decrease the restrictions on banks and other financial institutions and allow them to compete with us for investment opportunities that were previously not available or attractive to, or otherwise pursued by, them, which could reduce our access to capital and have a material adverse impact on us.
We may also be required to accrue interest income with respect to subordinate MBS at its stated rate regardless of whether corresponding cash payments are received or are ultimately collectable.
We may also be required to accrue interest income with respect to subordinate MBS at its stated rate regardless of whether corresponding cash payments are received or are ultimately collectible.
Some of the factors that could negatively affect the market price of our common stock include: • our actual or projected operating results, financial condition, cash flows and liquidity, or changes in investment strategy or prospects; • actual or perceived conflicts of interest between us and our Manager or its affiliates or personnel; • equity or equity-related issuances by us, or share resales by our stockholders, or the perception that such issuances or resales may occur; • our inability to raise capital on attractive terms when needed, including the loss of one or more major financing sources; • our inability to originate investments with attractive risk-adjusted returns; • actual, anticipated or perceived accounting or internal control problems; • publication of research reports about us, the CRE industry, CRE debt on transitional assets or interest rates; 56 • changes in market valuations of similar companies; • adverse market reaction to any increased leverage we incur in the future; • additions to or departures of key personnel of our Sponsor or its affiliates, including our Manager, or their key personnel; • speculation in the press or investment community about us or other similar companies; • changes in market interest rates, which may lead investors to demand a higher distribution yield for our common stock, if we have begun to pay dividends to our stockholders, and which could result in increased interest expenses on our debt; • a compression of the yield on our investments and an increase in the cost of our liabilities; • failure to maintain our REIT qualification and our exclusion from registration under the 1940 Act; • price and volume fluctuations in the overall stock market from time to time; • a prolonged economic slowdown, a lengthy or severe recession or declining real estate values; • general market and economic conditions, and trends including inflationary concerns and the current state of the credit and capital markets, and the impact of natural disasters, prolonged civil unrest, political instability or uncertainty, military activities, or broad-based sanctions, should they continue for the long term or escalate, global health crises, such as the outbreak of COVID-19, and other events on market and economic conditions; • significant volatility in the market price and trading volume of securities of publicly-traded REITs or other companies in our sector, which are not necessarily related to the operating performance of these companies; • changes in law, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to REITs; • changes in the value of our portfolio; • any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts; • operating performance of companies comparable to us; • level of competitive pressures from time to time; • short-selling pressure with respect to shares of our common stock or commercial mortgage REITs generally; • uncertainty surrounding the strength of the U.S. economic recovery; • concerns regarding the high-yield debt market; and • the other factors described under “Risk Factors.” As noted above, market factors unrelated to our performance could also negatively impact the market price of our common stock.
Some of the factors that could negatively affect the market price of our common stock include: • our actual or projected operating results, financial condition, cash flows and liquidity, or changes in investment strategy or prospects; 48 • actual or perceived conflicts of interest between us and our Manager or its affiliates or personnel; • equity or equity-related issuances by us, or share resales by our stockholders, or the perception that such issuances or resales may occur; • our inability to raise capital on attractive terms when needed, including the loss of one or more major financing sources; • our inability to originate investments with attractive risk-adjusted returns; • actual, anticipated or perceived accounting or internal control problems; • publication of research reports about us, the CRE industry, CRE debt on transitional assets or interest rates; • changes in market valuations of similar companies; • adverse market reaction to any increased leverage we incur in the future; • additions to or departures of key personnel of our Sponsor or its affiliates, including our Manager, or their key personnel; • speculation in the press or investment community about us or other similar companies; • changes in market interest rates, which may lead investors to demand a higher distribution yield for our common stock, if we have begun to pay dividends to our stockholders, and which could result in increased interest expenses on our debt; • a compression of the yield on our investments and an increase in the cost of our liabilities; • failure to maintain our REIT qualification and our exclusion from registration under the 1940 Act; • price and volume fluctuations in the overall stock market from time to time; • a prolonged economic slowdown, a lengthy or severe recession or declining real estate values; • general market and economic conditions, and trends including inflationary concerns and the current state of the credit and capital markets, and the impact of natural disasters, prolonged civil unrest, political instability or uncertainty, including the military conflicts between Russia and Ukraine, Israel and Hamas, and other conflicts throughout the Middle East and North Africa more broadly, tensions involving Russia, China, and Iran, military activities, or broad-based sanctions, should they continue for the long term or escalate, global health crises and other events on market and economic conditions; • significant volatility in the market price and trading volume of securities of publicly-traded REITs or other companies in our sector, which are not necessarily related to the operating performance of these companies; • changes in law, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to REITs; • changes in the value of our portfolio; • any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts; • operating performance of companies comparable to us; • level of competitive pressures from time to time; • short-selling pressure with respect to shares of our common stock or commercial mortgage REITs generally; • uncertainty surrounding the strength of the U.S. economic recovery; • concerns regarding the high-yield debt market; and • the other factors described under “Risk Factors.” As noted above, market factors unrelated to our performance could also negatively impact the market price of our common stock.
The assets in our portfolio are relatively illiquid investments due to their short life, lack of (or limited) cash flow from property that is collateral for those loans, their potential unsuitability for securitization and the greater difficulty of recovery in the event of a borrower’s default.
The assets in our portfolio are relatively illiquid investments due to their relatively short expected lives, lack of (or limited) cash flow from property that is collateral for those loans, their potential unsuitability for securitization and the greater difficulty of recovery in the event of a borrower’s default.
In the future, subject to market conditions and availability, we may incur significant additional debt through repurchase facilities, asset-specific financing structures, and secured term loan borrowings.
In the future, subject to market conditions and availability, we may incur significant additional debt through repurchase agreements, asset-specific financing structures, and secured term loan borrowings.

… 189 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 2. Pr operties. Our corporate headquarters office, which is leased by our manager’s affiliate, is located at 60 Columbus Circle, 20 th Floor, New York, New York, 10023. We consider these facilities to be suitable and adequate for the management and operations of our business.
Biggest changeItem 2. Pr operties. Our corporate headquarters office, which is leased by our Manager’s affiliate, is located at 60 Columbus Circle, 20 th Floor, New York, NY, 10023. We consider these facilities to be suitable and adequate for the management and operations of our business.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−0 removed0 unchanged
Biggest changeItem 3. Legal Proceedings. From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of December 31, 2022, we were not involved in any material legal proceedings. Refer to Note 14 to our consolidated financial statements for information on our commitments and contingencies. 58 Item 4.
Biggest changeItem 3. Legal Proceedings. From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of December 31, 2023, we were not involved in any material legal proceedings. Refer to Note 14 to our consolidated financial statements for information on our commitments and contingencies. Item 4.
Mine Safe ty Disclosures. Not applicable 59 PART II
Mine Safe ty Disclosures. Not applicable. 51 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−3 removed2 unchanged
Biggest changeThe following table sets forth the dividends declared during each calendar quarter for 2022, 2021, and 2020: First Quarter Second Quarter Third Quarter Fourth Quarter 2022 Cash dividend $ 0.37 $ 0.37 $ 0.37 $ 0.37 2021 Cash dividend $ 0.37 $ 0.37 $ 0.37 $ 0.37 2020 Cash dividend $ 0.43 $ 0.44 $ 0.37 $ 0.37 RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED SECURITIES None.
Biggest changeThe following table sets forth the dividends declared per share during each calendar quarter for 2023, 2022, and 2021: First Quarter Second Quarter Third Quarter Fourth Quarter 2023 Cash dividend $ 0.37 $ 0.37 $ 0.25 $ 0.25 2022 Cash dividend $ 0.37 $ 0.37 $ 0.37 $ 0.37 2021 Cash dividend $ 0.37 $ 0.37 $ 0.37 $ 0.37 RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED SECURITIES None.
PERFORMANCE GRAPH The information below shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent we specifically request that such information be treated as soliciting material 60 or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
PERFORMANCE GRAPH The information below shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
We intend to pay regular quarterly dividends to our stockholders, although all future distributions will be declared and paid at the discretion of the Board of Directors and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Directors deems relevant.
We intend to declare and pay regular quarterly dividends to our stockholders, although all future distributions will be declared and paid at the discretion of the Board of Directors and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Directors deems relevant.
The following graph is a comparison of the cumulative total stockholder return on shares of our common stock, the Russell 2000 Index (the “Russell 2000”), and the Bloomberg REIT Mortgage Index, a published industry index, from November 3, 2021 (the date our common stock began trading on the NYSE) to December 31, 2022.
The following graph is a comparison of the cumulative total stockholder return on shares of our common stock, the Russell 2000 Index (the “Russell 2000”), and the Bloomberg REIT Mortgage Index, a published industry index, from November 3, 2021 (the date our common stock began trading on the NYSE) to December 31, 2023.
There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted in the graph below. Item 6. [R eserved] 61
There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted in the graph below. 52 Item 6. [R eserved] 53
Item 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities. MARKET INFORMATION FOR COMMON STOCK, HOLDERS OF RECORD AND DIVIDEND POLICY On November 3, 2021, our common stock began trading on the NYSE under the symbol “CMTG.” As of February 2, 2023, there were approximately 29 stockholders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities. MARKET INFORMATION FOR COMMON STOCK, HOLDERS OF RECORD AND DIVIDEND POLICY On November 3, 2021, our common stock began trading on the NYSE under the symbol “CMTG.” As of February 16, 2024, there were approximately 21 stockholders of record of our common stock.
Removed
ISSUER PURCHASES OF EQUITY SECURITIES We entered into an agreement (the “10b5-1 Purchase Plan”) with Morgan & Stanley Co. LLC, pursuant to which Morgan Stanley & Co.
Added
ISSUER PURCHASES OF EQUITY SECURITIES None. EQUITY COMPENSATION PLAN INFORMATION Our equity compensation plan information required by this item will be included in the Proxy Statement to be filed relating to our 2024 Annual Meeting of Stockholders and is incorporated herein by reference.
Removed
LLC, as our agent, has bought in the open market $25.0 million in shares of our common stock in the aggregate during the period beginning on December 6, 2021 and ending 12 months thereafter.
Removed
The following table presents information with respect to the repurchase of our common stock during period from December 6, 2021 through October 24, 2022 ($ in thousands, except for share data and average price paid per share): Period Total number of shares purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan December 6, 2021 - October 24, 2022 1,679,570 $ 14.88 1,679,570 $ — Total 1,679,570 $ 14.88 1,679,570 $ - EQUITY COMPENSATION PLAN INFORMATION Our equity compensation plan information required by this item will be included in the Proxy Statement to be filed relating to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

114 edited+86 added−33 removed30 unchanged
Biggest changePortfolio Activity and Overview The following table summarizes changes in unpaid principal balance within our portfolio, for both our loans and for our interests in loans (i.e., loans in which we have acquired an interest in a loan for which the transferor did not account for the transaction as a sale under GAAP) ($ in thousands): 65 Three Months Ended December 31, 2022 Year Ended December 31, 2022 Loans Receivable Interests in Loans Receivable Total Loans Receivable Interests in Loans Receivable Total Unpaid principal balance, beginning of period $ 7,380,506 $ — $ 7,380,506 $ 6,441,238 $ 161,566 $ 6,602,804 Initial funding of loans 34,370 — 34,370 2,030,456 — 2,030,456 Advances on loans 198,480 — 198,480 679,258 17,080 696,338 Loan repayments (74,804 ) — (74,804 ) (1,484,880 ) (178,646 ) (1,663,526 ) Principal charge-offs (27 ) — (27 ) (11,527 ) — (11,527 ) Sale of loans receivable — — — (116,020 ) — (116,020 ) Total net fundings/(payoffs) 158,019 — 158,019 1,097,287 (161,566 ) 935,721 Unpaid principal balance, end of period $ 7,538,525 $ — $ 7,538,525 $ 7,538,525 $ — $ 7,538,525 66 The following table details our loan investments individually based on unpaid principal balances as of December 31, 2022 ($ in thousands): Loan Number Loan type Origination Date Loan Commitment (1) Unpaid Principal Balance Carrying Value (2) Fully Extended Maturity (3) Property Type Construction (4) Location Risk Rating 1 Senior 12/16/2021 405,000 399,499 396,894 6/16/2027 Multifamily - CA 3 2 Senior 11/1/2019 390,000 390,000 388,918 11/1/2026 Multifamily - NY 3 3 Senior 7/12/2018 280,000 280,000 281,123 8/1/2023 Hospitality - NY 3 4 Senior 7/26/2021 225,000 224,079 222,928 7/26/2026 Hospitality - GA 3 5 Senior 10/18/2019 259,987 221,605 221,605 10/18/2024 For Sale Condo Y CA 3 6 Senior 10/4/2019 252,057 213,452 213,113 10/1/2025 Mixed-Use Y DC 3 7 Senior 6/30/2022 227,000 211,222 208,866 6/30/2029 Hospitality - CA 3 8 Senior 12/27/2018 210,000 208,797 166,790 2/1/2025 Mixed-Use - NY 5 9 Senior 8/17/2022 235,000 207,941 205,966 8/17/2027 Hospitality - CA 3 10 Senior 9/7/2018 192,600 192,600 192,355 10/18/2024 Land - NY 3 11 Senior 2/15/2022 262,500 190,288 188,100 2/15/2027 Multifamily Y CA 3 12 Senior 1/14/2022 170,000 170,000 168,847 1/14/2027 Multifamily - CO 3 13 Senior 4/14/2022 193,400 166,700 165,223 4/14/2027 Multifamily - MI 3 14 Senior 9/26/2019 258,400 163,955 162,697 9/26/2026 Office - GA 4 15 Senior 9/20/2019 225,000 159,391 157,832 12/31/2025 For Sale Condo Y FL 3 16 Senior 9/8/2022 160,000 151,509 150,087 9/8/2027 Multifamily - AZ 3 17 Senior 2/28/2019 150,000 150,000 149,938 2/28/2024 Office - CT 3 18 Senior 1/9/2018 148,500 148,500 148,500 1/9/2024 Hospitality - VA 4 19 Senior 12/30/2021 147,500 147,500 147,215 12/30/2025 Multifamily - PA 3 20 Senior 8/8/2019 154,999 138,749 120,036 8/8/2026 Multifamily - CA 5 21 Senior 4/26/2022 151,698 133,059 131,611 4/26/2027 Multifamily - TX 3 22 Senior 12/10/2021 130,000 130,000 129,279 12/10/2026 Multifamily - VA 3 23 Subordinate 12/9/2021 125,000 125,000 124,755 1/1/2027 Office - IL 3 24 Senior 9/24/2021 127,535 122,535 121,712 9/24/2028 Hospitality - TX 3 25 Senior 9/30/2019 122,500 122,500 122,373 2/9/2027 Office - NY 3 26 Senior 4/29/2019 120,000 119,510 119,336 4/29/2024 Mixed-Use - NY 3 27 Senior 3/1/2022 122,000 118,600 117,779 2/28/2027 Multifamily - TX 3 28 Senior 8/8/2022 115,000 115,000 114,126 8/8/2027 Multifamily - CO 3 29 Senior 7/20/2021 113,500 113,500 113,272 7/20/2026 Multifamily - IL 3 30 Senior 2/13/2020 124,810 112,442 112,088 2/13/2025 Office - CA 4 31 Senior 6/17/2022 127,250 111,521 110,146 6/17/2027 Multifamily - TX 3 32 Senior 6/7/2018 104,250 104,250 105,343 1/15/2022 Land - NY 4 33 Senior 12/15/2021 103,000 103,000 102,396 12/15/2026 Multifamily - TN 3 34 Senior 4/1/2020 141,084 97,774 96,781 4/1/2026 Office Y TN 3 35 Senior 10/11/2017 97,500 97,500 97,094 10/31/2023 Hospitality - CA 3 36 Senior 8/2/2021 100,000 96,710 96,189 8/2/2026 Office - CA 4 37 Senior 1/27/2022 100,800 95,877 95,216 1/27/2027 Multifamily - NV 3 38 Senior 3/31/2020 87,750 87,750 87,750 2/9/2025 Office - TX 4 39 Senior 8/1/2022 115,250 78,500 78,201 7/30/2026 Hospitality Y NY 4 40 Senior 7/10/2018 76,369 76,369 74,169 7/10/2025 Hospitality - CA 4 41 Senior 4/5/2019 75,500 75,500 75,452 4/5/2024 Mixed-Use - NY 3 42 Senior 12/14/2018 75,000 75,000 75,000 3/8/2023 Multifamily - DC 3 43 Senior 7/27/2022 76,000 73,686 73,211 7/27/2027 Multifamily - UT 3 44 Senior 3/22/2021 148,303 71,142 70,199 3/22/2026 Other Y MA 3 45 Senior 8/27/2021 84,810 69,869 69,298 8/27/2026 Office - GA 4 46 Senior 7/31/2019 67,000 67,000 67,000 1/30/2022 Land - NY 4 47 Senior 12/22/2021 76,350 64,468 63,907 12/22/2026 Multifamily - TX 3 48 Senior 11/2/2021 77,115 60,294 59,669 11/2/2026 Multifamily Y FL 3 49 Senior 8/29/2018 60,000 60,000 59,900 8/31/2023 Hospitality - NY 3 50 Senior 6/3/2021 79,600 58,829 58,281 6/3/2026 Other - MI 3 51 Senior 1/19/2022 73,677 54,070 53,487 1/19/2027 Hospitality - TN 3 52 Senior 1/10/2022 130,461 50,805 49,506 1/9/2027 Other Y PA 3 53 Senior 3/15/2022 53,300 49,844 49,459 3/15/2027 Multifamily - AZ 3 54 Senior 11/4/2022 140,000 40,086 38,703 11/9/2026 Other Y MA 3 55 Senior 2/4/2022 44,768 38,002 37,658 2/4/2027 Multifamily - TX 3 56 Senior 2/2/2022 90,000 35,104 34,199 2/2/2027 Office Y WA 3 57 Senior 12/30/2021 34,918 34,918 34,678 12/30/2025 For Sale Condo - VA 3 58 Subordinate 12/21/2018 32,902 32,902 33,059 6/21/2022 Land - NY 3 59 Senior 4/18/2019 30,000 30,000 29,950 5/1/2023 Office - MA 3 60 Senior 12/30/2021 141,791 29,643 28,291 12/30/2026 Mixed-use Y FL 3 61 Subordinate 7/2/2021 30,200 28,861 28,888 7/2/2024 Land - FL 3 62 Senior 11/24/2021 60,255 25,988 25,403 11/24/2026 Multifamily Y NV 3 63 Senior 2/17/2022 28,479 24,525 24,324 2/17/2027 Multifamily - TX 3 64 Senior 8/2/2019 19,873 19,873 20,095 2/2/2024 For Sale Condo - NY 3 65 Senior 1/31/2022 34,641 18,736 18,416 1/31/2027 Other Y FL 3 66 Senior 6/30/2022 48,500 16,753 16,290 6/30/2026 Other Y NV 3 67 Senior 5/13/2022 202,500 14,640 12,617 5/13/2027 Mixed-Use Y VA 3 68 Senior 10/13/2022 106,500 6,812 5,749 10/13/2026 Other Y NV 3 69 Senior 1/4/2022 32,795 3,501 3,177 1/4/2027 Other Y GA 3 70 Senior 7/1/2019 3,500 3,500 3,500 12/30/2020 Other - Other 5 71 Senior 4/19/2022 23,378 2,856 2,624 4/19/2027 Other Y GA 3 72 Senior 2/25/2022 53,984 1,723 1,184 2/25/2027 Other Y GA 3 73 Senior 2/18/2022 32,083 1,352 1,032 2/18/2027 Other Y FL 3 74 Subordinate 8/2/2018 927 927 913 7/9/2023 Other - NY 2 75 Senior 4/19/2022 24,245 132 (110 ) 4/19/2027 Other Y GA 3 76 Senior 9/2/2022 176,257 - (1,763 ) 9/2/2027 Multifamily Y UT 3 77 Senior 12/21/2022 112,100 - (1,121 ) 12/21/2027 Multifamily Y WA 3 Total 9,433,951 7,538,525 7,428,774 General CECL reserve (68,347 ) Grand Total/Weighted Average 9,433,951 7,538,525 7,360,427 30.6% 3.2 67 (1) Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
Biggest changePortfolio Activity and Overview The following table summarizes changes in unpaid principal balance for our loans receivable held-for-investment ($ in thousands): Three Months Ended December 31, 2023 Year Ended December 31, 2023 Year Ended December 31, 2022 Unpaid principal balance, beginning of period $ 7,185,948 $ 7,538,525 $ 6,441,238 Initial funding of loans - 101,059 2,030,456 Advances on loans 168,012 730,350 679,258 Loan repayments (37,903 ) (584,970 ) (1,484,880 ) Sales of loans receivable - (260,110 ) (116,020 ) Transfer to real estate owned (See Note 5) - (208,797 ) - Transfer to loans held-for-sale (271,533 ) (271,533 ) - Principal charge-offs - - (11,527 ) Total net fundings/(repayments/sales/transfers) (141,424 ) (494,001 ) 1,097,287 Unpaid principal balance, end of period $ 7,044,524 $ 7,044,524 $ 7,538,525 57 The following table details our individual loan receivables held-for-investment based on unpaid principal balances as of December 31, 2023 ($ in thousands): Loan Number Loan type Origination Date Loan Commitment (1) Unpaid Principal Balance Carrying Value (2) Fully Extended Maturity (3) Property Type (4) Construction (4, 5) Location Risk Rating 1 Senior 12/16/2021 $ 405,000 $ 401,157 $ 399,441 6/16/2027 Multifamily - CA 3 2 Senior 11/1/2019 390,000 390,000 389,508 11/1/2026 Multifamily - NY 3 3 Senior 7/12/2018 265,000 265,000 266,350 8/1/2028 Hospitality - NY 3 4 Senior 7/26/2021 225,000 225,000 224,789 7/26/2026 Hospitality - GA 3 5 Senior 6/30/2022 227,000 216,186 214,947 6/30/2029 Hospitality - CA 3 6 Senior 2/15/2022 262,122 214,480 212,877 2/15/2027 Multifamily Y CA 4 7 Senior 8/17/2022 235,000 213,831 212,751 8/17/2027 Hospitality - CA 3 8 Senior 10/18/2019 247,260 208,928 208,928 10/18/2024 For Sale Condo - CA 3 9 Senior 10/4/2019 197,332 189,047 188,796 10/1/2025 Mixed-Use - DC 3 10 Senior 9/7/2018 182,970 182,970 182,723 10/18/2024 Land - NY 3 11 Senior 9/26/2019 319,900 174,201 174,201 3/31/2026 Office - GA 4 12 Senior 1/14/2022 170,000 170,000 169,420 1/14/2027 Multifamily - CO 3 13 Senior 4/14/2022 193,400 168,941 168,116 4/14/2027 Multifamily - MI 3 14 Senior 9/8/2022 160,000 155,000 154,111 9/8/2027 Multifamily - AZ 3 15 Senior 1/9/2018 151,326 151,326 120,100 1/9/2024 Land - VA 5 16 Senior 2/28/2019 150,000 150,000 149,938 2/28/2024 Office - CT 4 17 Senior 12/30/2021 136,500 136,500 136,160 12/30/2025 Multifamily - PA 3 18 Senior 4/26/2022 151,698 133,630 132,807 4/26/2027 Multifamily - TX 3 19 Senior 12/10/2021 130,000 130,000 129,652 12/10/2026 Multifamily - VA 3 20 Subordinate 12/9/2021 125,000 125,000 124,817 1/1/2027 Office - IL 3 21 Senior 6/17/2022 127,250 123,346 122,488 6/17/2027 Multifamily - TX 3 22 Senior 9/30/2019 122,500 122,500 122,490 2/9/2027 Office - NY 4 23 Senior 4/29/2019 122,123 119,643 119,543 4/29/2025 Mixed-Use - NY 3 24 Senior 3/1/2022 122,000 119,084 118,522 2/28/2027 Multifamily - TX 4 25 Senior 8/8/2022 115,000 115,000 114,787 8/8/2027 Multifamily - CO 3 26 Senior 7/20/2021 113,500 113,500 113,637 7/20/2026 Multifamily - IL 3 27 Senior 2/13/2020 124,810 112,442 91,640 2/13/2025 Office - CA 5 28 Senior 5/13/2022 202,500 112,303 110,418 5/13/2027 Mixed-Use Y VA 3 29 Senior 6/7/2018 104,250 104,250 105,343 1/15/2022 Hospitality Y NY 4 30 Senior 12/15/2021 103,000 103,000 102,709 12/15/2026 Mixed-Use - TN 3 31 Senior 3/21/2023 101,059 101,059 100,886 4/1/2028 Hospitality - CA 3 32 Senior 3/22/2021 148,303 99,131 98,566 3/22/2026 Other - MA 3 33 Senior 8/2/2021 100,000 98,214 97,827 8/2/2026 Office - CA 4 34 Senior 1/27/2022 100,800 96,529 96,082 1/27/2027 Multifamily - NV 3 35 Senior 3/31/2020 87,750 87,750 87,750 2/9/2025 Office - TX 4 36 Senior 12/21/2018 87,741 87,741 88,166 6/21/2022 Land - NY 4 37 Senior 8/1/2022 115,250 78,500 78,390 7/30/2026 Hospitality Y NY 4 38 Senior 11/4/2022 140,000 78,018 76,951 11/9/2026 Other Y MA 3 39 Senior 1/10/2022 130,461 77,560 76,463 1/9/2027 Other - PA 3 40 Senior 7/10/2018 76,369 76,369 76,369 6/10/2024 Hospitality - CA 4 41 Senior 7/27/2022 76,000 75,550 75,303 7/27/2027 Multifamily - UT 3 42 Senior 4/5/2019 75,500 75,500 75,453 4/5/2024 Mixed-Use - NY 3 43 Senior 8/27/2021 84,810 71,492 51,140 8/27/2026 Office - GA 5 44 Senior 6/3/2021 79,600 70,654 70,449 6/3/2026 Other - MI 3 45 Senior 12/22/2021 83,901 67,742 67,439 12/22/2026 Multifamily - TX 4 46 Senior 7/31/2019 67,000 67,000 67,000 10/31/2021 Land - NY 4 47 Senior 10/13/2022 106,500 66,606 65,637 10/13/2026 Other Y NV 3 48 Senior 9/2/2022 176,257 65,991 64,270 9/2/2027 Multifamily Y UT 3 49 Senior 2/2/2022 90,000 62,712 61,941 2/2/2027 Office - WA 3 50 Senior 1/19/2022 73,677 59,607 59,242 1/19/2027 Hospitality - TN 3 51 Senior 11/24/2021 60,255 53,035 52,662 11/24/2026 Multifamily - NV 3 52 Senior 3/15/2022 53,300 50,164 49,957 3/15/2027 Multifamily - AZ 4 53 Senior 2/4/2022 44,768 38,753 38,560 2/4/2027 Multifamily - TX 4 54 Subordinate 7/2/2021 30,200 30,200 30,313 7/2/2024 Land - FL 3 55 Senior 4/18/2019 30,000 30,000 29,950 5/1/2024 Land - MA 3 56 Senior 1/4/2022 32,795 29,519 29,263 1/4/2027 Other Y GA 3 57 Senior 2/17/2022 28,479 24,865 24,758 2/17/2027 Multifamily - TX 3 58 Senior 2/25/2022 53,984 22,396 21,898 2/25/2027 Other Y GA 3 59 Senior 4/19/2022 23,378 16,174 15,971 4/19/2027 Other Y GA 3 60 Senior 2/18/2022 32,083 14,882 14,593 2/18/2027 Other Y FL 3 61 Senior 4/19/2022 24,245 11,116 10,892 4/19/2027 Other Y GA 3 62 Senior 8/2/2019 10,645 10,645 10,868 2/2/2024 For Sale Condo - NY 3 63 Senior 7/1/2019 1,899 1,899 1,899 12/30/2020 Other - Other 5 64 Subordinate 8/2/2018 886 886 - 7/9/2023 Other - NY 5 65 Senior 12/21/2022 112,100 - (1,121 ) 12/21/2027 Multifamily Y WA 3 Total $ 8,121,436 $ 7,044,524 $ 6,947,796 General CECL reserve (70,371 ) Grand Total/Weighted Average $ 8,121,436 $ 7,044,524 $ 6,877,425 17.1% 3.3 (1) Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
Net Debt-to-Equity Ratio is calculated as the ratio of asset specific debt (repurchase agreements, loan participations sold, net, notes payable, net, term participation facility, and debt related to real estate owned, net) and secured term loan, less cash and cash equivalents to total equity.
Net Debt-to-Equity Ratio is calculated as the ratio of asset-specific debt (repurchase agreements, term participation facility, loan participations sold, net, notes payable, net, and debt related to real estate owned, net) and secured term loan, less cash and cash equivalents to total equity.
Additionally, further adjustments may be made based upon loan positions senior to ours, the risk rating of a loan, whether a loan is a construction loan, or economic conditions specific to the property type of a loan's underlying collateral.
Additionally, further adjustments may be made based upon loan positions senior to ours, the risk rating of a loan, whether a loan is a construction loan, or the economic conditions specific to the property type of a loan’s underlying collateral.
Distributable Earnings is a non-GAAP measure, which we define as net income in accordance with GAAP, excluding (i) non-cash stock-based compensation expense (income), (ii) real estate depreciation and amortization, (iii) any unrealized gains or losses from mark-to-market valuation changes (other than permanent impairments) that are included in net income for the applicable period, (iv) one-time events pursuant to changes in GAAP and (v) certain non-cash items, which in the judgment of our Manager, should not be included in Distributable Earnings.
Distributable Earnings (Loss) is a non-GAAP measure, which we define as net income (loss) in accordance with GAAP, excluding (i) non-cash stock-based compensation expense, (ii) real estate depreciation and amortization, (iii) any unrealized gains or losses from mark-to-market valuation changes (other than permanent impairments) that are included in net income (loss) for the applicable period, (iv) one-time events pursuant to changes in GAAP and (v) certain non-cash items, which in the judgment of our Manager, should not be included in Distributable Earnings (Loss).
Introduction We are a CRE finance company focused primarily on originating loans on transitional CRE assets located in major U.S. markets, including mortgage loans secured by a first priority or subordinate mortgage on transitional CRE assets, and subordinate loans including mezzanine loans secured by a pledge of equity ownership interests in the direct or indirect property owner rather than directly in the underlying commercial properties.
Introduction We are a CRE finance company focused primarily on originating senior and subordinate loans on transitional CRE assets located in major U.S. markets, including mortgage loans secured by a first priority or subordinate mortgage on transitional CRE assets, and subordinate loans including mezzanine loans secured by a pledge of equity ownership interests in the direct or indirect property owner rather than directly in the underlying commercial properties.
In certain circumstances we may determine that a loan is no longer suited for the WARM method due to its unique risk characteristics, where we have deemed the borrower/sponsor to be experiencing financial difficulty and the repayment of the loan’s principal is collateral-dependent.
In certain circumstances we may determine that a loan is no longer suited for the WARM method due to its unique risk characteristics or where we have deemed the borrower/sponsor to be experiencing financial difficulty and the repayment of the loan’s principal is collateral-dependent.
(6) LTV represents “loan-to-value” or “loan-to-cost”, which is calculated as our total loan commitment from time to time, as if fully funded, plus any financings that are pari passu with or senior to our loan, divided by our estimate of either (1) the value of the underlying real estate, determined in accordance with our underwriting process (typically consistent with, if not less than, the value set forth in a third-party appraisal) or (2) the borrower’s projected, fully funded cost basis in the asset, in each case as we deem appropriate for the relevant loan and other loans with similar characteristics.
(6) LTV represents “loan-to-value” or “loan-to-cost,” which is calculated as our total loan commitment from time to time, as if fully funded, plus any financings that are pari passu with or senior to our loan, divided by our estimate of either (1) the value of the underlying real estate, determined in accordance with our underwriting process (typically consistent with, if not less than, the value set forth in a third-party appraisal) or (2) the borrower’s projected, fully funded cost basis in the asset, in each case as we deem appropriate for the relevant loan and other loans with similar characteristics.
Liquidity Needs In addition to our ongoing loan origination and acquisition activity, our primary liquidity needs include future fundings to our borrowers on our unfunded loan commitments, interest and principal payments on outstanding borrowings under our financings, operating expenses and dividend payments to our stockholders necessary to satisfy REIT dividend requirements.
Liquidity Needs In addition to our loan origination and acquisition activity, our primary liquidity needs include future fundings to our borrowers on our unfunded loan commitments, interest and principal payments on outstanding borrowings under our financings, operating expenses, and dividend payments to our stockholders necessary to satisfy REIT dividend requirements.
Changes in the fair value of our interest rate cap are recorded as an unrealized gain or loss on interest rate cap 70 on our consolidated statements of operations and the fair value is recorded in other assets on our consolidated balance sheets.
Changes in the fair value of our interest rate cap are recorded as an unrealized gain or loss on interest rate cap on our consolidated statements of operations and the fair value is recorded in other assets on our consolidated balance sheets.
Our general CECL reserve reflects our forecast of the current and future macroeconomic conditions that impact the performance of the commercial real estate assets securing our loans and the borrower's ultimate ability to repay.
Our general CECL reserve reflects our forecast of the current and future macroeconomic conditions that may impact the performance of the commercial real estate assets securing our loans and the borrower’s ultimate ability to repay.
In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay (or are treated as paying) out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. Our real estate owned is held in a TRS.
In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay (or are treated as paying) out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. Our real estate owned hotel portfolio is held in a TRS.
The preparation of these financial statements requires our Manager to make estimates, judgements and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.
The preparation of these financial statements requires our Manager to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.
We strive to create a diversified investment portfolio of CRE loans that we generally intend to hold to maturity. We focus primarily on originating loans ranging from $50 million to $300 million on transitional CRE assets located in major markets with attractive fundamental characteristics supported by macroeconomic tailwinds.
We strive to create a diversified investment portfolio of CRE loans that we generally intend to hold to maturity. We focus primarily on originating loans ranging from $50 million to $300 million on transitional CRE assets located in U.S. markets with attractive fundamental characteristics supported by macroeconomic tailwinds.
To estimate an annual historical loss rate, we obtained historical loss rate data for loans most comparable to our loan portfolio from a commercial mortgage backed securities database licensed by a third party, Trepp, LLC which contains historical loss rates from January 1, 1999 through December 31, 2022.
To estimate an annual historical loss rate, we obtained historical loss rate data for loans most comparable to our loan portfolio from a commercial mortgage-backed securities database licensed by a third party, Trepp, LLC, which contains historical loss data from January 1, 1999 through December 31, 2023.
Expenses Expenses are primarily comprised of base management fees payable to our Manager, general and administrative expenses, stock-based compensation expense, operating expenses from real estate owned, interest expense from debt 73 related to real estate owned, and depreciation on real estate owned.
Expenses Expenses are primarily comprised of base management fees payable to our Manager, incentive fees payable to our Manager, general and administrative expenses, stock-based compensation expense, operating expenses from real estate owned, interest expense from debt related to real estate owned, and depreciation and amortization on real estate owned.
Our floating rate loans and related liabilities are indexed to one-month LIBOR or one-month SOFR. Totals exclude non-consolidated senior interests. We are required to pay our Manager, in cash, a base management fee and incentive fees (to the extent earned) on a quarterly basis in arrears.
Our floating rate loans and related liabilities are indexed to SOFR. Totals exclude non-consolidated senior interests. We are required to pay our Manager, in cash, a base management fee and incentive fees (to the extent earned) on a quarterly basis in arrears.
If the sum of such estimated cash flows are less than the carrying amount of the real estate, an impairment charge is recorded equal to the excess of the carrying value of the real estate asset over the fair value.
If the sum of such estimated undiscounted cash flows is less than the carrying amount of the real estate asset, an impairment charge is recorded equal to the excess of the carrying value of the real estate asset over its estimated fair value.
In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed in Part 1.
In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those in this discussion as a result of various factors, including those discussed in Part I.
Management’s Discussion and Analysis of Financial Condition and Results of Operations —Results of Operations — Year Ended December 31, 2021 and 2020” in our Form 10-K, which is accessible on the SEC’s website at www.sec.gov, for a comparison of year ended December 2021 and 2020.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Year Ended December 31, 2022 and 2021” in our Form 10-K, which is accessible on the SEC’s website at www.sec.gov , for a comparison of year ended December 2022 and 2021.
When determining the fair value of a real estate asset, we make certain assumptions including, but not limited to, consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon our estimate of a capitalization rate and discount rate.
When determining the estimated fair value of a real estate asset, we make certain assumptions including consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon our estimate of a capitalization rate and discount rate.
Significant judgment is required in determining impairment and in estimating the resulting credit loss reserve, and actual losses, if any, could materially differ from those estimates. Real estate owned, net We may assume legal title or physical possession of the underlying collateral of a defaulted loan through foreclosure.
Significant judgment is required in determining impairment and in estimating the resulting credit loss reserve, and actual losses, if any, could materially differ from those estimates. 70 Real Estate Owned We may assume legal title and/or physical possession of the underlying collateral property of a defaulted loan through foreclosure, a deed-in-lieu of foreclosure, or an assignment-in-lieu of foreclosure.
The facility generally provides interim financing for eligible loans for up to 180 days at an initial advance rate of 75%, which begins to decline after the 90th day. The facility matures on June 29, 2025 and earns interest at a rate of one-month term SOFR, plus a 0.10% credit spread adjustment, plus a spread of 2.25%.
The facility generally provides interim financing for eligible loans for up to 180 days at an initial advance rate between 55% and 75%, which begins to decline after the 90th day. The facility matures on June 29, 2025 and we incur interest at a rate of SOFR, plus a 0.10% credit spread adjustment, plus a spread of 2.25%.
Our debt related to real estate owned as of December 31, 2022 has an unpaid principal balance of $290.0 million, a carrying value of $289.4 million and a stated rate of one-month LIBOR plus 2.78%, subject to a one-month LIBOR floor of 0.75%. See Derivatives below for further detail of our interest rate cap.
As of December 31, 2023, our debt related to real estate owned has an unpaid principal balance of $290.0 million, a carrying value of $289.9 million and a stated rate of one-month SOFR plus 2.83%, subject to a one-month SOFR floor of 0.75%. See Derivatives below for further detail of our interest rate cap.
A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate asset over the estimated remaining holding period is less than the carrying amount of such real estate asset. Cash flows include operating cash flows net of anticipated capital proceeds generated by the real estate asset.
A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate asset over the estimated remaining holding period is less than the carrying amount of such real estate asset.
Selections of these economic forecasts require judgement about future events that, while based on the information available to us as of the balance sheet date, are ultimately unknowable with certainty, and the actual economic conditions could vary significantly from the estimates we made.
Selections of these economic forecasts require judgment about future events that, while based on the information available to us as of the balance sheet date, are ultimately subjective and uncertain, and the actual economic conditions could vary significantly from the estimates we made.
(3) Amounts include the related future interest payment obligations, which are estimated by assuming the amounts outstanding under our secured financing agreements and one-month LIBOR or one-month term SOFR in effect as of December 31, 2022 will remain constant into the future. This is only an estimate, as actual amounts borrowed and rates will vary over time.
(4) Amounts include the related future interest payment obligations, which are estimated by assuming the amounts outstanding under our secured financing agreements and SOFR in effect as of December 31, 2023 will remain constant into the future. This is only an estimate, as actual amounts borrowed and rates will vary over time.
Key Financial Measures and Indicators As a CRE finance company, we believe the key financial measures and indicators for our business are net income per share, dividends declared per share, Distributable Earnings per share, Distributable Earnings excluding realized losses per share, book value per share, adjusted book value per share, Net Debt-to-Equity Ratio and Total Leverage Ratio.
Key Financial Measures and Indicators As a CRE finance company, we believe the key financial measures and indicators for our business are net income (loss) per share, Distributable Earnings (Loss) per share, Distributable Earnings per share prior to realized gains and losses, which includes principal charge-offs, dividends declared per share, book value per share, adjusted book value per share, Net Debt-to-Equity Ratio and Total Leverage Ratio.
In addition, our methodology for calculating Distributable Earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures and, accordingly, our reported Distributable Earnings may not be comparable to the Distributable Earnings reported by other companies.
In addition, our methodology for calculating these non-GAAP measures may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures and, accordingly, our reported Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses may not be comparable to the Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses reported by other companies.
We believe that all of the decisions and estimates are reasonable, based upon the information available to us. We believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements. Refer to Note 2 to our consolidated financial statements for a description of our significant accounting policies.
We believe that all of the decisions and estimates are reasonable, based upon the information available to us. We believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Derivatives As part of the agreement to amend the terms of our debt related to real estate owned on June 2, 2021, we acquired an interest rate cap with a notional amount of $290.0 million and a maturity date of February 15, 2024 for $275,000. The fair value of the interest rate cap is $6.0 million at December 31, 2022.
Derivatives As part of the agreement to amend the terms of our debt related to real estate owned on June 2, 2021, we acquired an interest rate cap with a notional amount of $290.0 million, a strike rate of 3.00%, and a maturity date of February 15, 2024 for $275,000.
(2) Net of specific CECL reserve of $60.3 million. (3) Weighted averages are based on unpaid principal balance. (4) All-in yield represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon, and fees received, based on the applicable floating benchmark rate/floors (if applicable), in place as of December 31, 2022.
(3) Weighted averages are based on unpaid principal balance. (4) Represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon, and fees received, based on the applicable floating benchmark rate/floors (if applicable), in place as of December 31, 2023.
Pursuant to the Management Agreement, we use Core Earnings, which is substantially the same as Distributable Earnings excluding incentive fees, to determine the incentive fees we pay our Manager. Distributable Earnings is substantially the same as Core Earnings, as defined in the Management Agreement, for the periods presented.
Pursuant to the Management Agreement, we use Core Earnings, which is substantially the same as Distributable Earnings (Loss) excluding incentive fees, to determine the incentive fees we pay our Manager.
As of December 31, 2022, our Secured Term Loan had an outstanding balance of $755.1 million and our debt related to real estate owned had an outstanding balance of $290.0 million.
As of December 31, 2023, our secured term loan had an outstanding balance of $725.5 million and our debt related to real estate owned had an outstanding balance of $290.0 million.
Additionally, our financing, repurchase and term loan agreements require us to maintain minimum levels of liquidity in order to satisfy certain financial covenants. We currently maintain, and seek to maintain, excess cash and liquidity to comply with minimum liquidity requirements under our financings, and if necessary, to reduce borrowings under our secured financings, including our repurchase agreements.
Additionally, certain financial covenants in our financing agreements require us to maintain minimum levels of liquidity. We currently maintain, and seek to maintain, cash and liquidity to comply with minimum liquidity requirements under our financings, and we also maintain and seek to maintain excess cash and liquidity to, if necessary, de-lever certain of our secured financings, including our repurchase agreements.
The following table sets forth, as of December 31, 2022 and 2021, our sources of available liquidity ($ in thousands): December 31, 2022 December 31, 2021 Cash and cash equivalents $ 306,456 $ 310,194 Loan principal payments held by servicer (1) — 67,100 Approved and undrawn credit capacity 213,113 19,283 Total sources of liquidity $ 519,569 $ 396,577 (1) Represents loan principal payments held in lockboxes or by our third-party loan servicer as of the balance sheet date which were remitted to us during the subsequent remittance cycle, net of the related secured debt balance.
The following table sets forth, as of December 31, 2023 and 2022, our sources of available liquidity ($ in thousands): December 31, 2023 December 31, 2022 Cash and cash equivalents $ 187,301 $ 306,456 Loan principal payments held by servicer (1) 2,200 - Approved and undrawn credit capacity (2) 48,055 213,113 Total sources of liquidity $ 237,556 $ 519,569 (1) Represents loan principal payments held in lockboxes or by our third-party loan servicer as of the balance sheet date which were remitted to us during the subsequent remittance cycle, net of the related secured debt balance.
As of December 31, 2022, we had 138,376,144 shares of our common stock outstanding, representing $2.5 billion of stockholders’ equity and we also had $5.7 billion of outstanding borrowings under our secured financings, our Secured Term Loan, our debt related to real estate owned, and our acquisition facility.
As of December 31, 2023, we had 138,745,357 shares of our common stock outstanding, representing $2.3 billion of equity, and also had $5.7 billion of outstanding borrowings under our secured financings, our secured term loan, and our debt related to real estate owned.
We may instead elect to employ different methods to estimate loan losses that also conform to ASU 2016-13 and related guidance. For such loan we would measure the specific reserve of each loan separately by using the fair value of the collateral or the net present value of its expected future cash flows.
We may instead elect to employ different methods to estimate credit losses that also conform to ASU 2016-13 and related guidance. For such loan we would separately measure the specific reserve for each loan by using the estimated fair value of the loan’s collateral.
If the fair value of the collateral is less than the carrying value of the loan, an asset-specific reserve is created as a component of our overall current expected credit loss reserve (following the adoption of CECL, or as a loan loss reserve prior to the adoption of CECL).
If the estimated fair value of the loan's collateral is less than the carrying value of the loan, an asset-specific reserve is created as a component of our overall current expected credit loss reserve.
Distributable Earnings does not represent net income or cash flows from operating activities and should not be considered as an alternative to GAAP net income, an indication of our cash flows from operating activities, a measure of our liquidity or an indication of funds available for our cash needs.
Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses do not represent net income (loss) or cash flows from operating activities in accordance with GAAP and should not be considered as an alternative to GAAP net income (loss), an indication of our cash flows from operating activities, a measure of our liquidity or an indication of funds available for our cash needs.
These assumptions are based upon the nature of the properties, recent sales and lease comparables, and anticipated real estate and capital market conditions. Portfolio Financing Our portfolio financing arrangements include repurchase facilities, asset-specific financing structures, mortgages on real estate owned and Secured Term Loan borrowings.
These assumptions are based upon the nature of the properties, recent sales and lease comparables, and anticipated real estate and capital market conditions. Portfolio Financing Our financing arrangements include repurchase arrangements, a term participation facility, asset-specific financings, debt related to real estate owned and secured term loan borrowings.
We operate our business in a manner that permits us to maintain our exclusion from registration under the 1940 Act. I.
We operate our business in a manner that permits us to maintain our exclusion from registration under the Investment Company Act of 1940, as amended (the “1940 Act”). I.
Through the final repayment of a loan, the asset management team maintains regular contact with borrowers, servicers and local market experts monitoring performance of the collateral, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate. From time to time, some of our borrowers may experience delays in the execution of their business plans.
Through the final repayment of a loan, the asset management team maintains regular contact with borrowers, servicers and local market experts monitoring performance of the collateral, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.
Non-recoverability is determined (i) upon the resolution of a loan (i.e. when the loan is repaid, fully or partially, or in the case of foreclosure, when the underlying asset is sold), or (ii) with respect to any amount due under any loan, when such amount is determined to be non-collectible.
Non-recoverability is determined (i) upon the resolution of a loan (i.e., when the loan is repaid, fully or partially, or when we acquire title in the case of foreclosure, deed-in-lieu of foreclosure, or assignment-in-lieu of foreclosure), or (ii) with respect to any amount due under any loan, when such amount is determined to be uncollectible.
When evaluating the current and future macroeconomic environment, we consider the aforementioned macroeconomic factors. Historical data for each metric is compared to historical commercial real estate loan losses in order to determine the relationship between the two variables.
We believe this CMBS data is the most relevant, available, and comparable dataset to our portfolio. When evaluating the current and future macroeconomic environment, we consider the aforementioned macroeconomic factors. Historical data for each metric is compared to historical commercial real estate credit losses in order to determine the relationship between the two variables.
In instances where we have multiple loan participations with the same lender, the financings are generally not cross-collateralized. Each of our loan participations sold is generally term-matched to its corresponding loan collateral. As of December 31, 2022, three of our loans were financed with loan participations sold.
In instances where we have multiple loan participations with the same lender, the financings are generally not cross-collateralized. Each of our loan participations sold is generally term-matched to its underlying loan.
The hotel portfolio appears as real estate owned, net on our consolidated balance sheet and, as of December 31, 2022, was encumbered by a $290.0 million securitized senior mortgage, which is included as a liability on our consolidated balance sheet. Refer to Note 5 to our consolidated financial statements for additional details.
As of December 31, 2023, the hotel portfolio appears as part of real estate owned, net on our consolidated balance sheet and is encumbered by a $290.0 million securitized senior mortgage, which is included as a liability on our consolidated balance sheet.
Current Expected Credit Losses The current expected credit loss ("CECL") reserve required under ASU 2016-13 “Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments (Topic 326)” (“ASU 2016-13”), reflects our current estimate of potential credit losses related to our loan portfolio.
Refer to Note 2 to our consolidated financial statements for a description of our significant accounting policies. 69 Current Expected Credit Losses The CECL reserve required under ASU 2016-13 “Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments (Topic 326)” (“ASU 2016-13”), reflects our current estimate of potential credit losses related to our loan portfolio.
Realized gain on sale of loan During the year ended December 31, 2022, we realized a gain on the sale of a loan of $30.1 million, compared to the year ended December 31, 2021 where we realized a loss on the sale of a loan of $0.2 million.
Gain on Sale of Loan During the year ended December 31, 2023, we realized a gain on the sale of a loan of $0.6 million. During the year ended December 31, 2022, we realized a gain on the sale of a loan of $30.1 million.
Item 1A, “Risk Factors”and "Cautionary Note Regarding Forward-Looking Statements" in this Annual Report on Form 10-K.
Item 1A, “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K.
Secured Term Loan We have a secured term loan of $755.1 million which we originally entered into on August 9, 2019. Our secured term loan is presented net of any original issue discount and transaction expenses which are deferred and recognized as a component of interest expense over the life of the loan using the effective interest method.
Our secured term loan is presented net of any original issue discount and transaction expenses which are deferred and recognized as interest expense over the life of the loan using the effective interest method.
With the consent of our lenders, and subject to certain conditions, the commitment of the facility may be increased up to $500.0 million. As of December 31, 2022, the outstanding balance of the facility is $0. As of December 31, 2022, we were in compliance with all financial covenants under our financings.
With the consent of our lenders, and subject to certain conditions, the commitment of the facility may be increased up to $500.0 million. As of December 31, 2023 and 2022, we had no outstanding balance on the facility. Financial Covenants Our financing agreements generally contain certain financial covenants.
(2) The allocation of our secured financings and term loan agreement is based on the earlier of the fully extended maturity date of each individual borrowing or the maximum maturity date under the respective agreement, and assumes two loans with aggregate borrowings outstanding of $75.2 million that are in maturity default have an extended maturity date in 2023.
(2) The allocation of our secured financings and secured term loan is based on the earlier of the fully extended maturity date (assuming conditions to extend are met) of each individual borrowing or the maximum maturity date under the respective agreement, and assumes five loans with aggregate borrowings outstanding of $250.7 million that are in maturity default have a contractual obligation to pay in less than one year.
We received $2.2 billion of proceeds from borrowings under our financing arrangements, received $1.7 billion from loan repayments and received $132.2 million of sales proceeds. Income Taxes We have elected and believe we have qualified to be taxed as a REIT for U.S. federal income tax purposes, commencing with our initial taxable year ended December 31, 2015.
Income Taxes We have elected and believe we have qualified to be taxed as a REIT for U.S. federal income tax purposes, commencing with our initial taxable year ended December 31, 2015.
As of December 31, 2022, our book value per share was $17.48, our adjusted book value per share was $18.20, our Net-Debt-to-Equity Ratio was 2.2x, and our Total Leverage Ratio was 2.6x.
As of December 31, 2023, our book value per share was $16.28, our adjusted book value per share was $17.03, our Net-Debt-to-Equity Ratio was 2.4x, and our Total Leverage Ratio was 2.8x.
As a transitional lender, we work with our borrowers to execute loan modifications which could include additional equity contributions from borrowers, repurposing of reserves, temporary deferrals of interest or principal, or partial deferral of coupon interest as payment-in-kind interest.
As a transitional lender, we may from time to time execute loan modifications with borrowers when and if appropriate, which may include additional equity contributions from them, repurposing of reserves, pledge of additional collateral or other forms of credit support, provide additional guarantees, temporary deferrals of interest or principal, and/or partial deferral of coupon interest as payment-in-kind interest.
Loan Participations Sold We finance certain investments via the sale of a participation in loans receivable that we own, and we present the loan participation sold as a liability on our consolidated balance sheet when such arrangement does not qualify as a sale under GAAP.
As of December 31, 2023, six of our loans were financed under the term participation facility. Loan Participations Sold We finance certain of our loans via the sale of a participation in such loans, and we present the loan participations sold as a liability on our consolidated balance sheet when such arrangements do not qualify as sales under GAAP.
Proceeds from interest rate cap Proceeds from interest rate cap was $0.5 million higher during the comparative period due to LIBOR exceeding our interest rate cap's 3% strike price during the fourth quarter of 2022.
Proceeds from Interest Rate Cap Proceeds from interest rate cap were $5.6 million higher during the comparative period due to SOFR exceeding our interest rate cap’s 3% strike rate during 2023.
Our Portfolio The below table summarizes our loan portfolio as of December 31, 2022 ($ in thousands): Weighted Average (3) Number of Loans Loan Commitment (1) Carrying Value (2) Yield to Maturity (4) Term to Fully Extended Maturity (in years) (5) LTV (6) Senior and subordinate loans 77 $ 9,433,951 $ 7,428,774 8.6 % 3.2 68.2 % (1) Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
Our Portfolio The below table summarizes our loans receivable held-for-investment as of December 31, 2023 ($ in thousands): Weighted Average (3) Number of Loans Loan Commitment (1) Unpaid Principal Balance Carrying Value (2) Yield to Maturity (4) Term to Initial Maturity (in years) Term to Fully Extended Maturity (in years) (5) LTV (6) Senior and subordinate loans 65 $ 8,121,436 $ 7,044,524 $ 6,947,796 9.1 % 1.2 2.6 69.2 % (1) Loan commitment represents principal outstanding plus remaining unfunded loan commitments. 56 (2) Net of specific CECL reserve of $72.6 million.
ASU 2016-13 specifies the reserve should be based on relevant information about past events, including historical loss experience, current portfolio, market conditions and reasonable and supportable macroeconomic forecasts for the duration of each loan. 78 For our loan portfolio, we perform a quantitative assessment of the impact of CECL using the Weighted Average Remaining Maturity, or WARM, method.
Changes to the CECL reserve are recognized through a provision for or reversal of current expected credit loss reserve on our consolidated statements of operations. ASU 2016-13 specifies the reserve should be based on relevant information about past events, including historical loss experience, current loan portfolio, market conditions and reasonable and supportable macroeconomic forecasts for the duration of each loan.
The following table presents our Net Debt-to-Equity Ratios and Total Leverage Ratios as of December 31, 2022 and 2021 ($ in thousands): December 31, 2022 December 31, 2021 Asset specific debt $ 4,927,098 $ 3,995,061 Secured term loan, net 736,853 $ 739,762 Total debt 5,663,951 4,734,823 Less: cash and cash equivalents (306,456 ) (310,194 ) Net Debt $ 5,357,495 $ 4,424,629 Total Stockholders’ Equity $ 2,456,471 $ 2,604,267 Net Debt-to-Equity Ratio 2.2x 1.7x Non-consolidated senior loans 968,302 1,063,939 Total Leverage $ 6,325,797 $ 5,488,568 Total Leverage Ratio 2.6x 2.1x 75 Sources of Liquidity Our primary sources of liquidity include cash and cash equivalents, interest income from our loans, loan repayments, available borrowings under our secured revolving repurchase facilities and identified borrowing capacity related to our notes payable and loan participations sold, borrowings under our Secured Term Loan, and proceeds from the issuance of our common stock.
The following table presents our Net Debt-to-Equity Ratios and Total Leverage Ratios as of December 31, 2023 and 2022 ($ in thousands): December 31, 2023 December 31, 2022 Asset-specific debt $ 4,964,874 $ 4,927,098 Secured term loan, net 712,576 736,853 Total debt 5,677,450 5,663,951 Less: cash and cash equivalents (187,301 ) (306,456 ) Net Debt $ 5,490,149 $ 5,357,495 Total Equity $ 2,299,900 $ 2,456,471 Net Debt-to-Equity Ratio 2.4x 2.2x Non-consolidated senior loans 887,300 968,302 Total Leverage $ 6,377,449 $ 6,325,797 Total Leverage Ratio 2.8x 2.6x Sources of Liquidity Our primary sources of liquidity include cash and cash equivalents, interest income from our loans, loan repayments, available borrowings under our repurchase agreements based on existing collateral, identified borrowing capacity related to our notes payable and loan participations sold based on existing collateral, proceeds from the issuance of incremental secured term loan or other corporate debt issuances, and proceeds from the issuance of our common stock.
(2) Net of specific CECL reserve on applicable loans. (3) Fully extended maturity assumes all extension options are exercised by the borrower upon satisfaction of the applicable conditions. (4) Based on loan commitment as of December 31, 2022.
(2) Net of specific CECL reserve of $72.6 million. (3) Fully extended maturity assumes all extension options are exercised by the borrower upon satisfaction of the applicable conditions. (4) Classification of property type and construction status reflect the state of collateral as of December 31, 2023.
Cash Flows The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash for the years ended December 31, 2022 and 2021 ($ in thousands): December 31, 2022 December 31, 2021 Net cash flows provided by operating activities $ 111,028 $ 213,557 Net cash flows used in investing activities (773,302 ) (373,196 ) Net cash flows provided by financing activities 676,297 62,801 Net increase (decrease) in cash and cash equivalents and restricted cash $ 14,023 $ (96,838 ) We experienced a net increase in cash and cash equivalents and restricted cash of $14.0 million during the year ended December 31, 2022, compared to a net decrease of $96.8 million during the year ended December 31, 2021. 77 During the year ended December 31, 2022, we made initial fundings of $2.0 billion of new loans and $602.3 million of advances on existing loans and made repayments on financings arrangements of $1.3 billion.
Cash Flows The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash for the years ended December 31, 2023 and 2022 ($ in thousands): December 31, 2023 December 31, 2022 Net cash flows provided by operating activities $ 111,140 $ 111,028 Net cash flows used in investing activities (39,337 ) (773,302 ) Net cash flows (used in) provided by financing activities (205,073 ) 676,297 Net (decrease) increase in cash and cash equivalents and restricted cash $ (133,270 ) $ 14,023 68 We experienced a net decrease in cash and cash equivalents and restricted cash of $133.3 million during the year ended December 31, 2023, compared to a net increase of $14.0 million during the year ended December 31, 2022.
The following table summarizes our non-consolidated senior interests and related retained subordinate interests as of December 31, 2022 ($ in thousands): Non-Consolidated Senior Interests Loan Count Loan Commitment Unpaid Principal Balance Carrying Value Weighted Average Spread (1)(2) Term to Fully Extended Maturity (in years) (3) Floating rate non-consolidated senior loans 2 $ 111,000 $ 108,642 N/A + 5.04% 0.8 Retained floating rate subordinate loans 2 63,102 61,763 61,947 + 11.55% 0.7 Fixed rate non-consolidated senior loans 2 $ 861,073 $ 859,660 N/A 3.47 % 3.9 Retained fixed rate subordinate loans 2 125,927 125,927 125,668 8.49 % 4.0 (1) Non-consolidated senior interests are indexed to one-month LIBOR, which was 4.39% at December 31, 2022.
The following table summarizes our non-consolidated senior interests and related retained subordinate interests as of December 31, 2023 ($ in thousands): Loan Count Loan Commitment Unpaid Principal Balance Carrying Value Weighted Average Spread (2) Term to Initial Maturity (in years) Term to Fully Extended Maturity (in years) (3) Floating rate non-consolidated senior loans (1) 1 $ 57,300 $ 57,300 N/A + 4.46% 0.5 0.5 Retained floating rate subordinate loans 1 $ 30,200 $ 30,200 $ 30,313 + 12.86% 0.5 0.5 Fixed rate non-consolidated senior loans 1 $ 830,000 $ 830,000 N/A 3.47% 3.0 3.0 Retained fixed rate subordinate loans 1 $ 125,000 $ 125,000 $ 124,817 8.50% 3.0 3.0 (1) Non-consolidated senior interests are indexed to SOFR, which was 5.35% at December 31, 2023.
Proceeds received from our counterparty related to the interest rate cap are recorded as proceeds from interest rate cap on our consolidated statements of operations. During the year ended December 31, 2022, we recognized approximately $495,000 as proceeds from interest rate cap. Acquisition Facility On June 29, 2022, we entered into a $150.0 million full recourse credit facility.
Proceeds received from our counterparty related to the interest rate cap are recorded as proceeds from interest rate cap on our consolidated statements of operations. During the years ended December 31, 2023 and 2022, we recognized approximately $6.1 million and $0.5 million, respectively, as proceeds from interest rate cap.
Specific reserves are equal to the excess of a loan’s carrying value to the net present value of its expected future cash flows discounted at the loan’s effective rate or the fair value of the collateral, less estimated costs to sell, if recovery of our investment is expected from the sale of the collateral.
Specific reserves are equal to the excess of a loan’s carrying value to the estimated fair value of the collateral, less estimated costs to sell, if recovery of our investment is expected from the sale of the collateral and such costs will reduce amounts recoverable by us.
While Distributable Earnings excludes the impact of our unrealized current provision for credit losses, loan losses are charged off and recognized through Distributable Earnings when deemed non-recoverable.
While Distributable Earnings (Loss) excludes the impact of our provision for or reversal of current expected credit loss reserve, principal charge-offs are recognized through Distributable Earnings (Loss) when deemed non-recoverable.
The increase was partially offset by a decrease in net interest income of $10.9 million for the comparative period, which was driven by an increase in interest expense of $66.3 million, as a result of increased borrowing levels and reference rate increases, offset in part by an increase in interest income of $55.4 million as a result of an increased loans receivable balance and average reference rate increases over the year ended December 31, 2022.
The increase was also due to an increase in net interest income of $3.6 million for the comparative period, which was driven by an increase in interest income of $227.2 million, primarily as a result of reference rate increases and an increased average loans receivable balance, partially offset by a greater portion of the loan portfolio being on non-accrual during the year ended December 31, 2023, and further offset by an increase in interest expense of $223.6 million as a result of increased borrowing levels and reference rate increases.
We have an interest rate cap with a notional amount of $290.0 million and a maturity date of February 15, 2024 on our debt related to real estate owned. The interest rate cap effectively limits the maximum interest rate of our debt related to real estate owned to 5.78%.
The interest rate cap effectively limits the maximum interest rate of our debt related to real estate owned to 5.83%. On February 7, 2024, we modified our debt related to real estate owned and concurrently purchased an interest rate cap for $0.5 million which provides for a strike rate of 5.00% through the extended contractual maturity date.
The table below summarizes the reconciliation from weighted-average diluted shares under GAAP to the weighted-average diluted shares used for Distributable Earnings: Weighted-Averages December 31, 2022 December 31, 2021 Diluted Shares - GAAP 139,306,311 134,539,645 Unvested RSUs 1,190,126 - Diluted Shares - Distributable Earnings 140,496,437 134,539,645 The following table provides a reconciliation of net (loss) income attributable to common stock to Distributable Earnings ($ in thousands, except share and per share data): Three Months Ended Year Ended December 31, 2022 December 31, 2022 December 31, 2021 Net (loss) income attributable to common stock: $ (22,653 ) $ 112,064 $ 170,537 Adjustments: Non-cash stock-based compensation expense 3,427 7,457 8,812 Provision for (reversal of) current expected credit loss reserve 71,377 84,361 (8,962 ) Gain on foreclosure of real estate owned — — (1,430 ) Other income — — (5,855 ) Depreciation expense 2,039 8,041 7,113 Unrealized gain on interest rate cap (429 ) (6,042 ) — Distributable Earnings prior to principal charge-offs $ 53,761 $ 205,881 $ 170,215 Principal charge-offs (27 ) (11,527 ) (1,761 ) Distributable Earnings $ 53,734 $ 194,354 $ 168,454 Weighted average diluted shares - Distributable Earnings 140,616,356 140,496,437 134,539,645 Diluted Distributable Earnings per share prior to principal charge-offs $ 0.38 $ 1.47 $ 1.27 Diluted Distributable Earnings per share $ 0.38 $ 1.38 $ 1.25 Book Value Per Share We believe that presenting book value per share adjusted for the general current expected credit loss reserve and accumulated depreciation is useful for investors as it enhances the comparability across the industry.
The table below summarizes the reconciliation from weighted average diluted shares under GAAP to the weighted average diluted shares used for Distributable Earnings (Loss) for the years ended December 31, 2023 and 2022: Weighted Averages December 31, 2023 December 31, 2022 Diluted Shares - GAAP 138,617,043 139,306,311 Unvested RSUs 2,637,717 1,190,126 Diluted Shares - Distributable Earnings (Loss) 141,254,760 140,496,437 55 The following table provides a reconciliation of net income attributable to common stock to Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and principal charge-offs ($ in thousands, except share and per share data): Three Months Ended Year Ended December 31, 2023 December 31, 2023 December 31, 2022 Net income attributable to common stock: $ 34,043 $ 6,027 $ 112,064 Adjustments: Non-cash stock-based compensation expense 4,469 16,599 7,457 Provision for current expected credit loss reserve 5,247 153,683 84,361 Depreciation and amortization expense 2,579 9,287 8,041 Amortization of above and below market lease values, net 354 708 - Unrealized loss (gain) on interest rate cap 1,835 5,157 (6,042 ) Gain on extinguishment of debt - (2,217 ) - Gain on sale of loan - (575 ) - Gain on foreclosure of real estate owned (4,162 ) (4,162 ) - Distributable Earnings prior to realized gains and principal charge-offs $ 44,365 $ 184,507 $ 205,881 Gain on sale of loan - 575 - Gain on extinguishment of debt - 2,217 - Principal charge-offs (7,468 ) (147,361 ) (11,527 ) Distributable Earnings (Loss) $ 36,897 $ 39,938 $ 194,354 Weighted average diluted shares - Distributable Earnings (Loss) 141,321,572 141,254,760 140,496,437 Diluted Distributable Earnings per share prior to realized gains and principal charge-offs $ 0.31 $ 1.31 $ 1.47 Diluted Distributable Earnings (Loss) per share $ 0.26 $ 0.28 $ 1.38 Book Value Per Share We believe that presenting book value per share adjusted for the general current expected credit loss reserve and accumulated depreciation and amortization on our real estate owned and related lease intangibles is useful for investors as it enhances the comparability across the industry.
The weighted-average diluted shares outstanding used for Distributable Earnings has been adjusted from weighted-average diluted shares under GAAP to include unvested RSUs.
In determining Distributable Earnings (Loss) per share and Distributable Earnings per share prior to realized gains and losses, the dilutive effect of unvested RSUs is considered. The weighted average diluted shares outstanding used for Distributable Earnings (Loss) has been adjusted from weighted average diluted shares under GAAP to include weighted average unvested RSUs.
We believe that our investors and lenders consider book value excluding these items as an important metric related to our overall capitalization. 64 The following table sets forth the calculation of our book value and our adjusted book value per share ($ in thousands, except share and per share data): December 31, 2022 December 31, 2021 Total Stockholders’ Equity $ 2,456,471 $ 2,604,267 Non-controlling interest — (37,636 ) Stockholders’ Equity, net of non-controlling interest $ 2,456,471 $ 2,566,631 Number of shares of common stock outstanding and RSUs 140,542,274 139,840,088 Book Value per share (1) $ 17.48 $ 18.35 Add back: accumulated depreciation on real estate owned $ 0.11 $ 0.05 Add back: general CECL reserve $ 0.61 $ 0.48 Adjusted Book Value per share $ 18.20 $ 18.88 (1) Calculated as (i) total stockholders’ equity less non-controlling interest divided by (ii) number of shares of common stock outstanding and RSUs at period end.
The following table sets forth the calculation of our book value and our adjusted book value per share as of December 31, 2023 and 2022 ($ in thousands, except share and per share data): December 31, 2023 December 31, 2022 Equity $ 2,299,900 $ 2,456,471 Number of shares of common stock outstanding and RSUs 141,313,339 140,542,274 Book Value per share (1) $ 16.28 $ 17.48 Add back: accumulated depreciation on real estate owned and accumulated amortization of related lease intangibles $ 0.18 $ 0.11 Add back: general CECL reserve $ 0.57 $ 0.61 Adjusted Book Value per share $ 17.03 $ 18.20 (1) Calculated as (i) total equity divided by (ii) number of shares of common stock outstanding and RSUs at period end.
Repurchase Agreements and Term Participation Facility We finance certain of our loans using repurchase facilities and term participation facilities. As of December 31, 2022, aggregate borrowings outstanding under our secured revolving repurchase and term participation facilities totaled $4.2 billion, with a weighted average coupon of one-month LIBOR or one-month term SOFR plus 2.4% per annum.
As of December 31, 2023, aggregate borrowings outstanding under our repurchase agreements and term participation facility totaled $4.3 billion, with a weighted average coupon of SOFR plus 2.76% per annum based on unpaid principal balance.
The interest rate cap effectively limits the maximum interest rate of our debt related to real estate owned to 5.78%.
The fair value of the interest rate cap is $0.9 million at December 31, 2023. The interest rate cap effectively limits the maximum interest rate of our debt related to real estate owned to 5.83%.
Debt Related to Real Estate Owned On February 8, 2021 we assumed a $300.0 million securitized senior mortgage in connection with a Uniform Commercial Code foreclosure on a portfolio of seven limited service hotels located in New York, New York.
Debt Related to Real Estate Owned On February 8, 2021 in connection with a foreclosure of a hotel portfolio we assumed a securitized senior mortgage, which is non-recourse to us, with a then unpaid principal balance of $300.0 million.
As of December 31, 2022, our secured financings consisted of six secured revolving repurchase facilities for loan investments with capacity of $5.0 billion and an outstanding balance of $4.0 billion, a term participation facility with capacity of $1.0 billion and an outstanding balance of $257.5 million, nine asset-specific financings for loan investments with capacity $760.2 million and an outstanding balance of $418.9 million and an acquisition facility with a capacity of $150.0 million and no outstanding balance.
As of December 31, 2023, our secured financings consisted of six repurchase agreements with capacity of $5.1 billion and an outstanding balance of $3.8 billion, a term participation facility with capacity of $654.4 million and an outstanding balance of $465.4 million, seven asset-specific financings with capacity of $540.5 million and an outstanding balance of $407.5 million and a short-term funding facility with capacity of $150.0 million and no outstanding balance.
Asset Management Our Manager proactively manages the loans in our portfolio from closing to final repayment and our Sponsor has dedicated asset management employees to perform asset management services. Following the closing of an investment, the asset management team rigorously monitors the loan, with an emphasis on ongoing financial, legal, market condition and quantitative analyses.
Asset Management Our Manager proactively manages the loans in our portfolio from closing to final repayment and our Sponsor has dedicated asset management employees to perform asset management services.
During the fourth quarter of 2022, we recorded a specific CECL reserve of $42.0 million in connection with a senior loan with an unpaid principal balance and carrying value prior to any specific CECL reserve of $208.8 million and an initial maturity date of February 1, 2023.
The loan was secured by a mixed-use building in New York, NY and a pledge of equity interests therein with an unpaid principal balance and carrying value prior to any specific CECL reserve of $208.8 million and an initial maturity date of February 1, 2023.
Fair market values used to determine specific CECL reserves are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach. Estimates of fair market values include assumptions of property specific cash flows over estimated holding periods, discount rates approximating 6.0%, and market capitalization rates ranging from 4.5% to 6.0%.
Estimates of fair market values used to determine specific CECL reserves as of December 31, 2023 include assumptions of property specific cash flows over estimated holding periods, assumptions of property redevelopment costs, discount rates ranging from 7.5% to 9.5%, and market and terminal capitalization rates ranging from 6.0% to 8.3%.
As of December 31, 2022, our secured term loan has an unpaid principal balance of $755.1 million and a carrying value of $736.9 million.
The secured term loan matures on August 9, 2026 and as of December 31, 2023 has an unpaid principal balance of $725.5 million and a carrying value of $712.6 million.
During the year ended December 31, 2022, we had net income per share of $0.79, dividends declared per share of $1.48, Distributable Earnings per share of $1.38, and Distributable Earnings excluding realized losses per share of $1.47.
During the year ended December 31, 2023, we had net income per share of $0.02, Distributable Earnings (Loss) per share of $0.28, and Distributable Earnings per share prior to realized gains and principal charge-offs of $1.31, and dividends declared per share of $1.24.

… 153 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

25 edited+13 added−12 removed13 unchanged
Biggest changeThe following table illustrates the impact on our interest income and interest expense for the twelve-month period following December 31, 2022, assuming a decrease in LIBOR or SOFR of 50 and 100 basis points and an increase in LIBOR or SOFR of 50 and 100 basis points in the applicable interest rate benchmark (based on one-month LIBOR of 4.39% and one-month term SOFR of 4.36% as of December 31, 2022) ($ in thousands, except per share data): Decrease Increase Assets (Liabilities) Subject to Interest Rate Sensitivity Change in 100 Basis Points 50 Basis Points 50 Basis Points 100 Basis Points $ 1,720,864 Net interest income $ (15,963 ) $ (7,982 ) $ 7,982 $ 15,963 Net interest income per share $ (0.11 ) $ (0.06 ) $ 0.06 $ 0.11 80 LIBOR Transition On March 5, 2021, the Financial Conduct Authority of the U.K.
Biggest changeThe following table illustrates as of December 31, 2023 the impact on our interest income and interest expense for the twelve-month period following December 31, 2023, excluding loans classified as held-for-sale as of December 31, 2023, assuming a decrease in SOFR of 50 and 100 basis points and an increase in SOFR of 50 and 100 basis points in the applicable interest rate benchmark (based on SOFR of 5.35% as of December 31, 2023) ($ in thousands, except per share data): 71 Net Floating Decrease Increase Rate Exposure Change in 100 Basis Points 50 Basis Points 50 Basis Points 100 Basis Points $ 1,232,069 Net interest income $ (8,071 ) $ (4,036 ) $ 4,036 $ 8,071 Net interest income per share $ (0.06 ) $ (0.03 ) $ 0.03 $ 0.06 Risks related to fluctuations in cash flows and asset values associated with movements in interest rates may also contribute to the risk of nonperformance on floating rate assets.
In addition, we may seek to finance our business through the issuance of our common stock or other equity or equity-related instruments, though there is no assurance that such financing will be available on a timely basis with attractive terms, or at all. 83
In addition, we may seek to finance our business through the issuance of our common stock or other equity or equity-related instruments, though there is no assurance that such financing will be available on a timely basis with attractive terms, or at all.
In addition, we are exposed to the risks generally associated with the CRE market, including variances in occupancy rates, capitalization rates, absorption rates and other macroeconomic factors beyond our control. We seek to manage these risks through our underwriting, loan structuring, financing structuring and asset management processes.
In addition, we are exposed to the risks generally associated with the CRE market, including variances in occupancy rates, capitalization rates, absorption rates and other macroeconomic factors (including interest rates) beyond our control. We seek to manage these risks through our underwriting, loan structuring, financing structuring, and asset management processes.
Financing Risk We finance our business through a variety of means, including the syndication of non-consolidated senior interests, notes payable, borrowings under our repurchase facilities, the syndication of pari passu portions of our loans, the syndication of senior participations in our originated senior loans, and our secured term loan.
Financing Risk We finance our business through a variety of means, including the syndication of non-consolidated senior interests, notes payable, borrowings under our repurchase and participation facilities, the syndication of pari passu portions of our loans, the syndication of senior participations in our originated senior loans, and our secured term loan.
The nature of our loans and other investments also exposes us to the risk that our loan counterparties are unable to execute their business plans, and as a result do not make required interest and principal payments on scheduled due dates, as well as the impact of our borrowers’ tenants not making scheduled rent payments when contractually due.
The nature of our loans and other investments also exposes us to the risk that our borrowers are unable to execute their business plans, and as a result do not make required interest and principal payments on scheduled due dates, as well as the impact of our borrowers’ tenants not making scheduled rent payments when contractually due.
By its very nature, our investment strategy emphasizes prudent risk management and capital preservation by primarily originating senior loans utilizing underwriting techniques resulting in relatively conservative loan-to-value ratio levels to insulate us from loan losses absent a significant diminution in collateral value.
By its very nature, our investment strategy emphasizes prudent risk management and capital preservation by primarily originating senior loans utilizing underwriting techniques requiring relatively conservative loan-to-value ratio levels to insulate us from credit losses absent a significant diminution in collateral value.
Any such changes in foreign currency exchange rates may impact the measurement of such assets or income for the purposes of our REIT tests and may affect the amounts available for payment of dividends to our stockholders. Although not required, if applicable, we may hedge any currency exposures in a prudent manner.
Any such changes in foreign currency exchange rates may impact the measurement of such assets or income for the purposes of our REIT tests and may affect the amounts available for payment of dividends to our stockholders. Although not required, if applicable, we may hedge any currency exposures.
In particular, changes in general economic conditions will affect the creditworthiness of borrowers and/or the value of underlying real estate collateral relating to our investments.
In particular, changes in general economic conditions, including interest rates, will affect the creditworthiness of borrowers and/or the value of underlying real estate collateral relating to our investments.
In addition, we seek to manage credit risk through performance of extensive due diligence on our collateral, borrower and guarantors, as applicable, that evaluates, among other things, title, environmental and physical condition of collateral, comparable sales and leasing analysis of similar collateral, the quality of and alternative uses for the real estate collateral being underwritten, submarket trends, our borrower’s track record and the reasonableness of the borrower’s projections prior to originating a loan.
In addition, we seek to manage credit risk by performing extensive due diligence on our collateral, borrower and guarantors, as applicable, evaluating, among other things, title, environmental and physical condition of collateral, comparable sales and leasing analysis of similar collateral, the quality of and alternative uses for the real estate collateral being underwritten, submarket trends, our borrower’s track record and the reasonableness of the borrower’s projections prior to originating a loan.
However, certain of our repurchase facilities permit valuation adjustments solely as a result of collateral-specific credit events, while other repurchase facilities contain provisions also allowing our lenders to make margin calls or require additional collateral upon the occurrence of adverse changes in the markets or interest rate or spread fluctuations, subject to minimum thresholds, among other factors.
Certain of our repurchase agreements permit valuation adjustments solely as a result of collateral-specific credit events, while other repurchase agreements contain provisions also allowing our lenders to make margin calls upon the occurrence of adverse changes in the capital markets or as a result of interest rate or spread fluctuations, subject to minimum thresholds, among other factors.
We seek to mitigate these risks by monitoring the debt and equity capital markets, the maturity profile of our in-place loan portfolio related to secured financings, and future loan funding requirements to inform our decisions on the amount, timing and terms of capital we raise.
We seek to mitigate these risks by constantly monitoring the debt and equity capital markets, the maturity profile of our in-place loan portfolio and financings, and future funding requirements on our loan portfolio to inform our decisions on the amount, timing, and terms of any capital we may raise.
Subsequent to loan origination, we also manage credit risk through proactive investment monitoring and, whenever possible, limiting our own leverage to partial recourse or non-recourse, match-funding financing. Notwithstanding these efforts, there can be no assurance that we will be able to avoid losses in all circumstances.
Subsequent to origination, we also manage credit risk by proactively monitoring our investments and, whenever possible, limiting our own leverage to partial recourse or non-recourse, match-funding financing. Notwithstanding these efforts, there can be no assurance that we will be able to avoid losses in all circumstances.
Each loan is structured with various lender 82 protections that are designed to prevent fraudulent behavior or other bad acts by borrowers, as well as require borrowers to adhere to their stated business plans while the loan is outstanding.
Each loan is structured with various lender protections that are designed to discourage and deter fraudulent behavior and other bad acts by borrowers, as well as require borrowers to adhere to their stated business plans while the loan is outstanding.
In the event that we are forced to foreclose, our broader Sponsor platform includes professionals experienced in CRE development, ownership, property management and asset management which enables us to execute the workout of a troubled loan and protect investors’ capital in a way that we believe many non-traditional lenders cannot. 81 Capital Markets Risks We are exposed to risks related to the equity and debt capital markets and our related ability to raise capital through the issuance of our common stock or other debt or equity-related instruments.
In the event that we are forced to foreclose, our broader Sponsor platform includes professionals experienced in CRE development, ownership, property management, and asset management which enables us to execute the workout of a troubled loan and protect investors’ capital in a way that we believe many non-traditional lenders cannot.
Real Estate Risk The market values of loans secured directly or indirectly by CRE assets are subject to volatility and may be adversely affected by a number of factors, including, but not limited to, the impacts of the COVID-19 pandemic discussed above, national, regional, local and foreign economic conditions (which may be adversely affected by industry slowdowns and other factors); regional or local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; changes to building or similar codes and regulatory requirements (such as rent control); and changes in real property tax rates.
Real Estate Risk The market values of loans secured directly or indirectly by CRE assets are subject to volatility and may be adversely affected by a number of factors, including the interest rate environment; persistent inflation; increases in remote work trends; natural disasters or pandemics; national, regional, local and foreign economic conditions (which may be adversely affected by industry slowdowns and other factors); changes in social conditions; regional or local real estate conditions; geopolitical volatility, changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; changes to building or similar codes and government regulatory requirements (such as rent control and zoning laws); and changes in real property tax rates.
In addition, decreases in property values reduce the value of the loan collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses. We seek to manage these risks through our underwriting, loan structuring, financing structuring and asset management processes.
In addition, decreases in property values reduce the value of the loan collateral and the potential proceeds available and to a borrower to repay the underlying loans, which could also cause us to suffer losses.
This could have a negative impact on our results of operations, and in some situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses. Counterparty Risk The nature of our business requires us to hold cash and cash equivalents and obtain financing from various financial institutions.
This could have a negative impact on our results of operations, and in some situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses.
Weakness or volatility in the debt capital markets, the CRE and mortgage markets, changes in regulatory requirements, and the economy generally, in particular as a result of the COVID-19 pandemic, and recent rapid increase in interest rates that central banks are using to combat inflation could adversely affect one or more of our lenders or potential lenders and could cause one or more of our lenders or potential lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing or otherwise offer unattractive terms for that financing.
Weakness or volatility in the debt capital markets, the CRE and mortgage markets, changes in regulatory requirements, geopolitical volatility, and recent rapid increase in interest rates and the resulting market disruptions therefrom could adversely affect one or more of our lenders or potential lenders and could cause one or more of our lenders or potential lenders to be unwilling or unable to provide us with financing, increase the costs of or reduce the advance rate on existing financing or otherwise offer unattractive terms for that financing.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk. Interest Rate Risk Rising interest rates will generally increase our net interest income, while declining interest rates will generally decrease our net interest income. During 2022, the Federal Reserve began a campaign to combat inflation by increasing interest rates by a total of 4.25% throughout the year.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk. Interest Rate Risk In early 2022, the U.S. Federal Reserve began a campaign to combat inflation by increasing interest rates. By the end of 2022, the U.S. Federal Reserve had raised interest rates by a total of 4.25%. While there still remains a risk that the U.S.
A substantial deterioration in the commercial real estate capital markets may negatively impact the value of assets pledge to lenders that have margin maintenance provisions in their facilities. The lender’s margin amount is typically based on a percentage of the market value of the loan asset and/or mortgaged property collateral.
A substantial deterioration in the commercial real estate capital markets may negatively impact the value of assets financed with lenders that have margin maintenance provisions in their facilities.
This exposes us to the risk that these financial institutions may not fulfill their obligations to us under these various contractual arrangements. We mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with high credit-quality institutions.
Counterparty Risk The nature of our business requires us to hold cash and cash equivalents with various financial institutions, as well as obtain financing from various financial institutions. This exposes us to the risk that these financial institutions may not fulfill their obligations to us under various contractual arrangements.
Repayment / Extension Risk Loans are expected to be repaid at maturity, unless the borrower repays early or meets contractual conditions to qualify for a maturity extension. However, in the case of a loan maturity extension, we are often entitled to extension fees, principal paydowns and/or spread increases.
Repayment / Extension Risk Loans are expected to be repaid at maturity, unless the borrower repays early or meets contractual conditions to qualify for a maturity extension. The granting of these extensions may cause a loan’s term to extend beyond the term of its related secured financing. Higher interest rates recently imposed by the U.S.
Our relationships with our repurchase agreement providers subject us to counterparty risks in the event a counterparty is unable to fund its undrawn credit capacity, particularly in the event of a counterparty’s bankruptcy. We seek to manage this risk by diversifying our financing sources across counterparties and financing types.
We mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with high credit-quality institutions. Our relationships with our lenders subject us to counterparty risks including the risk that a counterparty is unable to fund undrawn credit capacity, particularly if such counterparty enters bankruptcy, among other detrimental effects.
In January 2023, the Federal Reserve raised rates another 0.25% and signaled further increases in coming quarters. Higher interest rates imposed by the Federal Reserve may increase our interest expense and may impact the ability of our borrowers to service our debt.
Despite this potential reversal in policy, rates have risen 5.25% since 2022 and remain high relative to recent historical trends. Higher interest rates imposed by the U.S. Federal Reserve may continue to increase our interest expense, negatively impact the ability of our borrowers to service their debt, and reduce the value of the CRE collateral underlying our loans.
Higher interest rates imposed by the Federal Reserve may lead to an increase in the number of our borrowers who exercise extension options, which could extend beyond the term of certain secured financing agreements we use to finance our loan investments.
Federal Reserve may lead to an increase in the number of our borrowers who exercise or request additional extension options, or who may become unwilling or unable to make contractual payments when due.
Removed
(the “FCA”), which regulates LIBOR, announced (the “FCA Announcement”) that all relevant LIBOR tenors will cease to be published or will no longer be representative after June 30, 2023.
Added
Federal Reserve will continue to increase interest rates if inflation persists or accelerates, recent moderation in inflationary pressures have reduced likelihood of such increases. Through recent public statements, the U.S. Federal Reserve has indicated that if inflation continues to moderate, it will consider cutting interest rates during 2024.
Removed
The FCA Announcement coincides with the March 5, 2021 announcement of LIBOR’s administrator, the ICE Benchmark Administration Limited (the “IBA”), indicating that, as a result of not having access to input data necessary to calculate relevant LIBOR tenors on a representative basis after June 30, 2023, the IBA would have to cease publication of such LIBOR tenors immediately after the last publication on June 30, 2023.
Added
Rising interest rates will generally increase our net interest income, while declining interest rates will generally decrease our net interest income.
Removed
Further, on March 15, 2022, the Consolidated Appropriations Act of 2022, which includes the Adjustable Interest Rate (LIBOR) Act, was signed into law in the United States. This legislation establishes a uniform benchmark replacement process for financial contracts maturing after June 30, 2023 that do not contain clearly defined or practicable fallback provisions.
Added
In the case of a significant increase in interest rates, the cash flows of the collateral real estate assets to our loans may be insufficient to pay debt service due, which may contribute to nonperformance of, or in severe cases default on, our loans.
Removed
The legislation also creates a safe harbor that shields lenders from litigation if they choose to utilize a replacement rate recommended by the Board of Governors of the Federal Reserve. The United States Federal Reserve has also advised banks to cease entering into new contracts that use USD LIBOR as a reference rate.
Added
We seek to manage this risk by, among other things, generally requiring our borrowers to acquire interest rate caps from an unaffiliated third-party. Credit Risk Our loans and other investments are also subject to credit risk, including the risk of default.
Removed
The Federal Reserve, in conjunction with the Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR.
Added
Capital Markets Risks We are exposed to risks related to the equity and debt capital markets which impact our related ability to raise capital through the issuance of our common stock or other debt or equity-related instruments.
Removed
There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities.
Added
Each of our repurchase agreements contain “margin maintenance” provisions, which allow the lender to require the delivery of cash or other assets to reduce the financing amount against loans that have been deemed to have experienced a diminution in value.
Removed
If our LIBOR-based borrowings are converted to SOFR, the differences between LIBOR and SOFR, could result in higher interest costs for us, which could have a material adverse effect on our operating results.
Added
As of December 31, 2023, we have not received any margin calls under any of our repurchase agreements. During 2023, there was significant volatility in the banking sector resulting from several bank failures. Substantially all of our cash and cash equivalents currently on deposit with major financial institutions exceed insured limits.
Removed
Although SOFR is the ARRC’s recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in other ways that would result in higher interest costs for us.
Added
Such deposits are redeemable upon demand and are maintained with financial institutions with strong credit profiles and we therefore believe bear minimal risk. 72 Further, we do not and have not had any financing relationships with any of the banks that have recently failed, and thus none of our future fundings are subject to the risk that one of the failed banks will not fund.
Removed
We cannot predict the effect of the decision not to sustain LIBOR, or the potential transition to SOFR or another alternative reference rate as LIBOR’s replacement. Credit Risk Our loans and other investments are also subject to credit risk, including the risk of default.
Added
We seek to manage this risk by diversifying our financing sources across counterparties and financing types and generally obtaining financing from high credit quality institutions.
Removed
Each of the repurchase facilities involves “margin maintenance” provisions, which are designed to allow the repurchase lender to maintain a certain margin of credit enhancement against the loan assets which serve as collateral.
Added
Some of our borrowers may experience delays in the execution of their business plans or changes in market conditions which may impact the performance of the underlying collateral asset, borrower, or sponsor.
Removed
As of December 31, 2022 we have not received any margin calls under any of our repurchase facilities.
Added
Accordingly, this may result in the borrower not meeting certain extension conditions such as minimum debt yield, maximum LTV, and/or the ability of the borrower to purchase replacement interest rate caps.
Removed
Our Manager computes the projected weighted average life of our assets based on the initial and fully extended scheduled maturity dates of loans in our portfolio.
Added
Higher interest rates may also increase the number of our borrowers who may default because, among other things, they may 73 not be able to find replacement financing for our loan. Furthermore, there may be certain instances where, for loans which have been modified, we may not be able to maintain the associated financing on its existing terms.
Added
We may realize losses related to foreclosures or to the restructuring of the loans in our investment portfolio on terms that may be more favorable to borrowers than those underwritten at origination. We seek to manage these risks through our underwriting, loan structuring, financing structuring and asset management processes. 74

Other CMTG 10-K year-over-year comparisons