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What changed in TPG RE Finance Trust, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TPG RE Finance 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.

+585 added−564 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-21)

Top changes in TPG RE Finance Trust, Inc.'s 2023 10-K

585 paragraphs added · 564 removed · 440 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

38 edited+6 added−8 removed69 unchanged
Biggest changeMSA (1) MSA rank (1) Number of loans Loan commitment Unpaid principal balance New York City 1 7 $ 939,697 $ 917,625 San Francisco 11 5 596,748 509,759 Los Angeles 2 6 484,602 434,587 Dallas 4 2 235,500 200,613 San Antonio 24 4 184,370 173,572 Philadelphia 7 1 177,603 169,603 Atlanta 9 1 152,633 110,356 Miami 8 3 133,475 128,532 Baltimore 21 1 122,500 120,243 Chicago 3 2 119,000 118,536 Tampa 18 2 116,000 103,760 Houston 5 2 114,532 114,532 Washington DC 6 1 101,000 86,464 San Diego 17 2 75,600 50,720 St.
Biggest changeMSA (1) MSA rank (1) Number of loans Loan commitment Unpaid principal balance New York City 1 4 $ 604,133 $ 603,544 San Francisco 11 3 392,900 363,728 San Antonio 24 4 184,370 178,438 Los Angeles 2 2 174,775 168,001 Miami 8 3 172,375 164,372 Dallas 4 2 124,000 100,093 Baltimore 21 1 122,500 121,133 Phoenix 12 2 78,100 69,511 San Diego 17 2 75,600 69,875 Tampa 18 1 69,000 64,570 St.
We had no fixed rate loans outstanding as of December 31, 2022. 10 Table of Contents Investment Guidelines Our board of directors has approved the following investment guidelines: • No investment will be made that would cause us to fail to maintain our qualification as a REIT under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”); • No investment will be made that would cause us or any of our subsidiaries to be required to be registered as an investment company under the Investment Company Act; • Our Manager will seek to invest our capital in our target assets; • Prior to the deployment of our capital into our target assets, our Manager may cause our capital to be invested in any short-term investments in money market funds, bank accounts, overnight repurchase agreements with primary Federal Reserve Bank dealers collateralized by direct U.S. government obligations and other instruments or investments determined by our Manager to be of high quality; • Not more than 25% of our Equity (as defined in our Management Agreement) may be invested in any individual investment without the approval of a majority of our independent directors (it being understood, however, that for purposes of the foregoing concentration limit, in the case of any investment that is comprised (whether through a structured investment vehicle or other arrangement) of securities, instruments or assets of multiple portfolio issuers, such investment for purposes of the foregoing limitation will be deemed to be multiple investments in such underlying securities, instruments and assets and not the particular vehicle, product or other arrangement in which they are aggregated); and • Any investment in excess of $300 million requires the approval of a majority of our independent directors.
We had no fixed rate loans outstanding as of December 31, 2023. 10 Table of Contents Investment Guidelines Our board of directors has approved the following investment guidelines: • No investment will be made that would cause us to fail to maintain our qualification as a REIT under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”); • No investment will be made that would cause us or any of our subsidiaries to be required to be registered as an investment company under the Investment Company Act; • Our Manager will seek to invest our capital in our target assets; • Prior to the deployment of our capital into our target assets, our Manager may cause our capital to be invested in any short-term investments in money market funds, bank accounts, overnight repurchase agreements with primary Federal Reserve Bank dealers collateralized by direct U.S. government obligations and other instruments or investments determined by our Manager to be of high quality; • Not more than 25% of our Equity (as defined in our Management Agreement) may be invested in any individual investment without the approval of a majority of our independent directors (it being understood, however, that for purposes of the foregoing concentration limit, in the case of any investment that is comprised (whether through a structured investment vehicle or other arrangement) of securities, instruments or assets of multiple portfolio issuers, such investment for purposes of the foregoing limitation will be deemed to be multiple investments in such underlying securities, instruments and assets and not the particular vehicle, product or other arrangement in which they are aggregated); and • Any investment in excess of $300 million requires the approval of a majority of our independent directors.
Investment Strategy Our investment objective is to directly originate and acquire a diversified portfolio of commercial real estate related assets, consisting primarily of first mortgage loans and senior participation interests in first mortgage loans secured by institutional-quality properties in primary and select secondary markets in the United States.
Investment Strategy Our investment objective is to directly originate and acquire a diversified portfolio of commercial real estate-related credit assets, consisting primarily of first mortgage loans and senior participation interests in first mortgage loans secured by institutional-quality properties in primary and select secondary markets in the United States.
These investment guidelines may be amended, supplemented or waived pursuant to the approval of our board of directors (which must include a majority of our independent directors) from time to time, but without the approval of our stockholders. Competition We operate in a competitive market for the origination and acquisition of attractive investment opportunities.
These investment guidelines may be amended, supplemented or waived pursuant to the approval of our board of directors (which must include a majority of our independent directors) from time to time, without the approval of our stockholders. Competition We operate in a competitive market for the origination and acquisition of attractive investment opportunities.
Our interests in wholly-owned or majority-owned subsidiaries that qualify for the exclusion pursuant to Section 3(c)(5)(C), as described below, or another exclusion or exception under the Investment Company Act (other than Section 3(c)(1) or Section 3(c)(7) thereof), do not constitute “investment securities.” We hold our assets primarily through direct or indirect wholly-owned or majority-owned subsidiaries, certain of which are excluded from the definition of investment company pursuant to Section 3(c)(5)(C) of the Investment Company Act.
Our interests in wholly-owned or majority-owned subsidiaries that qualify for the exclusion pursuant to Section 3(c)(5)(C), as described below, Rule 3a-7, as described below, or another exclusion or exception under the Investment Company Act (other than Section 3(c)(1) or Section 3(c)(7) thereof), do not constitute “investment securities.” We hold our assets primarily through direct or indirect wholly-owned or majority-owned subsidiaries, certain of which are excluded from the definition of investment company pursuant to Section 3(c)(5)(C) of the Investment Company Act.
Our borrowing arrangements contain defined mark-to-market provisions that permit our lenders to issue margin calls to the Company only in the event that the collateral properties underlying the Company’s loans pledged to the Company’s lenders experience a non-temporary decline in value (“credit marks”) due to reasons other than capital markets events that result in changing credit spreads for similar borrowing obligations.
Certain of our borrowing arrangements contain defined mark-to-market provisions that permit our lenders to issue margin calls to the Company only in the event that the collateral properties underlying the Company’s loans pledged to the Company’s lenders experience a non-temporary decline in value (“credit marks”) due to reasons other than capital markets events that result in changing credit spreads for similar borrowing obligations.
(6) Except for construction loans, LTV is calculated for loan originations and existing loans as the total outstanding principal balance of the loan or participation interest in a loan (plus any financing that is pari passu with or senior to such loan or participation interest) as of December 31, 2022, divided by the as-is appraised value of our collateral at the time of origination or acquisition of such loan or participation interest.
(6) Except for construction loans, LTV is calculated for loan originations and existing loans as the total outstanding principal balance of the loan or participation interest in a loan (plus any financing that is pari passu with or senior to such loan or participation interest) as of December 31, 2023, divided by the as-is appraised value of our collateral at the time of origination or acquisition of such loan or participation interest.
We did not have any non-consolidated senior interests as of December 31, 2022. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Investment Portfolio Financing–Non-Consolidated Senior Interests” in this Form 10-K for additional information. (2) Unpaid principal balance includes PIK interest of $1.7 million as of December 31, 2022.
We did not have any non-consolidated senior interests as of December 31, 2023. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Investment Portfolio Financing–Non-Consolidated Senior Interests” in this Form 10-K for additional information. (2) Unpaid principal balance includes PIK interest of $1.2 million as of December 31, 2023.
The commercial mortgage loans we target for origination or acquisition typically include, but are not limited to, the following characteristics: • Unpaid principal balance greater than $50.0 million; • As-is loan-to value (“LTV”) of less than 80% with respect to individual properties; • Floating rate loans tied to the one-month U.S. dollar-denominated LIBOR or Secured Overnight Financing Rate (“SOFR”) and credit spreads of 300 to 600 basis points over the benchmark interest rate; • Secured by properties that are: (1) primarily in the multifamily, life science, mixed-use, hospitality, self storage, and industrial real estate sectors; (2) expected to reach stabilization within 24 months of the origination or acquisition date; and (3) located in primary and select secondary markets in the U.S. that we believe have attractive economic conditions and commercial real estate fundamentals, such as growth in employment and household formation, medical infrastructure, universities and attractive cultural and lifestyle amenities; and • Well-capitalized sponsors with experience in particular real estate sectors and geographic markets.
The commercial mortgage loans we target for origination or acquisition typically include, but are not limited to, the following characteristics: • Unpaid principal balance greater than $35.0 million; • As-is loan-to value (“LTV”) of less than 80% with respect to individual properties; • Floating rate loans tied to the one-month U.S. dollar-denominated Secured Overnight Financing Rate (“Term SOFR”) and credit spreads of 300 to 600 basis points over the benchmark interest rate; • Secured by properties that are: (1) primarily in the multifamily, life science, mixed-use, hospitality, self storage, and industrial real estate sectors; (2) expected to reach stabilization within 24 months of the origination or acquisition date; and (3) located in primary and select secondary markets in the U.S. that we believe have attractive economic conditions and commercial real estate fundamentals, such as growth in employment and household formation, medical infrastructure, universities and attractive cultural and lifestyle amenities; and • Well-capitalized sponsors with experience in particular real estate sectors and geographic markets.
We currently expect that our leverage, measured as the ratio of total debt to equity, will generally be less than 3.75:1, subject to compliance with our financial covenants under our secured credit agreements and other contractual obligations.
We currently expect that our leverage, measured as the ratio of total debt to equity, will generally be less than 3.75:1, subject to compliance with our financial covenants under our secured financing agreements and other contractual obligations.
We may also target assets with equity-linked characteristics, or forms of direct equity ownership of commercial real estate properties, in either case subject to any duties to offer to other funds managed by TPG.
We may also target assets with equity-linked characteristics, or forms of direct equity ownership of commercial real estate properties, in either case subject to any duties to offer or other contractual obligations to other funds managed by TPG.
From time to time we may invest in other commercial real estate-related debt instruments, subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and exclusion or exemption from regulation under the Investment Company Act, including, but not limited to, subordinate 4 Table of Contents mortgage interests, mezzanine loans, secured real estate securities, note financing, preferred equity and miscellaneous debt instruments.
From time to time we may invest in other commercial real estate-related debt instruments, subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and exclusion or exemption from regulation under the Investment Company Act, including, but not limited to, subordinate mortgage interests, mezzanine loans, secured real estate securities, note financing, preferred equity and miscellaneous debt instruments.
We compete with a variety of institutional investors, including other REITs, debt funds, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, private equity and hedge funds, governmental bodies and other entities and may compete with other TPG Funds.
We compete with a variety of institutional investors, including other REITs, debt funds, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, private equity and hedge funds, governmental bodies and other entities and may compete with other TPG Funds (such as the TRECO Funds).
As of December 31, 2022, 100.0% of our loan investments by unpaid principal balance earned a floating rate of interest and were financed with liabilities that require interest payments based on floating rates, which resulted in approximately $0.8 billion of net floating rate exposure, subject to the impact of interest rate floors on all of our floating rate loans and less than 3.0% of our liabilities.
As of December 31, 2023, 100.0% of our loan investments by unpaid principal balance earned a floating rate of interest and were financed with liabilities that require interest payments based on floating rates, which resulted in approximately $0.5 billion of net floating rate exposure, subject to the impact of interest rate floors on all of our floating rate loans and less than 1.2% of our liabilities.
The following table illustrates the quarterly impact to our net interest income of an immediate increase of 25, 50, 75, and 100 basis points in the LIBOR and Term SOFR benchmark rates underlying our existing floating rate loans held for investment portfolio and related liabilities as of December 31, 2022 (dollars in thousands).
The following table illustrates the quarterly impact to our net interest income of an immediate increase or decrease of 50 and 100 basis points in the Term SOFR benchmark rates underlying our existing floating rate loans held for investment portfolio and related liabilities as of December 31, 2023 (dollars in thousands).
These investments may encompass a whole commercial mortgage loan or may include a pari passu participation within a commercial mortgage loan. • Other Commercial Real Estate-Related Debt Instruments .
These investments may encompass a whole commercial mortgage loan or may include a pari passu participation within a commercial mortgage loan. 4 Table of Contents • Other Commercial Real Estate-Related Debt Instruments .
TPG Real Estate’s teams work across TPG offices in New York, San Francisco and London, and representative offices in Atlanta and Chicago, and have 19 and 38 employees, respectively, between TPG’s real estate debt investment platform and TPG’s real estate equity platform. Our chief executive officer, chief financial officer, and other executive officers are senior TPG Real Estate professionals.
TPG Real Estate’s teams work across TPG offices in New York, San Francisco and London, and representative offices in Atlanta and Chicago, and have 18 and 43 employees, respectively, between TPG’s real estate debt investment platform and TPG’s real estate equity platform. Our chief executive officer, president and chief financial officer are senior TPG Real Estate professionals.
As of December 31, 2022, 100.0% of our loan commitments were floating rate, of which 100.0% were first mortgage loans or, in two instances, a first mortgage loan and contiguous mezzanine loan both owned by us.
As of December 31, 2023, 100.0% of our loan commitments were floating rate, of which 100.0% were first mortgage loans or, in one instance, a first mortgage loan and contiguous mezzanine loan both owned by us.
As of December 31, 2022, our balance sheet loan portfolio had a weighted average all-in yield of 8.1% and a weighted average term to extended maturity (assuming all extension options are exercised by our borrowers) of 2.8 years.
As of December 31, 2023, our balance sheet loan portfolio had a weighted average all-in yield of 9.3% and a weighted average term to extended maturity (assuming all extension options are exercised by our borrowers) of 2.6 years.
We reserve the right to adjust this range without advance notice to satisfy our corporate finance and risk management objectives. 9 Table of Contents Floating Rate Portfolio Our business model seeks to minimize our exposure to changing interest rates by match-indexing our assets using the same, or similar, benchmark indices, typically LIBOR or SOFR.
We reserve the right to adjust this range without advance notice to satisfy our corporate finance and risk management objectives. 9 Table of Contents Floating Rate Portfolio Our business model seeks to minimize our exposure to changing interest rates by match-indexing our assets and liabilities using the same benchmark index, which is Term SOFR.
As of December 31, 2022, based on the unpaid principal balance of our total loan exposure, 37.8% of our loans were subject to yield maintenance or other prepayment restrictions and 62.2% were open to repayment by the borrower without penalty.
As of December 31, 2023, based on the unpaid principal balance of our total loan exposure, 8.4% of our loans were subject to yield maintenance or other prepayment restrictions and 91.6% were open to repayment by the borrower without penalty.
However, to capitalize on investment opportunities and returns at different points in the economic and real estate investment cycle, we may modify, expand or change our investment strategy by targeting other assets with debt characteristics, such as subordinate mortgage loans, mezzanine loans, preferred equity, real estate securities and note financings.
However, to capitalize on investment opportunities and returns at different points in the economic and real estate investment cycle, we may modify, expand or change our investment strategy by targeting other assets with debt characteristics, such as subordinate mortgage loans, mezzanine loans, preferred equity, real estate securities and note financings, in each case subject to any duties to offer or other contractual obligations to other funds managed by TPG.
As of December 31, 2022, our allowance for credit losses for loans held for investment was $214.6 million, or 395 basis points of total loan commitments, including an allowance for credit losses on unfunded loan commitments, compared to $46.2 million, or 85 basis points of total loan commitments, as of December 31, 2021, an increase of $168.4 million from the prior year. 7 Table of Contents The following table details our total loan commitments and unpaid principal balance across the top 25 Metropolitan Statistical Areas (“MSA”), as of December 31, 2022 (dollars in thousands).
As of December 31, 2023, our allowance for credit losses for loans held for investment was $69.8 million, or 190 basis points of total loan commitments, including an allowance for credit losses on unfunded loan commitments, compared to $214.6 million, or 395 basis points of total loan commitments, as of December 31, 2022, a decrease of $144.8 million from the prior year. 7 Table of Contents The following table details our total loan commitments and unpaid principal balance across the top 25 Metropolitan Statistical Areas (“MSA”), as of December 31, 2023 (dollars in thousands).
In addition to credit spread, all-in yield includes the amortization of deferred origination fees, purchase price premium and discount, and accrual of both extension and exit fees. All-in yield for the total portfolio assumes the applicable floating benchmark interest rate as of December 31, 2022 for weighted average calculations.
In addition to credit spread, all-in yield includes the amortization of deferred origination fees, purchase price premium and discount, and accrual of both extension and exit fees. All-in yield for the total portfolio assumes Term SOFR as of December 31, 2023 for weighted average calculations.
(3) Unfunded loan commitments may be funded over the term of each loan, subject in certain cases to an expiration date or a force-funding date, primarily to finance property improvements or lease-related expenditures by our borrowers, to finance operating deficits during renovation and lease-up, and in limited instances to finance construction.
(3) Unfunded loan commitments may be funded over the term of each loan, subject in certain cases to an expiration date or a force-funding date, primarily to finance property improvements or lease-related expenditures by our borrowers, and to finance operating deficits during renovation and lease-up. (4) As of December 31, 2023, all of our loans were indexed to Term SOFR.
We will classify our assets for purposes of certain of our subsidiaries’ Section 3(c)(5)(C) exemption from the Investment Company Act based upon positions set forth by the SEC staff.
We classify the assets of our subsidiaries relying on the Section 3(c)(5)(C) exemption from the Investment Company Act based upon positions set forth by the SEC staff.
Under certain circumstances, we may determine not to do so, or we may otherwise be unable to do so.
Under certain circumstances, we may determine not to match-fund or match-index our investments, or we may otherwise be unable to do so.
For additional information regarding our investment portfolio as of December 31, 2022, see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K. 8 Table of Contents Investment Portfolio Financing Strategy In addition to raising capital through public offerings of our equity and debt securities, we finance our investment portfolio using secured credit agreements, including secured credit facilities (formerly called secured revolving repurchase agreements, and including one mortgage warehouse facility) , mortgage loans, asset-specific financing arrangements, and collateralized loan obligations (“CLOs”).
For additional information regarding our investment portfolio as of December 31, 2023, see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K. 8 Table of Contents Investment Portfolio Financing Strategy We finance our investment portfolio using secured financing arrangements, including secured credit agreements, secured revolving credit facilities, mortgage loans, asset-specific financing arrangements, and collateralized loan obligations (“CLOs”).
We have in the past invested in short-term, primarily investment grade CRE CLOs and commercial mortgage-backed securities (“CMBS”).
We have in the past invested in short-term, primarily investment grade collateralized loan obligations (“CRE CLOs”) and commercial mortgage-backed securities (“CMBS”).
TPG Real Estate, TPG’s real estate platform, includes TPG Real Estate Partners and TPG Thematic Advantage Core-Plus, TPG’s real estate equity investment vehicles, and us, TPG’s dedicated real estate debt investment platform. Collectively, TPG Real Estate managed more than $19.8 billion in real estate and real estate-related assets as of September 30, 2022.
TPG Real Estate, TPG’s real estate platform, includes TPG Real Estate Partners and TPG Thematic Advantage Core-Plus, TPG’s real estate equity investment vehicles, and us, TPG's public real estate debt investment platform. Collectively, TPG Real Estate managed more than $17.9 billion in real estate and real estate-related assets as of December 31, 2023.
Deferred fundings are commonly conditioned on the borrower’s satisfaction of certain collateral performance tests, the completion of specified property improvements, or both. 6 Table of Contents The following charts present, by total loan commitment, the property types securing our balance sheet loans held for investment portfolio and their geographic distribution within the U.S., as of December 31, 2022: The following charts present, by total loan commitment, our loans held for investment portfolio by year of origination and loan category, as of December 31, 2022: As of December 31, 2022, two loans, one secured by a multifamily property and another by an office property, were on non-accrual status due to a maturity default in one instance and non-payment of interest in the other.
Deferred fundings are commonly conditioned on the borrower’s satisfaction of certain collateral performance tests, the completion of specified property improvements, or both. 6 Table of Contents The following charts present, by total loan commitment, the property types securing our balance sheet loans held for investment portfolio and their geographic distribution within the U.S., as of December 31, 2023: The following charts present, by total loan commitment, our loans held for investment portfolio by year of origination and loan category, as of December 31, 2023: As of December 31, 2023, we did not have any loans on non-accrual status.
TPG is a global, diversified alternative asset management firm consisting of five multi-product private equity investment platforms, including capital, growth, impact, real estate, and market solutions. Our Manager manages our investments and our day-to-day business and affairs in conformity with our investment guidelines and other policies that are approved and monitored by our board of directors.
TPG invests across a broadly diversified set of strategies, including private equity, impact, credit, real estate, and market solutions. Our Manager manages our investments and our day-to-day business and affairs in conformity with our investment guidelines and other policies that are approved and monitored by our board of directors.
As of December 31, 2022, we did not hold any real estate owned (“REO”) or CRE debt securities. 5 Table of Contents Loan Portfolio The following table details overall statistics for our loans held for investment portfolio as of December 31, 2022 (dollars in thousands): Balance sheet portfolio Total loan exposure (1) Number of loans 70 70 Floating rate loans 100.0 % 100.0 % Total loan commitment (1) $ 5,429,146 $ 5,429,146 Unpaid principal balance (2) $ 5,004,798 $ 5,004,798 Unfunded loan commitments (3) $ 426,061 $ 426,061 Amortized cost $ 4,978,674 $ 4,978,674 Weighted average credit spread (4) 3.4 % 3.4 % Weighted average all-in yield (4) 8.1 % 8.1 % Weighted average term to extended maturity (in years) (5) 2.8 2.8 Weighted average LTV (6) 67.2 % 67.2 % _________________________________ (1) In certain instances, we create structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third-party.
As of December 31, 2023, we owned four office properties and one multifamily property with an aggregate carrying value of $199.8 million. 5 Table of Contents Loan Portfolio The following table details overall statistics for our loans held for investment portfolio as of December 31, 2023 (dollars in thousands): Balance sheet portfolio Total loan exposure (1) Number of loans 53 53 Floating rate loans 100.0 % 100.0 % Total loan commitment (1) $ 3,666,173 $ 3,666,173 Unpaid principal balance (2) $ 3,484,052 $ 3,484,052 Unfunded loan commitments (3) $ 183,293 $ 183,293 Amortized cost $ 3,476,776 $ 3,476,776 Weighted average credit spread (4) 3.7 % 3.7 % Weighted average all-in yield (4) 9.3 % 9.3 % Weighted average term to extended maturity (in years) (5) 2.6 2.6 Weighted average LTV (6) 67.3 % 67.3 % _________________________________ (1) In certain instances, we create structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third-party.
The following table details the principal balance amounts outstanding for our investment portfolio financing arrangements as of December 31, 2022 (dollars in thousands): Total indebtedness Non-mark-to-market Mark-to-market Collateralized loan obligations $ 2,461,170 $ 2,461,170 $ — Secured credit agreements 1,108,386 — 1,108,386 Secured revolving credit facility 44,279 44,279 — Asset-specific financing 565,376 565,376 — Non-consolidated senior interests — — — Total indebtedness (1) $ 4,179,211 $ 3,070,825 $ 1,108,386 Percent of total indebtedness 73.5 % 26.5 % _________________________________ (1) Excludes deferred financing costs of $18.7 million as of December 31, 2022.
The following table details the principal balance amounts outstanding for our loan portfolio financing arrangements as of December 31, 2023 (dollars in thousands): Total indebtedness Non-mark-to-market Mark-to-market Collateralized loan obligations $ 1,919,790 $ 1,919,790 $ — Secured credit agreements 799,518 — 799,518 Secured revolving credit facility 23,782 23,782 — Asset-specific financing 274,158 274,158 — Total indebtedness (1) $ 3,017,248 $ 2,217,730 $ 799,518 Percent of total indebtedness 73.5 % 26.5 % _________________________________ (1) Excludes deferred financing costs of $8.4 million as of December 31, 2023.
As of December 31, 2022, our balance sheet loan portfolio consisted of 70 loans held for investment totaling $5.4 billion of commitments and an unpaid principal balance of $5.0 billion, with a weighted average credit spread of 3.4%.
Investment Portfolio Our interest-earning assets are comprised almost entirely of a portfolio of floating rate, first mortgage loans and contiguous mezzanine loans. As of December 31, 2023, our balance sheet loan portfolio consisted of 53 loans held for investment totaling $3.7 billion of commitments and an unpaid principal balance of $3.5 billion, with a weighted average credit spread of 3.7%.
As of December 31, 2022, our balance sheet loan portfolio had a weighted average LTV of 67.2% and, subject to the satisfaction of certain borrower milestones, $426.1 million of unfunded loan commitments.
As of December 31, 2023, our balance sheet loan portfolio had a weighted average LTV of 67.3% and, subject to the satisfaction of certain borrower milestones, $183.3 million of unfunded loan commitments. We may hold real estate owned (“REO”) as a result of taking title to a loan's collateral.
Louis 20 1 65,600 52,400 Riverside (San Bernardino) 13 1 36,440 33,915 Phoenix 12 1 34,500 31,400 Charlotte 22 1 23,043 23,043 Other 27 1,716,303 1,625,138 Total 70 $ 5,429,146 $ 5,004,798 _________________________________ (1) Based on rankings of MSA for 2020 according to the United States Census Bureau.
Louis 20 1 65,600 57,000 Atlanta 9 1 44,500 35,072 Chicago 3 1 39,000 39,000 Riverside (San Bernardino) 13 1 36,440 33,915 Other 25 1,482,880 1,415,800 Total 53 $ 3,666,173 $ 3,484,052 _________________________________ (1) Based on rankings of MSA for 2020 according to the United States Census Bureau.
In connection with one of these borrowing arrangements, the lender is also permitted to issue margin calls to the Company in the event the lender determines capital markets events have caused credit spreads to change for similar borrowing obligations (“spread marks”). As of December 31, 2022, 73.5% of our loan investment portfolio financing arrangements contained no mark-to-market provisions.
As of December 31, 2023, 73.5% of our loan investment portfolio financing arrangements contained no mark-to-market provisions.
Removed
The Company has in the past invested in commercial real estate debt securities (“CRE debt securities”), primarily investment-grade commercial real estate collateralized loan obligation securities (“CRE CLOs”). Manager We are externally managed by our Manager, TPG RE Finance Trust Management, L.P., an affiliate of TPG.
Added
Manager We are externally managed by our Manager, TPG RE Finance Trust Management, L.P., an affiliate of TPG. TPG is a leading global, alternative asset management firm, founded in San Francisco in 1992, with $222 billion of assets under management (as of December 31, 2023) and investment and operational teams around the world.
Removed
Investment Portfolio Our interest-earning assets are comprised almost entirely of a portfolio of floating rate, first mortgage loans, or in limited instances, mezzanine loans.
Added
In the fourth quarter, TPG Real Estate held an initial closing of TPG Real Estate Credit Opportunities, and two associated funds-of-one (together the "TRECO Funds"). The TRECO Funds are private credit vehicles, with investment mandates focused on opportunistic real estate credit investing.
Removed
(4) As of December 31, 2022, all of our loans were floating rate. Loans originated before December 31, 2021 are indexed to LIBOR, while loans originated after January 1, 2022 are indexed to Term SOFR.
Added
Real Estate Owned As of December 31, 2023, we owned four office properties and one multifamily property with an aggregate carrying value of $199.8 million.
Removed
As of December 31, 2022, based on the total loan commitments of our loan portfolio, 20.7% (or $1.1 billion) of our loans were subject to Term SOFR and 79.3% (or $4.3 billion) were subject to LIBOR as the benchmark interest rate.
Added
Certain of our subsidiaries rely on Rule 3a-7 under the Investment Company Act.
Removed
The amortized cost of the loan investments was $190.4 million.
Added
We refer to these subsidiaries as our “CLO subsidiaries.” Rule 3a-7 under the Investment Company Act is available to certain structured financing vehicles that are engaged in the business of holding financial assets that, by their terms, convert into cash within a finite time period and that issue fixed income securities entitling holders to receive payments that depend primarily on the cash flows from these assets, provided that, among other things, the structured finance vehicle does not engage in certain portfolio management practices resembling those employed by management investment companies (e.g., mutual funds).
Removed
Real Estate Owned and CRE Debt Securities Portfolio As of December 31, 2021, we owned a 10 acre parcel of largely undeveloped land near the north end of the Las Vegas Strip with a carrying value of $60.6 million. The Las Vegas land was acquired pursuant to a negotiated deed-in-lieu of foreclosure in December 2020.
Added
Accordingly, each of these CLO subsidiaries is subject to legal and contractual restrictions regarding their structure and operation. As a result of these restrictions, our CLO subsidiaries may suffer losses on their assets and we may suffer losses on our investments in those CLO subsidiaries.
Removed
On April 4, 2022, we sold the 10 acre parcel of Las Vegas land for net cash proceeds of $73.9 million and recognized a gain on sale of real estate owned, net of $13.3 million. On October 12, 2022, we acquired an office property pursuant to a negotiated deed-in-lieu of foreclosure.
Removed
On November 21, 2022, we sold the office property for gross proceeds of $78.6 million. As of December 31, 2022, we no longer own any REO. We have, in the past, invested in CRE debt securities. As of December 31, 2022, we did not own any CRE debt securities.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe may not find a suitable replacement for this service provider if our agreement with them is terminated, or if key personnel of this service provider cease to be employed or otherwise become unavailable to us. • Rapid changes in the market value or income potential of our assets may make it more difficult for us to maintain our qualification as a REIT or our exclusion or exemption from regulation under the Investment Company Act. • Actions of the U.S. government and other governmental and regulatory bodies designed to stabilize or reform the financial markets may not achieve the intended effect. • Operational risks, including the risks of cyberattacks and the proposed transition from LIBOR to an alternate rate, may disrupt our businesses, result in losses or limit our growth. 14 Table of Contents Risks Related to our REIT Status and Certain Other Tax Items • Failure to comply with REIT requirements could subject us to higher taxes and liquidity issues and reduce the amount of cash available for distribution to our stockholders. • Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends. • Compliance with the REIT requirements may hinder our ability to grow, which could materially and adversely affect us. • We may choose to make distributions to our stockholders in shares of our common stock, in which case our stockholders could be required to pay income taxes in excess of the cash dividends they receive. • Liquidation of assets may jeopardize our REIT qualification or create additional tax liability for us.
Biggest changeWe may not find a suitable replacement for this service provider if our agreement with them is terminated, or if key personnel of this service provider cease to be employed or otherwise become unavailable to us. 14 Table of Contents • Rapid changes in the market value or income potential of our assets may make it more difficult for us to maintain our qualification as a REIT or our exclusion or exemption from regulation under the Investment Company Act. • Actions of the U.S. government and other governmental and regulatory bodies designed to stabilize or reform the financial markets may not achieve the intended effect. • Operational risks, including the risks of cyberattacks, may disrupt our businesses, result in losses or limit our growth.
Operational risks, including the risks of cyberattacks, may disrupt our businesses, result in losses or limit our growth. We rely heavily on our and TPG’s financial, accounting, communications and other data processing systems. Such systems may fail to operate properly or become disabled as a result of tampering or a breach of the network security systems or otherwise.
Operational risks, including the risks of cyberattacks, may disrupt our businesses, result in losses or limit our growth. We rely heavily on TPG’s financial, accounting, communications and other data processing systems. Such systems may fail to operate properly or become disabled as a result of tampering or a breach of the network security systems or otherwise.
There has been an increase in the frequency and sophistication of the cyber and security threats TPG faces, with attacks ranging from those common to businesses generally to those that are more advanced and persistent, which may target TPG because TPG holds a significant amount of confidential and sensitive information about its and our investors, its portfolio companies and potential investments.
There has been an increase in the frequency and sophistication of the cyber and security threats TPG faces, with attacks ranging from those common to businesses generally to those that are more advanced and persistent, which may target TPG because TPG holds a significant amount of confidential and sensitive information about its and our investors, its portfolio companies and its and our potential investments.
If successful, these types of attacks on our or TPG’s network or other systems could have a material adverse effect on our business and results of operations, due to, among other things, the loss of investor or proprietary data, interruptions or delays in the operation of our business and damage to our reputation.
If successful, these types of attacks on TPG’s network or other systems could have a material adverse effect on our business and results of operations, due to, among other things, the loss of investor or proprietary data, interruptions or delays in the operation of our business and damage to our or TPG's reputation.
Breaches in security, whether malicious in nature or through inadvertent transmittal or other loss of data, could potentially jeopardize our or TPG’s, its employees’, or our investors’ or counterparties’ confidential, proprietary and other information processed and stored in, and transmitted through, our or TPG’s computer systems and networks, or otherwise cause interruptions or malfunctions in our or TPG’s, its employees’, or our investors’, our 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 or TPG’s, its employees’, or our investors’ or counterparties’ confidential, proprietary and other information processed and stored in, and transmitted through, TPG’s computer systems and networks, or otherwise cause interruptions or malfunctions in our or TPG’s, its employees’, or our investors’, our 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 current macroeconomic environment is characterized by high inflation, supply chain challenges, labor shortages, high interest rates, foreign currency exchange volatility, volatility in global capital markets and growing recession risk.
The current macroeconomic environment is characterized by inflation, supply chain challenges, labor shortages, high interest rates, foreign currency exchange volatility, volatility in global capital markets and growing recession risk.
Our interests in wholly-owned or majority-owned subsidiaries that qualify for the exclusion pursuant to Section 3(c)(5)(C), as described below, Rule 3a-7, as described below, or another exclusion or exception under the Investment Company Act (other than Section 3(c)(1) or Section 3(c)(7) thereof), do not constitute “investment securities.” To maintain our status as a non-investment company, the securities issued to us by any wholly-owned or majority-owned subsidiaries that we may form in the future that are excluded from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act, together with any other investment securities we may own, may not have a value in excess of 40% of the value of our total assets on an unconsolidated basis.
Our interests in wholly-owned or majority-owned subsidiaries that qualify for the exclusion pursuant to Section 3(c)(5)(C), as described below, Rule 3a-7, as described below, or another exclusion or exception under the Investment Company Act (other than Section 3(c)(1) or Section 3(c)(7) thereof), do not constitute “investment securities.” To maintain our status as a non-investment company, the securities issued to us by any of our existing wholly-owned or majority-owned subsidiaries or subsidiaries that we may form in the future, that are excluded from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act, together with any other investment securities we may own, may not have a value in excess of 40% of the value of our total assets on an unconsolidated basis.
To the extent any TPG Funds otherwise have investment objectives or guidelines that overlap with ours, in whole or in part, then, pursuant to TPG’s allocation policy, investment opportunities that fall within such common objectives or guidelines will generally be allocated among our company and one or more of such TPG Funds on a basis that our Manager and applicable TPG affiliates determine to be fair and reasonable in their sole discretion, subject to the following considerations: • our and the relevant TPG Funds’ investment focuses and objectives; • the TPG professionals who sourced the investment opportunity; • the TPG professionals who are expected to oversee and monitor the investment; • the expected amount of capital required to make the investment, as well as our and the relevant TPG Funds’ current and projected capacity for investing (including for any potential follow-on investments); • our and the relevant TPG Funds’ targeted rates of return and investment holding periods; • the stage of development of the prospective portfolio company or borrower; • our and the relevant TPG Funds’ respective existing portfolio of investments; • the investment opportunity’s risk profile; • our and the relevant TPG Funds’ respective expected life cycles; • any investment targets or restrictions (e.g., industry, size, etc.) that apply to us and the relevant TPG Funds; • our ability and the ability of the relevant TPG Funds to accommodate structural, timing and other aspects of the investment process; and • legal, tax, contractual, regulatory or other considerations that our Manager and applicable TPG affiliates deem relevant.
To the extent any TPG Funds, including a TRECO Fund, otherwise have investment objectives or guidelines that overlap with ours, in whole or in part, then, pursuant to TPG’s allocation policy, investment opportunities that fall within such common objectives or guidelines will generally be allocated among our company and one or more of such TPG Funds, including a TRECO Fund, on a basis that our Manager and applicable TPG affiliates determine to be fair and reasonable in their sole discretion, subject to the following considerations: • our and the relevant TPG Funds’ investment focuses and objectives; • the TPG professionals who sourced the investment opportunity; • the TPG professionals who are expected to oversee and monitor the investment; • the expected amount of capital required to make the investment, as well as our and the relevant TPG Funds’ current and projected capacity for investing (including for any potential follow-on investments); • our and the relevant TPG Funds’ targeted rates of return and investment holding periods; • the stage of development of the prospective portfolio company or borrower; • our and the relevant TPG Funds’ respective existing portfolio of investments; • the investment opportunity’s risk profile; • our and the relevant TPG Funds’ respective expected life cycles; • any investment targets or restrictions (e.g., industry, size, etc.) that apply to us and the relevant TPG Funds; • our ability and the ability of the relevant TPG Funds to accommodate structural, timing and other aspects of the investment process; and • legal, tax, contractual, regulatory or other considerations that our Manager and applicable TPG affiliates deem relevant.
Such joint venture investments may involve risks not otherwise present when we originate or acquire investments without partners, including the following: • we may not have exclusive control over the investment or the joint venture, which may prevent us from taking actions that are in our best interest; • joint venture agreements often restrict the transfer of a partner’s interest or may otherwise restrict our ability to sell the interest when we desire and/or on advantageous terms; • any future joint venture agreements may contain buy-sell provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner’s interest or selling its interest to that partner; 22 Table of Contents • we may not be in a position to exercise sole decision-making authority regarding the investment or joint venture, which could create the potential risk of creating impasses on decisions, such as with respect to acquisitions or dispositions; • a partner may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals; • a partner may be in a position to take action contrary to our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT and our exclusion or exemption from registration under the Investment Company Act; • a partner may fail to fund its share of required capital contributions or may become bankrupt, which may mean that we and any other remaining partners generally would remain liable for the joint venture’s liabilities; • our relationships with our partners are contractual in nature and may be terminated or dissolved under the terms of the applicable joint venture agreements and, in such event, we may not continue to own or operate the interests or investments underlying such relationship or may need to purchase such interests or investments at a premium to the market price to continue ownership; • disputes between us and a partner may result in litigation or arbitration that could increase our expenses and prevent our Manager and our officers and directors from focusing their time and efforts on our business and could result in subjecting the investments owned by the joint venture to additional risk; or • we may, in certain circumstances, be liable for the actions of a partner, and the activities of a partner could adversely affect our ability to maintain our qualification as a REIT or our exclusion or exemption from registration under the Investment Company Act, even though we do not control the joint venture.
Such joint venture investments may involve risks not otherwise present when we originate or acquire investments without partners, including the following: • we may not have exclusive control over the investment or the joint venture, which may prevent us from taking actions that are in our best interest; • joint venture agreements often restrict the transfer of a partner’s interest or may otherwise restrict our ability to sell the interest when we desire and/or on advantageous terms; • any future joint venture agreements may contain buy-sell provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner’s interest or selling its interest to that partner; • we may not be in a position to exercise sole decision-making authority regarding the investment or joint venture, which could create the potential risk of creating impasses on decisions, such as with respect to acquisitions or dispositions; • a partner may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals; • a partner may be in a position to take action contrary to our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT and our exclusion or exemption from registration under the Investment Company Act; • a partner may fail to fund its share of required capital contributions or may become bankrupt, which may mean that we and any other remaining partners generally would remain liable for the joint venture’s liabilities; • our relationships with our partners are contractual in nature and may be terminated or dissolved under the terms of the applicable joint venture agreements and, in such event, we may not continue to own or operate the interests or investments underlying such relationship or may need to purchase such interests or investments at a premium to the market price to continue ownership; • disputes between us and a partner may result in litigation or arbitration that could increase our expenses and prevent our Manager and our officers and directors from focusing their time and efforts on our business and could result in subjecting the investments owned by the joint venture to additional risk; or • we may, in certain circumstances, be liable for the actions of a partner, and the activities of a partner could adversely affect our ability to maintain our qualification as a REIT or our exclusion or exemption from registration under the Investment Company Act, even though we do not control the joint venture.
We may invest alongside TPG Funds and in connection therewith may, for legal, tax, regulatory or other reasons which may be unrelated to us, share with or assign to such TPG Funds certain of our rights, in whole or in part, or agree to limit our rights, including in certain instances certain control- and/or foreclosure-related rights with respect to such shared investments and/or otherwise agree to implement certain procedures to ameliorate conflicts of interest which may in certain circumstances involve a forbearance of our rights.
We may invest alongside TPG Funds (including TRECO Funds) and in connection therewith may, for legal, tax, regulatory or other reasons which may be unrelated to us, share with or assign to such TPG Funds certain of our rights, in whole or in part, or agree to limit our rights, including in certain instances certain control- and/or foreclosure-related rights with respect to such shared investments and/or otherwise agree to implement certain procedures to ameliorate conflicts of interest which may in certain circumstances involve a forbearance of our rights.
Some of the factors that could negatively affect the market price of our common stock include: • our actual or projected operating results, financial condition, cash flows and liquidity, or changes in investment strategy or prospects; • actual or perceived changes in the value of our investment portfolio; • actual or perceived conflicts of interest with TPG, including our Manager, and the personnel of TPG provided to our Manager, including our executive officers, and TPG Funds; • equity issuances by us, or share resales by our stockholders, or the perception that such issuances or resales may occur; • loss of a major funding source or inability to obtain new favorable funding sources in the future; • increases in market interest rates, which may lead investors to demand a higher distribution yield for our common stock and would result in increased interest expense on our debt; • our financing strategy and leverage; • actual or anticipated accounting problems; • publication of research reports about us or the commercial real estate industry; • adverse market reaction to additional indebtedness we incur or securities we may issue in the future; • additions to or departures of key personnel of TPG, including our Manager; • changes in market valuations or operating performance of companies comparable to us; • price and volume fluctuations in the overall stock market from time to time; • short-selling pressure with respect to shares of our common stock or REITs generally; • speculation in the press or investment community; • any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts; • failure to maintain our REIT qualification or exclusion or exemption from Investment Company Act regulation or listing on the NYSE; • changes in law, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to REITs; • general market and economic conditions and trends, including inflationary concerns and the current state of the credit and capital markets; and • the other factors described in this Item 1A - “Risk Factors.” 51 Table of Contents As noted above, market factors unrelated to our performance could also negatively impact the market price of our common stock.
Some of the factors that could negatively affect the market price of our common stock include: • our actual or projected operating results, financial condition, cash flows and liquidity, or changes in investment strategy or prospects; • actual or perceived changes in the value of our investment portfolio; • actual or perceived conflicts of interest with TPG, including our Manager, and the personnel of TPG provided to our Manager, including our executive officers, and TPG Funds; • equity issuances by us, or share resales by our stockholders, or the perception that such issuances or resales may occur; • loss of a major funding source or inability to obtain new favorable funding sources in the future; • increases in market interest rates, which may lead investors to demand a higher distribution yield for our common stock and would result in increased interest expense on our debt; • our financing strategy and leverage; • actual or anticipated accounting problems; • publication of research reports, including by short sellers, or speculation in the press or the investment community, about us or the commercial real estate industry; • adverse market reaction to additional indebtedness we incur or securities we may issue in the future; • additions to or departures of key personnel of TPG, including our Manager; • changes in market valuations or operating performance of companies comparable to us; • price and volume fluctuations in the overall stock market from time to time; • short-selling pressure with respect to shares of our common stock or REITs generally; • speculation in the press or investment community; • any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts; • failure to maintain our REIT qualification or exclusion or exemption from Investment Company Act regulation or listing on the NYSE; • changes in law, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to REITs; • general market and economic conditions and trends, including inflationary concerns and the current state of the credit and capital markets; and • the other factors described in this Item 1A - “Risk Factors.” As noted above, market factors unrelated to our performance could also negatively impact the market price of our common stock.
In addition, if regulatory capital requirements imposed on our lenders are increased, they may be required to limit, or increase the cost of, financing they provide to us. In general, this could potentially increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price.
In addition, if regulatory capital requirements imposed on our lenders are increased, they may be required to limit, or increase the cost of, financing they provide to us. In general, this could potentially increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or an unfavorable price.
The inability to consummate securitizations to finance our investments on a long-term basis could require us to seek other forms of potentially less attractive financing or to liquidate assets at an inopportune time or price, which could adversely affect our performance and our ability to grow our business.
The inability to consummate securitizations to finance our investments on a long-term basis could require us to seek other forms of potentially less attractive financing or to liquidate assets at an inopportune time or unfavorable price, which could adversely affect our performance and our ability to grow our business.
Our counterparties for critical financial relationships may include both domestic and international financial institutions. These institutions could be severely impacted by credit market turmoil, changes in legislation, allegations of civil or criminal wrongdoing and may as a result experience financial or other pressures.
Our counterparties for critical financial relationships may include both domestic and international financial institutions. These institutions could be severely impacted by credit market turmoil, changes in legislation, changes in regulation, allegations of civil or criminal wrongdoing and may as a result experience financial or other pressures.
Physical effects of climate change such as increases in temperature, sea levels, the severity of weather events and the frequency of natural disasters, such as hurricanes, tropical storms, tornadoes, wildfires, floods and earthquakes, among other effects, could damage the properties underlying our investments.
Physical effects of climate change such as increases in temperature, sea levels, the severity of weather events and the frequency of natural disasters, such as hurricanes, tropical storms, tornadoes, wildfires, droughts, floods and earthquakes, among other effects, could damage the properties underlying our investments.
Statements about our ESG related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
Statements about our ESG-related initiatives, commitments and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
Except for customary nonrecourse carve-outs for certain actions and environmental liability, most commercial mortgage loans are nonrecourse obligations of the sponsor and borrower, meaning that there is no recourse against the assets of the borrower or sponsor other than the underlying collateral.
Except for customary nonrecourse carve-outs for certain actions and environmental liability, most commercial mortgage loans are nonrecourse obligations of the sponsor and borrower, meaning that there is no recourse against the assets of the sponsor other than the underlying collateral.
In particular, the final rule requires covered swap entities and financial end-users having “material swaps exposure,” defined as an average aggregate daily notional amount of uncleared swaps exceeding a certain specified amount, to collect 43 Table of Contents and/or post (as applicable) a minimum amount of “initial margin” in respect of each uncleared swap; the specified amounts for material swaps exposure differ subject to a phase-in schedule, when the average aggregate daily notional amount will thenceforth be $8.0 billion as calculated from June, July and August of the previous calendar year.
In particular, the final rule requires covered swap entities and financial end-users having “material swaps exposure,” defined as an average aggregate daily notional amount of uncleared swaps exceeding a certain specified amount, to collect and/or post (as applicable) a minimum amount of “initial margin” in respect of each uncleared swap; the specified amounts for material swaps exposure differ subject to a phase-in schedule, when the average aggregate daily notional amount will thenceforth be 47 Table of Contents $8.0 billion as calculated from June, July and August of the previous calendar year.
Moreover, even if the “protective” TRS election were to be effective in the event of the failure of our subsidiary REIT to qualify as a REIT, such subsidiary REIT would be subject to U.S. federal income tax and applicable state and local taxes on its taxable income at regular corporate rates and we cannot assure you that we would not fail to satisfy the requirement that not more than 20% of the value of our total assets may be represented by the securities of one or more TRSs.
Moreover, even if the “protective” TRS elections were to be effective in the event of the failure of our subsidiary REIT to qualify as a REIT, such subsidiary REIT would be subject to U.S. federal income tax and applicable state and local taxes on its taxable income at regular corporate rates and we cannot assure you that we would not fail to satisfy the requirement that not more than 20% of the value of our total assets may be represented by the securities of one or more TRSs.
The SEC recently proposed amendments to its rules related to cybersecurity risk management, strategy, governance, and incident reporting, and many jurisdictions in which we and TPG operate have, or are considering adopting, laws and regulations relating to data privacy, cybersecurity and protection of personal information, including the General Data Protection Regulation in the European Union that went into effect in May 2018 and the California Consumer Privacy Act that became effective on January 1, 2020.
The SEC recently adopted amendments to its rules related to cybersecurity risk management, strategy, governance, and incident reporting, and many jurisdictions in which we and TPG operate have, or are considering adopting, laws and regulations relating to data privacy, cybersecurity and protection of personal information, including the General Data Protection Regulation in the European Union that went into effect in May 2018 and the California Consumer Privacy Act that became effective on January 1, 2020.
The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause stockholders to lose confidence in our financial results, which could materially and adversely affect us. 56 Table of Contents Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to ESG matters, that could expose us to numerous risks.
The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause stockholders to lose confidence in our financial results, which could materially and adversely affect us. 61 Table of Contents Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to ESG matters, that could expose us to numerous risks.
Accordingly, there can be no assurance that we will be able to obtain or utilize any financing arrangements in the future on similar or more favorable terms, or at all.
There can be no assurance that we will be able to obtain or utilize any financing arrangements in the future on similar or more favorable terms, or at all.
Actions may be taken for the TPG Funds that are adverse to us, including with respect to the timing and manner of sale and actions taken in circumstances of financial distress.
Actions may be taken for TPG Funds (including TRECO Funds) that are adverse to us, including with respect to the timing and manner of sale and actions taken in circumstances of financial distress.
In addition, we intend to conduct our operations so that we do not come within the definition of an investment company under Section 3(a)(1)(C) of the Investment Company Act because less than 40% of the value of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis will consist of “investment securities” (the “40% test”).
In addition, we conduct and intend to continue to conduct, our operations so that we do not come within the definition of an investment company under Section 3(a)(1)(C) of the Investment Company Act because less than 40% of the value of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis consist of “investment securities” (the “40% test”).
The methodology applied between us and one or more of the TPG Funds under TPG’s allocation policy may result in us not participating (and/or not participating to the same extent) in certain investment opportunities in which we would have otherwise participated had the related allocations been determined without regard to such allocation policy and/or based only on the circumstances of those particular investments.
The methodology applied between us and one or more of the TPG Funds, including the TRECO Funds, under TPG’s allocation policy may result in us not participating (and/or not participating to the same extent) in certain investment opportunities in which we would have otherwise participated had the related allocations been determined without regard to such allocation policy and/or based only on the circumstances of those particular investments.
Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis.
Our compliance with the REIT annual income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis.
Additionally, certain properties that secure a portion of our mortgage loan portfolio, such as those for offices, hospitality or residential tenants, could be especially vulnerable to various macroeconomic pressures. For example, in times of economic downturn, such as the current times, office tenants typically reduce their average occupancy as employment levels are reduced, lowering their need for office space.
Additionally, certain properties that secure a portion of our mortgage loan portfolio, such as those for offices, hospitality or residential tenants, could be especially vulnerable to various macroeconomic pressures. For example, in times of economic downturn, office tenants typically reduce their average occupancy as employment levels are reduced, lowering their need for office space.
Selecting and evaluating material ESG factors is subjective by nature, and there is no guarantee that the criteria utilized or judgment exercised by our Manager or a third-party ESG 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 asset managers or with market trends.
In addition, selecting and evaluating material ESG factors is subjective by nature, and there is no guarantee that the criteria utilized or judgment exercised by our Manager or a third-party ESG 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 asset managers or with market trends.
We may from time to time seek to participate in investments relating to the refinancing of loans held by TPG Funds. While it is expected that our participation in connection with such refinancing transactions will be at arms’ length and on market/contract terms, such transactions may give rise to potential or actual conflicts of interest.
We may from time to time seek to participate in investments relating to the refinancing of loans held by TPG Funds, including TRECO Funds. While it is expected that our participation in connection with such refinancing transactions will be at arms’ length and on market/contract terms, such transactions may give rise to potential or actual conflicts of interest.
Furthermore, if we or TPG fail to comply with the relevant laws and regulations or fail to provide the appropriate regulatory or other notifications of a breach in a timely manner, it could result in regulatory investigations and penalties, which could lead to negative publicity and may cause our investors or investors in the TPG Funds and TPG clients to lose confidence in the effectiveness of our or TPG’s security measures.
Furthermore, if we or TPG fail to comply with the relevant laws and regulations or fail to provide the appropriate regulatory or other notifications of a breach in a timely manner, it could result in regulatory investigations and penalties, which could lead to negative publicity and reputational harm and may cause our investors or investors in the TPG Funds and TPG clients to lose confidence in the effectiveness of our or TPG’s security measures.
We have made a “protective” TRS election with respect to our subsidiary REIT and may implement other protective arrangements intended to avoid such an outcome if our subsidiary REIT were not to qualify as a REIT, but there can be no assurance that such “protective” elections and other arrangements will be effective to avoid the resulting adverse consequences to us.
We have made annual “protective” TRS elections with respect to our subsidiary REIT and may implement other protective arrangements intended to avoid such an outcome if our subsidiary REIT were not to qualify as a REIT, but there can be no assurance that such “protective” elections and other arrangements will be effective to avoid the resulting adverse consequences to us.
In certain situations, we have: • acquired loans or investments subject to rights of senior classes, servicers or collateral managers under intercreditor or servicing agreements or securitization documents; • pledged our investments as collateral for financing arrangements; • acquired only a minority and/or a non-controlling participation in an underlying loan or investment; • co-invested with others through partnerships, joint ventures or other entities, thereby acquiring non-controlling interests; or • relied on independent third-party management or servicing with respect to the management of an asset.
In certain situations, we have: • acquired loans or investments subject to rights of senior classes, servicers or collateral managers under intercreditor or servicing agreements or securitization documents; • pledged our investments as collateral for financing arrangements; 21 Table of Contents • acquired only a minority and/or a non-controlling participation in an underlying loan or investment; • co-invested with others through partnerships, joint ventures or other entities, thereby acquiring non-controlling interests; or • relied on independent third-party management or servicing with respect to the management of an asset.
As a result, we cannot provide any assurances regarding the amount of time our Manager or its affiliates will dedicate to the management of our business and our Manager and its affiliates may have conflicts in allocating their time, resources and services among our business and any TPG Funds they may manage, and such conflicts may not be resolved in our favor.
As a result, we cannot provide any assurances regarding the amount of time our Manager or its affiliates will dedicate to the management of our business and our Manager and its affiliates may have conflicts in allocating their time, resources and services among our business and any TPG Funds they may manage, including the TRECO Funds, and such conflicts may not be resolved in our favor.
Certain of our service providers or their affiliates (including administrators, lenders, brokers, attorneys, consultants and investment banking or commercial banking firms) also provide goods or services to, or have business, personal or other relationships with, TPG. Such service providers may be sources of investment opportunities, co-investors or commercial counterparties or portfolio companies of TPG Funds.
Certain of our service providers or their affiliates (including administrators, lenders, brokers, property managers, attorneys, consultants and investment banking or commercial banking firms) also provide goods or services to, or have business, personal or other relationships with, TPG. Such service providers may be sources of investment opportunities, co-investors or commercial counterparties or portfolio companies of TPG Funds.
As a result of these rules, we intend to limit our use of advantageous hedging techniques or implement those hedges through a domestic TRS.
As a result of these rules, we intend to limit our use of advantageous hedging techniques or implement those hedges through a TRS.
We believe that a change in any one of the following factors could adversely affect our results of operations and cash flows and impair our ability to make distributions to our stockholders: • our ability to make attractive investments; • margin calls or other expenses that reduce our cash flows; • defaults or prepayments in our investment portfolio or decreases in the value of our investment portfolio; • the impact of changes in interest rates on our net interest income; and • the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.
We believe that a change in any one of the following factors could adversely affect our results of operations and cash flows and impair our ability to make distributions to our stockholders: • our ability to make attractive investments; • margin calls or other expenses that reduce our cash flows; • defaults or prepayments in our investment portfolio or decreases in the value of our investment portfolio; • the impact of changes in interest rates on our net interest income; and 57 Table of Contents • the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.
These floating rate loans are insulated from changes in value specifically due to changes in interest rates; however, the interest they earn fluctuates based upon interest rates (for example, LIBOR or SOFR) and, in a declining and/or low interest rate environment, these loans will earn lower rates of interest and this will impact our operating performance.
These floating rate loans are insulated from changes in value specifically due to changes in interest rates; however, the interest they earn fluctuates based upon interest rates (for example, Term SOFR) and, in a declining and/or low interest rate environment, these loans will earn lower rates of interest and this will impact our operating performance.
We are subject to conflicts of interest arising out of our relationship with TPG, including our Manager and its affiliates. As of December 31, 2022, three of our eight directors are employees of TPG. In addition, our chief financial officer and our other executive officers are also employees of TPG, and we are managed by our Manager, a TPG affiliate.
We are subject to conflicts of interest arising out of our relationship with TPG, including our Manager and its affiliates. As of December 31, 2023, three of our eight directors are employees of TPG. In addition, our chief financial officer and our other executive officers are also employees of TPG, and we are managed by our Manager, a TPG affiliate.
If the amount or structure of the base management fees, incentive compensation and/or our Manager’s or its affiliates’ compensation differs among us and the TPG Funds (such as where certain TPG Funds pay higher base management fees, incentive compensation, performance-based management fees or other fees), our Manager or its affiliates might be motivated to help such TPG Funds over us.
If the amount or structure of the base management fees, incentive compensation and/or our Manager’s or its affiliates’ compensation differs among us and the TPG Funds (including the TRECO Funds) (such as where certain TPG Funds pay higher base management fees, incentive compensation, performance-based management fees or other fees), our Manager or its affiliates might be motivated to help such TPG Funds (including TRECO Funds) over us.
See “—Risks Related to Our Company—Changes in laws or regulations governing our operations or those of our competitors, or changes in the interpretation thereof, or newly enacted laws or regulations, could result in increased competition for our target assets, required changes to our business practices and collectively could adversely impact our revenues and impose additional costs on us, which could materially and adversely affect us.” 19 Table of Contents As a result, competition may limit our ability to originate or acquire attractive investments in our target assets and could result in reduced returns.
See “—Risks Related to Our Company—Changes in laws or regulations governing our operations or those of our competitors, or changes in the interpretation thereof, or newly enacted laws or regulations, could result in increased competition for our target assets, required changes to our business practices and collectively could adversely impact our revenues and impose additional costs on us, which could materially and adversely affect us.” As a result, competition may limit our ability to originate or acquire attractive investments in our target assets and could result in reduced returns.
Furthermore, if “regulatory capital” or “capital adequacy” requirements—whether under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), Basel III, or other regulatory action—are further strengthened or expanded with respect to lenders that provide us with debt financing, or were to be imposed on us directly, they or we may be required to limit, or increase the cost of, financing they 42 Table of Contents provide to us or that we provide to others.
Furthermore, if “regulatory capital” or “capital adequacy” requirements—whether under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), Basel III, or other regulatory action—are further strengthened or expanded with respect to lenders that provide us with debt financing, or were to be imposed on us directly, they or we may be required to limit, or increase the cost of, financing they provide to us or that we provide to others.
Attacks on TPG and its affiliates and their portfolio companies’ and service providers’ systems could involve attacks that are intended to obtain unauthorized access to our proprietary information or personal identifying information of our stockholders, destroy data or disable, degrade or sabotage our systems, or divert or otherwise steal funds, including through the introduction of “phishing” attempts and other forms of social engineering, computer viruses and other malicious code.
Attacks on TPG and its affiliates and their portfolio companies’ and service providers’ systems could involve attacks that are intended to obtain unauthorized access to our proprietary information or personal identifying information of our stockholders, destroy data or disable, degrade or sabotage the TPG systems on which we rely, or divert or otherwise steal funds, including through the introduction of “phishing” attempts and other forms of social engineering, computer viruses and other malicious code.
Our Manager may, for example, have an incentive to allocate favorable or limited opportunity investments or structure the timing of investments to favor such TPG Funds. Additionally, our Manager might be motivated to favor TPG Funds in which it has an ownership interest or in which TPG has ownership interests.
Our Manager may, for example, have an incentive to allocate favorable or limited opportunity investments or structure the timing of investments to favor such TPG Funds (including TRECO Funds). Additionally, our Manager might be motivated to favor TPG Funds, including TRECO Funds, in which it has an ownership interest or in which TPG has ownership interests.
The TRS rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. Any of these taxes would reduce our cash flow, which could materially and adversely affect us. 47 Table of Contents Complying with REIT requirements may cause us to forego otherwise attractive investment opportunities.
The TRS rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. Any of these taxes would reduce our cash flow, which could materially and adversely affect us. Complying with REIT requirements may cause us to forego otherwise attractive investment opportunities.
If the securitization or other financing is not consummated, the lender could demand repayment of the facility, and in the event that we were unable to timely repay, could liquidate the warehoused collateral and we would then have to pay 32 Table of Contents any amount by which the original purchase price of the collateral assets exceeds its sale price, subject to negotiated caps, if any, on our exposure.
If the securitization or other financing is not consummated, the lender could demand repayment of the facility, and in the event that we were unable to timely repay, could liquidate the warehoused collateral and we would then have to pay any amount by which the original purchase price of the collateral assets exceeds its sale price, subject to negotiated caps, if any, on our exposure.
Such transactions will be conducted in accordance with, and subject to, the terms and conditions of our Management Agreement (including the requirement that sales to, or acquisitions of investments or receipt of financing from, TPG, any TPG Fund or any of their affiliates be approved in advance by a majority of our independent directors) and our code of business conduct and ethics and applicable laws and regulations. • Loan Refinancings.
Such transactions will be conducted in accordance with, and subject to, the terms and conditions of our Management Agreement (including the requirement that sales to, or acquisitions of investments or receipt of financing 41 Table of Contents from, TPG, any TPG Fund or any of their affiliates be approved in advance by a majority of our independent directors) and our code of business conduct and ethics and applicable laws and regulations. • Loan Refinancings.
Any failure to manage increases in size effectively could adversely affect our results of operations and financial condition. We operate in a competitive market for the origination and acquisition of attractive investment opportunities and competition may limit our ability to originate or acquire attractive investments in our target assets, which could have a material adverse effect on us.
Any failure to manage increases in size effectively could adversely affect our results of operations and financial condition. 18 Table of Contents We operate in a competitive market for the origination and acquisition of attractive investment opportunities and competition may limit our ability to originate or acquire attractive investments in our target assets, which could have a material adverse effect on us.
We, TPG or a portfolio entity could be required to make a significant investment to remedy the effects of any such failures, harm to their reputations, legal claims that they and their respective affiliates may be subjected to, regulatory action or enforcement arising out of applicable privacy and other laws, adverse publicity and other events that may affect their business and financial performance.
We, TPG or a portfolio entity could be required to make a significant investment to remedy the effects of any such failures, harm to our or their reputations, legal claims that we or they and their respective affiliates may be subjected to, regulatory action or enforcement arising out of applicable privacy and other laws, adverse publicity and other events that may affect our and their businesses and financial performance.
The “unsolicited takeover” provisions of the MGCL permit our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement takeover defenses, including a classified board structure, if we have a class of equity securities registered under the Exchange Act and at least three independent directors (both of which we currently 53 Table of Contents have).
The “unsolicited takeover” provisions of the MGCL permit our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement takeover defenses, including a classified board structure, if we have a class of equity securities registered under the Exchange Act and at least three independent directors (both of which we currently have).
While our CLO liabilities have set maturity dates, repayment of these are dependent on timing of related collateral loan asset repayments after the reinvestment period concludes. Warehouse facilities that we may obtain in the future may limit our ability to originate or acquire assets, and we may incur losses if the collateral is liquidated.
While our CLO liabilities have set maturity dates, repayment of these liabilities are dependent on timing of related collateral loan asset repayments after the reinvestment period concludes. 34 Table of Contents Warehouse facilities that we may obtain in the future may limit our ability to originate or acquire assets, and we may incur losses if the collateral is liquidated.
While TPG 36 Table of Contents will seek to resolve any conflicts in a fair and equitable manner with respect to conflicts resolution among us and the TPG Funds generally, such transactions are not required to be presented to our board of directors for approval, and there can be no assurance that any such conflicts will be resolved in our favor. • Co-Investments with Other TPG Vehicles.
While TPG will seek to resolve any conflicts in a fair and equitable manner with respect to conflicts resolution among us and the TPG Funds generally, such transactions are not required to be presented to our board of directors for approval, and there can be no assurance that any such conflicts will be resolved in our favor. • Co-Investments with Other TPG Vehicles.
In addition, even if we are able to foreclose on the underlying collateral following a default on a mezzanine loan, we would be substituted for the defaulting borrower and, to the extent income generated on the underlying property is insufficient to meet outstanding debt obligations on the property, we may need to commit substantial additional capital and/or deliver a replacement 23 Table of Contents guarantee by a creditworthy entity, which could include us, to preserve the existing mortgage loan on the property, stabilize the property and prevent additional defaults to lenders with existing liens on the property.
In addition, even if we are able to foreclose on the underlying collateral following a default on a mezzanine loan, we would be substituted for the defaulting borrower and, to the extent income generated on the underlying property is insufficient to meet outstanding debt obligations on the property, we may need to commit substantial additional capital and/or deliver a replacement guarantee by a creditworthy entity, which could include us, to preserve the existing mortgage loan on the property, stabilize the property and prevent additional defaults to lenders with existing liens on the property.
As described below, the process of foreclosing on a property is time-consuming, and we may incur significant expense if we foreclose on a property securing a loan under these or other circumstances. Risks of cost overruns and non-completion of the construction or renovation of the properties underlying loans we originate or acquire could materially and adversely affect us.
As described below, the process of foreclosing on a property is time-consuming, and we may incur significant expense if we foreclose on a property securing a loan under these or other circumstances. 23 Table of Contents Risks of cost overruns and non-completion of the construction or renovation of the properties underlying loans we originate or acquire could materially and adversely affect us.
Thus, holders of our common stock will bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their stock holdings in us. 57 Table of Contents Item 1B. Unresolved Staff Comments. None.
Thus, holders of our common stock will bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their stock holdings in us. Item 1B. Unresolved Staff Comments. None. 63 Table of Contents
Certain inherent conflicts of interest arise from the fact that TPG and our Manager will provide investment management and other services both to us and to other persons or entities, whether or not the investment objectives or policies of any such other person or entity are similar to those of ours, including, without limitation, the sponsoring, closing and/or managing of any TPG Fund.
Certain inherent conflicts of interest arise from the fact that TPG and our Manager provide investment management and other services both to us and to other persons or entities, whether or not the investment objectives or policies of any such other person or entity are similar to those of ours, including, without limitation, the sponsoring, closing and/or managing of any TPG Fund (including the TRECO Funds).
For example, we may be required to accrue income from mortgage loans, CRE debt securities and other types of debt investments or interests in debt investments before we receive any payments of interest or principal on such assets. We may also acquire distressed debt 46 Table of Contents investments that are subsequently modified by agreement with the borrower.
For example, we may be required to accrue income from mortgage loans, CRE debt securities and other types of debt investments or interests in debt investments before we receive any payments of interest or principal on such assets. We may also acquire distressed debt investments that are subsequently modified by agreement with the borrower.
Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. 31 Table of Contents Furthermore, we intend to record any derivative and hedging transactions we enter into in accordance with GAAP. However, we may choose not to pursue, or fail to qualify for, hedge accounting treatment relating to such derivative instruments.
Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. Furthermore, we intend to record any derivative and hedging transactions we enter into in accordance with GAAP. However, we may choose not to pursue, or fail to qualify for, hedge accounting treatment relating to such derivative instruments.
As a result, our operating results may suffer because any losses on these derivative instruments may not be offset by a change in the fair value of the related hedged transaction or item. Our investments may be subject to fluctuations in interest rates that may not be adequately protected, or protected at all, by our hedging strategies.
As a result, our operating results may suffer because any losses on these derivative instruments may not be offset by a change in the fair value of the related hedged transaction or item. 33 Table of Contents Our investments may be subject to fluctuations in interest rates that may not be adequately protected, or protected at all, by our hedging strategies.
Cash flow with respect to interest receipts that is swept by our lenders is considered as taxable income to us, and our distribution requirements as a REIT are not lessened. Risks Related to Our Relationship with Our Manager and its Affiliates We depend on our Manager and the personnel of TPG provided to our Manager for our success.
Cash flow with respect to interest receipts that is swept by our lenders is considered as taxable income to us, and our distribution requirements as a REIT are not lessened. 36 Table of Contents Risks Related to Our Relationship with Our Manager and its Affiliates We depend on our Manager and the personnel of TPG provided to our Manager for our success.
Altering our investment portfolio in this manner may materially and adverse affect us if we are forced to dispose of or acquire assets in an unfavorable market. There can be no assurance that we and our subsidiaries will be able to successfully avoid operating as an unregistered investment company.
Altering our investment portfolio in this manner may materially and adverse affect us if we are forced to dispose of or acquire assets in an unfavorable market. 45 Table of Contents There can be no assurance that we and our subsidiaries will be able to successfully avoid operating as an unregistered investment company.
In addition, TPG operates in businesses that are 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, cybersecurity has become a top priority for regulators around the world.
In addition, we and TPG operate in businesses that are 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, cybersecurity has become a top priority for regulators around the world.
It is possible, however, that the IRS could assert that we did not own the assets during the term of the repurchase transaction, in which case we could fail to continue to qualify as a REIT. 49 Table of Contents Liquidation of assets may jeopardize our REIT qualification or create additional tax liability for us.
It is possible, however, that the IRS could assert that we did not own the assets during the term of the repurchase transaction, in which case we could fail to continue to qualify as a REIT. Liquidation of assets may jeopardize our REIT qualification or create additional tax liability for us.
TPG and our Manager may also give advice to TPG Funds that may differ from advice given to us even though such TPG Funds’ investment objectives may be the same or similar to ours.
TPG and our Manager may also give advice to TPG Funds, including the TRECO Funds, that may differ from advice given to us even though such TPG Funds’ investment objectives may be the same or similar to ours.
If we or our wholly-owned subsidiaries or our majority-owned subsidiaries do not meet 41 Table of Contents these requirements, we could be forced to alter our investment portfolio by selling or otherwise disposing of a substantial portion of the assets that do not satisfy the applicable requirements or by acquiring a significant position in assets that are Qualifying Interests.
If we or our wholly-owned subsidiaries or our majority-owned subsidiaries do not meet these requirements, we could be forced to alter our investment portfolio by selling or otherwise disposing of a substantial portion of the assets that do not satisfy the applicable requirements or by acquiring a significant position in assets that are Qualifying Interests.
Risks Related to Our Lending and Investment Activities • Our success depends on the availability of attractive investment opportunities and our Manager’s ability to identify, structure, consummate, leverage, manage and realize returns on our investments. • Our commercial mortgage loans and other commercial real estate-related debt instruments expose us to risks associated with real estate investments generally. • We operate in a competitive market for the origination and acquisition of attractive investment opportunities and competition may limit our ability to originate or acquire attractive investments in our target assets. • The due diligence process undertaken by our Manager in regard to our investment opportunities may not reveal all facts relevant to an investment and, as a result, we may experience losses. • Real estate valuation is inherently subjective and uncertain.
Risks Related to Our Lending and Investment Activities • Our success depends on the availability of attractive investment opportunities and our Manager’s ability to identify, structure, consummate, leverage, manage and realize returns on our investments. • Our commercial mortgage loans and other commercial real estate-related debt instruments expose us to risks associated with real estate investments generally. • We operate in a competitive market for the origination and acquisition of attractive investment opportunities and competition may limit our ability to originate or acquire attractive investments in our target assets. • The due diligence process undertaken by our Manager in regard to our investment opportunities may not reveal all facts relevant to an investment and, as a result, we may experience losses. • Real estate valuation is inherently subjective and uncertain, and is subject to change, especially during periods of volatility.
With respect to the management and servicing of those loans, the related special servicer or collateral manager may take actions that could materially and adversely affect our interests. 24 Table of Contents Investments in non-investment grade, rated or unrated, investments involve an increased risk of default and loss.
With respect to the management and servicing of those loans, the related special servicer or collateral manager may take actions that could materially and adversely affect our interests. Investments in non-investment grade, rated or unrated, investments involve an increased risk of default and loss.
The non-performance of such obligations may cause losses to us in excess of the capital we initially may have invested or committed under such obligations and there is no assurance that we will have sufficient capital to cover any such losses. We are subject to counterparty risk associated with our debt obligations.
The non-performance of such obligations may cause losses to us in excess of the capital we initially may have invested or committed under such obligations and there is no assurance that we will have sufficient capital to cover any such losses. 35 Table of Contents We are subject to counterparty risk associated with our debt obligations.
Conversely, if an investment professional at our Manager or its affiliates does not personally hold an investment in us but holds investments in TPG Funds, such investment professional’s conflicts of interest with respect to us may be more acute. • Underwriting, Advisory and Other Relationships.
Conversely, if an investment professional at our Manager or its affiliates does not personally hold an investment in us but holds investments in TPG Funds (such as the TRECO Funds), such investment professional’s conflicts of interest with respect to us may be more acute. • Underwriting, Advisory and Other Relationships.
Qualifying Interests for this purpose include senior 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 Qualifying Interests for the purposes of the Investment Company Act.
Qualifying Interests for this purpose include senior mortgage loans, certain B-Notes and certain mezzanine loans that satisfy various conditions as set forth in SEC staff no-action letters 44 Table of Contents and other guidance, and other assets that the SEC staff in various no-action letters and other guidance has determined are Qualifying Interests for the purposes of the Investment Company Act.
In addition, in order to continue to meet the REIT qualification requirements, prevent the recognition of certain types of non-cash income or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory, we may hold a significant amount of our investments through taxable REIT subsidiaries (“TRSs”) or other subsidiary corporations that will be subject to corporate-level income tax at regular rates.
In addition, in order to continue to meet the REIT qualification requirements, prevent the recognition of certain types of non-cash income or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory, we may hold a significant amount of our investments through TRSs or other subsidiary corporations that will be subject to corporate-level income tax at regular rates.
Moreover, we expect that many of our investments are not or will not be registered under the relevant securities laws, resulting in prohibitions against their transfer, sale, pledge or their disposition except in transactions that are exempt 21 Table of Contents from registration requirements or are otherwise in accordance with such laws.
Moreover, we expect that many of our investments are not or will not be registered under the relevant securities laws, resulting in prohibitions against their transfer, sale, pledge or their disposition except in transactions that are exempt from registration requirements or are otherwise in accordance with such laws.
Additionally, our reputation and investor relationships could be damaged 27 Table of Contents as a result of our involvement with certain industries or assets associated with activities perceived to be causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.
Additionally, our reputation and investor relationships could be damaged as a result of our involvement with certain industries or assets associated with activities perceived to be causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.
In addressing these conflicts and regulatory, legal and contractual requirements across its various businesses, TPG has implemented certain policies and procedures (for example, information walls) that may reduce the benefits that TPG expects to utilize for our Manager for purposes of identifying and managing our investments.
In addressing these conflicts and regulatory, legal and contractual requirements across its various businesses, TPG has implemented certain policies and procedures (for example, 38 Table of Contents information walls) that may reduce the benefits that TPG expects to utilize for our Manager for purposes of identifying and managing our investments.
As a result, we could experience poor performance or losses for which our Manager would not be liable. We do not own the TPG name, but we may use it as part of our corporate name pursuant to a trademark license agreement with an affiliate of TPG.
As a result, we could experience poor performance or losses for which our Manager would not be liable. 42 Table of Contents We do not own the TPG name, but we may use it as part of our corporate name pursuant to a trademark license agreement with an affiliate of TPG.
These clients may themselves represent appropriate investment opportunities for us or may compete with us for investment opportunities. • Transactions with TPG Funds . From time to time, we may enter into purchase and sale transactions with TPG Funds.
These clients may themselves represent appropriate investment opportunities for us or may compete with us for investment opportunities. • Transactions with TPG Funds . From time to time, we may enter into purchase and sale transactions with TPG Funds, including TRECO Funds.
If we foreclose on any properties underlying our loans, the presence of hazardous substances on a property may adversely affect our ability to sell the property and we may incur substantial remediation costs. As a result, the discovery of material environmental liabilities attached to such properties could materially and adversely affect us.
If we acquire ownership of any properties underlying our loans, the presence of hazardous substances on a property may adversely affect our ability to sell the property and we may incur substantial remediation costs. As a result, the discovery of material environmental liabilities attached to such properties could materially and adversely affect us.
Inaccurate or inflated appraisals may result in an increase in the severity of losses on the mortgage loans. Any such losses could materially and adversely affect us. Interest rate fluctuations could significantly decrease our ability to generate income on our investments, which could materially and adversely affect us.
Inaccurate or inflated appraisals may result in an increase in the severity of losses on the mortgage loans. Any such losses could materially and adversely affect us. 19 Table of Contents Interest rate fluctuations could significantly decrease our ability to generate income on our investments, which could materially and adversely affect us.
Net operating income of an income-producing property may be adversely affected by the risks particular to commercial real property described above, as well as, among other things: • tenant mix and tenant bankruptcies; • success of tenant businesses; • property management decisions, including with respect to capital improvements, particularly in older building structures; • property location and condition, including, without limitation, any need to address environmental contamination at a property; • competition from comparable types of properties; • changes in global, national, regional or local economic conditions or changes in specific industry segments; • changes in interest rates, and in the state of the credit, securitization, debt and equity capital markets, including diminished availability or lack of debt financing for commercial real estate; • global trade disruption, supply chain issues, significant introductions of trade barriers and bilateral trade frictions; • declines in regional or local real estate values or rental or occupancy rates; • responses of businesses, governments and individuals to pandemics or outbreaks of contagious disease; • labor shortages and increases in the minimum wage and other forms of employee compensation and benefits; • changes in real estate tax rates, tax credits and other operating expenses; • changes to tax laws and rates to which real estate lenders and investors are subject; and • government regulations.
Net operating income of an income-producing property may be adversely affected by the risks particular to commercial real property described above, as well as, among other things: • tenant mix and tenant bankruptcies; • success of tenant businesses; • property management decisions, including with respect to capital improvements, particularly in older building structures; • renovations or repositionings during which operations may be limited or halted completely; • property location and condition, including, without limitation, any need to address environmental contamination or climate-related risks at a property; • competition from comparable types of properties; • changes in global, national, regional or local economic conditions or changes in specific industry segments; • changes in interest rates, and in the state of the credit, securitization, debt and equity capital markets, including diminished availability or lack of debt financing for commercial real estate; • global trade disruption, supply chain issues, significant introductions of trade barriers and bilateral trade frictions; • declines in regional or local real estate values or rental or occupancy rates; • responses of businesses, governments and individuals to pandemics or outbreaks of contagious disease; • labor shortages and increases in the minimum wage and other forms of employee compensation and benefits; • higher rates of inflation; • changes in real estate tax rates, tax credits and other operating expenses; • changes to tax laws and rates to which real estate lenders and investors are subject; and • government regulations.
TPG’s disaster recovery program may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all. We depend on Situs Asset Management, LLC (“SitusAMC”) for asset management services.
TPG’s disaster recovery program may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all. 49 Table of Contents We depend on Situs Asset Management, LLC (“SitusAMC”) for asset management services.
Our determination of general and asset-specific loan loss reserves may rely on material estimates regarding many factors, including the fair value of any loan collateral. The estimation of ultimate loan losses, loss reserves, and credit loss expense is a complex and subjective process.
Our determination of general and asset-specific allowance for loan losses may rely on material estimates regarding many factors, including the fair value of any loan collateral. The estimation of ultimate loan losses, allowance for loan losses, and credit loss expense is a complex and subjective process.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe consider these facilities to be suitable and adequate for the management and operations of our business. Item 3. Legal Proceedings. From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of December 31, 2022, we were not involved in any material legal proceedings. Item 4.
Biggest changeFrom time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of December 31, 2023, we were not involved in any material legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 65 Table of Contents PART II
Item 2. Properties. Our principal executive office is located in leased space at 888 Seventh Avenue, 35 th Floor, New York, New York 10106. Our principal administrative office is located in leased space at 301 Commerce Street, 33 rd Floor, Fort Worth, Texas 76102. We do not own any real property.
Item 2. Properties. Our principal executive office is located in leased space at 888 Seventh Avenue, 35 th Floor, New York, New York 10106. Our principal administrative office is located in leased space at 301 Commerce Street, 33 rd Floor, Fort Worth, Texas 76102.
Removed
Mine Safety Disclosures. Not applicable. 58 Table of Contents PART II
Added
We consider these facilities to be suitable and adequate for the management and operations of our business. For an overview of our real estate investments, see Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investment Portfolio Overview.” Item 3. Legal Proceedings.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePerformance Graph The following graph sets forth the cumulative total stockholder return based on a $100 investment in our common stock, assuming a quarterly reinvestment of dividends before consideration of income taxes during the period from July 20, 2017 (the date our common stock began trading on the NYSE) through December 31, 2022, as well as the corresponding returns on an overall stock market index (S&P 500 Index) and the Bloomberg REIT Mortgage Index.
Biggest changePerformance Graph The following graph sets forth the cumulative total stockholder return based on a $100 investment in our common stock, assuming a quarterly reinvestment of dividends before consideration of income taxes during the period from December 31, 2018 through December 31, 2023, as well as the corresponding returns on an overall stock market index (S&P 500 Index) and the Bloomberg REIT Mortgage Index.
Stockholder returns over the indicated periods should not be considered indicative of future stock prices or stockholder returns. Item 6. [Reserved] 59 Table of Contents
Stockholder returns over the indicated periods should not be considered indicative of future stock prices or stockholder returns. Item 6. [Reserved] 66 Table of Contents
It has been our policy to declare quarterly dividends to common stockholders in compliance with applicable provisions of the Internal Revenue Code governing REITs. As of February 17, 2023, there were approximately 46 holders of record of our common stock. This does not include the number of stockholders that hold shares in “street name” through banks or broker-dealers.
It has been our policy to declare quarterly dividends to common stockholders in compliance with applicable provisions of the Internal Revenue Code governing REITs. As of February 20, 2024, there were approximately 50 holders of record of our common stock. This does not include the number of stockholders that hold shares in “street name” through banks or broker-dealers.

Item 7. Management's Discussion & Analysis

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

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Biggest changeLouis, MO Multifamily Moderate Transitional $158,838 Unit 69.3 % 3 32 Senior Loan 6/28/2019 63.9 59.5 59.5 L + 2.5% L + 2.7% Floating 7/9/2024 Burlington, CA Office Light Transitional $327 Sq ft 70.9 % 3 33 Senior Loan 4/20/2022 63.0 63.0 62.5 S + 4.2% S + 4.5% Floating 5/9/2027 Buffalo, NY Multifamily Bridge $167,553 Unit 67.1 % 3 34 Senior Loan 4/11/2022 62.4 58.1 58.1 S + 3.4% S + 3.7% Floating 5/9/2027 San Antonio, TX Multifamily Bridge $104,017 Unit 81.2 % 3 35 Senior Loan 6/25/2019 62.0 62.0 62.0 L + 3.1% L + 3.3% Floating 7/9/2024 Calistoga, CA Hotel Moderate Transitional $696,629 Unit 48.6 % 2 36 Senior Loan (17) 9/1/2022 61.5 61.5 60.0 L + 2.8% L + 1.5% Floating 5/9/2026 Raleigh, NC Multifamily Bridge $188,650 Unit 66.2 % 3 37 Senior Loan 12/29/2021 60.6 55.1 54.7 L + 3.3% L + 3.6% Floating 1/9/2027 Rogers, AR Multifamily Bridge $153,125 Unit 75.9 % 3 38 Senior Loan 12/18/2019 58.8 58.8 58.8 L + 2.7% L + 3.0% Floating 1/9/2025 Houston, TX Multifamily Light Transitional $80,109 Unit 73.6 % 2 39 Senior Loan 3/3/2022 58.0 58.0 58.0 S + 3.4% S + 3.7% Floating 3/9/2027 Hampton, VA Multifamily Bridge $202,091 Unit 72.4 % 3 40 Senior Loan 6/20/2018 55.7 55.7 55.7 L + 3.0% L + 3.3% Floating 1/31/2023 Houston, TX Office Light Transitional $148 Sq ft 74.9 % 5 41 Senior Loan 3/12/2020 55.0 51.7 51.6 L + 2.7% L + 2.9% Floating 3/9/2025 Round Rock, TX Multifamily Light Transitional $133,820 Unit 75.4 % 3 42 Senior Loan 1/22/2019 54.0 54.0 54.0 L + 4.4% L + 4.8% Floating 2/9/2023 Manhattan, NY Office Light Transitional $441 Sq ft 61.1 % 5 89 Table of Contents Loan # Form of investment Origination or acquisition date (2) Total loan Principal balance Amortized cost (3) Interest rate (4) All-in yield (5) Fixed / floating Extended maturity (6) City / state Property type Loan type Loan per SQFT / unit LTV (7) Risk rating (8) 43 Senior Loan 10/10/2019 45.9 44.0 44.0 L + 2.8% L + 3.1% Floating 11/9/2024 Miami, FL Office Light Transitional $186 Sq ft 69.5 % 3 44 Senior Loan 12/17/2021 52.1 47.5 47.5 L + 3.7% L + 4.0% Floating 1/9/2027 Newport News, VA Multifamily Light Transitional $135,677 Unit 67.3 % 3 45 Senior Loan 10/27/2021 51.9 42.3 42.0 L + 3.4% L + 3.7% Floating 11/9/2026 Longmont, CO Office Moderate Transitional $149 Sq ft 70.6 % 3 46 Senior Loan 6/24/2022 51.6 47.8 47.8 S + 3.8% S + 4.1% Floating 7/9/2027 San Antonio, TX Multifamily Bridge $159,259 Unit 70.2 % 3 47 Senior Loan 12/20/2017 51.0 51.5 51.5 L + 4.8% L + 5.1% Floating 1/9/2023 New Orleans, LA Hotel Bridge $217,949 Unit 59.9 % 4 48 Senior Loan 8/26/2021 51.0 29.1 28.8 L + 4.1% L + 4.4% Floating 9/9/2026 San Diego, CA Life Science Moderate Transitional $630 Sq ft 72.1 % 3 49 Senior Loan 5/26/2022 50.6 29.0 28.6 S + 8.5% S + 9.5% Floating 6/9/2024 Durham, NC Other Construction $34 Sq ft 37.0 % 3 50 Senior Loan 3/12/2020 50.2 47.3 47.2 L + 2.7% L + 2.9% Floating 3/9/2025 Round Rock, TX Multifamily Light Transitional $137,049 Unit 75.6 % 3 51 Senior Loan 6/2/2021 48.6 45.5 45.3 L + 3.8% L + 4.1% Floating 6/9/2026 Fort Lauderdale, FL Office Light Transitional $187 Sq ft 71.0 % 3 52 Senior Loan 4/6/2021 47.0 45.9 45.9 L + 3.7% L + 4.1% Floating 4/9/2026 St.
Biggest changeLouis, MO Multifamily Moderate Transitional $158,838 Unit 69.3 % 3 18 Senior Loan 6/28/2019 63.9 60.7 60.7 S + 2.6% S + 2.8% Floating 7/9/2024 Burlingame, CA Office Light Transitional $352 Sq ft 70.9 % 3 19 Senior Loan 4/20/2022 63.0 63.0 62.7 S + 3.7% S + 4.0% Floating 5/9/2027 Buffalo, NY Multifamily Bridge $167,553 Unit 67.1 % 3 20 Senior Loan 4/11/2022 62.4 60.2 60.2 S + 3.4% S + 3.7% Floating 5/9/2027 San Antonio, TX Multifamily Bridge $104,017 Unit 81.2 % 4 21 Senior Loan 11/3/2023 62.0 48.3 48.0 S + 3.5% S + 3.8% Floating 11/9/2028 Stamford, CT Multifamily Moderate Transitional $254,098 Unit 66.1 % 3 22 Senior Loan 6/25/2019 62.0 62.0 62.0 S + 3.2% S + 3.4% Floating 7/9/2024 Calistoga, CA Hotel Moderate Transitional $620,000 Unit 48.6 % 2 23 Senior Loan (12) 6/9/2021 61.5 61.5 61.1 S + 2.9% S + 1.9% Floating 5/9/2026 Raleigh, NC Multifamily Bridge $188,650 Unit 66.2 % 3 24 Senior Loan 12/29/2021 60.6 56.0 55.8 S + 3.4% S + 3.7% Floating 1/9/2027 Rogers, AR Multifamily Bridge $153,125 Unit 75.9 % 3 25 Senior Loan 3/3/2022 58.0 58.0 58.0 S + 3.4% S + 3.7% Floating 3/9/2027 Hampton, VA Multifamily Bridge $202,091 Unit 72.4 % 3 26 Senior Loan 3/12/2020 55.0 51.8 51.8 S + 3.8% S + 3.9% Floating 2/29/2024 Round Rock, TX Multifamily Light Transitional $133,820 Unit 75.4 % 3 27 Senior Loan 12/17/2021 52.1 48.8 48.8 S + 3.8% S + 4.1% Floating 1/9/2027 Newport News, VA Multifamily Light Transitional $135,677 Unit 67.3 % 3 28 Senior Loan 10/27/2021 51.9 43.7 43.6 S + 3.5% S + 3.8% Floating 11/9/2026 Longmont, CO Office Moderate Transitional $150 Sq ft 70.6 % 3 29 Senior Loan 6/24/2022 51.6 50.2 50.2 S + 3.8% S + 4.1% Floating 7/9/2027 San Antonio, TX Multifamily Bridge $159,259 Unit 70.2 % 3 30 Senior Loan 12/20/2017 51.0 51.0 51.0 S + 4.9% S + 5.3% Floating 3/9/2025 New Orleans, LA Hotel Bridge $217,949 Unit 59.9 % 3 31 Senior Loan 8/26/2021 51.0 45.7 45.5 S + 4.2% S + 4.5% Floating 9/9/2026 San Diego, CA Life Science Moderate Transitional $599 Sq ft 72.1 % 3 32 Senior Loan 5/26/2022 50.6 38.4 38.3 S + 8.5% S + 9.5% Floating 6/9/2024 Durham, NC Other Construction $34 Sq ft 37.0 % 3 33 Senior Loan 3/12/2020 50.2 48.7 48.7 S + 3.8% S + 3.9% Floating 2/29/2024 Round Rock, TX Multifamily Light Transitional $137,049 Unit 75.6 % 3 34 Senior Loan 6/2/2021 48.6 48.3 48.2 S + 3.9% S + 4.2% Floating 6/9/2026 Fort Lauderdale, FL Office Light Transitional $187 Sq ft 71.0 % 3 35 Senior Loan 8/10/2022 46.2 37.6 37.4 S + 3.9% S + 4.4% Floating 9/9/2027 Plano, TX Multifamily Moderate Transitional $173,534 Unit 66.3 % 3 36 Senior Loan 9/30/2021 45.9 45.9 45.8 S + 3.4% S + 3.7% Floating 10/9/2026 San Antonio, TX Multifamily Bridge $136,488 Unit 64.1 % 3 37 Senior Loan 3/17/2021 45.4 45.2 45.2 S + 3.4% S + 3.7% Floating 4/9/2026 Indianapolis, IN Multifamily Light Transitional $62,294 Unit 63.7 % 3 38 Senior Loan 12/21/2021 45.0 44.9 44.9 S + 3.8% S + 4.1% Floating 1/9/2027 Knoxville, TN Multifamily Bridge $119,681 Unit 84.9 % 3 39 Senior Loan 8/7/2018 44.5 35.1 35.1 S + 3.5% S + 3.7% Floating 3/31/2024 Atlanta, GA Office Light Transitional $63 Sq ft 61.4 % 3 40 Senior Loan 7/28/2023 43.6 37.2 36.9 S + 4.6% S + 5.1% Floating 8/9/2028 Various, AZ Hotel Bridge $150,345 Unit 63.3 % 3 41 Senior Loan 1/14/2022 43.0 43.0 43.0 S + 3.7% S + 4.0% Floating 2/9/2027 Columbia, SC Multifamily Bridge $162,879 Unit 79.8 % 3 42 Senior Loan 3/30/2018 42.4 41.2 41.2 S + 3.8% S + 4.0% Floating 11/22/2024 Honolulu, HI Office Light Transitional $147 Sq ft 57.9 % 4 98 Table of Contents Loan # Form of investment Origination or acquisition date (2) Total loan Principal balance Amortized cost (3) Interest rate All-in yield (4) Fixed / floating Extended maturity (5) City / state Property type Loan type Loan per SQFT / unit LTV (6) Risk rating (7) 43 Senior Loan 3/7/2019 39.2 40.4 40.4 S + 4.0% S + 4.4% Floating 3/9/2024 Lexington, KY Hotel Moderate Transitional $107,221 Unit 61.6 % 4 44 Senior Loan 7/15/2021 39.0 39.0 38.9 S + 3.6% S + 3.9% Floating 8/9/2026 Chicago, IL Multifamily Bridge $261,745 Unit 78.8 % 3 45 Senior Loan 3/11/2019 37.0 37.0 37.0 S + 4.0% S + 4.2% Floating 4/9/2024 Miami Beach, FL Hotel Bridge $280,303 Unit 59.3 % 2 46 Senior Loan 3/24/2023 37.0 33.3 33.0 S + 3.5% S + 3.8% Floating 4/9/2028 Dallas, TX Industrial Light Transitional $83 Sq ft 61.2 % 3 47 Senior Loan 6/3/2021 36.4 33.9 33.9 S + 3.7% S + 4.0% Floating 6/9/2026 Riverside, CA Mixed-Use Bridge $103 Sq ft 62.2 % 3 48 Senior Loan 8/11/2021 34.5 32.3 32.2 S + 3.7% S + 3.9% Floating 9/9/2026 Mesa, AZ Multifamily Bridge $176,020 Unit 78.5 % 3 49 Senior Loan 6/9/2022 31.2 27.8 27.7 S + 3.6% S + 3.9% Floating 6/9/2027 Centerton, AR Multifamily Light Transitional $156,859 Unit 73.8 % 3 50 Senior Loan 8/23/2022 31.0 29.0 28.8 S + 4.0% S + 4.7% Floating 9/9/2027 Marietta, GA Multifamily Light Transitional $127,049 Unit 68.5 % 3 51 Senior Loan 5/14/2021 27.6 27.1 27.1 S + 3.3% S + 3.6% Floating 6/9/2026 Pensacola, FL Multifamily Moderate Transitional $137,752 Unit 72.8 % 3 52 Senior Loan 10/27/2021 24.6 24.1 24.1 S + 5.6% S + 5.9% Floating 11/9/2026 San Diego, CA Life Science Moderate Transitional $814 Sq ft 75.8 % 3 53 Senior Loan 6/29/2022 24.5 22.2 22.1 S + 3.9% S + 4.2% Floating 7/9/2027 San Antonio, TX Multifamily Light Transitional $107,456 Unit 75.5 % 3 Total / weighted average (8) $ 3,666.2 $ 3,484.1 $ 3,476.8 S +3.7% S +4.0% 2.6 years 67.3 % 3.0 _______________________________ * Numbers presented may not foot due to rounding.
Calculated balances as the month-end averages. (2) Weighted average yield or financing cost calculated based on annualized interest income or expense divided by calculated month-end average outstanding balance. (3) Represents interest income on core interest-earning assets less interest expense on total interest-bearing liabilities.
Calculated balances as the month-end averages. (2) Weighted average yield or financing cost calculated based on annualized interest income or expense divided by calculated month-end average outstanding balance. (3) Represents interest income on core interest-earning assets less interest expense on total interest-bearing liabilities.
(2) Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, secured credit agreements, asset-specific financing arrangements, a secured revolving credit facility, and mortgage loans payable (if any), plus non-consolidated senior interests sold or co-originated (if any), less cash, to (ii) total stockholders’ equity, at period end.
(2) Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, secured credit agreements, asset-specific financing arrangements, a secured revolving credit facility, and mortgage loans payable, plus non-consolidated senior interests sold or co-originated (if any), less cash, to (ii) total stockholders’ equity, at period end.
The allowance for credit losses for loans held for investment, as reported in our consolidated balance sheets, is adjusted by a credit loss benefit (expense), which is reported in earnings in the consolidated statements of income (loss) and comprehensive income (loss) and reduced by the write-off of loan amounts, net of recoveries and additions related to purchased credit-deteriorated (“PCD”) assets, if relevant.
The allowance for credit losses for loans held for investment, as reported in our consolidated balance sheets, is adjusted by a credit loss (expense) benefit, which is reported in earnings in the consolidated statements of income and comprehensive income and reduced by the write-off of loan amounts, net of recoveries and additions related to purchased credit-deteriorated (“PCD”) assets, if relevant.
For construction loans only, LTV is calculated as the total commitment amount of the loan divided by the as-stabilized value of the real estate securing the loan.
For construction loans only, LTV is calculated as the total commitment amount of the loan divided by the as-stabilized value of the real estate securing the loan.
With respect to our debt obligations that are contractually due within the next five years, we plan to employ several strategies to meet these obligations, including: (i) exercising maturity date extension options that exist in our current financing arrangements; (ii) negotiating extensions of terms with our providers of credit; (iii) periodically accessing the private and public equity and debt capital markets to raise cash to fund new investments or the repayment of indebtedness; (iv) the issuance of additional structured finance vehicles, such as collateralized loan obligations similar to TRTX 2022-FL5, TRTX 2021-FL4, or TRTX 2019-FL3 as a method of financing; (v) term loans with private lenders; (vi) selling loans to generate cash to repay our debt obligations; and/or (vii) applying repayments from underlying loans to satisfy the debt obligations which they secure.
With respect to our debt obligations that are contractually due within the next five years, we plan to employ several strategies to meet these obligations, including: (i) exercising maturity date extension options that exist in our current financing arrangements; (ii) negotiating extensions of terms with our providers of credit; (iii) periodically accessing the private and public equity and debt capital markets to raise cash to fund new investments or the repayment of indebtedness; (iv) the issuance of additional structured finance vehicles, such as collateralized loan obligations similar to TRTX 2022-FL5, TRTX 2021-FL4, or TRTX 2019-FL3 as a method of financing; (v) term loans with private lenders; (vi) selling loans and REO to generate cash to repay our debt obligations; and/or (vii) applying repayments from underlying loans to satisfy the debt obligations which they secure.
Notwithstanding that a loan asset may be subject to a financing arrangement and serve as collateral under a secured credit agreement, we retain the right to administer and service the loan and interact directly with the underlying obligors and sponsors of our loan assets so long as there is no default under the secured credit agreement, and so long as we do not engage in certain material modifications (including amendments, waivers, exercises of remedies, or releases of obligors and collateral, among other things) of the loan assets without the lender’s prior consent. 72 Table of Contents Secured Revolving Credit Facility On February 22, 2022, we closed a $250.0 million, secured revolving credit facility with a syndicate of 5 banks to provide interim funding of up to 180 days for newly-originated and existing loans.
Notwithstanding that a loan asset may be subject to a financing arrangement and serve as collateral under a secured credit agreement, we retain the right to administer and service the loan and interact directly with the underlying obligors and sponsors of our loan assets so long as there is no default under the secured credit agreement, and so long as we do not engage in certain material modifications (including amendments, waivers, exercises of remedies, or releases of obligors and collateral, among other things) of the loan assets without the lender’s prior consent. 80 Table of Contents Secured Revolving Credit Facility On February 22, 2022, we closed a $250.0 million, secured revolving credit facility with a syndicate of 5 banks to provide interim funding of up to 180 days for newly-originated and existing loans.
The initial CECL reserve recorded on January 1, 2020 is reflected as a direct charge to our retained earnings on the consolidated statements of changes in equity. Subsequent changes to the CECL reserve are recognized through net income on our consolidated statements of income (loss) and comprehensive income (loss).
The initial CECL reserve recorded on January 1, 2020 is reflected as a direct charge to our retained earnings on the consolidated statements of changes in equity. Subsequent changes to the CECL reserve are recognized through net income on our consolidated statements of income and comprehensive income.
We have made an election to be taxed as a REIT for U.S. federal income tax purposes, commencing with our initial taxable year ended December 31, 2014.
We made an election to be taxed as a REIT for U.S. federal income tax purposes, commencing with our initial taxable year ended December 31, 2014.
Further, this could make it difficult for us to satisfy the requirements necessary to maintain our qualification as a REIT for U.S. federal income tax purposes. 75 Table of Contents Floating Rate Portfolio Our business model seeks to minimize our exposure to changing interest rates by match-indexing our assets using the same, or similar, benchmark indices.
Further, this could make it difficult for us to satisfy the requirements necessary to maintain our qualification as a REIT for U.S. federal income tax purposes. 83 Table of Contents Floating Rate Portfolio Our business model seeks to minimize our exposure to changing interest rates by match-indexing our assets using the same, or similar, benchmark indices.
These financing arrangements are generally 25% recourse to Holdco, with the exception of the secured revolving credit facility that is 100% recourse to Holdco. 62 Table of Contents Key Financial Measures and Indicators As a commercial real estate finance company, we believe the key financial measures and indicators for our business are earnings per share, dividends declared per common share, Distributable Earnings, and book value per common share.
These financing arrangements are generally 25% recourse to Holdco, with the exception of the secured revolving credit facility that is 100% recourse to Holdco. 69 Table of Contents Key Financial Measures and Indicators As a commercial real estate finance company, we believe the key financial measures and indicators for our business are earnings per share, dividends declared per common share, Distributable Earnings, and book value per common share.
(6) Except for construction loans, LTV is calculated for loan originations and existing loans as the total outstanding principal balance of the loan or participation interest in a loan (plus any financing that is pari passu with or senior to such loan or participation interest) as of December 31, 2022, divided by the as-is appraised value of our collateral at the time of origination or acquisition of such loan or participation interest.
(6) Except for construction loans, LTV is calculated for loan originations and existing loans as the total outstanding principal balance of the loan or participation interest in a loan (plus any financing that is pari passu with or senior to such loan or participation interest) as of December 31, 2023, divided by the as-is appraised value of our collateral at the time of origination or acquisition of such loan or participation interest.
(7) Except for construction loans, LTV is calculated for loan originations and existing loans as the total outstanding principal balance of the loan or participation interest in a loan (plus any financing that is pari passu with or senior to such loan or participation interest) divided by the as-is appraised value of our collateral at the time of origination or acquisition of such loan or participation interest.
(6) Except for construction loans, LTV is calculated for loan originations and existing loans as the total outstanding principal balance of the loan or participation interest in a loan (plus any financing that is pari passu with or senior to such loan or participation interest) divided by the as-is appraised value of our collateral at the time of origination or acquisition of such loan or participation interest.
The allowance for credit losses includes a modeled component and an individually-assessed component. We have elected to not measure an allowance for credit losses on accrued interest receivables related to all of our loans held for investment because we write off uncollectible accrued interest receivable in a timely manner pursuant to our non-accrual policy, described above.
The allowance for credit losses includes a modeled component and an individually-assessed component. We have elected to not measure an allowance for credit losses on accrued interest receivables related to all of our loans held for investment because we write off uncollectible accrued interest receivable in a timely manner pursuant to our non-accrual policy.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
(2) Weighted average spread excludes the amortization of loan fees and deferred financing costs. (3) Loan term represents weighted-average final maturity, assuming extension options are exercised by the borrower. Repayments of CRE CLO notes are dependent on timing of related loan repayments post-reinvestment period. The term of the CRE CLO notes represents the rated final distribution date.
(2) Weighted average spread excludes the amortization of loan fees and deferred financing costs. (3) Loan term represents weighted-average final maturity, assuming extension options are exercised by the borrower. Repayments of CRE CLO notes are dependent on timing of underlying loan repayments post-reinvestment period. The term of the CRE CLO notes represents the rated final distribution date.
(5) Amounts include the related future interest payment obligations, which are estimated by assuming the amounts outstanding under our secured debt agreements, asset-specific financing arrangements and collateralized loan obligations and the interest rates in effect as of December 31, 2022 will remain constant into the future.
(5) Amounts include the related future interest payment obligations, which are estimated by assuming the amounts outstanding under our secured debt agreements, asset-specific financing arrangements and collateralized loan obligations and the interest rates in effect as of December 31, 2023 will remain constant into the future.
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 activity and operations.
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 investment activity and operations.
See Note 9 to our Consolidated Financial Statements included in this Form 10-K for additional details. 85 Table of Contents Corporate Activities Dividends Upon the approval of our Board of Directors, we accrue dividends.
See Note 9 to our Consolidated Financial Statements included in this Form 10-K for additional details. 93 Table of Contents Corporate Activities Dividends Upon the approval of our Board of Directors, we accrue dividends.
If conditions change from those expected, it is possible that our judgments, estimates and assumptions could change, which may result in a change in our interest income and other revenue recognition, allowance for loan losses, expense recognition, tax liability, future impairment of our investments, and valuation of our investment portfolio, among other effects.
If conditions change from those expected, it is possible that our judgments, estimates and assumptions could change, which may result in a change in our interest income and other revenue recognition, allowance for loan losses, expense recognition, tax liability, future write-offs of our investments, and valuation of our investment portfolio, among other effects.
(5) In addition to the interest rate, all-in yield includes the amortization of deferred origination fees, purchase price premium and discount, and accrual of both extension and exit fees.
(4) In addition to the interest rate, all-in yield includes the amortization of deferred origination fees, purchase price premium and discount, and accrual of both extension and exit fees.
We intend to distribute each year not less than 90% of its taxable income to its stockholders to comply with the REIT provisions of the Internal Revenue Code.
We intend to distribute each year not less than 90% of our taxable income to our stockholders to comply with the REIT provisions of the Internal Revenue Code.
All-in yield for our loan assets and total loan portfolio excludes the applicable floating benchmark interest rate as of December 31, 2022 and excludes the impact of our interest rate floors and borrower interest rate caps. (6) Extended maturity assumes all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date.
All-in yield for our loan assets and total loan portfolio excludes the applicable floating benchmark interest rate as of December 31, 2023 and excludes the impact of our interest rate floors and borrower interest rate caps. (5) Extended maturity assumes all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date.
As of December 31, 2022, borrowings under these secured credit agreements and secured revolving credit facility had a weighted average credit spread of 1.86% (1.86% for arrangements with mark-to-market provisions and 2.00% for one arrangement with no mark-to-market provisions), and a weighted average term to extended maturity assuming exercise of all extension options and term-out provisions of 2.1 years.
As of December 31, 2023, borrowings under these secured credit agreements and secured revolving credit facility had a weighted average credit spread of 2.00% (2.00% for arrangements with mark-to-market provisions and 2.00% for one arrangement with no mark-to-market provisions), and a weighted average term to extended maturity assuming exercise of all extension options and term-out provisions of 1.3 years.
As of December 31, 2022 and December 31, 2021, common stock dividends of $19.0 million and $24.2 million, respectively, were unpaid and are reflected in dividends payable on our consolidated balance sheets. 86 Table of Contents Critical Accounting Policies and Use of Estimates The preparation of our consolidated financial statements in accordance with GAAP requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities, interest income and other revenue recognition, allowance for loan losses, expense recognition, tax liability, future impairment of our investments, valuation of our investment portfolio and disclosure of contingent assets and liabilities, among other items.
As of December 31, 2023 and December 31, 2022, common stock dividends of $19.2 million and $19.0 million, respectively, were unpaid and are reflected in dividends payable on our consolidated balance sheets. 94 Table of Contents Critical Accounting Estimates The preparation of our consolidated financial statements in accordance with GAAP requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities, interest income and other revenue recognition, allowance for loan losses, expense recognition, tax liability, future impairment of our investments, valuation of our investment portfolio and disclosure of contingent assets and liabilities, among other items.
As of December 31, 2022, outstanding borrowings under these arrangements had a weighted average term to extended maturity of 2.1 years assuming the exercise of all extension options and term out provisions. These secured credit agreements are generally 25.0% recourse to Holdco.
As of December 31, 2023, outstanding borrowings under these arrangements had a weighted average term to extended maturity of 1.3 years assuming the exercise of all extension options and term out provisions. These secured credit agreements are generally 25.0% recourse to Holdco.
Item 1A, “Risk Factors” in this Form 10-K. This section discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Item 1A, “Risk Factors” in this Form 10-K. This section discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
This is only an estimate, as actual amounts borrowed and rates will vary over time. Our floating rate loans are indexed to LIBOR or Term SOFR; our related liabilities are indexed to LIBOR, Compounded SOFR or Term SOFR.
This is only an estimate, as actual amounts borrowed and rates will vary over time. Our floating rate loans and our related liabilities are indexed to Term SOFR.
(10) Calculated as the ratio of unpaid principal balance as of December 31, 2022 to the as-is appraised value at origination, to reflect the sale by us in August 2020 of the contiguous mezzanine loan with an unpaid principal balance of $46.4 million and a commitment amount of $50.0 million.
(9) Calculated as the ratio of unpaid principal balance as of December 31, 2023 to the as-is appraised value at origination, to reflect the sale by us in August 2020 of the contiguous mezzanine loan with an unpaid principal balance of $46.4 million and a commitment amount of $50.0 million as of sale date.
We did not have any non-consolidated senior interests as of December 31, 2022. (2) Unpaid principal balance includes PIK interest of $1.7 million as of December 31, 2022.
We did not have any non-consolidated senior interests as of December 31, 2023. (2) Unpaid principal balance includes PIK interest of $1.2 million as of December 31, 2023.
The following table presents our Debt-to-Equity ratio and Total Leverage ratio: December 31, 2022 December 31, 2021 Debt-to-equity ratio (1) 2.97x 2.36x Total leverage ratio (2) 2.97x 2.45x __________________________________ (1) Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, secured credit agreements, asset-specific financing arrangements, a secured revolving credit facility, and mortgage loans payable (if any), less cash, to (ii) total stockholders’ equity, at period end.
Debt-to-Equity Ratio and Total Leverage Ratio The following table presents our Debt-to-Equity ratio and Total Leverage ratio: December 31, 2023 December 31, 2022 Debt-to-equity ratio (1) 2.53x 2.97x Total leverage ratio (2) 2.53x 2.97x __________________________________ (1) Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, secured credit agreements, asset-specific financing arrangements, a secured revolving credit facility, and mortgage loans payable, less cash, to (ii) total stockholders’ equity, at period end.
During the year ended December 31, 2021, we declared cash dividends of $0.95 per common share, or $73.8 million. 82 Table of Contents Liquidity and Capital Resources Capitalization We have capitalized our business to-date through, among other things, the issuance and sale of shares of our common stock, issuance of Series C Preferred Stock classified as permanent equity, issuance of Series B Preferred Stock treated as temporary equity, borrowings under secured credit agreements, secured revolving credit facilities, collateralized loan obligations, mortgage loan payable, asset-specific financings, and non-consolidated senior interests.
During the year ended December 31, 2022, we declared cash dividends of $0.96 per common share, or $75.1 million. 90 Table of Contents Liquidity and Capital Resources Capitalization We have capitalized our business to-date through, among other things, the issuance and sale of shares of our common stock, issuance of Series C Preferred Stock classified as permanent equity, issuance of Series B Preferred Stock treated as temporary equity, borrowings under secured credit agreements, secured revolving credit facilities, collateralized loan obligations, mortgage loan payable, asset-specific financings, and non-consolidated senior interests.
Dividends Declared Per Common Share During the three months ended December 31, 2022, we declared cash dividends of $0.24 per common share, or $19.0 million.
Dividends Declared Per Common Share During the three months ended December 31, 2023, we declared cash dividends of $0.24 per common share, or $19.2 million.
As of December 31, 2022, the weighted average haircut (which is equal to one minus the advance rate percentage against collateral for our secured credit agreements taken as a whole) was 21.9% compared to 23.9% as of December 31, 2021.
As of December 31, 2023, the weighted average haircut (which is equal to one minus the advance rate percentage against collateral for our secured credit agreements taken as a whole) was 22.3% compared to 21.9% as of December 31, 2022.
As of December 31, 2022, 100.0% of our loan investments by unpaid principal balance earned a floating rate of interest and were financed with liabilities that require interest payments based on floating rates, which resulted in $0.8 billion of net floating rate exposure, subject to the impact of interest rate floors on all our floating rate loans and less than 3.0% of our liabilities.
As of December 31, 2023, 100.0% of our loan investments by unpaid principal balance earned a floating rate of interest and were financed with liabilities that require interest payments based on floating rates, which resulted in $0.5 billion of net floating rate exposure, subject to the impact of interest rate floors on all our floating rate loans and less than 1.2% of our liabilities.
We have the right to convert the mortgage assets benchmark interest rate from LIBOR to Term SOFR to eliminate the difference between benchmark rates used for the assets and liabilities of the CRE CLO.
We exercised our right to convert the mortgage assets' benchmark interest rate from LIBOR to Term SOFR to eliminate the difference between benchmark rates used for the assets and liabilities of the CRE CLO.
Investing Activities During the year ended December 31, 2022, cash flows used in investing activities totaled $452.6 million primarily due to new loan originations and acquisitions of $1,519.4 million, advances on loans and capital expenditures related to REO and other lending of $145.2 million and $5.1 million, respectively, offset by loan repayments of $1,062.4 million and proceeds from the sale of real estate owned of $154.7 million.
During the year ended December 31, 2022 cash flows used in investing activities totaled $452.6 million primarily due to new loan originations of $1.5 billion and advances on loans and capital expenditures related to real estate owned of $145.2 million and $5.1 million, respectively, offset by loan repayments of $1.1 billion and proceeds from the sale of real estate owned of $154.7 million.
Preferred Stock Dividends and Participating Securities Share in Earnings During the year ended December 31, 2022, we declared and paid a cash dividend of $12.6 million related to our Series C Preferred Stock.
Preferred Stock Dividends and Participating Securities Share in Earnings During each of the year ended periods ended December 31, 2023 and 2022, we declared and paid cash dividends of $12.6 million related to our Series C Preferred Stock.
(16) This loan represents a 41.2% pari passu participation interest in a first mortgage loan, that was originated by a third party on August 31, 2021 and acquired by us on September 1, 2022. (17) This loan was originated by a third party on June 9, 2021 and acquired by us on September 1, 2022. 91 Table of Contents
(11) This loan represents a 41.2% pari passu participation interest in a first mortgage loan, that was originated by a third party on August 31, 2021 and acquired by us on September 1, 2022. (12) This loan was originated by a third party on June 9, 2021 and acquired by us on September 1, 2022. 99 Table of Contents
Uses of Liquidity In addition to our ongoing loan activity, our primary liquidity needs include interest and principal payments under our $4.2 billion of outstanding borrowings under secured credit agreements, a secured revolving credit facility, asset-specific financing arrangements, and collateralized loan obligations, $426.1 million of unfunded loan commitments on our loans held for investment, dividend distributions to our preferred and common stockholders, and operating expenses. 83 Table of Contents Consolidated Cash Flows Our primary cash flow activities involve actively managing our investment portfolio, originating floating rate, first mortgage loan investments, and raising capital through public offerings of our equity and debt securities.
Uses of Liquidity In addition to our ongoing loan activity, our primary liquidity needs include interest and principal payments under our $3.0 billion of outstanding borrowings under secured credit agreements, a secured revolving credit facility, asset-specific financing arrangements, and collateralized loan obligations, the repurchase or deleveraging of loans, $183.3 million of unfunded loan commitments on our loans held for investment, dividend distributions to our preferred and common stockholders, and operating expenses. 91 Table of Contents Consolidated Cash Flows Our primary cash flow activities involve actively managing our investment portfolio, originating floating rate, first mortgage loan investments, and raising capital through public offerings of our equity and debt securities.
(2) Additional information regarding our consolidated results of operations and financial performance for the three months ended September 30, 2022 can be found in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 filed with the SEC on November 1, 2022.
(2) Additional information regarding our consolidated results of operations and financial performance for the three months ended September 30, 2023 can be found in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 filed with the SEC on October 31, 2023.
Preferred Stock Dividends and Participating Securities Share in Earnings During the three months ended December 31, 2022 and September 30, 2022, we declared and paid a cash dividend of $3.1 million related to our Series C Preferred Stock.
Preferred Stock Dividends and Participating Securities Share in Earnings During each of the three month periods ended December 31, 2023 and September 30, 2023, we declared and paid a cash dividend of $3.1 million related to our Series C Preferred Stock.
Gain on Sale of Real Estate Owned, net During the year ended December 31, 2022, we sold the remaining 10 acre parcel of the Las Vegas land for net cash proceeds of $73.9 million and recognized a gain on sale of real estate owned, net of $13.3 million.
During the year ended December 31, 2022, we sold a 10-acre parcel of REO property for net cash proceeds of $73.9 million and recognized a gain on sale of real estate owned, net of $13.3 million.
The collateralized loan obligations bear a weighted average interest rate of Term SOFR, LIBOR, or Compounded SOFR plus 1.78%, have a weighted average advance rate of 81.4%, and include a reinvestment feature that allows us to contribute existing or new loan investments in exchange for proceeds from loan repayments held by the CRE CLOs.
The collateralized loan obligations bear a weighted average interest rate of Term SOFR plus 1.95%, have a weighted average advance rate of 79.3%, and include a reinvestment feature that allows us to contribute existing or new loan investments in exchange for proceeds from loan repayments held by the CRE CLOs.
Financing Activities During the year ended December 31, 2022, cash flows provided by financing activities totaled $345.3 million primarily due to the issuance of TRTX 2022-FL5 which generated gross proceeds of $907.0 million, borrowings on our secured financing agreements of $1,333.0 million, borrowings on our asset-specific financing arrangements of $584.8 million, offset by repayments of CRE CLO liabilities of $1,001.9 million (of which $600.8 million related to the redemption of TRTX 2018-FL2), payments on secured financing agreements of $1,346.6 million, payments on asset-specific financing arrangements of $19.5 million and payment of dividends on our common stock and Series C Preferred Stock of $92.9 million.
During the year ended December 31, 2022, cash flows provided by financing activities totaled $345.3 million primarily due to proceeds from the issuance of TRTX 2022-FL5 of $907.0 million, borrowings on our secured financing agreements of $1.3 billion, borrowings on our asset-specific financing arrangements of $584.8 million, offset by payments on CRE CLOs of $1.0 billion (of which $600.8 million related to the redemption of TRTX 2018-FL2), payments on secured financing agreements of $1.3 billion, payments on asset-specific financing arrangements of $19.5 million, and payment of dividends on our common stock and Series C Preferred Stock of $92.9 million.
As of December 31, 2022, 100% of the loan commitments in our portfolio consisted of floating rate loans, of which 100.0% were first mortgage loans or, in two instances, a first mortgage loan and contiguous mezzanine loan both owned by us.
As of December 31, 2023, 100% of the loan commitments in our portfolio consisted of floating rate loans, of which 100.0% were first mortgage loans or, in one instance, a first mortgage loan and contiguous mezzanine loan both owned by us.
Distributable Earnings Distributable Earnings is a non-GAAP measure, which we define as GAAP net income (loss) attributable to our common stockholders, including realized gains and losses, regardless of whether such items are included in other comprehensive income or loss, or in GAAP net income (loss), and excluding (i) non-cash stock compensation expense, (ii) depreciation and amortization expense, (iii) unrealized gains (losses) (including credit loss expense (benefit), net), and (iv) certain non-cash or income and expense 63 Table of Contents items.
Distributable Earnings Distributable Earnings is a non-GAAP measure, which we define as GAAP net income (loss) attributable to our common stockholders, including realized gains and losses from loan write-offs, loan sales and other loan resolutions (including conversions to REO), regardless of whether such items are included in other comprehensive income or loss, or in GAAP net income (loss), and excluding (i) non-cash stock compensation expense, (ii) depreciation and amortization expense, (iii) unrealized gains (losses) (including credit loss expense (benefit), net), and (iv) certain non-cash or income and expense items.
Our loans are typically collateralized by real estate, or in the case of mezzanine loans, by a partnership interest or similar equity interest in an entity that owns real estate.
Our loans are typically collateralized by real estate, or in the case of mezzanine loans, by a partnership interest or similar equity interest in the entity that owns the real estate securing our first mortgage loan.
In either case, the senior mortgage loan (i.e., the non-consolidated senior interest) is not included on our balance sheet. When we create structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third party, we retain on our balance sheet a mezzanine loan.
Non-Consolidated Senior Interests and Retained Mezzanine Loans In certain instances, we create structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third party. In either case, the senior mortgage loan (i.e., the non-consolidated senior interest) is not included on our balance sheet.
Diluted earnings per common share also includes the impact of participating securities outstanding plus any incremental shares that would be outstanding assuming the exercise of the Warrants. Net Interest Income Net interest income decreased $13.0 million to $142.1 million during the year ended December 31, 2022 compared to $155.1 million for the year ended December 31, 2021.
Diluted earnings per common share also includes the impact of participating securities outstanding plus any incremental shares that would be outstanding assuming the exercise of the Warrants. Net Interest Income Net interest income decreased $53.4 million to $88.7 million during the year ended December 31, 2023 compared to $142.1 million for the year ended December 31, 2022.
On December 9, 2021, our Board of Directors declared a cash dividend of $0.3906 per share of Series C Preferred Stock, or $3.1 million in the aggregate, for for the fourth quarter of 2021. The Series C Preferred Stock dividend was paid on December 30, 2021 to the preferred stockholders of record as of December 20, 2021.
On December 8, 2023, our Board of Directors declared a cash dividend of $0.3906 per share of Series C Preferred Stock, or $3.1 million in the aggregate, for the fourth quarter of 2023. The Series C Preferred Stock dividend was paid on December 29, 2023 to the preferred stockholders of record as of December 19, 2023.
While the ultimate impact of the macroeconomic outlook and property performance trends remain uncertain, we selected our macroeconomic outlook to address this uncertainty, and made specific forward-looking adjustments to the inputs of our loan-level calculations to reflect variability in an economic climate marked by rising rates and other impacts to the broader economy.
While the ultimate impact of the macroeconomic outlook and property performance trends remain uncertain, we selected our macroeconomic outlook to address this uncertainty, and made specific forward-looking adjustments to the inputs of our loan-level calculations to reflect collateral operating performance, credit structure features of loan documents, variability in an economic climate marked by sustained higher interest rates, and other impacts to the broader economy.
As of December 31, 2022, we had outstanding 77.4 million shares of our common stock representing $1.1 billion of stockholders’ equity, $194.4 million of Series C Preferred Stock, and $4.2 billion of outstanding borrowings used to finance our investments and operations.
As of December 31, 2023, we had outstanding 77.9 million shares of our common stock representing $0.9 billion of stockholders’ equity, $194.4 million of Series C Preferred Stock, and $3.0 billion of outstanding borrowings used to finance our investments and operations.
(1) First mortgage loans are whole mortgage loans unless otherwise noted. (2) Date loan was originated or acquired by us. The origination or acquisition date is not updated for subsequent loan modifications. (3) Represents unpaid principal balance net of unamortized costs. (4) Interest rate represents the underlying benchmark interest rate ("BR") plus credit spread.
(1) First mortgage loans are whole mortgage loans unless otherwise noted. (2) Date loan was originated or acquired by us. The origination or acquisition date is not updated for subsequent loan modifications. (3) Represents unpaid principal balance net of unamortized costs.
See Notes 3 and 15 to our Consolidated Financial Statements included in this Form 10-K for additional details regarding our allowance for credit losses, risk ratings, and property type concentration risk.
See Note 3 to our Consolidated Financial Statements included in this Form 10-K for additional details regarding our allowance for credit losses and risk ratings.
As of December 31, 2022, based on the unpaid principal balance of our total loan exposure, 37.8% of our loans were subject to yield maintenance or other prepayment restrictions and 62.2% were open to repayment without penalty.
As of December 31, 2023, based on the unpaid principal balance of our total loan exposure, 8.4% of our loans were subject to yield maintenance or other prepayment restrictions and 91.6% were open to repayment without penalty.
Our current sources of near-term liquidity are set forth in the following table (dollars in thousands): December 31, 2022 December 31, 2021 Cash and cash equivalents $ 254,050 $ 260,635 Secured credit agreements 38,380 60,319 Secured revolving credit facility 556 — Asset-specific financing arrangements 770 — Collateralized loan obligation proceeds held at trustee 297,168 204 Total $ 590,924 $ 321,158 Our existing loan portfolio provides us with liquidity as loans are repaid or sold, in whole or in part, of which some proceeds may be included in accounts receivable from our servicers until released and the proceeds from such repayments become available for us to reinvest.
Our current sources of near-term liquidity are set forth in the following table (dollars in thousands): December 31, 2023 December 31, 2022 Cash and cash equivalents $ 206,376 $ 254,050 Secured credit agreements 24,784 38,380 Secured revolving credit facility — 556 Asset-specific financing arrangements 1,592 770 Collateralized loan obligation proceeds held at trustee 247,229 297,168 Total $ 479,981 $ 590,924 Our existing loan portfolio may provide us with liquidity as loans are repaid or sold, in whole or in part, of which some proceeds may be included in accounts receivable from our servicers until released and the proceeds from such repayments become available for us to reinvest.
In addition to credit spread, all-in yield includes the amortization of deferred origination fees, purchase price premium and discount, and accrual of both extension and exit fees. All-in yield for the total portfolio assumes the applicable floating benchmark interest rate as of December 31, 2022 for weighted average calculations.
In addition to credit spread, all-in yield includes the amortization of deferred origination fees, purchase price premium and discount, and accrual of both extension and exit fees. All-in yield for the total portfolio assumes Term SOFR as of December 31, 2023 for weighted average calculations.
As of December 31, 2022, based on unpaid principal balance, 37.8% of our loans were subject to yield maintenance or other prepayment restrictions and 62.2% were open to repayment by the borrower without penalty.
As of December 31, 2023, based on unpaid principal balance, 8.4% of our loans were subject to yield maintenance or other prepayment restrictions and 91.6% were open to repayment by the borrower without penalty.
For the year ended December 31, 2022 and 2021, common stock dividends in the amount of $75.1 million and $73.8 million, respectively, were declared and approved.
For the year ended December 31, 2023 and 2022, common stock dividends in the amount of $76.0 million and $75.1 million, respectively, were declared and approved.
For a summary of certain terms of the management agreement between us and our Manager (the “Management Agreement”), see Note 10 to our Consolidated Financial Statements included in this Form 10-K. 60 Table of Contents Fourth Quarter 2022 Activity Operating Results: • Recognized Net income attributable to common stockholders of $32.6 million, compared to Net loss of ($117.9) million for the three months ended September 30, 2022, an increase of $150.6 million. • Produced Net interest income of $35.2 million, resulting from interest income of $100.3 million and interest expense of $65.2 million.
For a summary of certain terms of the management agreement between us and our Manager (the “Management Agreement”), see Note 10 to our Consolidated Financial Statements included in this Form 10-K. 67 Table of Contents Fourth Quarter 2023 Activity Operating Results: • Recognized Net income (loss) attributable to common stockholders of $2.6 million, compared to ($64.6) million for the three months ended September 30, 2023, an increase of $67.3 million. • Produced Net interest income of $21.3 million, resulting from interest income of $84.1 million and interest expense of $62.8 million.
The remaining 26.5% of our loan portfolio borrowings, comprised primarily of our six secured credit agreements, are subject to credit marks, and in only one instance to credit and spread marks. As of December 31, 2022, we did not have any non-consolidated senior interests.
The remaining 26.5% of our loan portfolio borrowings, comprised primarily of our five secured credit agreements, are subject to credit marks only. As of December 31, 2023, we did not have any non-consolidated senior interests.
As of December 31, 2022, our CRE CLOs provide low cost, non-mark-to-market, non-recourse financing for 58.9% of our loan portfolio borrowings.
As of December 31, 2023, our CRE CLOs provide low cost, non-mark-to-market, non-recourse financing for 63.6% of our loan portfolio borrowings.
As of December 31, 2022, our loans held for investment portfolio consisted of 70 first mortgage loans (or interests therein) totaling $5.4 billion of commitments with an unpaid principal balance of $5.0 billion.
As of December 31, 2023, our loans held for investment portfolio consisted of 53 first mortgage loans (or interests therein) totaling $3.7 billion of commitments with an unpaid principal balance of $3.5 billion.
The separate arrangements provide non-mark-to-market financing, a term of up to 2 years, and are 15% recourse to Holdco. On June 30, 2022, we closed a $200.0 million loan financing facility (the "BMO Facility"). The BMO Facility provides asset-specific financing on a non-mark-to-market basis with matched term. This facility is 25% recourse to Holdco.
On June 30, 2022, we closed a $200.0 million loan financing facility (the "BMO Facility"). The BMO Facility provides asset-specific financing on a non-mark-to-market basis with matched term. This facility is 25% recourse to Holdco.
As of December 31, 2022, 58.9% of our borrowings were pursuant to our CRE CLO vehicles, 27.6% were pursuant to our secured credit agreements and secured revolving credit facility and 13.5% were pursuant to our asset-specific financing arrangements. Non-mark-to-market financing comprised 73.5% of total loan portfolio borrowings as of the end of the fourth quarter of 2022.
As of December 31, 2023, 63.6% of our borrowings were pursuant to our CRE CLO vehicles, 27.3% were pursuant to our secured credit agreements and secured revolving credit facility and 9.1% were pursuant to our asset-specific financing arrangements. Non-mark-to-market financing comprised 73.5% of total loan portfolio borrowings as of December 31, 2023.
(3) Unfunded loan commitments may be funded over the term of each loan, subject in certain cases to an expiration date or a force-funding date, primarily to finance property improvements or lease-related expenditures by our borrowers, to finance operating deficits during renovation and lease-up, and in limited instances to finance construction.
(3) Unfunded loan commitments may be funded over the term of each loan, subject in certain cases to an expiration date or a force-funding date, primarily to finance property improvements or lease-related expenditures by our borrowers and to finance operating deficits during renovation and lease-up. (4) As of December 31, 2023, all of our loans were indexed to Term SOFR.
The commercial property investment sales and commercial mortgage loan markets have experienced uneven liquidity due to global macroeconomic conditions, including heightened inflation, changes to fiscal and monetary policy, increased interest rates, currency fluctuations, labor shortages and challenges in the supply chain, coupled with the war in Ukraine and the lingering aftereffects of COVID-19, which continue to make it more difficult to estimate key inputs for estimating the allowance for credit losses.
The commercial property investment sales and commercial mortgage loan markets have experienced uneven liquidity due to global macroeconomic conditions, including heightened inflation, changes to fiscal and monetary policy, increased interest rates, currency fluctuations, labor shortages and recent distress in the banking sector, which continue to make it more difficult to estimate key inputs for estimating the allowance for credit losses.
For the year ended December 31, 2022, loan repayments (including $1.3 million of accrued PIK interest) totaled $1,508.2 million. Additionally, we held unencumbered loan investments with an aggregate unpaid principal balance of $5.6 million that are eligible to pledge under our existing financing arrangements.
For the year ended December 31, 2023, loan repayments (including $0.5 million of accrued PIK interest) totaled $891.1 million, and loan sales totaled $247.6 million. We held unencumbered loan investments with an aggregate unpaid principal balance of $97.8 million that are eligible to pledge under our existing financing arrangements.
For the three months ended December 31, 2022, we recorded net income attributable to common stockholders of $0.42 per diluted common share, an increase of $1.94 per diluted common share from the three months ended September 30, 2022, of which $1.91 per diluted common share relates to a decrease in our credit loss expense during the fourth quarter of 2022 as compared to the third quarter of 2022.
For the three months ended December 31, 2023, we recorded net income attributable to common stockholders of $0.03 per diluted common share, an increase of $0.86 per diluted common share from the three months ended September 30, 2023, of which $0.75 per diluted common share relates to a decrease in our credit loss expense during the fourth quarter of 2023, which totaled $17.3 million as compared to $75.8 million during the third quarter of 2023.
Significant judgment is required when estimating future credit losses and as a result actual losses over time could be materially different. During the year ended December 31, 2022, we recognized an increase of $168.4 million, respectively, to our allowance for credit losses. The credit loss allowance was $214.6 million as of December 31, 2022.
Significant judgment is required when estimating future credit losses and as a result actual losses over time could be materially different. During the year ended December 31, 2023, we recognized a decrease of $144.8 million to our allowance for credit losses. The credit loss allowance was $69.8 million as of December 31, 2023.
We have financed our loan investments as of December 31, 2022 utilizing three CRE CLOs totaling $2.5 billion, two of which are open for reinvestment of eligible loan collateral at year end, $1.1 billion under secured credit agreements with total commitments of $2.8 billion provided by six lenders, $565.4 million under asset-specific financing arrangements, and $44.3 million under our $290.0 million secured revolving credit facility.
We have financed our loan investments as of December 31, 2023 utilizing three CRE CLOs totaling $1.9 billion, one of which is open for reinvestment of eligible loan collateral at quarter end, $0.8 billion under secured credit agreements with total commitments of $2.2 billion provided by five lenders, $274.2 million under asset-specific financing arrangements, and $23.8 million under our $290.0 million secured revolving credit facility.
Credit Loss (Expense) Benefit Credit loss (expense) benefit decreased by $147.5 million for the three months ended December 31, 2022 compared to the three months ended September 30, 2022.
Credit Loss Expense Credit loss expense decreased by $58.6 million for the three months ended December 31, 2023 compared to the three months ended September 30, 2023.
These financing arrangements have credit spreads based upon the LTV and other risk characteristics of collateral pledged, and provide financing with mark-to-market provisions generally limited to collateral-specific events and, in only one instance, to capital markets-driven events.
These financing arrangements have credit spreads based upon the LTV and other risk characteristics of collateral pledged, and provide financing with mark-to-market provisions limited to collateral-specific events (i.e., "credit" marks).
For transactions under our secured credit agreements, the trade confirmation may also set forth any future funding obligations which are contemplated with respect to the specific transaction and/or the underlying loan asset and loan-specific margin maintenance provisions, described below. 71 Table of Contents Generally, our secured credit agreements allow for revolving balances, which allow us to voluntarily repay balances and draw again on existing available credit.
For transactions under our secured credit agreements, the trade confirmation may also set forth any future funding obligations which are contemplated with respect to the specific transaction and/or the underlying loan asset and loan-specific margin maintenance provisions, described below.
The table above does not include the amounts payable to our Manager under our Management Agreement as they are not fixed and determinable. During the year ended December 31, 2022, our Manager earned $5.2 million of incentive management fees.
The table above does not include the amounts payable to our Manager under our Management Agreement as they are not fixed and determinable. During the year ended December 31, 2023, our Manager did not earn an incentive management fee.
All interest income and interest expense resulted from our loan portfolio. 65 Table of Contents The following table details overall statistics for our loans held for investment portfolio as of December 31, 2022 (dollars in thousands): Balance sheet portfolio Total loan exposure (1) Number of loans (1) 70 70 Floating rate loans (by unpaid principal balance) 100.0 % 100.0 % Total loan commitments $ 5,429,146 $ 5,429,146 Unpaid principal balance (2) $ 5,004,798 $ 5,004,798 Unfunded loan commitments (3) $ 426,061 $ 426,061 Amortized cost $ 4,978,674 $ 4,978,674 Weighted average credit spread 3.4 % 3.4 % Weighted average all-in yield (4) 8.1 % 8.1 % Weighted average term to extended maturity (in years) (5) 2.8 2.8 Weighted average LTV (6) 67.2 % 67.2 % _________________________________ (1) In certain instances, we create structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third-party.
For the three months ended December 31, 2023, we generated interest income of $84.1 million and incurred interest expense of $62.8 million, which resulted in net interest income of $21.3 million. 72 Table of Contents The following table details overall statistics for our loans held for investment portfolio as of December 31, 2023 (dollars in thousands): Balance sheet portfolio Total loan exposure (1) Number of loans (1) 53 53 Floating rate loans 100.0 % 100.0 % Total loan commitments $ 3,666,173 $ 3,666,173 Unpaid principal balance (2) $ 3,484,052 $ 3,484,052 Unfunded loan commitments (3) $ 183,293 $ 183,293 Amortized cost $ 3,476,776 $ 3,476,776 Weighted average credit spread 3.7 % 3.7 % Weighted average all-in yield (4) 9.3 % 9.3 % Weighted average term to extended maturity (in years) (5) 2.6 2.6 Weighted average LTV (6) 67.3 % 67.3 % _________________________________ (1) In certain instances, we create structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third-party.
The following table provides a breakdown of the net change in our cash, cash equivalents, and restricted cash balances (dollars in thousands): Year Ended December 31, 2022 2021 Cash flows provided by operating activities $ 100,496 $ 132,167 Cash flows (used in) investing activities (452,561) (342,898) Cash flows provided by financing activities 345,341 152,101 Net change in cash, cash equivalents, and restricted cash $ (6,724) $ (58,630) Operating Activities During the year ended December 31, 2022 and 2021, cash flows provided by operating activities totaled $100.5 million and $132.2 million, respectively, primarily related to net interest income, offset by operating expenses.
The following table provides a breakdown of the net change in our cash, cash equivalents, and restricted cash balances (dollars in thousands): Year Ended December 31, 2023 2022 Cash flows provided by operating activities $ 80,126 $ 100,496 Cash flows provided by (used in) investing activities 1,095,385 (452,561) Cash flows (used in) provided by financing activities (1,222,808) 345,341 Net change in cash, cash equivalents, and restricted cash $ (47,297) $ (6,724) Operating Activities During the year ended December 31, 2023 and 2022, cash flows provided by operating activities totaled $80.1 million and $100.5 million, respectively, primarily related to a decline in net interest income and an increase in operating expenses.
We may amend or modify a loan depending on the loan’s specific facts and circumstances. These loan modifications typically include additional time for the borrower to refinance or sell the collateral property, adjustment or waiver of performance tests that are prerequisite to the extension of a loan maturity, and/or deferral of scheduled principal payments.
These loan modifications typically include additional time for the borrower to refinance or sell the collateral property, adjustment or waiver of performance tests that are prerequisite to the extension of a loan maturity, modification of terms of interest rate cap agreements, and/or deferral of scheduled principal payments.
Credit Loss (Expense) Benefit Credit loss (expense) benefit increased by $179.3 million for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to a $172.8 million increase to our allowance for credit losses during the year ended December 31, 2022 compared to a $6.3 million benefit recognized during the comparable period.
Credit Loss Expense Credit loss expense increased by $16.9 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to a $189.9 million increase to our allowance for credit losses during the year ended December 31, 2023 compared to a $173.0 million increase recognized during the comparable period.

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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 following table illustrates the impact on our interest income and interest expense, for the twelve-month period following December 31, 2022, of an immediate increase or decrease in the underlying benchmark interest rate of 25, 50 and 75 basis points on our existing floating rate loans held for investment portfolio and related liabilities (dollars in thousands): Assets (liabilities) subject to interest rate sensitivity (1)(2) Net exposure Income (expense) subject to interest rate sensitivity 25 Basis Point 50 Basis Point 75 Basis Point Increase Decrease Increase Decrease Increase Decrease Floating rate mortgage loan assets $ 5,004,798 Interest income $ 12,512 $ (12,512) $ 25,024 $ (25,024) $ 37,536 $ (37,536) Floating rate mortgage loan liabilities (4,179,211) Interest expense (10,448) 10,448 (20,896) 20,896 (31,344) 31,344 Total floating rate mortgage loan exposure, net $ 825,587 Total change in net interest income $ 2,064 $ (2,064) $ 4,128 $ (4,128) $ 6,192 $ (6,192) __________________________ (1) Prior to December 31, 2021, substantially all of our floating rate mortgage loan assets and liabilities were subject to LIBOR as the benchmark interest rate.
Biggest changeThe following table illustrates the impact on our interest income and interest expense, for the twelve-month period following December 31, 2023, of an immediate increase or decrease in the underlying benchmark interest rate of 25, 50 and 75 basis points on our existing floating rate loans held for investment portfolio and related liabilities (dollars in thousands): Assets (liabilities) subject to interest rate sensitivity (1)(2) Net exposure Income (expense) subject to interest rate sensitivity 25 Basis Point 50 Basis Point 75 Basis Point Increase Decrease Increase Decrease Increase Decrease Floating rate mortgage loan assets $ 3,484,052 Interest income $ 8,710 $ (8,710) $ 17,420 $ (17,420) $ 26,130 $ (25,904) Floating rate mortgage loan liabilities (3,017,248) Interest expense (7,543) 7,543 (15,086) 15,086 (22,629) 22,629 Total floating rate mortgage loan exposure, net $ 466,804 Total change in net interest income $ 1,167 $ (1,167) $ 2,334 $ (2,334) $ 3,501 $ (3,275) __________________________ (1) As of December 31, 2023, all of our floating rate mortgage loan assets and all of our floating rate mortgage loan liabilities were subject to Term SOFR as the benchmark interest rate.
Also, in such conditions, there is no guarantee that our borrowing arrangements or other arrangements for obtaining leverage will continue to be available or, if available, will be available on terms and conditions acceptable to us. 93 Table of Contents Capital Markets Risk We are exposed to risks related to the equity capital markets and our related ability to raise capital through the issuance of our stock or other equity instruments.
Also, in such conditions, there is no guarantee that our borrowing arrangements or other arrangements for obtaining leverage will continue to be available or, if available, will be available on terms and conditions acceptable to us. 101 Table of Contents Capital Markets Risk We are exposed to risks related to the equity capital markets and our related ability to raise capital through the issuance of our stock or other equity instruments.
In general, an increase in prepayment rates accelerates the accretion of purchase discounts, thereby increasing the interest income earned on the assets. 92 Table of Contents Extension Risk Our Manager computes the projected weighted average life of our assets based on assumptions regarding the pace at which individual borrowers will prepay the mortgages or extend.
In general, an increase in prepayment rates accelerates the accretion of purchase discounts, thereby increasing the interest income earned on the assets. 100 Table of Contents Extension Risk Our Manager computes the projected weighted average life of our assets based on assumptions regarding the pace at which individual borrowers will prepay the mortgages or extend.
As of December 31, 2022, all of our loans by unpaid principal balance earned a floating rate of interest, subject to the beneficial impact of embedded interest rate floors, and were financed with liabilities that require interest payments based on floating rates.
As of December 31, 2023, all of our loans by unpaid principal balance earned a floating rate of interest, subject to the impact of embedded interest rate floors, and were financed with liabilities that require interest payments based on floating rates.
We mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with high credit-quality institutions. The nature of our loans and other investments also exposes us to the risk that our counterparties do not make required interest and principal payments on scheduled due dates.
We seek to mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with what we believe to be high credit-quality institutions. The nature of our loans and other investments also exposes us to the risk that our counterparties do not make required interest and principal payments on scheduled due dates.
Accordingly, rising interest rates will generally increase our net interest income, while declining interest rates will generally decrease our net interest income, subject to the impact of interest rate floors embedded in substantially all of our loans. As of December 31, 2022, the weighted average interest rate floor for our loan portfolio was 0.85%.
Accordingly, rising interest rates will generally increase our net interest income, while declining interest rates will generally decrease our net interest income, subject to the impact of interest rate floors embedded in substantially all of our loans. As of December 31, 2023, the weighted average interest rate floor for our loan portfolio was 1.09%.
We expect that higher interest rates imposed by the Federal Reserve to rein in inflation may lead to a decrease in prepayment speeds and an increase in the number of our borrowers who exercise extension options, especially for loans involving office, and hotel properties. This could have a negative impact on our results of operations.
We expect that higher interest rates imposed by the Federal Reserve to rein in inflation may lead to a decrease in prepayment speeds and an increase in the number of our borrowers who exercise extension options. This could have a negative impact on our results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Investment Portfolio Risks Interest Rate Risk Our business model seeks to minimize our exposure to changing interest rates by matching duration of our assets and liabilities and match-indexing our assets using the same, or similar, benchmark indices, prior to December 31, 2021 LIBOR, and thereafter SOFR.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Investment Portfolio Risks Interest Rate Risk Our business model seeks to minimize our exposure to changing interest rates by matching duration of our assets and liabilities and match-indexing our assets using the same, or similar, benchmark indices.
As of December 31, 2022, less than 3.0% of our liabilities do not contain interest rate floors greater than zero.
As of December 31, 2023, less than 1.2% of our liabilities do not contain interest rate floors greater than zero.
Global macroeconomic conditions, including, without limitation, heightened inflation, changes to fiscal and monetary policy, increased interest rates, currency fluctuations, labor shortages and challenges in global supply chains, coupled with the war in Ukraine and the lingering aftereffects of COVID-19 have contributed to increased volatility in public debt and equity markets, increased cost of funds and reduced availability of efficient debt capital, factors which caused us to reduce our investment activity in the first half of 2022, and may cause us to restrain our investment activity in the future.
Global macroeconomic conditions, including, without limitation, heightened inflation, changes to fiscal and monetary policy, increased interest rates, stress to the commercial banking systems of the U.S. and Western Europe, currency fluctuations, and labor shortages, have contributed to increased volatility in public debt and equity markets, increased cost of funds and reduced availability of efficient debt capital, factors which caused us to reduce our investment activity in 2023, and may cause us to restrain our investment activity in the future.
Removed
As of December 31, 2022, $1.1 billion of $5.0 billion of our floating rate mortgage loan assets (based on total unpaid principal balance) and $2.8 billion of $4.2 billion of floating rate mortgage loan liabilities (based on outstanding principal balance) were subject to Compounded SOFR or Term SOFR as the benchmark interest rate.

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