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

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Paragraph-level year-over-year comparison of Granite Point 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.

+443 added−419 removedSource: 10-K (2024-03-01) vs 10-K (2023-03-02)

Top changes in Granite Point Mortgage Trust Inc.'s 2023 10-K

443 paragraphs added · 419 removed · 304 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeIn addition to our current mix of funding sources, we may use other forms of financing, including additional securitizations and public and private, secured and unsecured, debt issuances by us or our subsidiaries. 3 T a ble of Contents As of December 31, 2022, we had repurchase, asset-specific and secured credit financing facilities in place to finance loans held for investment with an aggregate maximum borrowing capacity of $2.2 billion, or $2.3 billion inclusive of our option to upsize the borrowing capacity of one of our financing facilities.
Biggest changeIn addition to our current mix of funding sources, we may use other forms of financing, including additional securitizations and public and private, secured and unsecured, debt issuances by us or our subsidiaries.
We are committed to creating and supporting a positive work environment and culture where our employees can grow professionally and contribute to the success of our company. Our core values of excellence, responsibility, integrity and respect also guide us in building and maintaining fruitful, long-term relationships with our various internal and external stakeholders, including our employees.
We are committed to creating and supporting a positive work environment and culture where our employees can grow professionally and contribute to the success of the Company. Our core values of excellence, responsibility, integrity and respect also guide us in building and maintaining fruitful, long-term relationships with our various internal and external stakeholders, including our employees.
Diversity, Equity and Inclusion We are dedicated to promoting a work environment that: • is free from discrimination, harassment or retaliation because of race, color, creed, religion, national origin, sex, sexual orientation (including transgender status, gender identity or expression), pregnancy (including childbirth, lactation or related conditions), marital status, disability, public assistance, age, familial status, genetic information, local commissions activity, veteran status, uniformed servicemember status, or any other status protected by federal, state or local laws; • provides fair treatment and mutual respect to all employees; • is inclusive and embraces individual differences; • provides equal employment opportunities based on ability, performance and potential; • informs all team members of their rights and responsibilities with regards to fairness, equity and respect for all aspects of diversity; • considers flexible work practices, benefits and policies to support employees and their changing needs; and • is committed to the attraction, retention and development of a diverse range of talented, energetic and committed people.
Diversity, Equity, Inclusion and Belonging We are dedicated to promoting a work environment that: • is free from discrimination, harassment or retaliation because of race, color, ethnicity, creed, religion, national origin, sex, sexual orientation (including transgender status, gender identity or expression), pregnancy (including childbirth, lactation or related conditions), marital status, disability, public assistance, age, familial status, genetic information, local commissions activity, veteran status, uniformed servicemember status, or any other status protected by federal, state or local laws; • provides fair treatment and mutual respect to all employees; • is inclusive and embraces individual differences; • provides equal employment opportunities based on ability, performance and potential; • informs all team members of their rights and responsibilities with regards to fairness, equity and respect for all aspects of diversity; • considers flexible work practices, benefits and policies to support employees and their changing needs; and • is committed to the attraction, retention and development of a diverse range of talented, energetic and committed people.
Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income or property. See “ Risk Factors - Risks Related to our REIT Status and Certain Other Tax Items ” included in Item 1A of this Annual Report on Form 10-K.
Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income or property. See “ Risk Factors — Risks Related to Our REIT Status and Certain Other Tax Items ” in Item 1A of this Annual Report on Form 10-K.
In addition, all officers and employees annually receive mandatory third-party training on anti-harassment and diversity, equity and inclusion. Topics addressed in diversity, equity and inclusion training have included creating a culture of belonging and addressing unconscious bias.
In addition, all officers and employees annually receive mandatory third-party training on anti-harassment and diversity, equity, inclusion and belonging. Topics addressed in such training have included creating a culture of belonging and addressing unconscious bias.
Human Capital Our team of talented employees is fundamental to our success. As of December 31, 2022, we employed 35 individuals, all of whom are full time and based out of our two primary office locations in New York, New York, and Saint Louis Park, Minnesota.
Human Capital Our team of talented employees is fundamental to our success. As of December 31, 2023, we employed 35 individuals, all of whom are full time and based out of our two primary office locations in New York, New York, and Saint Louis Park, Minnesota.
The Investment Company Act defines voting securities as any security presently entitling the owner, or holder thereof, to vote for the election of directors of a company. We treat entities in which we own at least a majority of the outstanding voting securities as majority-owned subsidiaries for purposes of the 40% test.
The Investment Company Act defines voting securities as any security presently entitling the owner, or holder 6 Table of Contents thereof, to vote for the election of directors of a company. We treat entities in which we own at least a majority of the outstanding voting securities as majority-owned subsidiaries for purposes of the 40% test.
The actual leverage we employ for particular investments will depend upon our assessment of the credit, liquidity, price volatility and other risks of those investments and the financing counterparties, and availability of particular types of financing at the time, as well as the financial covenants under our financing facilities.
The actual leverage we employ for particular investments will depend upon our assessment of the credit, liquidity, price volatility and other risks of those investments and the financing counterparties, and availability of particular types of financing at the time, as well as the financial covenants under 3 Table of Contents our financing facilities.
Our Exchange Act reports filed with, or furnished to, the SEC are also available on the SEC’s website at www.sec.gov . The content of any website referred to in this Annual Report on Form 10-K is not incorporated by reference into this Form 10-K unless expressly noted. 7 T a ble of Contents
Our Exchange Act reports filed with, or furnished to, the SEC are also available on the SEC’s website at www.sec.gov . The content of any website referred to in this Annual Report on Form 10-K is not incorporated by reference into this Form 10-K unless expressly noted. 7 Table of Contents
We also operate our business in a manner that will permit us to maintain our exclusion from registration under the Investment Company Act. We are organized as a holding company and operate our business primarily through various subsidiaries in a single reporting segment that originates, acquires and finances our target investments.
We also operate our business in a manner intended to maintain our exclusion from registration under the Investment Company Act. We are organized as a holding company and operate our business primarily through various subsidiaries in a single reporting segment that originates, acquires and finances our target investments.
As stabilized value may be based on certain assumptions, such as future construction completion, projected re-tenanting, payment of tenant improvement or leasing commissions allowances or free or abated rent periods, or increased tenant occupancies. 2 T a ble of Contents The map and charts below illustrate the geographic distribution and types of properties securing our portfolio as of December 31, 2022: Our Financing Strategy and Leverage We currently finance our business through public and private offerings of our equity and debt securities, asset-backed financings and our outstanding commercial real estate collateralized loan obligations, or CRE CLOs.
As stabilized value may be based on certain assumptions, such as future construction completion, projected re-tenanting, payment of tenant improvement or leasing commissions allowances or free or abated rent periods, or increased tenant occupancies. 2 Table of Contents The map and charts below, weighted by carrying value, illustrate the geographic distribution and types of properties securing our loan portfolio as of December 31, 2023: Our Financing Strategy and Leverage We currently finance our business through public and private offerings of our equity and debt securities, asset-backed financings and our outstanding commercial real estate collateralized loan obligations, or CRE CLOs.
For additional information concerning these competitive risks, see “ Risk Factors - Risks Related to our Lending and Investment Activities - We operate in a competitive market for investment opportunities and competition may limit our ability to originate or acquire desirable investments in our target investments and could also affect the pricing of these securities ” included in Item 1A of this Annual Report on Form 10-K.
For additional information concerning these competitive risks, see “ Risk Factors — Risks Related to our Lending and Investment Activities — We operate in a competitive market for investment opportunities and competition may limit our ability 4 Table of Contents to originate or acquire our target investments and could also affect the pricing of these investments ” in Item 1A of this Annual Report on Form 10-K.
Compensation and Benefits We provide a comprehensive suite of compensation and benefits that includes the following elements, among others, to promote our employees’ well-being: • competitive compensation packages that consist of salaries, cash bonuses, merit increases and stock-based compensation for eligible employees; • company-paid medical and dental insurance benefits for our full-time employees and their families; • savings and investment opportunities, including a 401(k) plan with company contributions and health savings accounts with company contributions; • mental health and wellness offerings, including a gym reimbursement program, free subscriptions to exercise and meditation apps, and an employee assistance program; • generous paid time off, ten company holidays and leave policies, gender neutral parenting leave; and • flexible/hybrid work model, where employees may work up to two days a week remotely.
Compensation and Benefits We provide a comprehensive suite of compensation and benefits that includes the following elements, among others, to promote our employees’ well-being: 5 Table of Contents • competitive compensation packages that consist of salaries, cash bonuses, merit increases and stock-based compensation for eligible employees; • company-paid medical and dental insurance benefits for our full-time employees and their families; • savings and investment opportunities, including a 401(k) plan with company contributions and health savings accounts with company contributions; • mental health and wellness offerings, including a gym reimbursement program, gym discount program, fitness rewards program, free subscriptions to a mental health and mediation app, and an employee assistance program; • generous paid time off, ten company holidays and leave policies, including gender neutral parenting leave; and • flexible/hybrid work model, where employees may work up to two days a week remotely.
We believe that our well-diversified portfolio and flexible investment strategy will allow us to actively adapt to changing market conditions and generate attractive, long-term returns for our stockholders in a variety of environments. 1 T a ble of Contents Our Portfolio As of December 31, 2022, our investment portfolio consisted of 90 commercial real estate loan investments with an aggregate principal balance of $3.4 billion and an additional $0.2 billion of future funding obligations.
We believe that our well-diversified portfolio and flexible investment strategy will allow us to actively adapt to changing market conditions and generate attractive, long-term returns for our stockholders in a variety of environments. 1 Table of Contents Our Loan Portfolio As of December 31, 2023, our loan portfolio consisted of 73 commercial real estate loan investments with an aggregate principal balance of $2.7 billion and an additional $0.2 billion of future funding obligations.
Employee Engagement In the fall of 2022, we developed and implemented a survey to measure employee engagement and satisfaction and to identify any areas where we may improve our work environment or culture. More than 90% of our team members completed this initial engagement survey.
Employee Engagement In the fall of 2022, we developed and implemented an annual survey to measure employee engagement and satisfaction and to identify any areas where we may improve our work environment or culture. More than 90% of our team members have completed this engagement survey each year.
The table below details overall statistics of our portfolio as of December 31, 2022: (dollars in thousands) Type Maximum Loan Commitment Principal Balance Carrying Value Cash Coupon (2) Yield (3) Original Term (Years) Initial LTV (4) Stabilized LTV (5) Senior loans (1) $ 3,577,849 $ 3,348,242 $ 3,254,619 L+/S+3.61% L+/S+4.05% 3.1 66.5 % 63.0 % Subordinated loans 13,764 13,764 13,196 8.00 % 8.11 % 10.0 41.4 % 36.2 % Total/Wtd.
The table below details overall statistics of our portfolio as of December 31, 2023: (dollars in thousands) Type Maximum Loan Commitment Principal Balance Carrying Value Cash Coupon (2) Yield (3) Original Term (Years) Initial LTV (4) Stabilized LTV (5) Senior loans (1) $ 2,874,370 $ 2,713,672 $ 2,570,677 S+3.75% S+4.03% 3.1 66.8 % 63.7 % Subordinated loans 13,507 13,507 13,148 8.00 % 8.11 % 10.0 41.4 % 36.2 % Total/Wtd.
We believe we are not an investment company under 6 T a ble of Contents Section 3(a)(1)(A) of the Investment Company Act because we do not engage primarily, or hold ourselves out as being engaged primarily, in the business of investing, reinvesting or trading in securities.
We believe we are not an investment company under Section 3(a)(1)(A) of the Investment Company Act because we do not engage primarily, or hold ourselves out as being engaged primarily, in the business of investing, reinvesting or trading in securities. Rather, through our wholly owned or majority-owned subsidiaries, we are primarily engaged in non-investment company business related to real estate.
Avg. $ 3,591,613 $ 3,362,006 $ 3,267,815 L+/S+3.61% L+/S+4.05% 3.1 66.4 % 62.9 % ____________________ (1) “Senior” means a loan primarily secured by a first priority lien on commercial real property and related personal property and also includes, when applicable, any companion subordinate loans. (2) Cash coupon does not include origination or exit fees.
Avg. $ 2,887,877 $ 2,727,179 $ 2,583,825 S+3.75% S+4.03% 3.2 66.7 % 63.6 % ____________________ (1) “Senior” means a loan primarily secured by a first priority lien on commercial real property and related personal property and also includes, when applicable, any companion subordinate loans. (2) Cash coupon does not include origination or exit fees.
We strive to provide our employees with a safe and healthy work environment free from hazards, violence and threatening behavior. We have policies against violent conduct, firearms, drugs and alcohol, and tobacco in the workplace. All personnel have an obligation to report all workplace accidents, injuries and unsafe equipment, practices or conditions.
We have policies against violent conduct, firearms, drugs and alcohol, and tobacco in the workplace. All personnel have an obligation to report all workplace accidents, injuries and unsafe equipment, practices or conditions.
As of December 31, 2022, 98.6% of our portfolio by carrying value earned a floating rate of interest.
As of December 31, 2023, 98.3% of our loan portfolio by principal balance earned a floating rate of interest.
We also finance pools of commercial real estate loans through CRE CLOs, which are consolidated on our financial statements. As of December 31, 2022, the outstanding amount due on securitized debt obligations was $1.1 billion. We are not required to maintain any particular debt-to-equity leverage ratio.
As of December 31, 2023, the outstanding amount due on securitized debt obligations was $1.0 billion. We are not required to maintain any particular debt-to-equity leverage ratio.
However, we may not be able to achieve our business goals or expectations due to the competitive risks that we face.
Additionally, we believe that our experience enables us to compete more effectively and generate attractive investment opportunities for our portfolio. However, we may not be able to achieve our business goals or expectations due to the competitive risks that we face.
See “ Risk Factors - Risks Related to Our Company and Structure - Maintaining our exclusions from registration as an investment company under the Investment Company Act imposes limits on our operations ” included in Item 1A of this Annual Report on Form 10-K. Additional Information Our website can be found at www.gpmtreit.com .
See “ Risk Factors - Risks Related to Our Company and Structure - Maintaining our exclusions from registration as an investment company under the Investment Company Act imposes limits on our operations .
Furthermore, competition for 4 T a ble of Contents originations of and investments in our target investments may lead to decreasing yields, which may further limit our ability to generate desired returns.
Furthermore, competition for originations of and investments in our target investments may lead to decreasing yields, which may further limit our ability to generate desired returns. We believe our industry experience and relationships provide us with a competitive advantage and help us assess risks and determine appropriate risk and return parameters for our target investments.
We also support our employees’ development in their roles through annual performance reviews, and we encourage regular dialogue and interactions between employees and their supervisor and senior leadership. 5 T a ble of Contents Health, Safety and Security in the Workplace We have responded to the health threats posed by COVID-19 by adopting safety measures, including thoughtful and flexible remote-working and return-to-office policies, enhanced office cleaning and air filtration measures, and installation of additional physical barriers within shared spaces.
We also support our employees’ development in their roles through annual performance reviews, and we encourage regular dialogue and interactions between employees and their supervisor and senior leadership.
Removed
We believe our industry experience and relationships provide us with a competitive advantage and help us assess risks and determine appropriate risk and return parameters for our target investments. Additionally, we believe that our experience enables us to compete more effectively and generate attractive investment opportunities for our portfolio.
Added
As of December 31, 2023, we had repurchase and secured credit financing facilities in place to finance loans held for investment and our one real estate owned, or REO, asset with an aggregate maximum borrowing capacity of $1.9 billion. We also finance pools of commercial real estate loans through CRE CLOs, which are consolidated on our financial statements.
Removed
The Overall Sentiment Score, as measured by the survey provider, was Positive (as compared to a score of either Neutral or Negative). We intend to repeat this engagement survey annually.
Added
More than 90% of respondents to the 2023 survey indicated that they Strongly Agree or Agree that they feel like they are part of a team, they have confidence in the leadership of the Company, and there is good interdepartmental cooperation.
Removed
The fall 2022 survey responses provide us with baseline data that we can track and compare over time, and we plan to use the detailed information gathered to implement any appropriate recommendations and strategies.
Added
Health, Safety and Security in the Workplace We monitor external threats, such as public health risks or civil unrest, and adopt safety measures or otherwise modify our policies and practices as needed to protect our employees. We strive to provide our employees with a safe and healthy work environment free from hazards, violence and threatening behavior.
Removed
Rather, through our wholly owned or majority-owned subsidiaries, we are primarily engaged in non-investment company business related to real estate.
Added
Investment returns may be reduced if we are required to register as an investment company under the Investment Company Act” in Item 1A of this Annual Report on Form 10-K. Additional Information Our website can be found at www.gpmtreit.com .

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSee “— Risks Related to Our REIT Status and Certain Other Tax Items—Our charter provides that any individual (including certain entities treated as individuals for this purpose) is prohibited from owning more than 9.8% of our common stock or of our capital stock, and attempts to acquire our common stock or any of our capital stock in excess of this 9.8% limit would not be effective without a prior exemption from those prohibitions by our board of directors .” Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interests.
Biggest changeSee “ — Risks Related to Our REIT Status and Certain Other Tax Items — Ownership limitations may restrict change of control or business combination opportunities. ” Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interests.
We may significantly increase the amount of leverage we utilize at any time without approval of our board of directors. In addition, we may leverage individual assets at substantially higher levels.
We may significantly increase the amount of leverage we utilize at any time without the approval of our board of directors. In addition, we may leverage individual assets at substantially higher levels.
Thus, avoiding registration under the Investment Company Act may hinder our ability to operate solely on the basis of maximizing profits. We determine whether an entity is a majority-owned subsidiary of our company.
Thus, avoiding registration under the Investment Company Act may hinder our ability to operate solely on the basis of maximizing profits. We determine whether an entity is a majority-owned subsidiary of the Company.
The market price and liquidity of the market for shares of our common stock has been and may in the future be significantly affected by numerous factors, including the risk factors described in this Item 1A - “ Risk Factors, ” some of which are beyond our control and may not be directly related to our operating performance.
The market price and liquidity of the market for shares of our common stock has been and may in the future be significantly affected by numerous factors, including the risk factors described “ Risk Factors ” in this Item 1A, some of which are beyond our control and may not be directly related to our operating performance.
These requirements make it more difficult to change our board of directors by removing and replacing directors and may prevent a change in control of our company that is in the best interests of our stockholders.
These requirements make it more difficult to change our board of directors by removing and replacing directors and may prevent a change in control of the Company that is in the best interests of our stockholders.
As a result of any high levels of concentration, any adverse economic, political, climate-related or other condition, such as the increased frequency or intensity of adverse weather and natural disasters associated with global climate change, that disproportionately affects those geographic areas or asset classes could have a magnified adverse effect on our results of operations and financial condition, and the value of our stockholders’ investments could vary more widely than if we invested in a more diverse portfolio of loans.
As a result of any high levels of concentration, any adverse economic, political, social, climate-related or other condition, such as the increased frequency or intensity of adverse weather and natural disasters associated with global climate change, that disproportionately affects those geographic areas or asset classes could have a magnified adverse effect on our results of operations and financial condition, and the value of our stockholders’ investments could vary more widely than if we invested in a more diverse portfolio of loans.
Such governmental, investor and societal attention to ESG matters, including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor and risk oversight, could expand the nature, scope, and complexity of matters that we are required to manage, assess and report and could negatively impact the market price of our securities.
Such governmental, investor and societal attention to ESG matters, including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor and risk oversight, could expand the nature, scope, and complexity of matters that we are required to manage, assess and report, which could negatively impact the market price of our securities.
We cannot predict the degree to which economic conditions generally, and the conditions for real estate debt investing in particular, will improve or decline. Any declines in the performance of the U.S. and global economies or in the real estate debt markets could have a material adverse effect on our business, financial condition, and results of operations.
We cannot predict the degree to which economic conditions generally, and the conditions for real estate debt investing in particular, will improve or decline. Any future declines in the performance of the U.S. and global economies or in the real estate debt markets could have a material adverse effect on our business, financial condition, and results of operations.
Our success depends on our ability to retain our senior management and other key members of our team and to recruit additional qualified personnel as needed. Many members of our senior management team have a history of working together that predates our company’s inception, and any loss of talent from that group could be disruptive to their effective functioning.
Our success depends on our ability to retain our senior management and other key members of our team and to recruit additional qualified personnel as needed. Many members of our senior management team have a history of working together that predates the Company’s inception, and any loss of talent from that group could be disruptive to their effective functioning.
We may need to periodically access the capital markets to, among other things, raise cash to fund new loans and investments. Unfavorable economic conditions or capital market conditions may increase our funding costs, limit our access to the capital markets or could result in a decision by our potential lenders not to extend credit.
We may need to periodically access the capital markets to, among other things, raise cash to fund new loans and investments. Unfavorable economic conditions or capital market conditions may increase our funding costs, limit our access to the capital markets or result in a decision by our potential lenders not to extend credit.
Real estate valuation is inherently subjective and uncertain. The valuation of real estate, and therefore the valuation of any collateral underlying our loans, is inherently subjective due to, among other factors, the individual nature of each property, its location, the expected future rental revenues from that particular property and the valuation methodology adopted.
The valuation of real estate, and therefore the valuation of any collateral underlying our loans, is inherently subjective due to, among other factors, the individual nature of each property, its location, the expected future rental revenues from that particular property and the valuation methodology adopted.
Although these transactions are intended to reduce our exposure to various risks, hedging may fail to adequately protect or could adversely affect us because, among other things: • hedging can be expensive, particularly during periods of volatile or rapidly changing interest rates; • available hedges may not correspond directly with the risks for which protection is sought; • the duration of the hedge may not match the duration of the related liability; • the amount of income that a REIT may earn from certain hedging transactions (other than through our TRS) is limited by U.S. federal income tax provisions governing REITs; • the credit quality of a hedging counterparty may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and • the hedging counterparty may default on its obligations.
Although these transactions are intended to reduce our exposure to various risks, hedging may fail to adequately protect or could adversely affect us because, among other things: • hedging can be expensive, particularly during periods of volatile or rapidly changing interest rates; • available hedges may not correspond directly with the risks for which protection is sought; • the duration of the hedge may not match the duration of the related liability; 21 Table of Contents • the amount of income that a REIT may earn from certain hedging transactions (other than through our TRS) is limited by U.S. federal income tax provisions governing REITs; • the credit quality of a hedging counterparty may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and • the hedging counterparty may default on its obligations.
In recent years, a number of judicial decisions have upheld the right of borrowers to sue lending institutions on the basis of various evolving legal theories, collectively termed “lender liability.” Generally, lender liability is founded on the premise that a lender has either violated a duty, whether implied or contractual, of good faith and fair dealing owed to the borrower or has assumed a degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or stockholders.
A number of judicial decisions have upheld the right of borrowers to sue lending institutions on the basis of various evolving legal theories, collectively termed “lender liability.” Generally, lender liability is founded on the premise that a lender has either violated a duty, whether implied or contractual, of good faith and fair dealing owed to the borrower or has assumed a degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or stockholders.
As a result, our ability to vary our portfolio in response to changes in economic or other conditions may be relatively limited, which could adversely affect our results of operations and financial condition.
As a result, our ability to vary our portfolio in response to changes in economic or other conditions may be limited, which could adversely affect our results of operations and financial condition.
Cyberattacks and other security threats could originate from a wide variety of sources, including cybercriminals, nation state hackers, hacktivists and other outside parties. Cyberattacks and other security threats could also originate from the malicious or accidental acts of insiders.
Cyberattacks and other security threats could originate from a wide variety of external sources, including cybercriminals, nation state hackers, hacktivists and other outside parties. Cyberattacks and other security threats could also originate from the malicious or accidental acts of insiders.
For further discussion of the risks related to capital deployment, see “Risk Factors-Risks Related to Our Lending and Investment Activities- Difficulty or delays in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to stockholders to suffer .” Our existing loan investments often contain call protection provisions that require a certain minimum amount of interest due to us regardless of when the loan is repaid.
For further discussion of the risks related to capital deployment, see “ — Risks Related to Our Lending and Investment Activities — Difficulty or delays in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to stockholders to suffer .” Our existing loan investments often contain call protection provisions that require a certain minimum amount of interest due to us regardless of when the loan is repaid.
Selecting and evaluating material due diligence matters, including ESG factors, is subjective by nature, and there is no guarantee that the criteria utilized or judgment exercised by us or a third-party specialist (if any) will reflect the beliefs, values, internal policies or preferred practices of any particular investor or align with the beliefs or values or preferred practices of other commercial real estate debt investors or with market trends.
In addition, selecting and evaluating material due diligence matters, including ESG factors, is subjective by nature, and there is no guarantee that the criteria utilized or judgment exercised by us or a third-party specialist (if any) will reflect the beliefs, values, internal policies or preferred practices of any particular investor or align with the beliefs or values or preferred practices of other commercial real estate debt investors or with market trends.
Our information and technology systems, as well as those of other related parties, such as service providers, may be vulnerable to damage or interruption from cybersecurity breaches, computer viruses or other malicious code, network failures, computer and telecommunication failures, infiltration by unauthorized persons and other security breaches, usage errors by their respective professionals or service providers, power, communications or other service outages and catastrophic events such as fires, tornadoes, floods, hurricanes and earthquakes.
For example, our information and technology systems, as well as those of other related parties, such as service providers, may be vulnerable to damage or interruption from cybersecurity breaches, computer viruses or other malicious code, network failures, computer and telecommunication failures, infiltration by unauthorized persons and other security breaches, usage errors by their respective professionals or service providers, power, communications or other service outages and catastrophic events such as fires, tornadoes, floods, hurricanes and earthquakes.
For the purpose of preserving our qualification as a REIT for federal income tax purposes, among other purposes, our charter provides that beneficial or constructive ownership by any individual (including certain entities treated as individuals for this purpose) of more than a certain percentage (currently 9.8%) in value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock, or 9.8% in value of our outstanding capital stock is prohibited, which we refer to as the “ownership limits.” The constructive ownership rules under the Code and our charter are complex and may cause shares of our outstanding common stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual.
For the purpose of preserving our qualification as a REIT for federal income tax purposes, among other purposes, our charter provides that beneficial or constructive ownership by any individual (including certain entities treated as individuals for this purpose) of more than a certain percentage (currently 9.8%) in value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock, or 9.8% in value of our outstanding capital stock is prohibited, which we refer to as the “ownership limits.” The constructive ownership rules under the Code and our charter are 30 Table of Contents complex and may cause shares of our outstanding common stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual.
Certain categories of stockholders such as foreign stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain tax-exempt stockholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to “excess inclusion income.” In addition, to the extent that our 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 income, we may incur a corporate level tax on a portion of our income from the taxable mortgage pool.
Certain categories of stockholders such as foreign stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain tax-exempt stockholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is 32 Table of Contents attributable to “excess inclusion income.” In addition, to the extent that our 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 income, we may incur a corporate level tax on a portion of our income from the taxable mortgage pool.
Additionally, the size of our employee base (35 employees as of December 31, 2022, inclusive of the senior management group) means that we have limited overlap in roles such that any degree of attrition could challenge operations. Many of these roles are highly specialized and specific to our industry, making them difficult to source.
Additionally, the size of our employee base (35 employees as of December 31, 2023, inclusive of the senior management group) means that we have limited overlap in roles such that any degree of attrition could challenge operations. Many of these roles are highly specialized and specific to our industry, making them difficult to source.
Our ability to fund our loans and investments may be impacted by our ability to secure bank credit facilities, warehouse facilities and structured financing arrangements, public and private debt issuances (including through securitizations) and derivative instruments, in addition to transaction or asset specific funding arrangements and additional repurchase agreements on acceptable terms.
Our ability to fund our loans and investments may be impacted by our ability to secure bank credit facilities, warehouse facilities and structured financing arrangements, public and private debt issuances (including through securitizations) and derivative instruments, in addition to transaction or asset-specific funding arrangements and additional repurchase agreements on acceptable terms or at all.
In addition, such systems are subject to cyberattacks, including ransomware attacks and social engineering, such as phishing, smishing and vishing, which will likely continue to increase in sophistication and frequency in the future. Moreover, remote working, including pursuant to our hybrid work model, may be less secure and more susceptible to cyberattacks.
In addition, such systems are subject to cyberattacks, including ransomware attacks and social engineering, such as phishing, smishing and vishing, which are continually evolving and will likely continue to increase in sophistication and frequency in the future. Moreover, remote working, including pursuant to our hybrid work model, may be less secure and more susceptible to cyberattacks.
As a result, the valuations of the real estate assets against which we will make or acquire loans are subject to a large degree of uncertainty and are made on the basis of assumptions and methodologies that may not prove to be accurate, particularly in periods of volatility, macroeconomic and local economic uncertainty, disrupted supply chains effecting the timing of delivery and cost of materials, inflationary pressures, low transaction flow or restricted debt availability.
As a result, the valuations of the real estate assets against which we will make or acquire loans are subject to a large 10 Table of Contents degree of uncertainty and are made on the basis of assumptions and methodologies that may not prove to be accurate, particularly in periods of volatility, macroeconomic and local economic uncertainty, disrupted supply chains effecting the timing of delivery and cost of materials, inflationary pressures, low transaction flow or restricted debt availability.
Breaches in security, whether malicious in nature or through inadvertent transmittal or other loss of data, could potentially jeopardize our employees’, investors’ or counterparties’ confidential, proprietary and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our employees’, investors’, counterparties’ or third parties’ operations, which could result in significant losses, increased costs, disruption of our business, liability to our investors and other counterparties, regulatory intervention or reputational damage.
Breaches in security, whether malicious in nature or through inadvertent transmittal or other loss of data, could potentially jeopardize our 23 Table of Contents employees’, investors’ or counterparties’ confidential, proprietary and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our employees’, investors’, counterparties’ or third-parties’ operations, which could result in significant losses, increased costs, disruption of our business, liability to our investors and other counterparties, regulatory intervention or reputational damage.
The “taxable mortgage pool” rules may increase the taxes that we or our stockholders may incur, and, therefore, may limit the manner in which we will affect future securitizations. Securitizations could result in the creation of taxable mortgage pools for federal income tax purposes.
The “taxable mortgage pool” rules may increase the taxes that we or our stockholders may incur, and, therefore, may limit the manner in which we will effect future securitizations. Securitizations could result in the creation of taxable mortgage pools for federal income tax purposes.
Issuance of stock without stockholder approval. Our charter authorizes our board of directors, without stockholder approval, to authorize the issuance of up to 450,000,000 shares of common stock and up to 50,000,000 shares of preferred stock. As of December 31, 2022, 11,500,000 shares of preferred stock are classified as 7.00% Series A Preferred Stock.
Issuance of stock without stockholder approval. Our charter authorizes our board of directors, without stockholder approval, to authorize the issuance of up to 450,000,000 shares of common stock and up to 50,000,000 shares of preferred stock. As of December 31, 2023, 11,500,000 shares of preferred stock are classified as 7.00% Series A Preferred Stock.
We are generally required to distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain, each year for us to qualify as a REIT under the Code, which requirement we currently intend to satisfy through quarterly distributions of at least 90% of our net taxable income in such year, subject to certain adjustments.
We are generally required to distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain, each year for us to qualify as a REIT under the Code, 28 Table of Contents which requirement we currently intend to satisfy through quarterly distributions of at least 90% of our net taxable income in such year, subject to certain adjustments.
Our substantial amount of debt could subject us to many risks that, if realized, would materially and adversely affect us, including the risk that: • our cash flow from operations may be insufficient to make required payments of principal of and interest on our debt, or we may fail to comply with covenants or breach a representation contained in our debt agreements, which in each case may result in (a) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision), which we then may be unable to repay from internal funds or to refinance on favorable terms, or at all, (b) our inability to borrow undrawn amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements, which would result in a decrease in our liquidity, and/or (c) the loss of some or all of our collateral assets to foreclosure or sale; • our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will increase in an amount sufficient to offset the higher financing costs; • we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities, stockholder distributions or other purposes; and • we may not be able to refinance any debt that matures prior to the maturity (or realization) of an underlying investment it was used to finance on favorable terms or at all.
Our substantial amount of debt could subject us to many risks that, if realized, would materially and adversely affect us, including the risk that: • our cash flow from operations may be insufficient to make required payments of principal of and interest on our debt, or we may fail to comply with covenants or breach a representation contained in our debt agreements, which in each case, if we are unable to obtain amendments or waivers of such convenants or representations from financing counterparties, may result in (a) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision), which we then may be unable to repay from internal funds or to refinance on favorable terms, or at all, (b) our inability to borrow undrawn amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements, which would result in a decrease in our liquidity, and/or (c) the loss of some or all of our collateral assets to foreclosure or sale; • our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will increase in an amount sufficient to offset the higher financing costs; • we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities, stockholder dividends or other purposes; and • we may not be able to refinance any debt that matures prior to the maturity (or realization) of an underlying investment it was used to finance on favorable terms or at all.
We are subject to the Maryland Business Combination Act, which, subject to limitations, prohibits certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our then outstanding voting shares or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding voting shares) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an 27 T a ble of Contents interested stockholder and, thereafter, imposes special stockholder voting requirements to approve these combinations unless the consideration being received by common stockholders satisfies certain conditions.
We are subject to the Maryland Business Combination Act, which, subject to limitations, prohibits certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our then outstanding voting shares or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding voting shares) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder and, thereafter, imposes special stockholder voting requirements to approve these combinations unless the consideration being received by common stockholders satisfies certain conditions.
Compliance with the Investment Company Act would, accordingly, limit our ability to make certain investments and require us to significantly restructure our business plan, which could materially adversely affect our ability to pay distributions to our stockholders.
Compliance with the Investment Company Act would, accordingly, limit our ability to make certain investments and require us to significantly restructure our business plan, which could materially adversely affect our ability to pay dividends to our stockholders.
Obtaining and maintaining licenses cause us to incur expenses and failure to be properly licensed under state law or otherwise may have a material adverse effect on us and our operations. 24 T a ble of Contents Changes in laws or regulations governing our operations, changes in the interpretation thereof or newly enacted laws or regulations (including laws and regulations having the effect of exempting REITs from the Investment Company Act) and any failure by us to comply with these laws or regulations, could require changes to certain of our business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us, subject us to increased competition or otherwise adversely affect our business.
Obtaining and maintaining licenses cause us to incur expenses and failure to be properly licensed under state law or otherwise may have a material adverse effect on us and our operations. 25 Table of Contents Changes in laws or regulations governing our operations, changes in the interpretation thereof or newly enacted laws or regulations (including laws and regulations having the effect of exempting REITs from the Investment Company Act) and any failure by us to comply with these laws or regulations, could require changes to certain of our business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us, subject us to increased competition or otherwise adversely affect our business.
Additionally, we will be subject to a 4% nondeductible excise tax on any amount by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from previous years.
Additionally, we will be subject to a 4% nondeductible excise tax on any amount by which distributions paid by us in any 31 Table of Contents calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from previous years.
We are, and in the future may also be, subject to cross-default and acceleration rights in our other debt arrangements. Further, this could also make it difficult for us to satisfy the distribution requirements necessary to maintain our qualification as a REIT for U.S. federal income tax purposes.
We are, and in the future may also be, subject to cross-default and acceleration rights in our other debt arrangements. Further, these covenants could also make it difficult for us to satisfy the distribution requirements necessary to maintain our qualification as a REIT for U.S. federal income tax purposes.
The discovery of material environmental liabilities attached to such properties could have a material adverse effect on our results of operations and financial condition and our ability to make distributions to our stockholders. The properties underlying our investments may be subject to other unknown liabilities that could adversely affect the value of these properties and, as a result, our investments.
The discovery of material environmental liabilities attached to such properties could have a material adverse effect on our results of operations and financial condition and our ability to make distributions to our stockholders. 12 Table of Contents The properties underlying our investments may be subject to other unknown liabilities that could adversely affect the value of these properties and, as a result, our investments.
Any investments in subordinated debt and mezzanine tranches of a borrower’s capital structure and our remedies with respect thereto, including the ability to foreclose on any collateral securing such investments, are subject to the rights of any senior creditors and, to the extent applicable, contractual intercreditor and/or participation agreement provisions.
Any investments in subordinated debt and mezzanine tranches of a borrower’s capital structure and our ability to exert control or exercise remedies with respect thereto, including the ability to foreclose on any collateral securing such investments, are subject to the rights of any senior creditors and, to the extent applicable, contractual intercreditor and/or participation agreement provisions.
The Investment Company Act defines voting securities as any security presently entitling the owner or holder thereof to vote for the election of directors of a company. We treat entities in which we own at least a majority of the outstanding voting securities as majority-owned subsidiaries for purposes of the 40% test.
The Investment Company Act defines voting securities as any security presently entitling the owner or holder thereof to vote for the election of directors of a 24 Table of Contents company. We treat entities in which we own at least a majority of the outstanding voting securities as majority-owned subsidiaries for purposes of the 40% test.
Risk Factors SUMMARY OF RISK FACTORS • Fluctuations in interest rates and credit spreads could reduce our ability to generate income on our loans and other investments, which could lead to a significant decrease in our results of operations, our cash flows and the market value of our investments, and ultimately limit our ability to pay distributions to our stockholders. • Adverse changes in the real estate and real estate capital markets could negatively impact our performance by making it more difficult for our borrowers to satisfy their debt payment obligations, which could result in losses on our loan investments and/or make it more difficult for us to generate consistent or attractive risk-adjusted returns. • Our results of operations, financial condition and business could be materially adversely affected if we experience difficulty accessing financing or raising capital (including due to a significant dislocation in or shut-down of the capital markets), a reduction in the yield on our investments, an increase in the cost of our financing, an inability to borrow incremental amounts or an obligation to repay amounts under our financing arrangements or borrower defaults. • Events giving rise to increases in our current expected credit loss reserve, including the impact of the current economic environment, have had an adverse effect on our business and results of operations and could in the future have a material adverse effect on our business, financial condition and results of operations. • Our lending and investment activities subject us to the general political, economic, capital markets, competitive and other conditions, including with respect to the long-term macroeconomic effects of the COVID-19 pandemic and other events that markedly impact financial markets. • Adverse legislative or regulatory developments, including with respect to tax laws, securities laws and the laws governing financial and lending institutions, could increase our cost of doing business and/or reduce our operating flexibility and the price of our common stock. • Acts of God, such as hurricanes, earthquakes and other natural disasters, including climate change-related risks, acts of war and/or terrorism, pandemics or outbreaks of infectious disease, and other events that can markedly impact financial markets, may cause unanticipated and uninsured performance declines and/or losses to us or the owners and operators of the real estate securing our investments. • The economic impact of escalating global trade tensions, including those related to the conflict between Russia and Ukraine, and the ensuing adoption or expansion of economic sanctions or trade restrictions, could adversely affect the real estate securing our investments. • Deterioration in the performance of properties securing our investments may cause deterioration in the performance of our investments, instances of default or foreclosure on such properties and, potentially, principal losses to us. • Adverse developments in the availability of desirable investment opportunities whether they are due to competition, regulation or otherwise, could adversely affect our results of operations. • Difficulty or delays in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to stockholders to suffer. • Increased competition from entities engaged in mortgage lending and/or investing in our target assets may limit our ability to originate or acquire desirable loans and investments, and could also affect the yields on these assets and have a material adverse effect on our business, financial condition and results of operations. • If we do not maintain our qualification as a REIT, we will be subject to tax as a regular corporation and could face a substantial tax liability.
Risk Factors SUMMARY OF RISK FACTORS • Fluctuations in interest rates and credit spreads could reduce our ability to generate income on our loans and other investments, which could lead to a significant decrease in our results of operations, our cash flows and the market value of our investments, and ultimately limit our ability to pay distributions to our stockholders. • Adverse changes in the real estate and real estate capital markets could negatively impact our performance by making it more difficult for our borrowers to satisfy their debt payment obligations, which could result in losses on our loan investments and/or make it more difficult for us to generate consistent or attractive risk-adjusted returns. • Our results of operations, financial condition and business could be materially adversely affected if we experience difficulty accessing financing or raising capital (including due to a significant dislocation in or shut-down of the capital markets), a reduction in the yield on our investments, an increase in the cost of our financing, an inability to borrow incremental amounts or an obligation to repay amounts under our financing arrangements or borrower defaults. • Events giving rise to increases in our current expected credit loss reserve, including the impact of the current economic environment, have had an adverse effect on our business and results of operations and could in the future have a material adverse effect on our business, financial condition and results of operations. • Our lending and investment activities subject us to the general political, economic, capital markets, societal, competitive and other conditions that markedly impact financial markets, such as reduced demand for office properties as a result of remote working arrangements that allow work from remote locations other than an employer’s office premises. • Adverse legislative or regulatory developments, including with respect to tax laws, securities laws and the laws governing financial and lending institutions, could increase our cost of doing business and/or reduce our operating flexibility and the price of our common stock. • Acts of God, such as hurricanes, earthquakes and other natural disasters, including climate change-related risks, acts of war and/or terrorism, pandemics or outbreaks of infectious disease, and other events that can markedly impact financial markets, may cause unanticipated and uninsured performance declines and/or losses to us or the owners and operators of the real estate securing our investments. • The economic impact of escalating global trade tensions, including those related to the conflict between Russia and Ukraine, and the ensuing adoption or expansion of economic sanctions or trade restrictions, could adversely affect the real estate securing our investments. • Deterioration in the performance of properties securing our investments may cause deterioration in the performance of our investments, instances of default or foreclosure on such properties and, potentially, principal losses to us. • Adverse developments in the availability of desirable investment opportunities whether they are due to competition, regulation or otherwise, could adversely affect our results of operations. • Difficulty or delays in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to stockholders to suffer. • Increased competition from entities engaged in mortgage lending and/or investing in our target assets may limit our ability to originate or acquire desirable loans and investments, and could also affect the yields on these assets and have a material adverse effect on our business, financial condition and results of operations. • If we do not maintain our qualification as a REIT, we will be subject to tax as a regular corporation and could face a substantial tax liability.
If the market in which the asset is located fails to improve according to the borrower’s projections, or if the borrower fails to improve the quality of the asset’s management and/or the value of the asset or stabilize the property, the borrower may not be able to satisfy the transitional loan through a sale of the property or conventional financing, and we bear the risk of loss of principal and non-payment of interest and fees.
If the borrower’s assessment of the asset as undervalued is inaccurate, or if the market in which the asset is located fails to improve according to the borrower’s projections, or if the borrower fails to improve the quality of the asset’s management and/or the value of the asset or stabilize the property, the borrower may not be able to satisfy the transitional loan through a sale of the property or conventional financing, and we bear the risk of loss of principal and non-payment of interest and fees.
The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior to the time that an interested stockholder becomes an interested stockholder. We are also subject to the Maryland Control Share Acquisition Act.
The statute permits various exemptions 27 Table of Contents from its provisions, including business combinations that are exempted by the board of directors prior to the time that an interested stockholder becomes an interested stockholder. We are also subject to the Maryland Control Share Acquisition Act.
If such renovation is not completed in a timely 13 T a ble of Contents manner, or if costs are greater than expected, the borrower may experience a prolonged reduction of net operating income and may not be able to make payments on our investment on a timely basis or at all, which could result in significant losses.
If such renovation is not completed in a timely manner, or if costs are greater than expected, the borrower may experience a prolonged reduction of net operating income and may not be able to make payments on our investment on a timely basis or at all, which could result in significant losses.
Significant losses related to such loans or investments could adversely affect our results of operations and financial condition. Investments in subordinated debt involve greater credit risk of default than the senior classes of the issue or series.
Significant losses related to such loans or investments could adversely affect our results of operations and financial condition. 17 Table of Contents Investments in subordinated debt involve greater credit risk of default than the senior classes of the issue or series.
There can be no assurance that the loan modifications we effected will be successful or that (i) we will be able to identify and implement successful restructuring programs and improvements with respect to any other distressed loans or investments we may have from time to time, or (ii) we have sufficient resources to implement such programs and improvements in times of widespread market challenges.
There can be no assurance that any of the loan modifications and restructurings we have effected will be successful or that (i) we will be able to identify and implement successful modifications and/or restructurings with respect to any other distressed loans or investments we may have from time to time, or (ii) we have sufficient resources to implement such modifications and/or restructurings in times of widespread market challenges.
For us to qualify as a REIT under the Code, not more than 50% of the value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals (including certain entities treated as individuals for this purpose) during the 30 T a ble of Contents last half of a taxable year.
For us to qualify as a REIT under the Code, not more than 50% of the value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals (including certain entities treated as individuals for this purpose) during the last half of a taxable year.
In the event of the bankruptcy of a borrower, the loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court) and the lien securing the 10 T a ble of Contents loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
In the event of the bankruptcy of a borrower, the loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court) and the lien securing the loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
For example, gain from the sale of properties that are “dealer” properties sold by a REIT (a “prohibited transaction” under the Code) will be subject to a 100% tax. Also, we may not make sufficient distributions to avoid excise taxes 29 T a ble of Contents applicable to REITs.
For example, gain from the sale of properties that are “dealer” properties sold by a REIT (a “prohibited transaction” under the Code) will be subject to a 100% tax. Also, we may not make sufficient distributions to avoid excise taxes applicable to REITs.
The percentage of leverage we employ varies depending on our available capital, our ability to obtain and access financing arrangements with lenders, the type of asset we are funding, whether the financing is recourse or nonrecourse, debt restrictions contained in those financing arrangements and the lenders’ and rating 18 T a ble of Contents agencies’ estimate of the stability of our investment portfolio’s cash flow.
The percentage of leverage we employ varies depending on our available capital, our ability to obtain and access financing arrangements with lenders, the type of asset we are funding, whether the financing is recourse or nonrecourse, debt restrictions contained in those financing arrangements and the lenders’ and rating agencies’ estimate of the stability of our investment portfolio’s cash flow.
“Qualifying” real estate assets for this purpose include mortgage loans, certain B-notes and certain mezzanine loans that satisfy various conditions as set forth in SEC staff no-action letters and other guidance, and other assets that the SEC staff in various no-action letters and other guidance has determined are the functional equivalent 23 T a ble of Contents of senior mortgage loans for the purposes of the Investment Company Act.
“Qualifying” real estate assets for this purpose include mortgage loans, certain B-notes and certain mezzanine loans that satisfy various conditions as set forth in SEC staff no-action letters and other guidance, and other assets that the SEC staff in various no-action letters and other guidance has determined are the functional equivalent of senior mortgage loans for the purposes of the Investment Company Act.
Moreover, we may acquire distressed loans or other debt investments that require subsequent modification by agreement with the borrower. If the amendments to the outstanding debt are “significant modifications” under applicable Treasury 32 T a ble of Contents regulations, the modified debt may be considered to have been reissued to us in a debt-for-debt taxable exchange with the borrower.
Moreover, we may acquire distressed loans or other debt investments that require subsequent modification by agreement with the borrower. If the amendments to the outstanding debt are “significant modifications” under applicable Treasury regulations, the modified debt may be considered to have been reissued to us in a debt-for-debt taxable exchange with the borrower.
Climate change and climate change-related regulation may adversely affect our business and financial results and damage our reputation. There has been increasing awareness of severe weather and other climate events outside of the historical norm as well as increasing concern from government agencies about the effects of climate change on the environment.
Risks associated with climate change may adversely affect our business and financial results and damage our reputation. There has been increasing awareness of severe weather and other climate events outside of the historical norm as well as increasing concern from government agencies about the effects of climate change on the environment.
Any such increases would also increase our borrowers’ interest payments and, for certain borrowers, may lead to defaults and losses to us. Such increases could also adversely affect commercial real estate property values.
Any such increases would also increase our borrowers’ interest payments and, 18 Table of Contents for certain borrowers, may lead to defaults and losses to us. Such increases could also adversely affect commercial real estate property values.
There can be no assurances that our credit ratings will not be downgraded in the future, whether as a result of deteriorating general economic conditions, failure to successfully implement our operating strategy or the adverse impact on our results of operations or liquidity position of any of the above, or otherwise.
There can be no assurances that the credit ratings of our corporate debt or the notes issued in our securitization transactions will not be downgraded in the future, whether as a result of deteriorating general economic conditions, failure to successfully implement our operating strategy or the adverse impact on our results of operations or liquidity position of any of the above, or otherwise.
Declining real estate values will likely reduce the level of new 9 T a ble of Contents mortgage and other real estate-related loan originations since borrowers often use appreciation in the value of their existing properties to support the purchase of or investment in additional properties.
Declining real estate values will likely reduce the level of new mortgage and other real estate-related loan originations since borrowers often use appreciation in the value of their existing properties to support the purchase of or investment in additional properties.
If any of our counterparties were to limit or cease operation, it could lead to financial losses for us. 20 T a ble of Contents We may be subject to losses arising from current and future guarantees of debt and contingent obligations of our subsidiaries.
If any of our counterparties were to limit or cease operation, it could lead to financial losses for us. We may be subject to losses arising from current and future guarantees of debt and contingent obligations of our subsidiaries.
Prospective investors should consult their own tax advisors regarding the effect of this rule on their effective tax rate with respect to REIT dividends. 31 T a ble of Contents We are largely dependent on external sources of capital to finance our growth.
Prospective investors should consult their own tax advisors regarding the effect of this rule on their effective tax rate with respect to REIT dividends. We are largely dependent on external sources of capital to finance our growth.
The net operating income of an income-producing property can be affected by numerous factors, including, but not limited to: • tenant mix; • success of tenant businesses and tenant bankruptcies; • property management decisions, including decisions on capital improvements, particularly in older building structures; • property location and condition; • competition from similar properties; • changes in national, regional or local economic conditions, real estate values or rental or occupancy rates; • labor shortages and increasing wages; • changes in interest rates and in the state of the credit and securitization markets and the debt and equity capital markets, including diminished availability or lack of debt financing for commercial real estate; • changes in governmental rules, regulations and fiscal policies, including income tax regulation, real estate taxes, environmental legislation and zoning laws; • responses of businesses, governments and individuals to pandemics or outbreaks of contagious disease; • environmental contamination and any liabilities relating to environmental matters at the property; • fraudulent acts or theft on the part of the property owner, sponsor and/or property manager; and • acts of God, natural disasters, including climate change-related risks, terrorism, social unrest, civil disturbances and other events which may result in property damage, decrease the availability of or increase the cost of insurance or otherwise result in uninsured losses.
The net operating income of an income-producing property can be affected by numerous factors, including, but not limited to: • tenant mix; • success of tenant businesses and tenant bankruptcies; • property management decisions, including decisions on capital improvements, particularly in older building structures; • renovations or repositionings during which operations may be limited or halted completely; • property location and condition; • competition from similar properties; • changes in national, regional or local economic conditions, real estate values or rental or occupancy rates; • increases in remote working arrangements and the subsequent effect on demand for commercial real estate, particularly office properties; • labor shortages and increasing wages; • changes in interest rates and in the state of the credit and securitization markets and the debt and equity capital markets, including diminished availability or lack of debt financing for commercial real estate; • changes in governmental rules, regulations and fiscal policies, including income tax regulation, real estate taxes, environmental legislation and zoning laws; • responses of businesses, governments and individuals to pandemics or outbreaks of contagious disease; • environmental contamination and any liabilities relating to environmental matters at the property; • fraudulent acts or theft on the part of the property owner, sponsor and/or property manager; and • natural disasters, such as hurricanes, earthquakes, wildfires and floods, including climate change-related risks; terrorism; social unrest; civil disturbances and other events which may result in property damage, decrease the availability of or increase the cost of insurance or otherwise result in uninsured losses.
To the extent that our financing costs are determined by reference to floating rates, such as LIBOR (or any replacement rate, such as SOFR) or a Treasury index, the amount of such costs will depend on the level and movement of interest rates.
To the extent that our financing costs are determined by reference to floating rates, such as the Secured Overnight Financing Rate, or SOFR, or a Treasury index, the amount of such costs will depend on the level and movement of interest rates.
Most of our investments are valued at cost. However, to the extent we hold available-for-sale investments, we value them quarterly at fair value, as determined in accordance with ASC 820, Fair Value Measurements and Disclosures , or ASC 820, which may include unobservable inputs.
However, to the extent we hold available-for-sale investments, we value them quarterly at fair value, as determined in accordance with ASC 820, Fair Value Measurements and Disclosures , or ASC 820, which may include unobservable inputs.
Loan servicers and other service providers, such as trustees, appraisers and other due diligence vendors and document custodians, may fail to perform or otherwise not perform in a manner that promotes our interests.
Such vendors and others, such as trustees, appraisers and other due diligence vendors and document custodians, may fail to perform or otherwise not perform in a manner that promotes our interests.
In certain limited cases (e.g., in connection with a workout, restructuring and/or foreclosing proceedings involving one or more of our investments), the success of our investment strategy will depend, in part, on our ability to effectuate loan modifications and/or restructure and improve the operations of our borrower entities.
In certain limited cases (e.g., in connection with a workout, restructuring and/or foreclosing proceedings involving one or more of our investments), the success of our investment strategy will depend, in part, on our ability to effectuate loan modifications and/or restructurings with our borrowers.
If we foreclose on a loan, we may take title to the property securing that loan, and if we do not or cannot sell the property, we would then come to own and operate it as “real estate owned.” Owning and operating real property involves risks that are different (and in many ways more significant) than the risks faced in owning a loan secured by that property.
If we take title to a property securing a loan investment, and if we do not or cannot sell the property, we would then come to own and operate it as REO. Owning and operating real property involves risks that are different (and in many ways more significant) than the risks faced in owning a loan secured by that property.
The issuance of additional shares of our common stock, including in connection with the conversion of our outstanding 6.375% convertible senior notes due 2023 and/or our outstanding 7% Series A cumulative redeemable preferred stock, or our Series A Preferred Stock, or in connection with other future issuances of our common stock or shares of preferred stock or securities convertible or exchangeable into equity securities, may dilute the ownership interest of our existing holders of our common stock.
The issuance of additional shares of our common stock, including in connection with our outstanding 7% Series A cumulative redeemable preferred stock, or our Series A Preferred Stock, or in connection with other future issuances of our common stock or shares of preferred stock or securities convertible or exchangeable into equity securities, may dilute the ownership interest of our existing holders of our common stock.
Our loss estimates may not prove accurate, as actual results may vary from estimates. If we underestimate the asset-level losses, we may experience losses with respect to such investment. 11 T a ble of Contents Moreover, our investment analyses and decisions may frequently be required to be undertaken on an expedited basis to take advantage of investment opportunities.
Our loss estimates may not prove accurate, as actual results may vary from estimates. If we underestimate the asset-level losses, we may be required to recognize an impairment and/or realize losses with respect to such investment. Moreover, our investment analyses and decisions may frequently be required to be undertaken on an expedited basis to take advantage of investment opportunities.
In addition to our senior floating-rate commercial mortgage loans, our portfolio contains mezzanine loans, and a B-note, and in the future, we may invest in CMBS, CRE CLOs, preferred equity investments and other investments that are subordinated or otherwise junior in an issuer’s capital structure and that involve privately negotiated structures.
In addition to our senior floating-rate commercial mortgage loans, our portfolio contains, and in the future we may invest in, other investments that are subordinated or otherwise junior in an issuer’s capital structure and that involve privately negotiated structures.
Our estimates and judgments are based on a number of factors, including projected cash flow from the collateral securing our loans, debt structure (including the availability of reserves and recourse guarantees), likelihood of repayment in full at the maturity of a loan, potential for refinancing and expected market discount rates for varying property types, all of which remain uncertain and are subjective.
Our estimates and judgments are based on a number of factors, including projected cash flow from the collateral securing our loans, debt structure (including the availability of reserves and recourse guarantees), likelihood of repayment in full at the maturity of a loan, potential for refinancing, the creditworthiness of borrowers and expected market discount rates for the real estate and other assets serving as collateral for our loan investments, all of which remain uncertain and are subjective.
The documents that govern these financing arrangements and the related guarantees contain, and additional lending facilities may contain, customary affirmative and negative covenants, including financial covenants applicable to us that may restrict our 19 T a ble of Contents flexibility to determine our operating policies and investment strategy.
The documents that govern these financing arrangements and the related guarantees contain, and additional lending facilities may contain, customary affirmative and negative covenants, including financial covenants that may restrict our flexibility to determine our operating policies and investment strategy.
Subject to maintaining our REIT qualification and our exclusion from registration under the Investment Company Act, we have great latitude within the broad parameters of the investment guidelines set by our board of directors in determining our investments and investment strategies, which could result in investment returns that are substantially below expectations or that result in material losses. 22 T a ble of Contents Maintaining our exclusions from registration as an investment company under the Investment Company Act imposes limits on our operations.
Subject to maintaining our REIT qualification and our exclusion from registration under the Investment Company Act, we have great latitude within the broad parameters of the investment guidelines set by our board of directors in determining our investments and investment strategies, which could result in investment returns that are substantially below expectations or that result in material losses.
Any distressed loans or investments we make, or loans and investments that later become distressed, may subject us to losses and other risks, which could include bankruptcy proceedings.
Any distressed loans or investments we make, or loans and investments that later become distressed, may subject us to losses and other risks.
Any deterioration of real estate fundamentals generally, and in the United States in particular, could negatively impact our performance, increase the default risk applicable to borrowers, and/or make it relatively more difficult for us to generate attractive risk-adjusted returns.
Deterioration of real estate fundamentals generally, and in the United States in particular, has increased the default risk applicable to borrowers, made it relatively more difficult for us to generate attractive risk-adjusted returns and continues to negatively impact our performance.
Recently, there has been growing concern from advocacy groups, government agencies and the general public on ESG matters and regulators, customers, investors, employees and other stakeholders are increasingly focusing on ESG matters and related disclosures.
Advocacy groups, government agencies, the general public, regulators, customers, investors, employees and other stakeholders are increasingly focusing on ESG matters and related disclosures.
Some of our investments, including the notes issued in our securitization transactions for which we are required to retain a portion of the credit risk, may be rated by rating agencies.
Additionally, the notes issued in our securitization transactions for which we are required to retain a portion of the credit risk, have been, and in the future may be, rated by rating agencies.
A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could impair our investments and harm our operations. We believe the risks associated with our business will be more severe during periods of economic slowdown or recession if these periods are accompanied by declining real estate values.
We believe the risks associated with our business will be more severe during periods of economic slowdown or recession if these periods are accompanied by declining real estate values.
In some states, foreclosure actions can take several years or more to litigate. At any time prior to or during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure actions and further delaying the foreclosure process and potentially results in a reduction or discharge of a borrower’s debt.
At any time prior to or during the foreclosure proceedings, the borrower may 15 Table of Contents file for bankruptcy, which would have the effect of staying the foreclosure actions and further delaying the foreclosure process and potentially results in a reduction or discharge of a borrower’s debt.
As the terms of such loans and investments are subject to contractual relationships among lenders, co-lending agents and others, they can vary significantly in their structural characteristics and other risks. Mezzanine loans are, by their nature, structurally subordinated to more senior property-level financings.
As the terms of such loans and investments are subject to contractual relationships among lenders, co-lending agents and others, they can vary significantly in their structural characteristics and other risks.
A TRS may earn income that would not be qualifying REIT income if earned directly by the parent REIT. Both the TRS and the REIT must jointly elect to treat the subsidiary as a TRS.
A REIT may own up to 100% of the stock of one or more TRSs. A TRS may earn income that would not be qualifying REIT income if earned directly by the parent REIT. Both the TRS and the REIT must jointly elect to treat the subsidiary as a TRS.
Changes in general economic conditions will affect the creditworthiness of borrowers and/or the value of underlying real estate collateral relating to our investments and may include economic and/or market fluctuations, changes in environmental, zoning and other laws, casualty or condemnation losses, regulatory limitations on rents, evictions and/or foreclosures, decreases in property values, changes in the appeal of properties to tenants, changes in supply and demand of real estate products, fluctuations in real estate fundamentals, the financial resources of borrower entities, energy and supply shortages, various uninsured or uninsurable risks, natural disasters, terrorism, acts of war, outbreaks of pandemic or contagious diseases, changes in government regulations, political and legislative uncertainty, changes in monetary policy, changes in real property tax rates and operating expenses, changes in interest rates, changes in the availability of debt financing and/or mortgage funds which may render the sale or refinancing of properties difficult or impracticable, increased mortgage defaults, increases in borrowing 8 T a ble of Contents rates, changes in consumer spending, negative developments in the economy that depress travel activity, adverse changes in demand and/or real estate values generally and other factors that are beyond our control.
Such changes have included, and may in the future include, economic and/or market fluctuations, reduced demand for office properties as a result of increases in remote working arrangements, changes in environmental, zoning and other laws, casualty or condemnation losses, regulatory limitations on rents, evictions and/or foreclosures, decreases in property values, changes in the appeal of properties to tenants, changes in supply and demand of real estate products, fluctuations in real estate fundamentals, the financial resources of borrower entities, energy and supply shortages, various uninsured or uninsurable risks, natural disasters, terrorism, acts of war, outbreaks of pandemic or contagious diseases, changes in government regulations, political and legislative uncertainty, changes in monetary policy, changes in real 8 Table of Contents property tax rates and operating expenses, changes in interest rates, changes in the availability of debt financing and/or mortgage funds which may render the sale or refinancing of properties difficult or impracticable, increased mortgage defaults, increases in borrowing rates, changes in consumer spending, negative developments in the economy that depress travel activity, escalating global trade tensions, the conflict between Russia and Ukraine, deteriorating conditions in the Middle East, adverse changes in demand and/or real estate values generally and other factors that are beyond our control.
The lack of liquidity of our investments may adversely affect our business, including our ability to value, finance and sell our investments. The illiquidity of some or all of our investments, and investments we intend to make, may make it difficult for us to sell such investment if the need or desire arises.
The illiquidity of some or all of our investments, and investments we intend to make, may make it difficult for us to sell such investment if the need or desire arises.
Therefore, in order to avoid the prohibited transactions tax, we may choose to engage in certain sales of loans through a TRS and not at the REIT level (which would give rise to corporate-level tax), and may limit the structures we utilize for our securitization transactions, even though direct sales by us or those structures might otherwise be beneficial to us. 33 T a ble of Contents The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to qualify as a REIT.
Therefore, in order to avoid the prohibited transactions tax, we may choose to engage in certain sales of loans through a TRS and not at the REIT level (which would give rise to corporate-level tax), and may limit the structures we utilize for our securitization transactions, even though direct sales by us or those structures might otherwise be beneficial to us.
Further, to the extent we have corporate credit ratings by any of the principal credit agencies, any downgrade of any such ratings may make it more difficult and costly for us to access capital.
Any downgrade of our or our corporate debt’s credit ratings by any of the principal credit agencies may make it more difficult and costly for us to access capital.
In addition, our business is highly dependent on information systems and technology. The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means.
In addition, our business is highly dependent on information systems and technology. The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. In addition, we could also suffer losses in connection with updates to, or the failure to timely update, our information systems and technology.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters is located in sub-leased office space at 3 Bryant Park, Suite 2400A, New York, New York 10036. We also lease office facilities in St. Louis Park, Minnesota. As of the date of this filing, we do not own any real property.
Biggest changeItem 2. Properties Our corporate headquarters is located in sub-leased office space at 3 Bryant Park, Suite 2400A, New York, New York 10036. We also lease office facilities in St. Louis Park, Minnesota. We consider these facilities to be suitable and adequate for the management and operations of our business.
Removed
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

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Biggest changeAs of the date of this filing, we are not party to any litigation or other legal proceedings or, to the best of our knowledge, any threatened litigation or legal proceedings, which, in our opinion, individually or in the aggregate would have a material adverse effect on our results of operations or financial condition.
Biggest changeAs of the date of this filing, we are not party to any litigation or other legal proceedings or, to the best of our knowledge, any threatened litigation or legal proceedings, which, in our opinion, individually or in the aggregate would have a material adverse effect on our results of operations or financial condition. Item 4.
Added
Mine Safety Disclosures Not applicable. 35 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThese results, and our ability to pay distributions, will be affected by various factors, including our taxable income, our financial condition, our maintenance of REIT status, restrictions related to our financing facilities, applicable law and other factors as our board of directors deems relevant. 35 T a ble of Contents Performance Graph The following graph compares the stockholder’s cumulative total return on our common stock, assuming $100 invested at June 28, 2017, with all quarterly reinvestment of dividends before consideration of income taxes and without the payment of any commissions, as if such amounts had been invested in: (i) our common stock; (ii) the stocks included in the Standard and Poor’s 500 Stock Index, or S&P 500; and (iii) the stocks included in the Bloomberg REIT Mortgage Index.
Biggest changeThe following table presents cash dividends declared on our common stock since 2022: Declaration Date Record Date Payment Date Cash Dividend Per Share 2023 December 19, 2023 December 29, 2023 January 16, 2024 $ 0.20 September 20, 2023 October 2, 2023 October 16, 2023 $ 0.20 June 22, 2023 July 3, 2023 July 17, 2023 $ 0.20 March 16, 2023 April 3, 2023 April 17, 2023 $ 0.20 $ 0.80 2022 December 20, 2022 December 30, 2022 January 17, 2023 $ 0.20 September 20, 2022 October 3, 2022 October 17, 2022 $ 0.25 June 16, 2022 July 1, 2022 July 15, 2022 $ 0.25 March 17, 2022 April 1, 2022 April 15, 2022 $ 0.25 $ 0.95 36 Table of Contents Performance Graph The following graph compares the stockholder’s cumulative total return on our common stock, assuming $100 invested at June 28, 2017, with all quarterly reinvestment of dividends before consideration of income taxes and without the payment of any commissions, as if such amounts had been invested in: (i) our common stock; (ii) the stocks included in the Standard and Poor’s 500 Stock Index, or S&P 500; and (iii) the stocks included in the Bloomberg REIT Mortgage Index.
Holders As of February 23, 2023, there were 193 registered holders of our common stock. This does not include the number of stockholders that hold shares in “street name” through banks or broker-dealers.
Holders As of February 26, 2024, there were 178 registered holders of our common stock. This does not include the number of stockholders that hold shares in “street name” through banks or broker-dealers.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the NYSE under the symbol “GPMT.” On February 23, 2023, the closing price of our common stock, as reported on the NYSE, was $6.13 per share.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the NYSE under the symbol “GPMT.” On February 26, 2024, the closing price of our common stock, as reported on the NYSE, was $4.63 per share.
COMPARISON OF CUMULATIVE TOTAL RETURN Among Granite Point Mortgage Trust Inc., S&P 500 and Bloomberg REIT Mortgage Index Index 6/28/17 6/30/17 12/31/17 6/30/18 12/31/18 6/30/19 12/31/19 6/30/20 12/31/20 6/30/21 12/31/21 6/30/22 12/31/22 Granite Point Mortgage Trust Inc. $ 100.00 $ 99.84 $ 97.25 $ 105.12 $ 108.05 $ 117.60 $ 120.47 $ 47.06 $ 70.39 $ 107.90 $ 89.15 $ 76.44 $ 46.14 S&P 500 $ 100.00 $ 99.30 $ 110.64 $ 113.56 $ 105.78 $ 125.39 $ 139.07 $ 134.78 $ 164.63 $ 189.74 $ 211.86 $ 169.55 $ 173.44 Bloomberg REIT Mortgage Index $ 100.00 $ 99.21 $ 102.58 $ 103.07 $ 99.59 $ 108.57 $ 123.12 $ 73.73 $ 95.79 $ 116.79 $ 112.65 $ 91.84 $ 85.20 36 T a ble of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers On December 16, 2021, we announced that our board of directors increased our share repurchase program to allow for the repurchase of up to an aggregate of 4,000,000 shares of our common stock.
COMPARISON OF CUMULATIVE TOTAL RETURN Among Granite Point Mortgage Trust Inc., S&P 500 and Bloomberg REIT Mortgage Index Index 6/28/17 6/30/17 12/31/17 6/30/18 12/31/18 6/30/19 12/31/19 6/30/20 12/31/20 6/30/21 12/31/21 6/30/22 12/31/22 6/30/23 12/31/23 Granite Point Mortgage Trust Inc. $ 100.00 $ 99.84 $ 97.25 $ 105.12 $ 108.05 $ 117.60 $ 120.47 $ 47.06 $ 70.39 $ 107.90 $ 89.15 $ 76.44 $ 46.14 $ 49.25 $ 59.34 S&P 500 $ 100.00 $ 99.30 $ 110.64 $ 113.56 $ 105.78 $ 125.39 $ 139.07 $ 134.78 $ 164.63 $ 189.74 $ 211.86 $ 169.55 $ 173.44 $ 202.73 $ 218.99 Bloomberg REIT Mortgage Index $ 100.00 $ 99.21 $ 102.58 $ 103.07 $ 99.59 $ 108.57 $ 123.12 $ 73.73 $ 95.79 $ 116.79 $ 112.65 $ 91.84 $ 85.20 $ 92.22 $ 97.53 37 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers On May 9, 2023, we announced that our board of directors had amended our share repurchase program to authorize the repurchase of an additional 5,000,000 shares of our common stock, for a total share repurchase authorization of 9,000,000 shares of our common stock, inclusive of amounts previously authorized.
Dividends We generally intend to distribute substantially all of our taxable income each year (which does not necessarily equal net income as calculated in accordance with GAAP) to our stockholders to comply with the REIT provisions of the Code. In addition, our dividend policy remains subject to revision at the discretion of our board of directors.
Dividends We generally intend to distribute substantially all of our taxable income each year (which does not necessarily equal net income as calculated in accordance with Generally Accepted Accounting Principles, or GAAP) to our stockholders to comply with the REIT provisions of the Code.
All distributions will be made at the discretion of our board of directors and will depend upon, among other things, our actual results of operations and liquidity.
In addition, our dividend policy remains subject to revision at the discretion of our board of directors. Any distributions will be made at the discretion of our board of directors and will depend upon, among other things, our actual results of operations and liquidity.
As of December 31, 2022, there remained 1,159,254 shares authorized for repurchase. No shares were repurchased during the three months ended December 31, 2022. During the year ended December 31, 2021, we repurchased 1,301,612 shares of our common stock at a weighted average price of $13.65 per share for an aggregate cost of $17.8 million.
During the three months ended December 31, 2023, under our share repurchase program, we repurchased 1,000,000 shares of our common stock at a weighted average price of $5.15 per share for an aggregate purchase price of $5.2 million. As of December 31, 2023, there remained 4,157,916 shares authorized for repurchase under our share repurchase program.
The manner, price, number and timing of share repurchases will be subject to a variety of factors, including market conditions and applicable SEC rules. During the year ended December 31, 2022, we repurchased 1,539,134 shares of our common stock at a weighted average price of $10.18 per share for an aggregate cost of $15.7 million.
During the year ended December 31, 2023, and 2022, under our share repurchase program, we repurchased 2,001,338 shares of our common stock at a weighted average purchase price of $5.12 per share for an aggregate purchase price of $10.2 million and 1,539,134 shares of our common stock at a weighted average purchase price of $10.18 per share for an aggregate purchase price of $15.7 million, respectively.
We have also authorized the repurchase of shares of restricted common stock granted to employees and directors for tax withholding purposes. During the year ended December 31, 2022, we repurchased from employees 69,039 shares of our common stock for an aggregate cost of $0.8 million.
Our board of directors also authorized the repurchase of shares of restricted common stock granted to employees and directors for tax withholding purposes.
During the year ended December 31, 2021, we repurchased from employees and directors 115,053 shares of our common stock for an aggregate cost of $1.2 million. No shares were repurchased for tax withholding purposes during the three months ended December 31, 2022. 37 T a ble of Contents Item 6. [Reserved]
During the year ended December 31, 2023, and 2022, pursuant to such authorization, we repurchased from employees 36,916 shares of our common stock at a weighted average purchase price of $6.40 for an aggregate purchase price of $0.2 million and 69,039 shares of our common stock at a weighted average purchase price of $11.94 for an aggregate purchase price of $0.8 million, respectively.
Added
These results, and our ability to pay distributions, will be affected by various factors, including our taxable income, our financial condition, our maintenance of REIT status, restrictions related to our financing facilities, applicable law and other factors as our board of directors deems relevant.
Added
The manner, price, number and timing of share repurchases will be subject to a variety of factors, including market conditions and applicable SEC rules.
Added
No shares were repurchased for tax withholding purposes during the three months ended December 31, 2023.
Added
Issuer Purchases of Equity Securities The following table summarizes the repurchase of common stock for the three months ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Programs (1) October 1-31, 2023 — $ — — 5,157,916 November 1-30, 2023 798,737 $ 5.06 798,737 4,359,179 December 1-31, 2023 201,263 $ 5.50 201,263 4,157,916 Total 1,000,000 $ 5.15 1,000,000 4,157,916 ____________________ (1) On May 9, 2023, we announced that our board of directors had amended our share repurchase program to authorize the repurchase an additional 5,000,000 shares of our common stock, for a total share repurchase authorization of 9,000,000 shares of our common stock, inclusive of amounts previously authorized.
Added
Our share repurchase program has no expiration date. Item 6. [Reserved] Not applicable. 38 Table of Contents

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe following table details overall statistics for our investment portfolio as of December 31, 2022: (dollars in thousands) Portfolio Summary Number of loans 90 Total loan commitments $ 3,591,613 Unpaid principal balance $ 3,362,006 Unfunded loan commitments $ 229,607 Carrying value $ 3,267,815 Weighted-average cash coupon L+/S+3.61% Weighted-average all-in yield L+/S+4.05% Stabilized LTV at origination 62.9 % 42 T a ble of Contents The following table provides detail of our portfolio as of December 31, 2022: (dollars in millions) Type (1) Origination/ Acquisition Date Maximum Loan Commitment Principal Balance Carrying Value Cash Coupon (2) All-in Yield at Origination (3) Original Term (Years) (4) State Property Type Initial LTV (5) Stabilized LTV (6) Senior 12/19 $111.1 $108.9 $108.7 L+2.75% L+3.23% 3.0 IL Multifamily 76.5% 73.0% Senior 12/18 96.4 87.9 87.6 L+3.75% L+5.21% 3.0 NY Mixed-Use 26.2% 47.6% Senior 08/19 93.1 93.1 93.2 L+2.80% L+3.26% 3.0 MN Office 73.1% 71.2% Senior 10/19 92.6 92.6 92.6 L+3.24% L+3.86% 3.0 CA Office 63.9% 61.1% Senior 07/19 89.8 79.6 79.3 L+3.69% L+4.32% 3.0 IL Office 70.0% 64.4% Senior 10/19 87.8 86.5 86.3 L+2.55% L+3.05% 3.0 TN Office 70.2% 74.2% Senior 12/15 82.0 82.0 82.0 L+4.15% L+4.43% 4.0 LA Mixed-Use 65.5% 60.0% Senior 01/20 81.8 72.2 72.2 L+3.25% L+3.93% 3.0 CO Industrial 47.2% 47.5% Senior 06/19 81.7 81.4 81.4 L+2.69% L+3.05% 3.0 TX Mixed-Use 71.7% 72.2% Senior 10/22 77.3 77.3 77.3 S+4.50% S+4.61% 2.0 CA Retail 47.7% 36.6% Senior 10/19 76.9 76.9 76.9 L+3.36% L+3.73% 3.0 FL Mixed-Use 67.7% 62.9% Senior 12/16 67.8 65.8 65.8 S+5.15% S+4.87% 4.0 FL Office 73.3% 63.2% Senior 12/19 63.7 60.5 60.2 S+3.50% S+3.28% 3.0 NY Office 68.8% 59.3% Senior 07/21 63.3 62.9 62.5 L+3.00% L+3.39% 3.0 LA Multifamily 68.8% 68.6% Senior 12/18 60.1 58.3 58.1 L+2.90% L+3.44% 3.0 TX Office 68.5% 66.7% Senior 10/21 55.5 52.5 52.3 L+3.15% L+3.42% 3.0 CO Multifamily 78.2% 74.7% Senior 05/22 55.5 41.9 41.5 S+3.29% S+3.70% 3.0 TX Multifamily 59.3% 62.9% Senior 05/19 55.4 52.2 52.1 L+3.20% L+3.60% 3.0 NY Mixed-Use 59.7% 55.1% Senior 06/19 54.1 53.1 53.0 L+3.30% L+3.70% 3.0 VA Office 49.3% 49.9% Senior 11/17 53.7 53.7 53.6 S+5.50% S+5.20% 3.0 TX Hotel 68.2% 61.6% Senior 11/21 52.8 47.9 47.6 L+3.40% L+3.82% 3.0 PA Mixed-Use 62.0% 63.5% Senior 06/21 52.7 46.7 46.4 L+4.32% L+4.75% 3.0 GA Office 68.0% 69.4% Senior 09/21 51.7 50.0 49.9 L+5.00% L+5.12% 3.0 MN Hotel 68.4% 57.8% Senior 02/20 50.2 46.2 46.1 L+3.30% L+3.75% 3.0 TN Hotel 69.1% 54.2% Senior 03/22 49.9 46.9 46.5 S+3.25% S+3.64% 3.0 MA Industrial 67.3% 60.8% Senior 08/19 48.2 45.1 44.8 L+3.70% L+3.39% 3.0 GA Office 69.5% 68.3% Senior 07/21 46.4 45.4 45.1 L+3.69% L+4.19% 3.0 CT Office 68.3% 63.5% Senior 04/22 46.2 43.1 42.8 S+3.41% S+3.78% 3.0 TX Multifamily 74.4% 64.0% Senior 08/21 45.8 45.4 45.2 L+3.16% L+3.53% 3.0 TX Multifamily 77.8% 75.2% Senior 07/22 45.0 43.4 42.7 S+3.58% S+4.25% 3.0 GA Multifamily 74.5% 68.2% Senior 08/17 44.9 44.9 44.7 S+4.35% S+4.40% 3.0 KY Multifamily 79.8% 73.1% Senior 09/21 44.3 39.8 39.5 L+3.30% L+3.72% 3.0 CA Office 62.4% 66.1% Senior 02/22 42.4 42.4 42.1 S+3.05% S+3.40% 3.0 NJ Industrial 75.0% 59.5% Senior 12/17 40.9 39.4 39.3 L+4.38% L+5.26% 3.0 MA Mixed-Use 72.9% 62.0% Senior 07/16 40.5 40.5 40.4 L+4.65% L+4.99% 4.0 VA Office 62.8% 61.5% Senior 04/22 40.2 36.7 36.6 S+4.65% S+4.87% 3.0 NY Other 66.7% 61.8% Senior 05/21 38.9 30.1 29.9 L+3.28% L+3.83% 3.0 AL Multifamily 72.2% 64.8% Senior 05/18 38.8 34.8 34.7 L+3.18% L+3.95% 3.0 MA Office 47.0% 41.1% Senior 11/18 37.1 36.9 36.9 L+3.60% L+5.50% 3.0 CA Mixed-Use 69.9% 67.9% Senior 11/19 36.5 35.5 35.4 L+3.28% L+3.14% 3.0 NC Multifamily 80.0% 72.8% Senior 03/20 34.9 21.0 21.0 L+3.42% L+4.66% 3.0 GA Office 63.2% 64.6% Senior 05/17 34.8 31.8 31.7 L+5.35% L+5.97% 3.0 TX Office 68.7% 65.1% Senior 12/18 34.2 33.4 33.4 L+2.92% L+3.27% 4.0 IL Multifamily 70.8% 62.1% Senior 08/19 33.5 29.9 29.9 L+2.90% L+3.38% 3.0 TX Multifamily 79.3% 72.5% Senior 11/21 33.4 29.7 29.5 L+3.18% L+3.52% 3.0 AL Multifamily 77.9% 68.1% Senior 03/16 33.0 33.0 32.9 5.11% 5.26% 10.0 NJ Office 74.9% 74.9% Senior 03/19 32.0 28.6 28.5 L+2.97% L+3.42% 3.0 NY Office 53.8% 48.5% Senior 10/19 31.8 24.3 24.2 L+3.65% L+3.75% 3.0 CA Office 70.6% 64.2% Senior 04/22 31.8 28.3 28.1 S+3.35% S+3.73% 3.0 GA Multifamily 75.1% 67.1% Senior 06/18 30.6 25.9 25.8 S+4.57% S+4.75% 3.0 OH Hotel 70.6% 57.4% Senior 05/17 29.7 29.7 29.7 S+4.51% S+5.36% 3.0 AZ Office 69.5% 59.0% Senior 05/18 29.4 29.4 29.3 S+5.00% S+4.63% 3.0 NY Mixed-Use 57.0% 51.1% Senior 04/22 28.6 25.7 25.5 S+3.22% S+3.55% 3.0 TX Multifamily 73.3% 63.9% Senior 03/20 28.0 23.6 23.6 L+2.80% L+3.27% 3.0 CA Office 63.6% 66.7% Senior 01/19 27.6 26.9 26.9 L+2.97% L+3.38% 3.0 TX Multifamily 64.9% 64.9% Senior 12/18 27.5 27.5 27.4 L+3.90% L+4.42% 3.0 MN Hotel 64.7% 57.7% Senior 03/22 27.2 24.1 23.7 S+4.14% S+4.89% 3.0 NC Office 47.4% 53.5% Senior 01/19 27.0 24.8 24.8 L+3.15% L+3.44% 3.0 MA Office 71.2% 70.1% 43 T a ble of Contents Senior 08/19 26.8 26.3 26.1 L+3.15% L+3.67% 3.0 SC Multifamily 67.0% 58.7% Senior 01/18 26.0 26.0 25.9 L+5.13% L+5.58% 3.0 AZ Hotel 65.8% 61.3% Senior 12/18 25.9 24.6 24.5 L+4.00% L+5.56% 3.0 PA Multifamily 70.1% 67.0% Senior 07/17 25.8 25.8 25.7 L+4.10% L+4.58% 3.0 NY Multifamily 76.5% 76.5% Senior 10/21 25.7 25.7 25.5 L+3.15% L+3.43% 4.0 GA Industrial 67.5% 64.5% Senior 08/19 25.0 23.9 23.8 L+2.66% L+3.07% 2.0 OK Multifamily 79.9% 74.2% Senior 12/21 24.7 16.7 16.6 L+3.30% L+3.59% 3.0 CA Office 72.9% 68.3% Senior 09/21 24.4 23.3 23.1 L+3.18% L+3.61% 3.0 CA Multifamily 71.9% 57.8% Senior 12/21 24.4 20.4 20.3 L+3.86% L+4.16% 3.0 Various Other 55.1% 64.3% Senior 05/21 23.3 17.4 17.3 L+3.50% L+4.09% 3.0 LA Multifamily 68.0% 69.6% Senior 10/15 23.2 23.2 23.2 L+4.07% L+5.76% 3.0 MO Hotel 73.2% 57.8% Senior 02/22 22.9 19.7 19.4 S+3.90% S+4.29% 3.0 CO Office 64.4% 60.2% Senior 06/18 22.8 19.1 19.0 S+5.31% S+4.73% 3.0 FL Retail 74.0% 69.4% Senior 04/18 22.2 22.2 22.2 L+4.05% L+4.46% 3.0 KS Multifamily 72.1% 67.4% Senior 06/19 21.5 21.5 21.4 L+4.50% L+5.05% 3.0 NY Other 39.6% 39.6% Senior 07/21 21.4 21.4 21.3 L+3.25% L+3.63% 3.0 GA Multifamily 77.0% 68.7% Senior 09/17 21.4 21.4 21.3 S+5.15% S+5.52% 3.0 MA Hotel 67.3% 63.9% Senior 06/19 21.0 19.9 19.9 L+2.90% L+4.24% 3.0 GA Mixed-Use 60.6% 67.4% Senior 05/21 20.6 19.4 19.3 L+3.99% L+4.41% 3.0 FL Multifamily 69.8% 62.8% Senior 10/18 20.3 20.1 20.0 S+4.71% S+5.16% 3.0 CT Hotel 75.4% 66.9% Senior 11/18 19.0 17.1 17.0 L+3.20% L+3.83% 3.0 CA Office 73.1% 64.5% Senior 07/19 18.5 15.8 15.7 L+3.00% L+3.60% 3.0 OH Office 63.1% 66.1% Senior 06/21 16.7 14.2 14.0 L+3.35% L+3.82% 4.0 IN Multifamily 67.0% 66.4% Senior 08/17 16.1 13.1 13.0 L+4.77% L+5.49% 3.0 PA Office 66.7% 67.3% Senior 07/18 14.8 10.5 10.5 L+3.75% L+4.35% 3.0 CA Office 77.1% 63.5% Senior 06/19 14.6 11.1 11.0 L+3.96% L+4.69% 3.0 NY Office 40.7% 60.0% Senior 08/21 14.4 14.0 13.9 L+3.65% L+3.88% 3.0 CO Office 72.0% 63.7% Senior 08/18 14.2 14.2 14.2 L+2.93% L+3.32% 3.0 TX Multifamily 68.9% 63.6% Mezzanine 01/17 13.7 13.7 13.7 8.00% 8.11% 10.0 HI Hotel 41.4% 36.2% Senior 09/19 12.0 11.8 11.7 L+2.99% L+3.50% 3.0 WI Multifamily 51.4% 75.0% Senior 10/19 11.9 3.9 3.9 L+2.75% L+3.28% 3.0 CA Office 70.6% 67.8% Senior 01/18 8.4 6.6 6.6 L+4.77% L+5.50% 3.0 PA Office 66.8% 67.3% Allowance for credit losses (82.3) Total/Weighted Average $3,591.6 $3,362.0 $3,267.8 L+/S+3.61% L+/S+4.05% 3.1 66.4% 62.9% ____________________ (1) “Senior” means a loan primarily secured by a first priority lien on commercial real property and related personal property and also includes, when applicable, any companion subordinate loans.
Biggest changeThe following table provides detail of our loan portfolio as of December 31, 2023: (dollars in millions) Type (1) Origination/ Acquisition Date Maximum Loan Commitment Principal Balance Carrying Value Cash Coupon (2) All-in Yield at Origination (3) Original Term (Years) (4) State Property Type Initial LTV (5) Stabilized LTV (6) Loans Held-For-Investment Senior 12/19 $111.1 $109.2 $108.9 S+2.80% S+3.23% 3.0 IL Multifamily 76.5% 73.0% Senior 12/18 96.5 92.2 92.0 S+3.75% S+5.21% 3.0 NY Mixed-Use 26.2% 47.6% Senior (7) 08/19 93.1 93.1 93.2 S+2.85% S+3.26% 3.0 MN Office 73.1% 71.2% Senior (7) 07/19 89.8 80.0 79.9 S+3.74% S+4.32% 3.0 IL Office 70.0% 64.4% Senior 10/19 87.4 87.2 86.8 S+2.60% S+3.05% 3.0 TN Office 70.2% 74.2% Senior (7) 12/15 86.0 85.6 85.4 S+4.15% S+4.43% 4.0 LA Mixed-Use 65.5% 60.0% Senior 06/19 81.2 81.0 80.5 S+3.29% S+3.05% 3.0 TX Mixed-Use 71.7% 72.2% Senior 12/18 78.1 60.1 60.0 S+3.40% S+3.44% 3.0 TX Office 68.5% 66.7% Senior 10/19 77.3 77.3 77.0 S+3.41% S+3.73% 3.0 FL Mixed-Use 67.7% 62.9% Senior 10/22 77.3 77.3 77.3 S+4.50% S+4.61% 2.0 CA Retail 47.7% 36.6% Senior 12/19 69.2 62.9 62.8 S+3.50% S+3.28% 3.0 NY Office 68.8% 59.3% Senior (7) 12/16 66.0 66.0 66.0 S+5.15% S+4.87% 4.0 FL Office 73.3% 63.2% Senior 12/23 61.8 48.8 48.8 S+5.50% S+5.65% 2.0 CA Office 80.0% 79.2% Senior 05/22 55.5 46.7 46.5 S+3.29% S+3.70% 3.0 TX Multifamily 59.3% 62.9% Senior 06/19 54.1 54.1 53.9 S+3.35% S+3.70% 3.0 VA Office 49.3% 49.9% Senior 11/21 52.8 50.1 49.9 S+3.40% S+3.82% 3.0 PA Mixed-Use 62.0% 63.5% Senior 06/21 52.7 47.5 47.4 S+4.38% S+4.75% 3.0 GA Office 68.0% 69.4% Senior 09/21 51.7 51.0 50.9 S+5.05% S+5.12% 3.0 MN Hotel 68.4% 57.8% Senior (7) 08/17 48.5 48.5 48.3 S+4.35% S+4.40% 3.0 KY Multifamily 79.8% 73.1% Senior 07/22 47.6 45.0 44.5 S+3.62% S+4.25% 3.0 GA Multifamily 74.5% 68.2% Senior 03/22 46.9 46.9 46.6 S+3.25% S+3.64% 3.0 MA Industrial 67.3% 60.8% Senior 07/21 46.4 45.4 45.2 S+3.72% S+4.19% 3.0 CT Office 68.3% 63.5% Senior 04/22 46.2 44.2 44.0 S+3.41% S+3.78% 3.0 TX Multifamily 74.4% 64.0% Senior 08/21 45.8 45.4 45.3 S+3.21% S+3.53% 3.0 TX Multifamily 77.8% 75.2% Senior 09/21 44.3 41.1 40.8 S+3.36% S+3.72% 3.0 CA Office 62.4% 66.1% Senior 02/22 42.4 42.4 42.2 S+3.05% S+3.40% 3.0 NJ Industrial 75.0% 59.5% Senior 04/22 40.2 37.5 37.3 S+4.65% S+4.87% 3.0 NY Other 66.7% 61.8% Senior 12/17 39.4 38.8 38.7 S+5.25% S+5.26% 3.0 MA Mixed-Use 72.9% 62.0% Senior 05/21 38.9 37.6 37.4 S+3.33% S+3.83% 3.0 AL Multifamily 72.2% 64.8% Senior 05/18 38.8 35.4 35.5 S+3.18% S+3.95% 3.0 MA Office 47.0% 41.1% Senior 07/16 38.5 38.5 38.3 S+5.55% S+4.99% 4.0 VA Office 62.8% 61.5% Senior (7) 11/18 37.1 37.1 37.1 S+3.60% S+5.50% 3.0 CA Mixed-Use 69.9% 67.9% Senior 03/20 34.9 24.1 24.1 S+5.04% S+4.66% 3.0 GA Office 63.2% 64.6% Senior 12/18 34.2 33.7 33.5 S+4.11% S+3.27% 4.0 IL Multifamily 70.8% 62.1% Senior 08/19 33.5 31.1 31.1 S+2.96% S+3.38% 3.0 TX Multifamily 79.3% 72.5% Senior 11/21 33.4 32.0 31.9 S+3.13% S+3.52% 3.0 AL Multifamily 77.9% 68.1% 44 Table of Contents Senior 11/19 32.9 32.7 32.5 S+3.73% S+3.14% 3.0 NC Multifamily 80.0% 72.8% Senior 03/16 32.5 32.5 32.5 5.11% 5.26% 10.0 NJ Office 74.9% 74.9% Senior 04/22 31.8 30.2 30.0 S+3.35% S+3.73% 3.0 GA Multifamily 75.1% 67.1% Senior 03/19 30.6 29.0 28.9 S+3.75% S+3.42% 3.0 NY Office 53.8% 48.5% Senior 04/22 28.6 26.4 26.2 S+3.22% S+3.55% 3.0 TX Multifamily 73.3% 63.9% Senior (7) 12/18 28.0 28.0 28.0 S+3.90% S+4.42% 3.0 MN Hotel 64.7% 57.7% Senior 01/19 27.6 26.9 26.9 S+3.00% S+3.38% 3.0 TX Multifamily 64.9% 64.9% Senior 03/22 27.2 24.3 24.0 S+4.14% S+4.89% 3.0 NC Office 47.4% 53.5% Senior 01/19 27.0 26.1 26.0 S+3.40% S+3.44% 3.0 MA Office 71.2% 70.1% Senior 08/19 26.8 26.6 26.5 S+3.20% S+3.67% 3.0 SC Multifamily 67.0% 58.7% Senior 10/21 25.7 25.7 25.5 S+3.20% S+3.43% 4.0 GA Industrial 67.5% 64.5% Senior 01/18 25.2 25.2 25.1 S+5.18% S+5.58% 3.0 AZ Hotel 65.8% 61.3% Senior 03/20 25.1 22.2 22.1 S+4.25% S+3.27% 3.0 CA Office 63.6% 66.7% Senior 08/19 25.0 23.9 23.8 S+2.71% S+3.07% 2.0 OK Multifamily 79.9% 74.2% Senior 12/21 24.7 16.7 16.6 S+3.36% S+3.59% 3.0 CA Office 72.9% 68.3% Senior 09/21 24.4 23.6 23.5 S+3.23% S+3.61% 3.0 CA Multifamily 71.9% 57.8% Senior 07/17 23.8 23.8 23.7 S+4.50% S+4.58% 3.0 NY Multifamily 76.5% 76.5% Senior 05/21 23.3 18.6 18.5 S+3.55% S+4.09% 3.0 LA Multifamily 68.0% 69.6% Senior 02/22 22.9 20.1 20.0 S+3.90% S+4.29% 3.0 CO Office 64.4% 60.2% Senior 02/20 21.9 21.9 21.8 S+4.00% S+3.75% 3.0 TN Hotel 69.1% 54.2% Senior 06/18 21.8 19.9 19.8 S+5.31% S+4.73% 3.0 FL Retail 74.0% 69.4% Senior 06/19 21.5 21.5 21.5 S+4.55% S+5.05% 3.0 NY Other 39.6% 39.6% Senior 05/21 20.6 20.4 20.4 S+4.05% S+4.41% 3.0 FL Multifamily 69.8% 62.8% Senior 12/21 20.4 20.4 20.3 S+3.91% S+4.16% 3.0 Various Other 55.1% 64.3% Senior 06/19 20.4 20.4 20.3 S+3.25% S+4.24% 3.0 GA Mixed-Use 60.6% 67.4% Senior 11/18 18.5 16.9 16.9 S+5.00% S+3.83% 3.0 CA Office 73.1% 64.5% Senior 10/18 16.9 16.9 16.9 S+4.71% S+5.16% 3.0 CT Hotel 75.4% 66.9% Senior 06/21 16.7 14.3 14.1 S+3.41% S+3.82% 4.0 IN Multifamily 67.0% 66.4% Senior 07/19 16.6 14.5 14.5 S+3.07% S+3.60% 3.0 OH Office 63.1% 66.1% Senior 08/17 15.4 12.4 12.3 S+5.25% S+5.49% 3.0 PA Office 66.7% 67.3% Senior 08/21 14.5 13.9 13.9 S+3.70% S+3.88% 3.0 CO Office 72.0% 63.7% Senior 07/18 14.3 10.0 10.0 S+4.86% S+4.35% 3.0 CA Office 77.1% 63.5% Mezzanine 01/17 13.5 13.5 13.5 8.00% 8.11% 10.0 HI Hotel 41.4% 36.2% Senior 10/19 11.8 4.3 4.3 S+2.81% S+3.28% 3.0 CA Office 70.6% 67.8% Senior (7) 09/19 11.7 11.7 11.7 S+3.05% S+3.50% 3.0 WI Multifamily 51.4% 75.0% Senior 06/19 11.4 10.4 10.4 S+4.01% S+4.69% 3.0 NY Office 40.7% 60.0% Senior 01/18 8.3 6.6 6.6 S+5.25% S+5.50% 3.0 PA Office 66.8% 67.3% Allowance for credit losses (134.7) Total/Weighted Average Loans $2,887.9 $2,727.2 $2,583.8 S+3.75% S+4.03% 3.2 66.7% 63.6% ____________________ (1) “Senior” means a loan primarily secured by a first priority lien on commercial real property and related personal property and also includes, when applicable, any companion subordinate loans.
We mitigate this counterparty risk by seeking to diversify our lending partners, focusing on establishing borrowing relationships with strong counterparties and continuously monitoring them through a thoughtful approach to counterparty risk oversight.
We mitigate this counterparty risk by seeking to diversify our lending partners, focusing on establishing borrowing relationships with strong counterparties and continuously monitoring them through a thoughtful approach to counterparty risk oversight.
If we fail to maintain our exempt status under the Investment Company Act and become regulated as an investment company, our ability to, among other things, use leverage would be substantially reduced and, as a result, we would be unable to conduct our business as described in Item 1 , “ Business - Government Regulation ” of this Annual Report on Form 10-K.
If we fail to maintain our exempt status under the Investment Company Act and become regulated as an investment company, our ability to, among other things, use leverage would be substantially reduced and, as a result, we would be unable to conduct our business as described in “ Business - Government Regulation ” in Item 1 of this Annual Report on Form 10-K.
For reporting purposes, we define Distributable Earnings as net income attributable to our stockholders, computed in accordance with GAAP, excluding: (i) non-cash equity compensation expenses; (ii) depreciation and amortization; (iii) any unrealized gains (losses) or other similar non-cash items that are included in net income for the applicable reporting period (regardless of whether such items are included in other comprehensive income or in net income for such period); and (iv) certain non-cash items and one-time expenses.
For reporting purposes, we define Distributable Earnings as net income (loss) attributable to our stockholders, computed in accordance with GAAP, excluding: (i) non-cash equity compensation expenses; (ii) depreciation and amortization; (iii) any unrealized gains (losses) or other similar non-cash items that are included in net income (loss) for the applicable reporting period (regardless of whether such items are included in other comprehensive income or in net income (loss) for such period); and (iv) certain non-cash items and one-time expenses.
Investor concerns over inflation, rising interest rates, slowing economic growth and geopolitical uncertainty have resulted in significant disruptions in financial markets, uncertainty about the overall macroeconomic outlook and a dislocation in the commercial real estate sector, including reduced borrower demand, wider credit spreads, higher lending rates, increased capitalization rates on properties and significantly lower transaction volume.
Investor concerns over inflation, rising interest rates, slowing economic growth, and geopolitical uncertainty have resulted in significant disruptions and volatility in financial markets, uncertainty about the overall macroeconomic outlook and a dislocation in the commercial real estate sector, including reduced borrower demand, wider credit spreads, higher lending rates, increased capitalization rates on properties and significantly lower transaction volume.
We continue to actively explore additional types of funding facilities in order to further diversify our financing sources. Investor concerns over inflation, rising interest rates, slowing economic growth and geopolitical uncertainty have resulted in significant disruptions in financial markets and uncertainty about the overall macroeconomic outlook.
We continue to actively explore additional types of funding facilities in order to further diversify our financing sources. Investor concerns over inflation, rising interest rates, slowing economic growth, and geopolitical uncertainty have resulted in significant disruptions and volatility in financial markets and uncertainty about the overall macroeconomic outlook.
(6) Stabilized loan-to-value ratio, or stabilized LTV, is calculated as the fully funded loan amount (plus any financing that is pari passu with or senior to such loan), including all contractually provided for future fundings, divided by the as stabilized value (as determined in conformance with USPAP) set forth in the original appraisal.
(6) Stabilized LTV is calculated as the fully funded loan amount (plus any financing that is pari passu with or senior to such loan), including all contractually provided for future fundings, divided by the as stabilized value (as determined in conformance with USPAP) set forth in the original appraisal.
We believe providing Distributable Earnings on a supplemental basis to our net income and cash flow from operating activities, as determined in accordance with GAAP, is helpful to stockholders in assessing the overall run-rate operating performance of our business.
We believe providing Distributable Earnings on a supplemental basis to our net income (loss) and cash flow from operating activities, as determined in accordance with GAAP, is helpful to stockholders in assessing the overall run-rate operating performance of our business.
Distributable Earnings does not represent net income or cash flow from operating activities and should not be considered as an alternative to GAAP net income, or an indication of our GAAP cash flows from operations, a measure of our liquidity, or an indication of funds available for our cash needs.
Distributable Earnings does not represent net income (loss) or cash flow from operating activities and should not be considered as an alternative to GAAP net income (loss), or an indication of our GAAP cash flows from operations, a measure of our liquidity, or an indication of funds available for our cash needs.
Declines in economic conditions have negatively impacted, and may continue to negatively impact, real estate and real estate capital markets, which could make it more difficult for us to obtain or maintain financing.
Declines in economic conditions have negatively impacted, and may continue to negatively impact, real estate fundamentals and real estate capital markets, which could make it more difficult for us to obtain or maintain financing.
Allowance for Credit Losses Our operating results are also impacted by the allowance for credit loss we record for loans held-for-investment using the CECL model pursuant to ASU 2016-13.
Allowance for Credit Losses Our operating results are also impacted by the allowance for credit losses we record for loans held-for-investment using the CECL model pursuant to ASU 2016-13.
Distributable Earnings is intended to over time serve as a general, though imperfect, proxy for our taxable income. As such, Distributable Earnings is considered a key indicator of our ability to generate sufficient income to pay our common dividends, which is the primary focus of income-oriented investors who comprise a meaningful segment of our stockholder base.
Distributable Earnings is intended to over time serve as a general, though imperfect, proxy for our taxable income. As such, Distributable Earnings is considered a key indicator of our ability to generate sufficient income to pay dividends on our common stock, which is the primary focus of income-oriented investors who comprise a meaningful segment of our stockholder base.
We continue to monitor the effects on each of these factors in light of the significant volatility in global markets, driven by investor concerns over inflation, rising interest rates, slowing economic growth and geopolitical uncertainty, and how they will affect the results of our operations.
We continue to monitor the effects on each of these factors in light of the significant volatility in global markets, driven by investor concerns over inflation, rising interest rates, slowing economic growth and geopolitical uncertainty, and how they will affect our operating results.
See Note 4 - Variable Interest Entities and Securitized Debt Obligations , Note 5 - Secured Financing Agreements and Note 6 - Convertible Senior Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional details regarding our securitized debt obligations; our secured financing facilities; and our secured convertible senior notes, respectively.
See Note 5 – Variable Interest Entities and Securitized Debt Obligations , Note 6 – Secured Financing Agreements and Note 7 – Convertible Senior Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional details regarding our securitized debt obligations, our secured financing facilities, and our convertible senior notes, respectively.
At any given time and from time to time we may be evaluating or pursuing one or more transactions, including loan sales, capital markets activities and other sources of funding, to improve our liquidity or to refinance our debt or may otherwise seek transactions to reduce our interest expense or leverage and extend our debt maturities, which transactions, depending on market conditions and other factors, could result in actual losses and/or otherwise negatively impact our results of operations in one or more periods.
At any given time and from time to time we may be evaluating or pursuing one or more transactions, including, but not limited to, loan sales, capital markets activities and other sources of funding, to improve our liquidity or to refinance our debt or may otherwise seek transactions to reduce our interest expense or leverage and extend our debt maturities, which transactions, depending on market conditions and other factors, could result in actual losses and/or otherwise negatively impact our results of operations in one or more periods.
Consequently, we met the REIT income and asset tests. We also met all REIT requirements regarding the ownership of our common stock and the distribution of our net income. Therefore, for the year ended December 31, 2022, we believe that we qualified as a REIT under the Code.
Consequently, we met the REIT income and asset tests. We also met all REIT requirements regarding the ownership of our common stock and the distribution of our net income. Therefore, for the year ended December 31, 2023, we believe that we qualified as a REIT under the Code.
We calculate that at least 75% of our assets were qualified REIT assets, as defined in the Code, for the year ended December 31, 2022. We also calculate that our revenue qualifies for the 75% source of income test and for the 95% source of income test rules for the year ended December 31, 2022.
We calculate that at least 75% of our assets were qualified REIT assets, as defined in the Code, for the year ended December 31, 2023. We also calculate that our revenue qualifies for the 75% source of income test and for the 95% source of income test rules for the year ended December 31, 2023.
Accordingly, we monitor our compliance with both the 55% Test and the 80% Tests of the Investment Company Act in order to maintain our exempt status. As of December 31, 2022, we determined that we maintained compliance with both the 55% Test and the 80% Test requirements.
Accordingly, we monitor our compliance with both the 55% Test and the 80% Tests of the Investment Company Act in order to maintain our exempt status. As of December 31, 2023, we determined that we maintained compliance with both the 55% Test and the 80% Test requirements.
We continue to actively explore additional types of funding facilities in order to further diversify our financing sources. Investor concerns over inflation, rising interest rates, slowing economic growth and geopolitical uncertainty have resulted in significant disruptions in financial markets and uncertainty about the overall macroeconomic outlook.
We continue to actively explore additional types of funding facilities in order to further diversify our financing sources. Investor concerns over inflation, rising interest 58 Table of Contents rates, slowing economic growth and geopolitical uncertainty have resulted in significant disruptions in financial markets and uncertainty about the overall macroeconomic outlook.
Changes in the Fair Value of Our Investments We intend to hold our target investments for the long-term and, as such, they are carried at an amortized cost on our consolidated balance sheets. Although we intend to hold our target investments for the long-term, we may occasionally classify some of our debt securities as available-for-sale, or AFS.
Changes in the Fair Value of Our Investments We intend to hold our target investments for the long-term and, as such, they are carried at an amortized cost on our consolidated balance sheets. Although we intend to hold our target investments for the long-term, we may occasionally invest in debt securities and classify them as available-for-sale, or AFS.
The amount of leverage we deploy for our target investments depends upon our assessment of a variety of factors, which may include the anticipated liquidity and any changes in value of the investments in our portfolio, the potential for losses in our portfolio, the gap between the maturities of our assets and liabilities, the availability and cost of financing our investments, our opinion of the creditworthiness of our financing counterparties, the health of the U.S. economy and commercial real estate financing markets, our outlook for the level and volatility of interest rates, the slope of the yield curve, the credit quality of our investments, the collateral underlying our investments and our outlook for investment credit spreads relative to LIBOR and/or SOFR.
The amount of leverage we deploy for our target investments depends upon our assessment of a variety of factors, which may include the anticipated liquidity and any changes 57 Table of Contents in value of the investments in our portfolio, the potential for losses in our portfolio, the gap between the maturities of our assets and liabilities, the availability and cost of financing our investments, our opinion of the creditworthiness of our financing counterparties, the health of the U.S. economy and commercial real estate financing markets, our outlook for the level and volatility of interest rates, the slope of the yield curve, the credit quality of our investments, the collateral underlying our investments and our outlook for investment credit spreads relative to SOFR.
We might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral and availability of relevant historical market loan loss data. We estimate our CECL allowance for our loan portfolio at the individual loan level.
We might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral and availability of relevant historical market loan loss data. 59 Table of Contents We estimate our CECL allowance for our loan portfolio at the individual loan level.
The following table represents our recourse leverage ratio and total leverage ratio as of December 31, 2022, and December 31, 2021: December 31, 2022 December 31, 2021 Recourse leverage ratio (1) 1.2 0.9 Total leverage ratio (2) 2.3 2.7 ____________________ (1) The debt-to-equity ratio with respect to our loans held-for-investment, defined as recourse debt, net of cash, divided by total equity.
The following table represents our recourse leverage ratio and total leverage ratio as of December 31, 2023, and December 31, 2022: December 31, 2023 December 31, 2022 Recourse leverage ratio (1) 0.9 1.2 Total leverage ratio (2) 2.1 2.3 ____________________ (1) The debt-to-equity ratio with respect to our loans held-for-investment, defined as recourse debt, net of cash, divided by total equity.
This section of this Annual Report on Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Changes in Market Interest Rates Our primary interest rate exposures relate to the yield on our loans and other investments and the financing cost of our borrowings. Changes in interest rates may affect our net interest income from loans and other investments.
Changes in Market Interest Rates Our primary interest rate exposures relate to the yield on our loans and other investments and the financing cost of our borrowings. Changes in interest rates have affected, and may continue to affect, our net interest income from loans and other investments.
Since many of our 57 T a ble of Contents assets are financed with secured financing facilities and/or CRE CLOs, a significant portion of the proceeds from sales of our assets, prepayments and scheduled amortization would be used to repay balances under these financing arrangements.
Since many of our assets are financed with secured financing facilities and/or CRE CLOs, a significant portion of the proceeds from sales of our assets, prepayments and scheduled amortization would be used to repay balances under these financing arrangements.
Under our repurchase facilities, other than with respect to our Centennial Bank repurchase facility, which provides financing on a non-mark-to-market basis, our counterparties may make margin calls because of a perceived decline in the value of our assets collateralizing the given secured financing arrangement due to a credit event or, under a limited number of our repurchase facilities, due to market events.
Under our repurchase facilities, other than with respect to our Centennial Bank repurchase facility, which provides financing on a non-mark-to-market basis, our counterparties may make margin calls as a result of a perceived decline in the value of our assets collateralizing the given secured financing arrangement due to a credit event or, under a limited number of our 48 Table of Contents repurchase facilities, due to market events.
See Note 3 - Loans Held-for-Investment, Net of Allowance for Credit Losses to our Consolidated Financial Statements included in this Annual Report on Form 10-K for details.
See Note 3 – Loans Held-for-Investment, Net of Allowance for Credit Losses to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional details regarding our risk ratings.
Typically, our loan documents allow us, among other things, to receive regular property, borrower and guarantor financial statements; approve annual budgets and major tenant leases; and enforce loan covenants and remedies.
Typically, our loan documents allow us, among other things, to receive regular property, borrower and guarantor financial statements; approve 45 Table of Contents annual budgets and major tenant leases; and enforce loan covenants and remedies.
We try to mitigate this risk by seeking to originate or acquire assets of higher quality at appropriate rates of return given anticipated and unanticipated losses, by employing a comprehensive review and selection process and by proactively monitoring investments.
We try to mitigate these risks by seeking to originate or acquire assets of higher quality at appropriate rates of return given anticipated and unanticipated losses, by employing a comprehensive review and selection process and by proactively monitoring our investments.
Our loan-level financing as of December 31, 2022, is generally term-matched or matures in 2023 or later, and includes $1.0 billion of secured repurchase agreements, $1.1 billion of CRE CLO securitizations, which are term-matched to the underlying assets, non-recourse and non-mark-to-market, $44.9 million of asset-specific financing facility and a $100.0 million secured credit facility.
Our loan-level financing as of December 31, 2023, is generally term-matched or matures in 2024 or later, and includes $0.9 billion of secured repurchase agreements, $1.0 billion of CRE CLO securitizations, which are term-matched to the underlying assets, non-recourse and non-mark-to-market, and a $84.0 million secured credit facility.
As of December 31, 2022, we had outstanding $1.0 billion of repurchase agreement facility borrowings, and the term to maturity ranged from 179 days to approximately 2.4 years. Our repurchase agreement facilities had a weighted average borrowing rate of 6.8% and weighted average remaining maturities of 1.1 years as of December 31, 2022.
As of December 31, 2023, we had outstanding $0.9 billion of repurchase agreement facility borrowings, and the term to maturity ranged from 180 days to approximately 1.6 years. Our repurchase agreement facilities had a weighted average borrowing rate of 8.8% and weighted average remaining maturities of 1.2 years as of December 31, 2023.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
In addition, we are exposed to the risks generally associated with the commercial real estate market, including variances in occupancy rates, capitalization rates, absorption rates and other macroeconomic factors beyond our control.
In addition, we are exposed to the risks generally associated with the commercial real estate market, including variances in occupancy rates, capitalization rates, absorption rates and other macroeconomic factors beyond our control such as the level of market interest rates.
Summary of Results of Operations and Financial Condition Our GAAP net (loss) attributable to common stockholders was $(55.3) million (or $(1.04) per basic weighted average share) for the year ended December 31, 2022, as compared to GAAP net income attributable to common stockholders of $67.6 million (or $1.24 per basic weighted average share) for the year ended December 31, 2021.
Summary of Results of Operations and Financial Condition Our GAAP net (loss) attributable to common stockholders was $(77.6) million (or $(1.50) per basic weighted average share) for the year ended December 31, 2023, as compared to GAAP net (loss) attributable to common stockholders of $(55.3) million (or $(1.04) per basic weighted average share) for the year ended December 31, 2022.
We may also access liquidity through our at-the-market stock offering program, pursuant to which we may sell, from time to time, up to 4,757,636 additional shares of our common stock as of December 31, 2022. See Note 12 – Stockholders’ Equity to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional details.
We may also access liquidity through our at-the-market stock offering program, pursuant to which we may sell, from time to time, up to 4,157,916 additional shares of our common stock as of December 31, 2023. See Note 12 – Stockholders’ Equity, to our Consolidated Financial Statements included in this Annual Report on Form 10-K for further detail.
During the year ended December 31, 2022, we recorded provision for credit losses of $(69.3) million, of which $(44.2) million has been excluded from Distributable Earnings consistent with other unrealized gains (losses) and other non-cash items pursuant to our existing policy for reporting Distributable Earnings referenced above.
During the year ended December 31, 2023, we recorded provision for credit losses of $(104.8) million, which has been excluded from Distributable Earnings, consistent with other unrealized gains (losses) and other non-cash items pursuant to our existing policy for reporting Distributable Earnings referenced above.
This dislocation in capital markets and decline in real estate sale transaction and refinancing activities have negatively impacted, and will likely continue to negatively impact, the volume of loan repayments and prepayments on select property types, which are a significant source of our overall liquidity and could make it more difficult for us to originate new loan investments.
This dislocation in capital markets and decline in real estate sale transaction and refinancing activities have negatively impacted, and will likely continue to negatively impact, the volume of loan repayments and prepayments on select property types (which are a significant source of our overall liquidity) and the volume of our originations of new loan investments.
During the year ended December 31, 2022, we recorded a $(18.8) million loss on early extinguishment of debt, which has been excluded from Distributable Earnings consistent with certain one-time expenses pursuant to our existing policy for reporting Distributable Earnings as a helpful indicator in assessing the overall run-rate operating performance of our business.
During the year ended December 31, 2023, we recorded a $0.2 million gain on early extinguishment of debt, which has been excluded from Distributable Earnings consistent with certain one-time events pursuant to our existing policy for reporting Distributable Earnings as a helpful indicator in assessing the overall run-rate operating performance of our business.
Temporary differences were principally timing differences between GAAP and tax accounting related to restructuring charges, provision for credit losses and amendments to loans treated as “significant modifications” for tax under applicable Treasury regulations. 55 T a ble of Contents Dividends For the year ended December 31, 2022, we declared dividends on our common stock totaling $0.95 per share.
Temporary differences were principally timing differences between GAAP and tax accounting related to restructuring charges, provision for credit losses and amendments to loans treated as “significant modifications” for tax under applicable Treasury regulations. Dividends For the year ended December 31, 2023, we declared dividends on our common stock totaling $0.80 per share.
As of December 31, 2022, 1.4% of our loan investments by carrying value earned a fixed rate of interest and were financed with liabilities that pay interest on a floating rate basis, which resulted in a negative correlation to rising interest rates on that amount of our financing.
As of December 31, 2023, 1.7% of our loan investments by principal balance earned a fixed rate of interest and were financed with liabilities that pay interest on a floating rate basis, which resulted in a negative correlation to rising interest rates on that amount of our financing.
The following table sets forth our sources of liquidity as of December 31, 2022: Year Ended (in thousands) December 31, 2022 Cash and cash equivalents $ 133,132 Approved but unused borrowing capacity on financing facilities — Total $ 133,132 We have access to liquidity through public offerings of debt and equity securities, subject to market conditions.
The following table sets forth our immediately available sources of liquidity as of December 31, 2023: (in thousands) December 31, 2023 Cash and cash equivalents $ 188,370 Approved but unused borrowing capacity on financing facilities — Total $ 188,370 We have access to liquidity through public offerings of debt and equity securities, subject to market conditions.
As of December 31, 2022, the weighted average borrowing rate on our repurchase facilities was 6.8%, the weighted average advance rate was 68.4%, and the term to maturity ranged from 179 days to approximately 2.4 years, with a weighted average remaining maturity of 1.1 years.
As of December 31, 2023, the weighted average borrowing rate on our repurchase facilities was 8.8%, the weighted average advance rate was 69.3%, and the term to maturity ranged from 180 days to approximately 1.6 years, with a weighted average remaining maturity of 1.2 years.
As of December 31, 2022, 98.6% of our loan investments by carrying value earned a floating rate of interest and were financed with liabilities that pay interest on a floating rate basis, which resulted in an amount of net floating rate exposure, subject to the impact of interest rate floors on certain of our floating rate loan investments, of $0.9 billion.
As of December 31, 2023, 98.3% of our loan investments by principal balance earned a floating rate of interest and were financed with liabilities that pay interest on a floating rate basis, which resulted in an amount of net floating rate exposure, subject to the impact of interest rate floors on certain of our floating rate loan investments, of $0.7 billion.
Yield/Cost (1) Collateral assets $ 185,723 $ 157,112 L+3.6% Borrowings outstanding 100,000 100,000 S+6.5% ______________________________________________________________________________________________________ (1) Calculations of all in yield on collateral assets at origination are based on a number of assumptions (some or all of which may not occur) and are expressed as monthly equivalent yields that include net origination fees and exit fees and exclude future fundings and any potential or completed loan amendments or modifications.
Yield/Cost (1) Collateral assets $ 141,899 $ 105,865 S+4.1% Borrowings outstanding 84,000 84,000 S+6.5% ____________________ (1) Calculations of all in yield on collateral assets at origination are based on a number of assumptions (some or all of which may not occur) and are expressed as monthly equivalent yields that include net origination fees and exit fees and exclude future fundings and any potential or completed loan amendments or modifications.
A portion of the dividend declared in the fourth quarter of 2019 and paid in the first quarter of 2020 was treated as a 2020 dividend for federal tax purposes.
The dividend declared in the fourth quarter of 2023 and paid in the first quarter of 2024 was treated as a 2024 dividend for federal tax purposes.
GAAP to Estimated Taxable Income The following tables provide reconciliations of our GAAP net income (loss) to our estimated taxable income (loss) split between our REIT and taxable REIT subsidiaries for the years ended December 31, 2022, and December 31, 2021: Year Ended December 31, 2022 (dollars in millions) TRS REIT Consolidated GAAP net income, pre-tax $ — $ (40.8) $ (40.8) Permanent differences Other permanent differences — (1.1) (1.1) Temporary differences Net accretion of OID and market discount — 2.0 2.0 Income from significant modifications — — — Net realized losses on sale of loans — (9.4) (9.4) Credit loss impairment — 52.9 52.9 Other temporary differences 2.2 (2.2) — Estimated taxable income 2.2 1.4 3.6 Dividend declaration deduction — (1.4) (1.4) Estimated taxable income post-dividend deduction $ 2.2 $ — $ 2.2 Year Ended December 31, 2021 (dollars in millions) TRS REIT Consolidated GAAP net income, pre-tax $ — $ 68.5 $ 68.5 Permanent differences Other permanent differences — (1.9) (1.9) Temporary differences Net accretion of OID and market discount — (3.8) (3.8) Income from significant modifications — 0.3 0.3 Other temporary differences 0.3 (16.5) (16.2) Estimated taxable income 0.3 46.6 46.9 Dividend declaration deduction — (46.6) (46.6) Estimated taxable income post-dividend deduction $ 0.3 $ — $ 0.3 The permanent tax differences recorded in 2022 and 2021 were principally related to recurring differences in compensation expense related to restricted stock dividends.
As of December 31, 2023, the debt-to-equity ratio, defined as total debt, net of cash, divided by equity, was 2.1:1.0. 55 Table of Contents GAAP to Estimated Taxable Income The following tables provide reconciliations of our GAAP net income (loss) to our estimated taxable income (loss) split between our REIT and taxable REIT subsidiaries for the years ended December 31, 2023, and December 31, 2022: Year Ended December 31, 2023 (in millions) TRS REIT Consolidated GAAP net (loss), pre-tax $ — $ (63.1) $ (63.1) Permanent differences Other permanent differences — (1.3) (1.3) Temporary differences Net accretion of OID and market discount — 0.8 0.8 Credit loss impairment — 50.0 50.0 Other temporary differences — 5.2 5.2 Estimated taxable income $ — $ (8.4) $ (8.4) Dividend declaration deduction — — — Estimated taxable income post-dividend deduction $ — $ (8.4) $ (8.4) Year Ended December 31, 2022 (in millions) TRS REIT Consolidated GAAP net (loss), pre-tax $ — $ (40.8) $ (40.8) Permanent differences Other permanent differences — (1.1) (1.1) Temporary differences Net accretion of OID and market discount — 2.0 2.0 Income from significant modifications — — — Net realized losses on sale of loans — (9.4) (9.4) Credit loss impairment — 52.9 52.9 Other temporary differences 2.2 (2.2) — Estimated taxable income $ 2.2 $ 1.4 $ 3.6 Dividend declaration deduction — (1.4) (1.4) Estimated taxable income post-dividend deduction $ 2.2 $ — $ 2.2 The permanent tax differences recorded in 2023 and 2022 were principally related to recurring differences in compensation expense related to restricted stock dividends.
Changes to the tax laws are likely to occur, and we intend to continue to monitor such changes.
Changes to the tax laws are likely to occur, and we intend to continue to monitor such changes. 60 Table of Contents
Interest Income Interest income for the year ended December 31, 2022, increased to $210.9 million from $198.3 million mainly due to an increase in short-term interest rates net of the impact of interest rate floors on our loans, partially offset by a lower average balance of our interest-earning assets and higher average balance of nonaccrual loans.
Interest Income Interest income for the year ended December 31, 2023, increased to $263.7 million from $210.9 million for the year ended December 31, 2022, mainly due to an increase in short-term interest rates, partially offset by a lower average balance of our interest-earning assets due to prepayments and a higher average balance of nonaccrual loans.
(2) As of December 31, 2022, we retained options to increase the maximum facility capacity amount up to $350 million, subject to customary terms and conditions. (3) As of December 31, 2022, we retained options to increase the maximum facility capacity amount up to $200 million, subject to customary terms and conditions.
(2) Unused capacity is not committed as of December 31, 2023. (3) As of December 31, 2023, we retained options to increase the maximum facility capacity amount up to $350 million, subject to customary terms and conditions.
The following table details the outstanding borrowings under our asset-specific financing facility as of December 31, 2022: (dollars in thousands) December 31, 2022 Asset-Specific Financing Facility Principal Balance Carrying Value Wtd. Avg.
The following table details the outstanding borrowings under our secured credit facility as of December 31, 2023: (dollars in thousands) December 31, 2023 Secured Credit Facility Principal Balance Carrying Value Wtd. Avg.
The following table provides the maturities of our repurchase facilities, asset-specific financing facility, secured credit facility, securitized debt obligations, and convertible senior notes, net of deferred debt issuance costs, as of December 31, 2022, and December 31, 2021: (in thousands) December 31, 2022 December 31, 2021 Within one year 1,338,194 $ 1,530,671 One to three years 1,091,952 1,096,112 Three to five years — 311,710 Five years and over — — Total $ 2,430,146 $ 2,938,493 Cash Flows For the year ended December 31, 2022, our restricted and unrestricted cash and cash equivalents balance decreased approximately $64.1 million, to $140.2 million.
The following table provides the maturities of our repurchase facilities, asset-specific financing facility, secured credit facility, securitized debt obligations, and convertible senior notes, net of deferred debt issuance costs, as of December 31, 2023, and December 31, 2022: (in thousands) December 31, 2023 December 31, 2022 Within one year $ 988,716 $ 1,338,194 One to three years 962,424 1,091,952 Three to five years — — Five years and over — — Total $ 1,951,140 $ 2,430,146 Cash Flows For the year ended December 31, 2023, our restricted and unrestricted cash and cash equivalents balance increased approximately $59.1 million, to $199.2 million.
Earnings Per Share and Dividends Declared Per Common Share The following table sets forth the calculation of basic and diluted (loss) earnings per share and dividends declared per share: Year Ended December 31, (in thousands, except share data) 2022 2021 Net (loss) income attributable to common stockholders $ (55,327) $ 67,560 Weighted average number of common shares outstanding 53,011,806 54,593,499 Weighted average number of diluted shares outstanding 53,011,806 54,929,070 Basic (loss) earnings per basic common share $ (1.04) $ 1.24 Diluted (loss) earnings per basic common share $ (1.04) $ 1.23 Dividend declared per common share $ 0.95 $ 1.00 Distributable Earnings In order to maintain our status as a REIT, we are required to distribute at least 90% of our taxable income as dividends.
(Loss) Earnings Per Share and Dividends Declared Per Common Share The following table sets forth the calculation of basic and diluted earnings (loss) per share and dividends declared per share for the years ended December 31, 2023, and 2022: Year Ended December 31, (in thousands, except share data) 2023 2022 Net (loss) attributable to common stockholders $ (77,649) $ (55,327) Weighted average number of common shares outstanding 51,641,619 53,011,806 Weighted average number of diluted shares outstanding 51,641,619 53,011,806 Basic (loss) per basic common share $ (1.50) $ (1.04) Diluted (loss) per basic common share $ (1.50) $ (1.04) Dividend declared per common share $ 0.80 $ 0.95 Distributable Earnings In order to maintain our status as a REIT, we are required to distribute at least 90% of our taxable income as dividends.
(2) Beginning with the year ended December 31, 2018, and subsequent years, ordinary dividends (non-qualified) are also the portion of dividends that may be eligible for the 20% qualified business income deduction under Internal Revenue Code Section 199A.
(2) Beginning with the year ended December 31, 2018, and subsequent years, ordinary dividends (non-qualified) are also the portion of dividends that may be eligible for the 20% qualified business income deduction under Internal Revenue Code Section 199A. (3) Distributions in excess of earnings and profits resulted in a return of capital for tax purposes.
The following table presents cash dividends declared on our common stock since 2020: Declaration Date Record Date Payment Date Cash Dividend Per Share 2022 December 20, 2022 December 30, 2022 January 17, 2023 $ 0.20 September 20, 2022 October 3, 2022 October 17, 2022 $ 0.25 June 16, 2022 July 1, 2022 July 15, 2022 $ 0.25 March 17, 2022 April 1, 2022 April 15, 2022 $ 0.25 $ 0.95 2021 December 16, 2021 December 31, 2021 January 18, 2022 $ 0.25 September 15, 2021 October 1, 2021 October 19, 2021 $ 0.25 June 15, 2021 July 1, 2021 July 19, 2021 $ 0.25 March 18, 2021 April 1, 2021 April 19, 2021 $ 0.25 $ 1.00 2020 December 18, 2020 December 31, 2020 January 22, 2021 $ 0.25 December 18, 2020 December 31, 2020 January 22, 2021 $ 0.20 September 28, 2020 October 8, 2020 October 19, 2020 $ 0.20 $ 0.65 The following table summarizes dividends declared since 2020 and their related tax characterization (per share amounts): Tax Characterization of Dividends Year Ended December 31, Dividends Declared Adjustments (1) Ordinary Dividends (Non-Qualified) (2) Qualified Ordinary Dividends Capital Gain Distribution Nondividend Distributions (3) 2022 $ 0.95 $ (0.20) $ 0.08 $ 0.01 $ — $ 0.66 2021 $ 1.00 $ — $ 0.99 $ 0.01 $ — $ — 2020 $ 0.65 $ 0.09 $ 0.74 $ — $ — $ — ____________________ (1) The dividend declared in the fourth quarter of 2022 and paid in the first quarter of 2023 was treated as a 2023 distribution for federal income tax purposes.
We have paid full cumulative dividends on all classes of our preferred stock from the respective dates of issuance through December 31, 2023. 56 Table of Contents The following table presents cash dividends declared on our common stock since 2022: Declaration Date Record Date Payment Date Cash Dividend Per Share 2023 December 19, 2023 December 29, 2023 January 16, 2024 $ 0.20 September 20, 2023 October 2, 2023 October 16, 2023 $ 0.20 June 22, 2023 July 3, 2023 July 17, 2023 $ 0.20 March 16, 2023 April 3, 2023 April 17, 2023 $ 0.20 $ 0.80 2022 December 20, 2022 December 30, 2022 January 17, 2023 $ 0.20 September 20, 2022 October 3, 2022 October 17, 2022 $ 0.25 June 16, 2022 July 1, 2022 July 15, 2022 $ 0.25 March 17, 2022 April 1, 2022 April 15, 2022 $ 0.25 $ 0.95 The following table summarizes dividends declared since 2022 and their related tax characterization (per share amounts): Tax Characterization of Dividends Year Ended December 31, Dividends Declared Adjustments (1) Ordinary Dividends (Non-Qualified) (2) Qualified Ordinary Dividends Capital Gain Distribution Nondividend Distributions (3) 2023 $ 0.80 $ — $ — $ — $ — $ 0.80 2022 $ 0.95 $ (0.20) $ 0.08 $ 0.01 $ — $ 0.66 ____________________ (1) The dividend declared in the fourth quarter of 2022 and paid in the first quarter of 2023 was treated as a 2023 distribution for federal income tax purposes.
For the year ended December 31, 2022, investing activities increased our cash balances by approximately $408.6 million, primarily driven by repayments of loans held-for-investment, partially offset by origination of 11 loans held-for-investment. • Cash flows from financing activities.
For the year ended December 31, 2023, investing activities increased our cash balances by approximately $561.4 million, primarily driven by repayments of loans held-for-investment. • Cash flows from financing activities.
Financial Condition As of December 31, 2022, our borrowings consisted of repurchase agreement facilities collateralized by a portion of our loans held-for-investment, securitized debt obligations issued by CRE CLOs collateralized by pools of our loans held-for-investment, a secured credit facility collateralized by loans held-for-investment, an asset-specific financing facility collateralized by one loan held-for-investment and unsecured convertible senior notes.
Financial Condition As of December 31, 2023, our borrowings consisted of repurchase agreement facilities collateralized by a portion of our loans held-for-investment and REO, securitized debt obligations issued by CRE CLOs collateralized by pools of our loans held-for-investment and a secured credit facility collateralized by loans held-for-investment.
Liquidity Needs In addition to our loan origination activities and general operating expenses, our primary liquidity needs include interest and principal payments under our $2.4 billion of outstanding borrowings under our repurchase facilities, collateralized loan obligations, asset-specific financing facility, secured credit facility and convertible senior notes; $229.6 million of unfunded loan commitments; and dividend distributions to our preferred and common stockholders.
Liquidity Needs In addition to our loan origination activities and general operating expenses, our primary liquidity needs include interest and principal payments under our $2.0 billion of outstanding borrowings under our repurchase facilities, CRE CLOs, and secured credit facility; $160.7 million of unfunded loan commitments; and dividend distributions to our preferred and common stockholders.
We do not limit our loan originations by geographical area or property type so that we may develop a well-diversified investment portfolio. Interest-earning assets include our 100% loan investment portfolio.
We place emphasis on diversifying our investment portfolio across geographical regions and local markets, property types, borrowers and loan structures. We do not limit our loan originations by geographical area or property type so that we may develop a well-diversified investment portfolio. Interest-earning assets include our 100% loan investment portfolio.
The nature and scope of our ESG diligence will vary based on the investment but may include a review of, among other things, energy management, pollution and contamination, accounting standards, bribery and corruption. In addition, our Anti-Money Laundering Policy is designed to help prevent money laundering and terrorist financing.
The nature and scope of our ESG diligence will vary based on the investment but may include a review of, among other things, energy management, pollution and contamination, accounting standards, bribery and corruption.
Interest Expense Interest expense for the year ended December 31, 2022, increased to $126.1 million from $105.6 million mainly due to an increase in short-term interest rates and two new higher-cost financing facilities, partially offset by a lower average balance on higher-cost senior secured term loan facilities, convertible notes and the term financing facility.
Interest Expense Interest expense for the year ended December 31, 2023, increased to $181.7 million from $126.1 million for the year ended December 31, 2022, mainly due to an increase in short-term interest rates and the higher-cost secured credit facility, partially offset by a lower average balance on portfolio level financing and corporate borrowings.
At December 31, 2022, we had three CRE CLOs outstanding: GPMT 2021-FL4, GPMT 2021-FL3 and GPMT 2019-FL2, totaling $1.1 billion of outstanding borrowings, financing 49 of our existing first mortgage loan investments with an aggregate principal balance of $1.6 billion.
At December 31, 2023, we had two CRE CLOs outstanding: GPMT 2021-FL4 and GPMT 2021-FL3, totaling $1.0 billion of outstanding borrowings, financing 39 of our existing first mortgage loan investments with an aggregate principal balance, inclusive of restricted cash, of $1.3 billion.
Asset-Specific Financing In April 2019, we entered into a $150 million asset-specific financing facility to provide us with loan-based financing on a non-mark-to-market basis with a term matched to the underlying loan collateral and partial recourse to us.
(3) No restricted cash is included as of December 31, 2023. Yield on collateral assets is exclusive of restricted cash. Asset-Specific Financing In April 2019, we entered into a $150.0 million asset-specific financing facility to provide us with loan-based financing on a non-mark-to-market basis with a term matched to the underlying loan collateral and partial recourse to us.
(3) Distributions in excess of earnings and profits resulted in a return of capital for tax purposes. 56 T a ble of Contents Liquidity and Capital Resources Capitalization To date we have capitalized our business primarily through the issuance and sale of shares of our common and preferred stock, borrowings under our senior secured term loan facilities, secured financing facilities, issuance of CRE CLOs and the issuance and sale of convertible notes.
Liquidity and Capital Resources Capitalization To date we have capitalized our business primarily through the issuance and sale of shares of our common and preferred stock, borrowings under our senior secured term loan facilities, secured financing facilities, issuance of CRE CLOs and the issuance and sale of convertible notes.
Cash dividends cannot be paid on our common stock unless we have paid full cumulative dividends on all classes of our preferred stock. We have paid full cumulative dividends on all classes of our preferred stock from the respective dates of issuance through December 31, 2022.
Cash dividends cannot be paid on our common stock unless we have paid full cumulative dividends on all classes of our preferred stock.
Our CRE CLOs provide us with an attractive cost of funds and, as of December 31, 2022, financed 46.5% of our total loan portfolio principal balance on a term-matched, non-recourse and non-mark-to-market basis. On April 22, 2022, we redeemed the GPMT 2018-FL1 CRE CLO, which at its redemption had $103.6 million of outstanding borrowings.
As of December 31, 2023, our CRE CLOs financed 45.9% of our total loan portfolio principal balance on a term-matched, non-recourse and non-mark-to-market basis with attractive cost of funds. On March 16, 2023, we redeemed the GPMT 2019-FL2 CRE CLO, which at its redemption had $98.1 million of outstanding borrowings.
At December 31, 2022, our portfolio was comprised of 90 loans, of which 89 were senior first mortgage loans totaling $3.6 billion of commitments with an unpaid principal balance of $3.3 billion, and one was a subordinated loan totaling $13.8 million in commitments and unpaid principal balance.
At December 31, 2023, our loan portfolio was comprised of 73 investments, of which 72 were senior first mortgage loans totaling $2.9 billion of commitments with an unpaid principal balance of $2.7 billion, and one subordinated loan totaling $13.5 million in commitments and unpaid principal balance.
As of December 31, 2022, our capitalization included $0.1 billion of corporate debt and $2.3 billion of loan-level financing.
As of December 31, 2023, our capitalization included $2.0 billion of loan-level financing.
Leverage Ratios As of December 31, 2022, the total debt-to-equity ratio with respect to our loans held-for-investment was 2.3:1.0, and our recourse leverage ratio was 1.2:1.0.
Interest coverage of 1.5:1.0 We were in compliance with all financial covenants as of December 31, 2023. Leverage Ratios As of December 31, 2023, the total debt-to-equity ratio with respect to our loans held-for-investment was 2.1:1.0, and our recourse leverage ratio was 0.9:1.0.
Calculations of all in weighted average yield at origination exclude fixed rate loans. Calculations of cost of funds is the initial weighted average coupon of the secured credit facility, exclusive of any secured credit facility issuance costs. Corporate Financing Convertible Senior Notes We redeemed for cash $143.8 million in convertible senior notes at maturity on December 1, 2022.
Calculations of cost of funds is the initial weighted average coupon of the secured credit facility, exclusive of any secured credit facility issuance costs. 49 Table of Contents Corporate Financing Convertible Senior Notes We redeemed for cash $131.6 million in convertible senior notes at maturity on October 1, 2023.
Additionally, rising rates and increasing costs may dampen consumer spending and slow corporate profit growth, which may negatively impact the collateral underlying certain of our loans.
Additionally, higher interest rates and increasing costs may dampen consumer spending and slow corporate profit growth, which may negatively impact the collateral underlying certain of our loans. Higher interest rates have adversely impacted, and may continue to adversely impact, commercial real estate property values.
As further described below, Distributable Earnings is a measure that is not prepared in accordance with GAAP. We use Distributable Earnings to evaluate our performance, excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations.
We use Distributable Earnings to evaluate our performance, excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations. In addition, Distributable Earnings is a performance metric we consider, along with other measures, when declaring our common stock dividends.
As of December 31, 2022, we had outstanding $1.1 billion of securitized debt obligations with a weighted average borrowing rate of 5.7% and weighted average estimated remaining maturities of 1.0 years based on the maturities of the underlying loan collateral. 54 T a ble of Contents As of December 31, 2022, we had outstanding $44.9 million of asset-specific financing facility borrowings with a weighted average borrowing rate of 6.0% and weighted average estimated remaining maturities of 0.9 years based on the maturity of the underlying collateral.
As of December 31, 2023, we had outstanding $1.0 billion of securitized debt obligations with a weighted average borrowing rate of 7.2% and weighted average estimated remaining maturities of 0.7 years based on the maturities of the underlying loan collateral.
The following table details our loan activity by unpaid principal balance for the years ended December 31, 2022, and 2021: Year Ended December 31, (in thousands) 2022 2021 Loan originations $ 420,955 $ 673,638 Other loan fundings (1) $ 143,386 $ 150,644 Deferred interest capitalized $ 2,458 $ 10,179 Loan sales $ (64,176) $ — Loan repayments (2) $ (910,134) $ (960,330) Loan write-offs and realized loan losses $ (27,308) $ (9,740) Total loan activity, net $ (434,819) $ (135,609) ___________________ (1) Additional fundings made under existing loan commitments and upsizing of loans.
The following table details our loan activity by unpaid principal balance for the years ended December 31, 2023, and 2022: Year Ended December 31, (in thousands) 2023 2022 Loan originations $ 48,800 $ 420,955 Other loan fundings (1) 71,266 143,386 Deferred interest capitalized 3,466 2,458 Transfers to real estate owned (24,000) — Loan repayments (2) (664,985) (910,134) Loan write-offs and realized loan losses (54,274) (27,308) Loan sales (15,100) (64,176) Total loan activity, net $ (634,827) $ (434,819) ____________________ (1) Additional fundings made under existing loan commitments and upsizing of loans.
The decrease in GAAP results was primarily due to an increase in provision for credit losses of $(69.3) million and a loss on extinguishment of debt of $(18.8) million during the year ended December 31, 2022, compared to a decrease in provision for credit losses of $20.0 million and $(8.9) million losses on extinguishment of debt during the year ended December 31, 2021. 52 T a ble of Contents Comparison of the Years Ended December 31, 2022, and December 31, 2021 Net Interest Income The following table presents the components of interest income and interest expense for the years ended December 31, 2022, and 2021: (in thousands) Year Ended December 31, Income Statement Data: 2022 2021 2022 vs 2021 Interest income: Loans held-for-investment $ 208,500 $ 197,942 $ 10,558 Cash and cash equivalents 2,354 346 2,008 Total interest income 210,854 198,288 $ 12,566 Interest expense: Repurchase facilities 49,452 25,973 23,479 Securitized debt obligations 51,631 29,926 21,705 Convertible senior notes 17,527 18,167 (640) Term financing facility 1,713 7,585 (5,872) Asset-specific financings 1,669 2,241 (572) Secured credit facility 383 — 383 Senior secured term loan facilities 3,754 21,688 (17,934) Total interest expense 126,129 105,580 20,549 Net interest income 84,725 92,708 (7,983) The majority of our interest-earning assets and liabilities have floating rates based on an index (e.g., one-month LIBOR/SOFR) plus a credit spread.
The decrease in GAAP results was primarily due to provision for credit losses of $(104.8) million, a gain on extinguishment of debt of $0.2 million, a net loss on REO of $(3.4) million and net interest income of $82.0 million during the year ended December 31, 2023, compared to a provision for credit losses of $(69.3) million, $(18.8) million losses on extinguishment of debt, no net loss on REO and net interest income of $84.7 million during the year ended December 31, 2022. 53 Table of Contents Comparison of the Year Ended December 31, 2023, and December 31, 2022 Net Interest Income The following table presents the components of interest income and interest expense for the year ended December 31, 2023, and December 31, 2022: (in thousands) Year Ended Income Statement Data: 2023 2022 2023 vs 2022 Interest income: Loans held-for-investment $ 254,733 $ 208,500 $ 46,233 Cash and cash equivalents 9,002 2,354 6,648 Total interest income $ 263,735 $ 210,854 $ 52,881 Interest expense: — Repurchase facilities $ 86,593 $ 49,452 $ 37,141 Securitized debt obligations 72,975 51,631 21,344 Convertible senior notes 6,975 17,527 (10,552) Term financing facility — 1,713 (1,713) Asset-specific financings 2,902 1,669 1,233 Secured credit facility 12,290 383 11,907 Senior secured term loan facilities — 3,754 (3,754) Total interest expense $ 181,735 $ 126,129 $ 55,606 Net interest income $ 82,000 $ 84,725 $ (2,725) The majority of our interest-earning assets and liabilities have floating rates based on an index (e.g., one-month SOFR) plus a credit spread.
Although our business model is such that, in general, rising interest rates will, all else being equal, correlate to increases in our net income, increases in interest rates may adversely affect our existing borrowers and cost of financing their properties.
Although our business model is such that higher interest rates will, all else being equal, generally correlate to higher net income, interest rates remaining elevated for an extended period of time has adversely affected, and may continue to adversely affect, our existing borrowers and the cost of financing their properties and lead to nonperformance.
During the year ended December 31, 2022, we resolved a first mortgage loan with an outstanding unpaid principal balance of $114.1 million, which involved a coordinated sale of the collateral property through a deed-in-lieu of foreclosure transaction and our company providing the new ownership group with a new $77.3 million senior floating rate loan.
During the year ended December 31, 2023, a senior loan with an outstanding principal balance of $92.6 million and collateralized by an office property located in San Diego, CA was resolved, which involved a coordinated sale of the collateral property through a deed-in-lieu of foreclosure transaction and our company providing the new ownership group with a senior floating rate loan with a total commitment of $61.8 million and an initial principal balance of $48.8 million.
Interest-Earning Assets and Interest-Bearing Liabilities The following tables present the components of interest income and average annualized net asset yield earned by asset type, the components of interest expense and average annualized cost of funds on borrowings incurred by collateral type and net interest income and average annualized net interest rate spread for the years ended December 31, 2022, and 2021: 49 T a ble of Contents Year Ended December 31, 2022 (dollars in thousands) Average Balance Interest Income/Expense (1) Net Yield/Cost of Funds Interest-earning assets (2) Loans held-for-investment Senior loans (3) $ 3,696,469 $ 207,145 5.6 % Subordinated loans 14,250 1,355 9.5 % Other — 2,354 Total interest income/net asset yield $ 3,710,719 $ 210,854 5.7 % Interest-bearing liabilities Borrowings collateralized by: Loans held-for-investment Senior loans (3) $ 2,503,708 $ 104,448 4.2 % Subordinated loans 8,332 400 4.8 % Other: Convertible senior notes 261,790 17,527 6.7 % Senior secured term loan facilities 36,003 3,754 10.4 % Total interest expense/cost of funds $ 2,809,833 126,129 4.5 % Net interest income/spread $ 84,725 1.2 % Year Ended December 31, 2021 (dollars in thousands) Average Balance Interest Income/Expense (1) Net Yield/Cost of Funds Interest-earning assets (2) Loans held-for-investment Senior loans (3) $ 3,732,225 $ 196,429 5.3 % Subordinated loans 15,783 1,513 9.6 % Other — 346 Total interest income/net asset yield $ 3,748,008 $ 198,288 5.3 % Interest-bearing liabilities Borrowings collateralized by: Loans held-for-investment Senior loans (3) $ 2,518,884 $ 65,457 2.6 % Subordinated loans 8,473 268 3.2 % Other: Senior secured term loan facilities 202,174 21,688 10.7 % Convertible senior notes 272,157 18,167 6.7 % Total interest expense/cost of funds $ 3,001,688 105,580 3.5 % Net interest income/spread $ 92,708 1.8 % ____________________ (1) Includes amortization of deferred debt issuance costs.
(3) Floating rate liabilities include our outstanding repurchase facilities, secured credit facility and CRE CLOs. 50 Table of Contents Interest-Earning Assets and Interest-Bearing Liabilities The following tables present the components of interest income and average annualized net asset yield earned by asset type, the components of interest expense and average annualized cost of funds on borrowings incurred by collateral type and net interest income and average annualized net interest rate spread for the years ended December 31, 2023, and 2022: Year Ended December 31, 2023 (dollars in thousands) Average Balance Interest Income/Expense (1) Net Yield/Cost of Funds Interest-earning assets (2) Loans held-for-investment Senior loans (3) $ 3,107,233 $ 253,629 8.2 % Subordinated loans 13,626 1,104 8.1 % Total loan interest income/net asset yield $ 3,120,859 $ 254,733 8.2 % Other - Interest on cash and cash equivalents 9,002 Total interest income $ 263,735 Interest-bearing liabilities Borrowings collateralized by: Loans held-for-investment Senior loans (3)(4) $ 2,196,553 $ 174,083 7.9 % Subordinated loans 8,182 677 8.3 % Other: Convertible senior notes 98,467 6,975 7.1 % Total interest expense/cost of funds $ 2,303,202 $ 181,735 7.9 % Net interest income/spread $ 82,000 0.3 % Year Ended December 31, 2022 (dollars in thousands) Average Balance Interest Income/Expense (1) Net Yield/Cost of Funds Interest-earning assets (2) Loans held-for-investment Senior loans (3) $ 3,696,469 $ 207,145 5.6 % Subordinated loans 14,250 1,355 9.5 % Total loan interest income/net asset yield $ 3,710,719 $ 208,500 5.7 % Other - Interest on cash and cash equivalents 2,354 Total interest income $ 210,854 Interest-bearing liabilities Borrowings collateralized by: Loans held-for-investment Senior loans (3) $ 2,503,708 $ 104,448 4.2 % Subordinated loans 8,332 400 4.8 % Other: Convertible senior notes 261,790 17,527 6.7 % Senior secured term loan facilities 36,003 3,754 10.4 % Total interest expense/cost of funds $ 2,809,833 $ 126,129 4.5 % Net interest income/spread $ 84,725 1.2 % ____________________ (1) Includes amortization of deferred debt issuance costs.
Expenses The following table presents the components of expenses for the years ended December 31, 2022, and 2021: Year Ended December 31, (dollars in thousands) 2022 2021 Compensation and benefits $ 20,225 $ 21,464 Servicing expenses $ 5,718 $ 5,173 Other operating expenses $ 10,754 $ 8,634 Annualized total operating expense ratio 3.5 % 3.7 % Annualized core operating expense ratio (excluding non-cash equity compensation) 2.8 % 2.9 % We incur compensation and benefits expenses, servicing expenses related to the servicing of commercial real estate loans and other operating expenses.
Expenses The following table presents the components of expenses for the year ended December 31, 2023, and December 31, 2022: Year Ended December 31, Year Ended December 31, (dollars in thousands) 2023 2022 Compensation and benefits $ 21,711 $ 20,225 Servicing expenses 5,313 5,718 Expenses from real estate owned operations 5,977 — Other operating expenses 10,289 10,754 Total operating expenses $ 43,290 $ 36,697 Annualized total operating expense ratio, excluding expenses from real estate owned operations 4.0 % 3.5 % Annualized core operating expense ratio (excluding non-cash equity compensation and expenses from real estate owned operations) 3.3 % 2.8 % Our operating expenses include compensation and benefits costs, expenses related to the servicing of our loan portfolio, expenses from REO operations and other operating expenses.
Calculations of cost of funds is the weighted average coupon of the CRE CLO, exclusive of any CRE CLO issuance costs. (2) Includes no restricted cash as of December 31, 2022. Yield on collateral assets is exclusive of restricted cash. (3) Includes $5.6 million of restricted cash as of December 31, 2022.
Calculations of cost of funds is the weighted average coupon of the CRE CLO, exclusive of any CRE CLO issuance costs. During the year ended December 31, 2023, the financing provided transitioned from LIBOR to SOFR. (2) No restricted cash is included as of December 31, 2023. Yield on collateral assets is exclusive of restricted cash.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe information presented in the following interest rate sensitivity table projects the potential impact of sudden parallel changes in interest rates on our financial results and financial condition over the next 12 months, based on our interest sensitive financial instruments at December 31, 2022. All changes in value are measured as the change from our December 31, 2022, financial position.
Biggest changeActual economic conditions or our implementation of decisions may produce results that differ significantly from the estimates and assumptions used in our analyses. 61 Table of Contents The information presented in the following interest rate sensitivity table projects the potential impact of sudden parallel changes in interest rates on our financial results and financial condition over the next 12 months, based on our interest sensitive financial instruments at December 31, 2023.
While we generally believe that the principal amount of our loans is typically sufficiently protected by the underlying collateral value, there is a risk that we will not realize the entire principal amount of certain of our loan investments. Interest Rate Risk Our strategy is to primarily originate, invest in and manage a portfolio of senior floating-rate commercial mortgage loans.
While we generally believe that the principal amount of our loans is typically sufficiently protected by the underlying collateral value, there is a risk that we will not realize the entire principal amount of certain of our loan investments. Interest Rate Risk Our primary strategy is to originate, invest in and manage a portfolio of senior floating-rate commercial mortgage loans.
As a result, we are exposed to risks related to the equity capital markets and our related ability to raise capital through the issuance of our common stock or other equity instruments.
As a result, we are exposed to risks related to the equity capital markets and our related ability to raise capital 62 Table of Contents through the issuance of our common stock or other equity instruments.
In addition, higher interest rates imposed by the Federal Reserve to address the high rate of inflation have led to, and may continue to lead to, a decrease in prepayment speeds and an increase in the number of our borrowers who exercise loan extension options. This could have a negative impact on our results of operations.
In addition, higher interest rates imposed by the Federal Reserve to address inflationary pressures have led to, and may continue to lead to, a decrease in prepayment speeds and an increase in the number of our borrowers who exercise loan extension options. This could have a negative impact on our results of operations.
Additionally, if one or more of our financing counterparties should choose not to provide ongoing funding, including with respect to future funding obligations on 62 T a ble of Contents existing loans financed with such counterparties, our ability to finance our investments and related future funding obligations would decline or exist at possibly less advantageous terms.
Additionally, if one or more of our financing counterparties should choose not to provide ongoing funding, including with respect to future funding obligations on existing loans financed with such counterparties, our ability to finance our investments and related future funding obligations would possibly decline or exist at less advantageous terms.
The base interest rate scenario assumes interest rates at December 31, 2022. The analysis utilizes assumptions and estimates based on management’s judgment and experience. Furthermore, while we generally expect to retain such assets and the associated interest rate risk to maturity, future originations, acquisitions and sales of assets could materially change our interest rate risk profile.
The analysis utilizes assumptions and estimates based on management’s judgment and experience. Furthermore, while we generally expect to retain such assets and the associated interest rate risk to maturity, future originations, acquisitions and sales of assets could materially change our interest rate risk profile.
If interest rates were to decline, the value of these fixed-rate investments may increase, and if interest rates were to increase, the value of these fixed-rate investments may fall; however, the interest income generated by these investments would not be affected by fluctuations in market interest rates.
The remaining approximately 1.7% of our portfolio earned a fixed rate of interest. If interest rates were to decline, the value of these fixed-rate investments may increase, and if interest rates were to increase, the value of these fixed-rate investments may fall; however, the interest income generated by these investments would not be affected by fluctuations in market interest rates.
All projected changes in annualized net interest income are measured as the change from our projected annualized net interest income based off current performance returns.
All changes in value are measured as the change from our December 31, 2023, financial position. All projected changes in annualized net interest income are measured as the change from our projected annualized net interest income based off current performance returns.
From time to time, we may originate or acquire fixed-rate investments, which may expose our operating results to the risks posed by fluctuations in interest rates, which we may choose to hedge, if we deem it prudent.
From time to time, we may originate or acquire fixed-rate investments, which may expose our operating results to the risks posed by fluctuations in interest rates, which we may choose to hedge, if we deem it prudent. In response to inflationary pressures, the Federal Reserve raised benchmark overnight interest rates on multiple occasions in 2022 and 2023.
Assumptions made on the interest rate sensitive liabilities include anticipated interest rates, collateral requirements as a percentage of borrowings and amount and term of borrowing. 61 T a ble of Contents Certain assumptions have been made in connection with the calculation of the information set forth in the foregoing interest rate sensitivity table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes.
Certain assumptions have been made in connection with the calculation of the information set forth in the foregoing interest rate sensitivity table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes. The base interest rate scenario assumes interest rates at December 31, 2023.
Such increases in interest rates have increased, and may continue to increase, our interest expense, which may not be fully offset by any increases in interest income, and may also slow the pace of loan repayments and increase the number of our borrowers who seek extension of term on their loans.
These increases in interest rates have increased, and may continue to increase, our interest expense, which may not be fully offset by any increases in interest income.
Nevertheless, unanticipated credit losses, including as a result of inflation, rising interest rates, slowing economic growth and geopolitical uncertainty, could occur that could adversely impact our operating results.
Nevertheless, unanticipated credit losses, including as a result of inflation, rising interest rates, slowing economic growth and geopolitical uncertainty, could occur and could adversely impact our operating results. We employ a long-term, fundamental value-oriented investment strategy and we aim to, on a loan-by-loan basis, construct an investment portfolio that is well-diversified across property types, geographies and sponsors.
We employ a long-term, fundamental value-oriented investment strategy and we aim to, on a loan-by-loan basis, construct an investment portfolio that is well-diversified across property types, geographies and sponsors. 60 T a ble of Contents We maintain an active dialogue and strong relationships with our borrowers as part of our overall asset management strategy to maximize the performance of our portfolio, including during periods of volatility.
We maintain an active dialogue and strong relationships with our borrowers as part of our overall asset management strategy to maximize the performance of our portfolio, including during periods of volatility.
Changes in Interest Rates (in thousands) -100 bps -50 bps +50 bps +100 bps Change in value of financial position: Loans held-for-investment $ 1,252 $ 628 $ (671) $ (1,342) Repurchase facilities (423) (212) 212 423 Securitized debt obligations (476) (238) 238 476 Asset-specific financings (19) (9) 9 19 Secured financing facility (42) (21) 21 41 Convertible senior notes (821) (409) 406 810 Total net assets $ (529) $ (261) $ 215 $ 427 -100 bps -50 bps +50 bps +100 bps Change in annualized net interest income: $ (7,256) $ (3,669) $ 3,669 $ 7,339 The interest rate sensitivity table quantifies the potential changes in annualized net interest income and portfolio value, should interest rates immediately change.
Changes in Interest Rates (in thousands) -100 bps -50 bps +50 bps +100 bps Change in value of financial position: Loans held-for-investment $ 1,028 $ 514 $ (530) $ (1,059) Repurchase facilities (365) (182) 182 365 Securitized debt obligations (414) (207) 207 414 Secured financing facility (35) (18) 18 35 Total net assets $ 214 $ 107 $ (123) $ (245) -100 bps -50 bps +50 bps +100 bps Change in annualized net interest income: $ (2,662) $ (1,331) $ 1,331 $ 2,662 The interest rate sensitivity table quantifies the potential changes in annualized net interest income and portfolio value, should interest rates immediately change.
Removed
In response to the inflationary pressures, over the last year the Federal Reserve has approved multiple increases to its federal funds rate target range and has indicated that it anticipates further increases in interest rates.
Added
In addition, these increases have increased borrowers’ interest payments, adversely affected commercial real estate property values and, for certain of our borrowers have contributed, and may continue to contribute, to loan non-performance, modifications, defaults, foreclosures and/or property sales, which could result in us realizing losses on our investments.
Removed
The ultimate impact of higher market interest rates on the economy, real estate fundamentals in general and our business is uncertain and difficult to predict. As of December 31, 2022, approximately 98.6% of our portfolio by carrying value earned a floating rate of interest. The remaining approximately 1.4% of our portfolio earned a fixed rate of interest.
Added
Although the Federal Reserve has indicated that no further interest rate increases are expected in 2024, how long interest rates will remain at their current levels and the direction and extent of any future rate changes remain uncertain. As of December 31, 2023, approximately 98.3% of our portfolio by principal balance earned a floating rate of interest.
Removed
Actual economic conditions or our implementation of decisions may produce results that differ significantly from the estimates and assumptions used in our analyses.
Added
Assumptions made on the interest rate sensitive liabilities include anticipated interest rates, collateral requirements as a percentage of borrowings and amount and term of borrowing.

Other GPMT 10-K year-over-year comparisons