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What changed in Claros Mortgage Trust, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Claros Mortgage Trust, Inc.'s 2023 and 2024 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 2024 report.

+466 added−405 removedSource: 10-K (2025-02-19) vs 10-K (2024-02-20)

Top changes in Claros Mortgage Trust, Inc.'s 2024 10-K

466 paragraphs added · 405 removed · 337 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

42 edited+12 added−8 removed40 unchanged
Biggest changeWe believe our current loan portfolio, comprised of loans that we view as representative of our target assets and investment philosophy, validates our ability to execute on our investment strategy, including lending to experienced and well‑capitalized sponsors against high‑quality transitional CRE assets primarily in major U.S. markets with attractive fundamental characteristics supported by macroeconomic tailwinds. 7 The below table summarizes our loans receivable held-for-investment as of December 31, 2023 ($ in thousands): Weighted Average (3) Number of Loans Loan Commitment (1) Unpaid Principal Balance Carrying Value (2) Yield to Maturity (4) Term to Initial Maturity (in years) Term to Fully Extended Maturity (in years) (5) LTV (6) Senior and subordinate loans 65 $ 8,121,436 $ 7,044,524 $ 6,947,796 9.1 % 1.2 2.6 69.2 % (1) Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
Biggest changeThe below table summarizes our loans receivable held-for-investment as of December 31, 2024 ($ in thousands): Weighted Average (3) Number of Loans Loan Commitment (1) Unpaid Principal Balance Carrying Value (2) Yield to Maturity (4) Term to Initial Maturity Term to Fully Extended Maturity (5) Weighted Average Origination LTV (6) Weighted Average Adjusted LTV (7) Senior and subordinate loans 52 $ 6,698,596 $ 6,200,290 $ 6,069,372 7.6 % 0.7 years 1.7 years 70.4% 72.2 % (1) Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
Participations in the mortgage loans we co‑originate or acquire, for which other participations have been or are expected to be syndicated to other investors.
Participations in Mortgage Loans: Participations in the mortgage loans we co‑originate or acquire, for which other participations have been or are expected to be syndicated to other investors.
We operate in a competitive market for the origination and acquisition of attractive investment opportunities and competition may limit our ability to originate or acquire attractive risk‑adjusted investments in our target assets, which could have a material adverse effect on us.” Staffing We are externally managed and advised by our Manager pursuant to the Management Agreement between our Manager and us.
We operate in a competitive market for the origination and acquisition of attractive investment opportunities and competition may limit our ability to originate or acquire attractive risk‑adjusted investments in our target assets, which could have a material adverse effect on us.” 11 Staffing We are externally managed and advised by our Manager pursuant to the Management Agreement between our Manager and us.
In performing its duties to us, our Manager is at all times subject to the supervision, direction and management of our board of directors. 6 Our Investment Strategy We seek primarily to originate, co-originate and acquire senior and subordinate loans on transitional CRE assets located in major U.S. markets and generally intend to hold our loans to maturity.
In performing its duties to us, our Manager is at all times subject to the supervision, direction and management of our board of directors (the “Board”). 6 Our Investment Strategy We seek primarily to originate, co-originate and acquire senior and subordinate loans on transitional CRE assets located in major U.S. markets and generally intend to hold our loans to maturity.
We intend to hold our loans to maturity. However, in order to maximize returns and manage portfolio risk while remaining opportunistic, we may dispose of loans earlier than anticipated. Additionally, our intention is that no more than 25% of our book value will be attributed to investments located outside of the U.S.
We intend to hold our 10 loans to maturity. However, in order to maximize returns and manage portfolio risk while remaining opportunistic, we may dispose of loans earlier than anticipated. Additionally, our intention is that no more than 25% of our book value will be attributed to investments located outside of the U.S.
We believe that our investment strategy currently provides significant opportunities for us to generate attractive risk‑adjusted returns over time for our stockholders. However, to capitalize on the investment opportunities at different points in the economic and real estate investment cycle, we may modify or expand our investment strategy.
We believe that our investment strategy provides significant opportunities for us to generate attractive risk‑adjusted returns over time for our stockholders. However, to capitalize on the investment opportunities at different points in the economic and real estate investment cycle, we may modify or expand our investment strategy.
Federal Income Tax Risks.” 10 Competition Our success depends, in part, on our ability to originate, acquire or manage loans at favorable spreads over our financing costs.
Federal Income Tax Risks.” Competition Our success depends, in part, on our ability to originate, acquire or manage loans at favorable spreads over our financing costs.
We believe that the flexibility of our strategy supported by our Sponsor’s significant CRE experience and its extensive resources will allow us to take advantage of changing market conditions to maximize total returns for our stockholders. Our financing strategy and investment process are discussed in more detail in “Our Financing Strategy” and “Investment Guidelines” below.
We believe that the flexibility of our strategy supported by our Sponsor’s significant CRE experience and its extensive resources will allow us to take advantage of changing market conditions to maximize total returns for our stockholders over time. Our financing strategy and investment process are discussed in more detail in “Our Financing Strategy” and “Investment Guidelines” below.
In performing its duties to us, our Manager benefits from the resources, relationships, and fundamental real estate underwriting and management expertise of our Sponsor’s broad group of real estate professionals. Our Manager is led by Richard Mack, Michael McGillis, Kevin Cullinan, Priyanka Garg, and J.D. Siegel.
In performing its duties to us, our Manager benefits from the resources, relationships, and fundamental real estate underwriting and management expertise of our Sponsor’s broad group of real estate professionals. Our Manager is led by Richard Mack, J. Michael McGillis, Priyanka Garg, and J.D. Siegel.
(6) LTV represents “loan-to-value” or “loan-to-cost,” which is calculated as our total loan commitment from time to time, as if fully funded, plus any financings that are pari passu with or senior to our loan, divided by our estimate of either (1) the value of the underlying real estate, determined in accordance with our underwriting process (typically consistent with, if not less than, the value set forth in a third-party appraisal) or (2) the borrower’s projected, fully funded cost basis in the asset, in each case as we deem appropriate for the relevant loan and other loans with similar characteristics.
(6) Origination LTV represents “loan-to-value” or “loan-to-cost,” which is calculated as our total loan commitment upon origination, as if fully funded, plus any financings that are pari passu with or senior to our loan, divided by our estimate of either (1) the value of the underlying real estate, determined in accordance with our underwriting process (typically consistent with, if not less than, the value set forth in a third-party appraisal) or (2) the borrower’s projected, fully funded cost basis in the asset, in each case as we deem appropriate for the relevant loan and other loans with similar characteristics.
To qualify as a REIT, we must meet on a continuing basis various requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our dividend levels and the diversity of ownership of shares of our capital stock.
To qualify as a REIT, we must meet on a continuing basis various requirements under the Internal Revenue Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our dividend levels and the diversity of ownership of shares of our capital stock.
Through the final repayment of a loan, the asset management team maintains regular contact with borrowers, servicers and local market experts monitoring performance of the collateral, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.
Through the final repayment or resolution of a loan, the asset management team maintains regular contact with borrowers, servicers and local market experts monitoring performance of the collateral, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.
To date, we have only invested in the U.S. Asset Management Our Manager proactively manages the loans in our portfolio from closing to final repayment and our Sponsor has dedicated asset management employees to perform asset management services.
To date, we have only invested in the U.S. Asset Management Our Manager proactively manages the loans in our portfolio from closing to final repayment or resolution and our Sponsor has dedicated asset management employees to perform asset management services.
As of December 31, 2023, our net debt‑to‑equity ratio was 2.4x. As of December 31, 2023, our total leverage ratio was 2.8x, and we expect that, going forward, our Total Leverage Ratio will range from 2.0x and 3.0x.
As of December 31, 2024, our net debt‑to‑equity ratio was 2.4x. As of December 31, 2024, our total leverage ratio was 2.8x, and we expect that, going forward, our Total Leverage Ratio will range from 2.0x and 3.0x.
We believe that this experience of our Sponsor and its affiliates enables our Manager to underwrite, originate and manage loans that facilitate the successful transition of CRE assets, with an appropriate level of execution risk and, in its judgment, relatively limited basis risk. Neither we nor our Manager employs personnel directly.
We believe that this experience of our Sponsor and its affiliates enables our Manager to underwrite, originate and manage loans that facilitate the successful transition of CRE assets, with an appropriate level of execution risk and, in its judgment, relatively limited basis risk at the time of origination. Neither we nor our Manager employs personnel directly.
Some of our loan commitments include a mixture of up‑front and future funding obligations, with future fundings subject to the borrower achieving conditions precedent specified in the loan documents, such as meeting certain construction milestones and/or leasing thresholds. Participations in Mortgage Loans.
Some of our loan commitments include a mixture of up‑front and future funding obligations, with future fundings subject to the borrower achieving conditions precedent specified in the loan documents, such as meeting certain construction milestones and/or leasing thresholds.
We believe that we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), and that our intended manner of operation will enable us to meet the requirements for qualification and taxation as a REIT.
We believe that we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and that our intended manner of operation will enable us to meet the requirements for qualification and taxation as a REIT.
As a transitional lender, we may from time to time execute loan modifications with borrowers when and if appropriate, which may include additional equity contributions from them, repurposing of reserves, pledge of additional collateral or other forms of credit support, provide additional guarantees, temporary deferrals of interest or principal, and/or partial deferral of coupon interest as payment-in-kind interest.
As a transitional lender, we may from time to time execute loan modifications with borrowers when and if appropriate, which may include additional equity contributions from them, repurposing of reserves, pledges of additional collateral or other forms of credit support, additional guarantees, temporary deferrals of interest or principal, partial deferral of coupon interest as payment-in-kind interest, and/or a discounted loan payoff.
(2) Net of specific CECL reserve of $72.6 million. (3) Weighted averages are based on unpaid principal balance. (4) Represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon, and fees received, based on the applicable floating benchmark rate/floors (if applicable), in place as of December 31, 2023.
(2) Net of specific CECL reserve of $120.9 million. (3) Weighted averages are based on unpaid principal balance. (4) Represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon, and fees received, based on the applicable floating benchmark rate/floors (if applicable), in place as of December 31, 2024.
The SEC maintains a website that contains these reports at www.sec.gov . 11
The SEC maintains a website that contains these reports at www.sec.gov . 12
As of December 31, 2023, we had $5.7 billion of capacity under our repurchase agreements and term participation facility, of which $4.3 billion was outstanding. We currently have master repurchase agreements with six counterparties.
As of December 31, 2024, we had $5.5 billion of capacity under our repurchase agreements and term participation facility, of which $3.7 billion was outstanding. We currently have master repurchase agreements with five counterparties.
Under certain circumstances, we utilize asset‑specific financing structures that are considered non-consolidated senior interests, and therefore not reflected on our balance sheet. As of December 31, 2023, we had $887.3 million of non-consolidated senior interests.
Under certain circumstances, we utilize asset‑specific financing structures that are considered non-consolidated senior interests, and therefore not reflected on our balance sheet. As of December 31, 2024, we had $830.0 million of non-consolidated senior interests.
Some of our borrowers may experience delays in the execution of their business plans or changes in market conditions which may impact the performance of the underlying collateral asset, borrower, or sponsor.
Some of our borrowers may experience delays in the execution of their business plans, changes in their capital position and available liquidity, and/or changes in market conditions which may impact the performance of the underlying collateral asset, borrower, or sponsor.
As such, we may modify our investment strategy from time to time by shifting focus to optimizing outcomes within our existing portfolio, which may include actions such as selling a loan or syndicating a portion of a loan, and working with our borrowers to enhance the value of underlying properties that constitute our collateral.
As such, we may modify our investment strategy from time to time by shifting focus to optimizing outcomes within our existing portfolio, which may include actions such as selling a loan or syndicating a portion of a loan, working with our borrowers to enhance the value of underlying properties that constitute our collateral, and in certain circumstances assuming legal title and/or physical possession of the underlying collateral property of a defaulted loan.
As of December 31, 2023, we had total capacity and unpaid principal balance of $540.5 million and $407.5 million, respectively, related to asset‑specific financings. The asset‑specific financing structures we utilize include notes payable arrangements and syndications of senior participations in the whole loans we originate.
As of December 31, 2024, we had total capacity and unpaid principal balance of $273.3 million and $238.9 million, respectively, related to asset‑specific financings. The asset‑specific financing structures we utilize include notes payable arrangements and syndications of senior participations in the whole loans we originate.
Website Access to Reports We maintain a website at www.clarosmortgage.com. We are providing the address to our website solely for the information of investors. The information on our website is not a part of, nor is it incorporated by reference into this report.
See Note 14 to our consolidated financial statements for information on our commitments and contingencies. Website Access to Reports We maintain a website at www.clarosmortgage.com. We are providing the address to our website solely for the information of investors. The information on our website is not a part of, nor is it incorporated by reference into this report.
Prior to the foreclosure, the hotel portfolio represented the collateral for a mezzanine loan held by us with an unpaid principal balance of $103.9 million and a securitized senior mortgage with an unpaid principal balance of $300.0 million held by third parties. Upon foreclosure, we assumed the securitized senior mortgage, which is non-recourse to us.
Prior to the foreclosure, the hotel portfolio represented the collateral for a mezzanine loan held by us with an unpaid principal balance of $103.9 million and the securitized senior mortgage.
Loans with specific CECL reserves are reflected as 100% LTV. On February 8, 2021, we acquired legal title to a portfolio of seven limited service hotels located in New York, NY through a foreclosure.
Loans with specific CECL reserves are reflected as 100% LTV. Real Estate Owned On February 8, 2021, we acquired legal title to a portfolio of seven limited service hotels located in New York, NY through a foreclosure and assumed the $300.0 million securitized senior mortgage held by third parties.
Neither the loans receivable classified as held-for-sale nor the real estate owned properties discussed above are included in the summary of our loan portfolio table above. 8 The following charts illustrate the diversification of our loan portfolio based on location and underlying property type, excluding our real estate owned investments, as of December 31, 2023, based on carrying value: For additional information about our loan portfolio, refer to Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – II.
The following charts illustrate the diversification of our loan portfolio based on location and underlying property type, excluding our real estate owned assets, as of December 31, 2024, based on carrying value: 9 For additional information about our loan portfolio, refer to Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – II.
We are externally managed and advised by our Manager, an investment adviser registered with the Securities and Exchange Commission (“SEC”) pursuant to the Investment Advisers Act of 1940, as amended, (the “Advisers Act”).
We are externally managed and advised by our Manager, an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) pursuant to the Investment Advisers Act of 1940, as amended, (the “Advisers Act”). We operate our business in a manner that permits us to maintain our exclusion from registration under the 1940 Act.
As of December 31, 2023, our secured term loan and debt related to real estate owned had unpaid principal balances of $725.5 million and $290.0 million, respectively. 9 In addition to these types of financings, we may also use other forms of leverage, such as secured and unsecured credit facilities, structured financings such as CMBS and collateralized loan obligations (“CLOs”), derivative instruments, and public and private secured and unsecured debt issuances by us or our subsidiaries, as well as issuances of public and private equity and equity-related securities.
In addition to these types of financings, we may also use other forms of leverage, including but not limited to secured and unsecured credit facilities, structured financings such as CMBS and collateralized loan obligations (“CLOs”), derivative instruments, and public and private secured and unsecured debt issuances by us or our subsidiaries, as well as issuances of public and private equity and equity-related securities.
The weighted average remaining term to initial maturity and fully extended maturity of our outstanding borrowings was 1.2 years and 2.7 years, respectively, based on unpaid principal balance as of December 31, 2023 and assuming all conditions to extend are met. We also utilize multiple asset-specific financing structures, with certain terms that are typically matched to the underlying loan.
As of December 31, 2024, the loans receivable securing the outstanding borrowings under these facilities had a weighted average term to initial maturity and fully extended maturity of 0.6 years and 1.6 years, respectively, assuming all conditions to extend are met. We also utilize multiple asset-specific financing structures, with certain terms that are typically matched to the underlying loan.
LTV is updated only in connection with a partial loan paydown and/or release of collateral, material changes to expected project costs, the receipt of a new appraisal (typically in connection with financing or refinancing activity) or a change in our loan commitment. Totals represent weighted average based on loan commitment, including non-consolidated senior interests and pari passu interests.
(7) Adjusted LTV represents origination LTV updated only in connection with a partial loan paydown and/or release of collateral, material changes to expected project costs, the receipt of a new appraisal (typically in connection with financing or refinancing activity) or a change in our loan commitment.
Our Target Assets We originate, co‑originate and acquire senior and subordinate loans on transitional CRE assets located primarily in major U.S. markets. Together, we refer to the following types of investments as our target assets: Senior Loans: We focus primarily on originating senior loans on transitional CRE assets, including: Mortgage Loans .
Our Target Assets We originate, co‑originate and acquire senior and subordinate loans on transitional CRE assets located primarily in major U.S. markets.
In some cases, there may be earlier pay downs of loans, including as a result of partial releases of collateral upon the occurrence of specified events, such as the sale of condominium units.
These loans are generally non-amortizing, require a balloon payment of principal at maturity, and are typically structured to be floating rate. In some cases, there may be earlier pay downs of loans, including as a result of partial releases of collateral upon the occurrence of specified events, such as the sale of condominium units.
In addition, in the future we may invest in assets other than our target assets, in each case subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and our exclusion from registration under the 1940 Act.
In addition, in the future we may invest in assets other than our target assets, in each case subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and our exclusion from registration under the 1940 Act. 7 Our Portfolio We began operations in August 2015 and, as of December 31, 2024, had a $6.1 billion diversified loan portfolio, based on carrying value, of senior and subordinate loans.
Underwritten values and projected costs should not be assumed to reflect our judgment of current market values or project costs, which may have changed materially since the date of origination.
Underwritten values and projected costs should not be assumed to reflect our judgment of current market values or project costs, which may have changed materially since the date of origination. Weighted average origination LTV is based on loan commitment, including non-consolidated senior interests and pari passu interests, and excludes risk rated 5 loans.
However, under certain circumstances, we may determine not to do so or we may otherwise be unable to do so. We also seek to diversify our financing counterparties. During 2023 and in cooperation with our various financing counterparties, we proactively de-levered specific assets and may continue to do so on an as-needed basis.
However, under certain circumstances, we may determine not to do so or we may otherwise be unable to do so. We also seek to diversify our financing counterparties.
The information found on, or otherwise accessible through, our website is not incorporated by reference into, nor does it form a part of, this Annual Report on Form 10-K.
Our principal executive offices are located at c/o Mack Real Estate Credit Strategies, L.P., 60 Columbus Circle, 20th Floor, New York, NY 10023. Our website is www.clarosmortgage.com . The information found on, or otherwise accessible through, our website is not incorporated by reference into, nor does it form a part of, this Annual Report on Form 10-K.
Such financing structures typically arise as a result of a subordinate, or mezzanine, loan held by us, and a first mortgage loan held by a third party.
Such financing structures typically arise as a result of a subordinate, or mezzanine, loan held by us, and a first mortgage loan held by a third party. As of December 31, 2024, our secured term loan and debt related to real estate owned had unpaid principal balances of $717.8 million and $275.0 million, respectively.
Concurrent with this modification, we purchased an interest rate cap for $0.5 million which provides for a strike rate of 5.00% through the extended contractual maturity date. On June 30, 2023, we acquired legal title to a mixed-use property located in New York, NY and the equity interests therein through an assignment-in-lieu of foreclosure.
We have determined this anticipated sale does not reflect a strategic shift and therefore does not qualify for presentation as a discontinued operation. On June 30, 2023, we acquired legal title to a mixed-use property located in New York, NY and the equity interests therein through an assignment-in-lieu of foreclosure. The mixed-use property contains office, retail and signage components.
The principal charge-off follows the recognition of an incremental specific CECL reserve in the same amount and is allocated and attributable to the construction status of one loan’s collateral asset and such loan’s $105.0 million of remaining unfunded commitments. As of September 30, 2023, the loans were ascribed loan risk ratings ranging from 2 to 3.
The loan was on non-accrual status effective October 1, 2023 and was sold in April 2024. (8) Principal charge-off attributable to the construction status of the loan’s collateral asset and its $105.0 million of remaining unfunded commitments.
Removed
We operate our business in a manner that permits us to maintain our exclusion from registration under the Investment Company Act of 1940, as amended (the “1940 Act”). Our principal executive offices are located at c/o Mack Real Estate Credit Strategies, L.P., 60 Columbus Circle, 20th Floor, New York, NY 10023. Our website is www.clarosmortgage.com .
Added
Together, we refer to the following types of investments as our target assets: Senior Loans: We focus primarily on originating senior loans on transitional CRE assets, including: Mortgage Loans: Mortgage loans secured by a first priority or subordinate mortgage on transitional CRE assets.
Removed
Mortgage loans secured by a first priority or subordinate mortgage on transitional CRE assets. These loans are generally non-amortizing, require a balloon payment of principal at maturity, and are typically structured to be floating rate.
Added
Our investment strategy includes lending to experienced and well‑capitalized sponsors against high‑quality transitional CRE assets primarily in major U.S. markets with attractive fundamental characteristics supported by macroeconomic tailwinds.
Removed
Our Portfolio We began operations in August 2015 and, as of December 31, 2023, had a $6.9 billion diversified loan portfolio, based on carrying value, of senior and subordinate loans.
Added
Adjusted LTV should not be assumed to reflect our judgment or current market values or project costs, which may have changed materially since the date of the most recent determination of LTV. Weighted average adjusted LTV is based on loan commitment, including non-consolidated senior interests, pari passu interests, and risk rated 5 loans.
Removed
On June 2, 2021, the terms of the securitized senior mortgage were modified to include an extension of the maturity date to February 9, 2024 and a principal repayment of $10.0 million. At December 31, 2023, the outstanding balance of our debt related to real estate owned was $290.0 million.
Added
As of December 31, 2024, our debt related to real estate owned has an unpaid principal balance of $275.0 million, a carrying value of $274.6 million and a stated rate of SOFR plus 2.94%.
Removed
On February 7, 2024, we modified this loan agreement to provide for, among other things, an extension of the contractual maturity date to November 9, 2024, a $10.0 million principal paydown, and partial recourse to us.
Added
As of December 31, 2024, we determined that our hotel portfolio real estate owned asset has met the held-for-sale criteria, and we have reclassified this asset to real estate owned held-for-sale on our consolidated balance sheet and concurrently recognized a $80.5 million loss based upon anticipated sales price, less estimated costs to sell.
Removed
The mixed-use property contains office, retail and signage components. Prior to the assignment-in-lieu of foreclosure, the mixed-use property and a pledge of equity interests therein represented the collateral for a senior loan with an unpaid principal balance of $208.8 million.
Added
Prior to the assignment-in-lieu of foreclosure, the mixed-use property and a pledge of equity interests therein represented the collateral for a senior loan with an unpaid principal balance of $208.8 million. 8 The following table summarizes loans receivable held-for-sale as of December 31, 2024 and 2023, and loans receivable sold during the year ended December 31, 2024 ($ in thousands): Property Type Location Loan Commitment Unpaid Principal Balance Carrying Value Before Principal Charge-Off Principal Charge-Off Held-For-Sale Carrying Value (1) Risk Rating (2) For Sale Condo (6) CA $ 247,260 $ 211,412 $ 211,412 $ (28,107 ) $ 176,078 4 Hospitality (4) CA 101,059 101,059 101,299 (315 ) 100,984 3 Total held-for-sale, December 31, 2024 $ 348,319 $ 312,471 $ 312,711 $ (28,422 ) $ 277,062 Multifamily (5) NV $ 60,255 $ 60,255 $ 60,049 $ (440 ) $ 59,609 3 Multifamily (5) CO 115,000 115,000 115,173 (3,657 ) 111,516 3 Land (5) FL 30,200 30,200 30,351 (343 ) 30,008 3 Multifamily (7) CA 260,899 216,045 214,443 (42,827 ) 171,616 4 For Sale Condo (3) FL 160,000 158,180 157,346 - 157,346 2 Multifamily (3) FL 77,115 76,580 76,275 - 76,275 3 Mixed-Use (3) (8) FL 141,791 36,773 35,556 (7,468 ) 28,088 3 Total sold, year ended December 31, 2024 $ 845,260 $ 693,033 $ 689,193 $ (54,735 ) $ 634,458 (1) For loans sold during a quarter which were not previously reflected as held-for-sale, amount reflects carrying value of the loan receivable upon sale.
Removed
Our loans receivable held-for-sale as of December 31, 2023 were comprised of the following loans ($ in thousands): Property Type Location Loan Commitment Unpaid Principal Balance Carrying Value Before Principal Charge-Off Principal Charge-Off Held-For-Sale Carrying Value For Sale Condo FL $ 160,000 $ 158,180 $ 157,346 $ - $ 157,346 Multifamily FL 77,115 76,580 76,275 - 76,275 Mixed-Use FL 141,791 36,773 35,556 (7,468 ) 28,088 Total $ 378,906 $ 271,533 $ 269,177 $ (7,468 ) $ 261,709 In January of 2024, we sold these three senior loans to an unaffiliated purchaser.
Added
(2) Reflects risk rating of the loan receivable prior to the loan sale or reclassification to held-for-sale. (3) Loan classified as held-for-sale as of December 31, 2023 and sold in January 2024. (4) Loan sold in January 2025. (5) Loan sold during the quarter ended December 31, 2024.
Removed
As of December 31, 2023, we determined that these loans met the held-for-sale criteria and were not considered in determining our general CECL reserve.
Added
(6) Upon reclassification to held-for-sale as of September 30, 2024, we recognized an additional $23.2 million charge-off of accrued interest receivable. The principal charge-offs were attributable to the delinquency of the loan and its $35.8 million of remaining unfunded commitments.
Added
During the three months ended December 31, 2024, we recognized a further adjustment to the held-for-sale carrying value of $7.2 million as a result of additional protective advances made and a reduction in anticipated proceeds from the sale, which is reflected as a valuation adjustment for loans receivable held-for-sale on our consolidated statement of operations.
Added
Effective October 1, 2024, this loan was placed on non-accrual status. (7) Principal charge-off attributable to the construction status of the loan’s collateral asset and its $44.9 million of remaining unfunded commitments. During the three months ended June 30, 2024, we recorded an additional principal charge-off of $0.6 million relating to transaction costs incurred.
Added
Neither the loans receivable classified as held-for-sale nor the real estate owned assets discussed above are included in the summary of our loan portfolio table above.
Added
During the years ended December 31, 2024 and 2023 and in cooperation with our various financing counterparties, we made deleveraging payments to certain of our financing counterparties and expect to continue to do so as agreed with our lenders or on an as-needed basis.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

146 edited+45 added−14 removed547 unchanged
Biggest changeSome of the factors that could negatively affect the market price of our common stock include: • our actual or projected operating results, financial condition, cash flows and liquidity, or changes in investment strategy or prospects; 48 • actual or perceived conflicts of interest between us and our Manager or its affiliates or personnel; • equity or equity-related issuances by us, or share resales by our stockholders, or the perception that such issuances or resales may occur; • our inability to raise capital on attractive terms when needed, including the loss of one or more major financing sources; • our inability to originate investments with attractive risk-adjusted returns; • actual, anticipated or perceived accounting or internal control problems; • publication of research reports about us, the CRE industry, CRE debt on transitional assets or interest rates; • changes in market valuations of similar companies; • adverse market reaction to any increased leverage we incur in the future; • additions to or departures of key personnel of our Sponsor or its affiliates, including our Manager, or their key personnel; • speculation in the press or investment community about us or other similar companies; • changes in market interest rates, which may lead investors to demand a higher distribution yield for our common stock, if we have begun to pay dividends to our stockholders, and which could result in increased interest expenses on our debt; • a compression of the yield on our investments and an increase in the cost of our liabilities; • failure to maintain our REIT qualification and our exclusion from registration under the 1940 Act; • price and volume fluctuations in the overall stock market from time to time; • a prolonged economic slowdown, a lengthy or severe recession or declining real estate values; • general market and economic conditions, and trends including inflationary concerns and the current state of the credit and capital markets, and the impact of natural disasters, prolonged civil unrest, political instability or uncertainty, including the military conflicts between Russia and Ukraine, Israel and Hamas, and other conflicts throughout the Middle East and North Africa more broadly, tensions involving Russia, China, and Iran, military activities, or broad-based sanctions, should they continue for the long term or escalate, global health crises and other events on market and economic conditions; • significant volatility in the market price and trading volume of securities of publicly-traded REITs or other companies in our sector, which are not necessarily related to the operating performance of these companies; • changes in law, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to REITs; • changes in the value of our portfolio; • any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts; • operating performance of companies comparable to us; • level of competitive pressures from time to time; • short-selling pressure with respect to shares of our common stock or commercial mortgage REITs generally; • uncertainty surrounding the strength of the U.S. economic recovery; • concerns regarding the high-yield debt market; and • the other factors described under “Risk Factors.” As noted above, market factors unrelated to our performance could also negatively impact the market price of our common stock.
Biggest changeFederal Reserve; • a prolonged economic slowdown, a lengthy or severe recession or declining real estate values; • general market and economic conditions, and trends including inflationary concerns and the current state of the credit and capital markets, and the impact of natural disasters, prolonged civil unrest, political instability or uncertainty, including the military conflicts between Russia and Ukraine, Israel and Hamas, and other conflicts throughout the Middle East and North Africa more broadly, tensions involving Russia, China, and Iran, military activities, or broad-based sanctions, should they continue for the long term or escalate, global health crises and other events on market and economic conditions; • significant volatility in the market price and trading volume of securities of publicly-traded REITs or other companies in our sector, which are not necessarily related to the operating performance of these companies; • changes in law, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to REITs; • changes in the value of our portfolio; • any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts; • operating performance of companies comparable to us; • implementation of strategic alternatives to maximize stockholder value; • instances of shareholder activism; • level of competitive pressures from time to time; • short-selling pressure with respect to shares of our common stock or commercial mortgage REITs generally; • uncertainty surrounding the strength of the U.S. economy; • concerns regarding the high-yield debt market; and • the other factors described under “Risk Factors.” As noted above, market factors unrelated to our performance could also negatively impact the market price of our common stock.
Our secured term loan, debt related to real estate owned, current financing facilities, derivative instruments, and secured loans contain, and additional financing facilities may contain various customary covenants, including requiring us to meet or maintain certain financial ratios or other requirements that restrict our operational flexibility, including restrictions on dividends, distributions or other payments from our subsidiaries, and impede certain investments that we might otherwise make.
Our secured term loan, debt related to real estate owned, current financing facilities, derivative instruments, and secured loans contain, and additional financing facilities may contain, various customary financial and other covenants, including requiring us to meet or maintain certain financial ratios or other requirements that restrict our operational flexibility, including restrictions on dividends, distributions or other payments from our subsidiaries, and impede certain investments that we might otherwise make.
Issuance of Stock Without Stockholder Approval . Our charter authorizes our Board, without stockholder approval, to authorize the issuance of up to 500,000,000 shares of common stock, $0.01 par value per share, and up to 10,000,000 shares of preferred stock, $0.01 par value per share, of which 125 shares are classified as 12.5% Series A Redeemable Cumulative Preferred Stock.
Our charter authorizes our Board, without stockholder approval, to authorize the issuance of up to 500,000,000 shares of common stock, $0.01 par value per share, and up to 10,000,000 shares of preferred stock, $0.01 par value per share, of which 125 shares are classified as 12.5% Series A Redeemable Cumulative Preferred Stock.
Pursuant to the Maryland Business Combination Act, our Board adopted a resolution exempting any business combination with any other person, provided that the business combination is first approved by the Board.
Pursuant to the Maryland Business Combination Act, our Board adopted a resolution exempting any business combination with any other person, provided that the business combination is first approved by our Board.
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 from registration under the 1940 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 continue to qualify as a REIT or maintain our exclusion from registration under the 1940 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 from registration under the 1940 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; 22 • 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 continue to qualify as a REIT or maintain our exclusion from registration under the 1940 Act, even though we do not control the joint venture.
A significant amount of debt subjects us to many risks that, if realized, would materially and adversely affect us, including the risk that: • our cash flow from operating activities could become insufficient to make required payments of principal and interest on our debt, which would likely result in (a) acceleration of the debt (and any other debt containing a cross-default or cross-acceleration provision), increasing the likelihood of further distress if refinancing is not available on favorable terms or at all, (b) our inability to borrow undrawn amounts under other existing financing arrangements, even if we have timely made all required payments under such arrangements, further compromising our liquidity, and/or (c) the loss of some or all of our assets that are pledged as collateral in connection with our financing arrangements (including assets transferred to lenders under repurchase agreements); • our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that such debt will increase our investment yields in an amount sufficient to offset the associated risks relating to leverage; • we may be required to dedicate a substantial portion of our cash flow from operating activities to payments on our debt, thereby reducing funds available for operations, future business opportunities, stockholder distributions and/or other purposes; • to the extent the maturity of certain debt ( e.g. , credit or repurchase agreements) occurs prior to the maturity of a related asset pledged or transferred as collateral for such debt ( e.g. , an underlying senior or subordinate loan made by us), we may not be able to refinance that debt on favorable terms or at all, which may reduce available liquidity and/or cause significant losses to us; and • in certain instances, we may be required to de-lever our financing specifically related to, or otherwise impacted by, a non-performing or defaulted loan, modify our financing facility or find replacement financing, if available, which could be on less favorable terms, or pledge additional collateral to our financing facility, all of which may reduce available liquidity.
Additional debt subjects us to many risks that, if realized, would materially and adversely affect us, including the risk that: • our cash flow from operating and investing activities could become insufficient to make required payments of principal and interest on our debt, which would likely result in (a) acceleration of the debt (and any other debt containing a cross-default or cross-acceleration provision), increasing the likelihood of further distress if refinancing is not available on favorable terms or at all, (b) our inability to borrow undrawn amounts under other existing financing arrangements, even if we have timely made all required payments under such arrangements, further compromising our liquidity, and/or (c) the loss of some or all of our assets that are pledged as collateral in connection with our financing arrangements (including assets transferred to lenders under repurchase agreements); • our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that such debt will increase our investment yields in an amount sufficient to offset the associated risks relating to leverage; • we may be required to dedicate a substantial portion of our cash flow from operating and investing activities to payments on our debt, thereby reducing funds available for operations, future business opportunities, stockholder distributions and/or other purposes; • to the extent the maturity of certain debt ( e.g. , credit or repurchase agreements) occurs prior to the maturity of a related asset pledged or transferred as collateral for such debt ( e.g. , an underlying senior or subordinate loan made by us), we may not be able to refinance that debt on favorable terms or at all, which may reduce available liquidity and/or cause significant losses to us; and • in certain instances, we may be required to de-lever our financing specifically related to, or otherwise impacted by, a non-performing or defaulted loan, modify our financing facility or find replacement financing, if available, which could be on less favorable terms, or pledge additional collateral to our financing facility, all of which may reduce available liquidity.
If we fail to qualify as a REIT or lose our REIT qualification, we will face serious tax consequences that would substantially reduce the funds available for distribution to our stockholders for each of the years involved because: • we would not be allowed a deduction for distributions to our stockholders in computing our REIT taxable income and would be subject to regular U.S. federal corporate income tax; • we also could be subject to increased state and local taxes; • we could be subject to the one percent excise tax on stock repurchases imposed by the Inflation Reduction Act of 2022; and • unless we are entitled to relief under applicable statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified.
If we fail to qualify as a REIT or lose our REIT qualification, we will face serious tax consequences that would substantially reduce the funds available for distribution to our stockholders for each of the years involved because: 45 • we would not be allowed a deduction for distributions to our stockholders in computing our REIT taxable income and would be subject to regular U.S. federal corporate income tax; • we also could be subject to increased state and local taxes; • we could be subject to the one percent excise tax on stock repurchases imposed by the Inflation Reduction Act of 2022; and • unless we are entitled to relief under applicable statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified.
Under these provisions, any income that we generate from transactions intended to hedge our interest rate exposure or currency fluctuations will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if (A) the instrument hedges either (i) interest rate risk on liabilities used to carry or acquire real estate assets or (ii) currency fluctuations with respect to items of income that qualify for purposes of the REIT 75% or 95% gross income tests or assets that generate such income or (B) the transaction is entered into to hedge the income or loss from prior hedging transactions, where the property or indebtedness which was the subject of the prior hedging transaction was extinguished or disposed of, and, in any such case, such instrument is properly identified under applicable Treasury Regulations.
Under these provisions, any income that we generate from transactions intended to hedge our interest rate exposure or currency fluctuations will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if (A) the instrument hedges either (i) interest rate risk on liabilities used to carry or acquire real estate assets or (ii) currency fluctuations with respect to items of income that qualify for purposes of the REIT 75% or 95% gross income tests or assets that generate such income or (B) the transaction is entered into to hedge the income or loss from prior hedging transactions, where the property or indebtedness which was the subject of the prior hedging 48 transaction was extinguished or disposed of, and, in any such case, such instrument is properly identified under applicable Treasury Regulations.
(“Ping An”) and Fuyou, together with other affiliates of Ping An, owns 4.9% or more of the outstanding shares of common stock, respectively, if a vacancy on our Board occurs at any time with respect to any director that was designated for nomination by either Almanac or Fuyou, then a new designee of Almanac or Fuyou, as the case may be, will be nominated 41 for election to serve, and will be elected, as a new director in accordance with our organizational documents.
(“Ping An”) and Fuyou, together with other affiliates of Ping An, owns 4.9% or more of the outstanding shares of common stock, respectively, if a vacancy on our Board occurs at any time with respect to any director that was designated for nomination by either Almanac or Fuyou, then a new designee of Almanac or Fuyou, as the case may be, will be nominated for election to serve, and will be elected, as a new director in accordance with our organizational documents.
Regardless, there can be no assurance that measures we or our Sponsor takes to ensure the integrity of our systems will provide protection, especially because cyberattack techniques used change frequently, or may not be recognized until successful, and are becoming more sophisticated – including by use of artificial intelligence – that circumvent security controls, evade detection and remove forensic evidence.
Regardless, there can be no assurance that measures we or our Sponsor takes to ensure the integrity of our systems will provide protection, especially because cyberattack techniques used change frequently, or may not be recognized until successful, and are becoming more sophisticated – including by use of artificial intelligence 35 – that circumvent security controls, evade detection and remove forensic evidence.
However, U.S. stockholders that are individuals, trusts and estates generally may deduct up to 20% of the ordinary dividends ( e.g. , dividends not designated as capital gain dividends or qualified dividend income) received from a REIT for taxable years beginning after December 31, 2017 and before January 1, 2026, subject to certain holding period 46 requirements.
However, U.S. stockholders that are individuals, trusts and estates generally may deduct up to 20% of the ordinary dividends ( e.g. , dividends not designated as capital gain dividends or qualified dividend income) received from a REIT for taxable years beginning after December 31, 2017 and before January 1, 2026, subject to certain holding period requirements.
When conducting due diligence, our Manager may be required to evaluate 21 a number of important issues, including those relating to business, financial, tax, accounting, environmental, social and governance (“ESG”) matters, technology, cybersecurity, legal, regulatory and macroeconomic trends. Outside consultants, legal advisors and accountants may be involved in the due diligence process in varying degrees depending on the investment.
When conducting due diligence, our Manager may be required to evaluate a number of important issues, including those relating to business, financial, tax, accounting, environmental, social and governance (“ESG”) matters, technology, cybersecurity, legal, regulatory and macroeconomic trends. Outside consultants, legal advisors and accountants may be involved in the due diligence process in varying degrees depending on the investment.
We will monitor our holdings to ensure continuing and ongoing compliance with this test. In addition, we believe that we will not be considered an investment company under Section 3(a)(1)(A) of the 1940 Act because we will not engage primarily or hold ourselves out as being engaged primarily in the business of investing, reinvesting or trading in securities.
We will monitor our holdings to ensure continuing 40 and ongoing compliance with this test. In addition, we believe that we will not be considered an investment company under Section 3(a)(1)(A) of the 1940 Act because we will not engage primarily or hold ourselves out as being engaged primarily in the business of investing, reinvesting or trading in securities.
In addition, to the extent that our common stock is owned by tax-exempt “disqualified organizations,” 45 such as certain government-related entities and charitable remainder trusts that are not subject to tax on unrelated business taxable income, or UBTI, we may incur a corporate-level tax on a portion of any excess inclusion income.
In addition, to the extent that our common stock is owned by tax-exempt “disqualified organizations,” such as certain government-related entities and charitable remainder trusts that are not subject to tax on unrelated business taxable income, or UBTI, we may incur a corporate-level tax on a portion of any excess inclusion income.
Net operating income of an income-producing property can be affected by, among other things: • tenant mix and tenant bankruptcies; • success of tenant businesses and the ability to respond to evolving risks, including public health risks and governmental measures that may be promulgated in connection therewith; 18 • renovations or repositionings during which operations may be limited or halted completely; • property management decisions, including with respect to capital improvements, particularly in older building structures; • property location and condition; • competition from other properties offering the same or similar services; • changes in supply and demand of regional markets in which our borrowers operate, which may be specific to certain property types; • changes in laws that increase operating expenses or limit rents that may be charged; • any need to address environmental contamination or compliance with environmental requirements at the property; • changes in national, regional or local economic conditions and/or specific industry segments; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates, including as a result of the increase in remote working arrangements; • changes in real estate tax rates and other operating expenses; • changes in governmental rules, regulations and fiscal policies, including Treasury Regulations promulgated under the Code, or Treasury Regulations, and environmental legislation; • fraudulent acts or theft on the part of the property owner, sponsor and/or manager; • the potential for uninsured or under-insured property losses; • acts of God, terrorism, social unrest and civil disturbances, which may decrease the availability of or increase the cost of insurance or result in uninsured losses; and • adverse changes in zoning laws.
Net operating income of an income-producing property can be affected by, among other things: • tenant mix and tenant bankruptcies; • success of tenant businesses and the ability to respond to evolving risks, including public health risks and governmental measures that may be promulgated in connection therewith; • renovations or repositionings during which operations may be limited or halted completely; • property management decisions, including with respect to capital improvements, particularly in older building structures; • property location and condition; • competition from other properties offering the same or similar services; • changes in supply and demand of regional markets in which our borrowers operate, which may be specific to certain property types; • changes in laws that increase operating expenses or limit rents that may be charged; • any need to address environmental contamination or compliance with environmental requirements at the property; • changes in national, regional or local economic conditions and/or specific industry segments; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates, including as a result of the increase in remote working arrangements; • changes in real estate tax rates and other operating expenses; • changes in governmental rules, regulations and fiscal policies, including Treasury Regulations promulgated under the Internal Revenue Code, or Treasury Regulations, and environmental legislation; • fraudulent acts or theft on the part of the property owner, sponsor and/or manager; • the potential for uninsured or under-insured property losses; • acts of God, terrorism, social unrest and civil disturbances, which may decrease the availability of or increase the cost of insurance or result in uninsured losses; and • adverse changes in zoning laws.
The SEC staff also takes the position that an asset that can be viewed as being the functional equivalent of, and provide its holder with the same economic experience as, a direct investment in real estate (or in a loan or lien fully secured by real estate) may be considered to be a qualifying real estate asset for purposes of Section 3(c)(5)(C).
The SEC staff also takes the position that an asset that can be viewed as being the 41 functional equivalent of, and provide its holder with the same economic experience as, a direct investment in real estate (or in a loan or lien fully secured by real estate) may be considered to be a qualifying real estate asset for purposes of Section 3(c)(5)(C).
The Exchange Act requires that we file annual, quarterly and current reports with the SEC. The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting. These reporting and other obligations place significant demands on our Manager’s senior management team, administrative, operational and accounting resources and cause us to incur significant expenses.
The Exchange Act requires that we file annual, quarterly and current reports with the SEC. The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting. These reporting and other obligations place significant demands on our Manager’s senior management 49 team, administrative, operational and accounting resources and cause us to incur significant expenses.
In such instances, we may also agree to a structured paydown over time in an effort to minimize the impact to our liquidity, subject to our financing counterparty’s consent. Under credit and repurchase agreements that provide for margin calls, the lender or counterparty can generally require cash or additional collateral to satisfy such margin call.
In such instances, we may also agree to a structured paydown over time in an effort to minimize the impact to our liquidity, subject to our financing 27 counterparty’s consent. Under credit and repurchase agreements that provide for margin calls, the lender or counterparty can generally require cash or additional collateral to satisfy such margin call.
Real estate owned investments are illiquid investments and we may be unable to adjust our portfolio in response to changes in economic or other conditions. In addition, the real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond our control.
Real estate owned assets are illiquid investments and we may be unable to adjust our portfolio in response to changes in economic or other conditions. In addition, the real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond our control.
If we are unable to adequately address such ESG matters or if we fail to achieve progress with respect to our goals within the 23 scope of ESG on a timely basis, or at all, or if we or our borrowers fail or are perceived to fail to comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results.
If we are unable to adequately address such ESG matters or if we fail to achieve progress with respect to our goals within the scope of ESG on a timely basis, or at all, or if we or our borrowers fail or are perceived to fail to comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results.
With respect to the management and servicing of those loans, the related special servicer or collateral manager may take actions that could materially and adversely affect our interests. 30 We may be subject to losses arising from future guarantees of debt and contingent obligations of our subsidiaries, joint venture or co-investment partners or our borrowers.
With respect to the management and servicing of those loans, the related special servicer or collateral manager may take actions that could materially and adversely affect our interests. We may be subject to losses arising from future guarantees of debt and contingent obligations of our subsidiaries, joint venture or co-investment partners or our borrowers.
For instance, the Volcker Rule provisions of the Dodd-Frank Act impose significant restrictions on the proprietary trading activities of “banking entities” (as defined under the Volcker Rule) and on their ability to acquire or retain an “ownership interest” (as defined under the Volcker Rule) in, “sponsor” (as defined under the Volcker Rule) or have certain relationships with “covered funds” (as defined under the Volcker Rule), unless pursuant to an exclusion or exemption under the Volcker Rule.
For instance, the Volcker Rule provisions of the Dodd-Frank Act impose significant restrictions on the proprietary trading activities of “banking entities” (as defined under the Volcker Rule) and on their ability 34 to acquire or retain an “ownership interest” (as defined under the Volcker Rule) in, “sponsor” (as defined under the Volcker Rule) or have certain relationships with “covered funds” (as defined under the Volcker Rule), unless pursuant to an exclusion or exemption under the Volcker Rule.
In addition, the exclusive forum provisions described above do not apply to any actions brought under the Exchange Act. 42 Some provisions of our charter and bylaws and Maryland law may delay, deter or prevent takeover attempts, which may limit the opportunity of our stockholders to sell their shares at a favorable price.
In addition, the exclusive forum provisions described above do not apply to any actions brought under the Exchange Act. Some provisions of our charter and bylaws and Maryland law may delay, deter or prevent takeover attempts, which may limit the opportunity of our stockholders to sell their shares at a favorable price.
In Revenue Procedure 2003-65, the IRS provided a safe harbor pursuant to which a mezzanine loan, if it meets each of the requirements, will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% gross income test.
In Revenue Procedure 2003-65, the IRS provided a safe harbor pursuant 46 to which a mezzanine loan, if it meets each of the requirements, will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% gross income test.
If we are owed this fair market value in the termination of the derivative transaction and its claim is unsecured, we will be treated as a general creditor of the counterparty, and will not have any claim with respect to the underlying security. We may obtain only a limited recovery or may obtain no recovery in these circumstances.
If we are owed this fair value in the termination of the derivative transaction and its claim is unsecured, we will be treated as a general creditor of the counterparty, and will not have any claim with respect to the underlying security. We may obtain only a limited recovery or may obtain no recovery in these circumstances.
However, some of our repurchase agreements contain, and certain of our future repurchase agreements or other financing facilities may contain, provisions allowing our lenders to make margin calls or require additional collateral solely 25 upon the occurrence of adverse changes in the markets or interest rate or spread fluctuations, subject to minimum thresholds, among other factors.
However, some of our repurchase agreements contain, and certain of our future repurchase agreements or other financing facilities may contain, provisions allowing our lenders to make margin calls or require additional collateral solely upon the occurrence of adverse changes in the markets or interest rate or spread fluctuations, subject to minimum thresholds, among other factors.
Moreover, these guidelines, as well as our investment strategy, target assets, financing strategy and policies with respect to investments, originations, acquisitions, growth, operations, indebtedness, hedging, capitalization, distributions and other corporate matters may be changed at any time without the consent of our stockholders, subject to applicable law.
Moreover, these guidelines, as well as our investment strategy, target assets, financing strategy and policies with respect to investments, originations, 33 acquisitions, growth, operations, indebtedness, hedging, capitalization, distributions and other corporate matters may be changed at any time without the consent of our stockholders, subject to applicable law.
Excluded from the term “investment securities,” among other things, are U.S. government 38 securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of “investment company” set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.
Excluded from the term “investment securities,” among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of “investment company” set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.
For the purpose of preserving our qualification as a REIT for federal income tax purposes, our charter prohibits beneficial or constructive ownership by any person of more than a certain percentage, currently 9.6%, in value or in number of shares, whichever is more restrictive, of the aggregate of the outstanding shares of our common stock or more than a certain percentage, currently 9.6%, in value of the aggregate of the outstanding shares of our capital stock.
For the purpose of preserving our qualification as a REIT for federal income tax purposes, our charter prohibits beneficial or constructive ownership by any person of 43 more than a certain percentage, currently 9.6%, in value or in number of shares, whichever is more restrictive, of the aggregate of the outstanding shares of our common stock or more than a certain percentage, currently 9.6%, in value of the aggregate of the outstanding shares of our capital stock.
Construction lending generally is considered to involve a higher degree of risk than other types of lending due to a variety of factors, including the difficulties 15 in estimating construction costs and anticipating construction delays and, generally, the dependency on timely, successful project completion and the lease-up or sale of units and commencement of operations post-completion of construction.
Construction lending generally is considered to involve a higher degree of risk than other types of lending due to a variety of factors, including the difficulties in estimating construction costs and anticipating construction delays and, generally, the dependency on timely, successful project completion and the lease-up or sale of units and commencement of operations post-completion of construction.
We expect that the aggregate value of our interests in subsidiaries that may in the future seek to rely on Rule 3a-7, if any, will comprise less than 20% of our total assets on an unconsolidated basis. 39 We intend to conduct our operations so that we will not be deemed to be an investment company.
We expect that the aggregate value of our interests in subsidiaries that may in the future seek to rely on Rule 3a-7, if any, will comprise less than 20% of our total assets on an unconsolidated basis. We intend to conduct our operations so that we will not be deemed to be an investment company.
Additionally, Title 3, Subtitle 8 of the MGCL permits our Board, without stockholder approval and regardless of what currently is provided in our charter or bylaws, to implement certain takeover defenses, such as a classified board, some of which we do not have. 43 U.S.
Additionally, Title 3, Subtitle 8 of the MGCL permits our Board, without stockholder approval and regardless of what currently is provided in our charter or bylaws, to implement certain takeover defenses, such as a classified board, some of which we do not have. U.S.
We cannot assure you that such claims will not arise or that we will not be subject to significant liability and losses if a claim of this type did arise. 22 Liability relating to environmental matters may impact the value of our loans or of properties that we may acquire upon foreclosure of the properties underlying our investments.
We cannot assure you that such claims will not arise or that we will not be subject to significant liability and losses if a claim of this type did arise. Liability relating to environmental matters may impact the value of our loans or of properties that we may acquire upon foreclosure of the properties underlying our investments.
Consequently, such prepayment rates cannot be predicted with certainty and no strategy can completely insulate us from prepayment or other such risks. 19 Difficulty in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to investors to suffer.
Consequently, such prepayment rates cannot be predicted with certainty and no strategy can completely insulate us from prepayment or other such risks. Difficulty in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to investors to suffer.
Therefore, our portfolio of target assets is and may be concentrated in certain property types that are subject to higher risk of achieving their stated business plans or other concentration risk, or supported by properties concentrated in a limited number of geographic locations.
Therefore, our portfolio of target assets is and may be concentrated in certain property types that are subject to higher risk of achieving their stated business plans or other concentration risk, or supported by properties concentrated in a limited number of 14 geographic locations.
If the real estate owned investment is owned by our TRS, income from the investment generally will be subject to corporate income tax. We cannot assure stockholders that we will have funds available to correct such defects, to make such improvements or to pay these operating costs.
If the real estate owned asset is owned by our TRS, income from the investment generally will be subject to corporate income tax. We cannot assure stockholders that we will have funds available to correct such defects, to make such improvements or to pay these operating costs.
Subject to maintaining our REIT qualification and our exclusion from regulation under the 1940 Act, our Manager has significant latitude within the broad investment guidelines in determining the types of loans and investments it makes for us, and how such loans and investments are financing or hedged, which could result in investment returns that are substantially below expectations or that result in losses, which could adversely affect our results of operations and financial condition. 35 We may compete with other investment vehicles managed by our Sponsor or its affiliates, including our Manager, or have other conflicts of interest with our Sponsor or its affiliates, including our Manager, which may result in decisions that are not in the best interests of our stockholders.
Subject to maintaining our REIT qualification and our exclusion from regulation under the 1940 Act, our Manager has significant latitude within the broad investment guidelines in determining the types of loans and investments it makes for us, and how such loans and investments are financing or hedged, which could result in investment returns that are substantially below expectations or that result in losses, which could adversely affect our results of operations and financial condition. 37 We may compete with other investment vehicles managed by our Sponsor or its affiliates, including our Manager, or have other conflicts of interest with our Sponsor or its affiliates, including our Manager, which may result in decisions that are not in the best interests of our stockholders.
Obtaining and maintaining state licenses will cause us to incur expenses and failure to be properly licensed under state law or otherwise may have a material adverse effect on us. 32 Actions of the U.S. government, including the U.S. Congress, U.S. Federal Reserve, U.S.
Obtaining and maintaining state licenses will cause us to incur expenses and failure to be properly licensed under state law or otherwise may have a material adverse effect on us. Actions of the U.S. government, including the U.S. Congress, U.S. Federal Reserve, U.S.
Any of these results would have a material adverse effect on us. Since we will not 40 be subject to the 1940 Act, we will not be subject to its substantive provisions, including provisions requiring diversification of investments, limiting leverage and restricting investments in illiquid assets.
Any of these results would have a material adverse effect on us. Since we will not be subject to the 1940 Act, we will not be subject to its substantive provisions, including provisions requiring diversification of investments, limiting leverage and restricting investments in illiquid assets.
If we foreclose on an asset, we may take title to the property securing that asset subject to any debt and debt service requirements then in effect, which was the case for the foreclosure resulting in our real estate owned investment.
If we foreclose on an asset, we may take title to the property securing that asset subject to any debt and debt service requirements then in effect, which was the case for the foreclosure resulting in our real estate owned asset.
If the decline in real estate asset values and/or income occurs quickly, this may be especially difficult to accomplish. This difficulty may be exacerbated by the illiquid nature of any non-qualifying assets that we may own.
If the decline in real estate asset values and/or income occurs quickly, this may be especially difficult to accomplish. This difficulty may be exacerbated by the illiquid nature of any 42 non-qualifying assets that we may own.
Foreclosure of a loan can be an expensive and lengthy process and could result in significant losses. Prepayment rates may adversely affect the yield on our loans, the value of our portfolio of assets, and our liquidity. The value of our assets may be affected by prepayment rates on loans.
Foreclosure of a loan can be an expensive and lengthy process and could result in significant losses. 20 Prepayment rates may adversely affect the yield on our loans, the value of our portfolio of assets, and our liquidity. The value of our assets may be affected by prepayment rates on loans.
Consequently, the five-year prohibition and the supermajority vote requirements do not apply to business combinations between us and any person, provided that the business combination is first approved by the Board.
Consequently, the five-year prohibition and the supermajority vote requirements do not apply to business combinations between us and any person, provided that the business combination is first approved by our Board.
As a result, we could experience poor performance or losses for which our Manager would not be liable. 37 Risks Related to Our Common Stock We have not established a minimum dividend payment level, and we may be unable to generate sufficient cash flows from our operations to pay dividends to our stockholders at any time in the future at a particular level, or at all, which could materially and adversely affect us.
As a result, we could experience poor performance or losses for which our Manager would not be liable. 39 Risks Related to Our Common Stock We have not established a minimum dividend payment level, and we may be unable to generate sufficient cash flows from our operations to pay dividends to our stockholders at any time in the future at a particular level, or at all, which could materially and adversely affect us.
These rules and regulations continue to evolve in scope and complexity and many new requirements have been created in response to laws enacted by Congress, making compliance more difficult and uncertain.
These rules and regulations continue 24 to evolve in scope and complexity and many new requirements have been created in response to laws enacted by Congress, making compliance more difficult and uncertain.
Our ability to fund a margin call will depend on the liquidity of our assets and access to capital at the time, and the need to fund these obligations could cause us to incur losses or otherwise materially and adversely affect us. 28 The extent of our hedging activity will vary in scope based on, among other things, the level and volatility of interest rates, the type of assets held, types of liabilities and other market conditions.
Our ability to fund a margin call will depend on the liquidity of our assets and access to capital at the time, and the need to fund these obligations could cause us to incur losses or otherwise materially and adversely affect us. 30 The extent of our hedging activity will vary in scope based on, among other things, the level and volatility of interest rates, the type of assets held, types of liabilities and other market conditions.
A guarantee may be on a joint and several basis with our joint venture or co-investment partner, in which case we may be liable in the event the partner defaults on its guarantee obligation.
A guarantee may be on a joint and several basis with our joint venture or 32 co-investment partner, in which case we may be liable in the event the partner defaults on its guarantee obligation.
In the future, subject to market conditions and availability, we may incur significant additional debt through repurchase agreements, asset-specific financing structures, and secured term loan borrowings.
In the future, subject to market conditions and availability, we may incur additional debt through repurchase agreements, asset-specific financing structures, and secured term loan borrowings.
Further, any downgrade of the Company’s credit ratings by any of the credit agencies that cover our debt may make it more difficult and costly for us to access capital.
Further, any downgrade of our credit ratings by any of the credit agencies that cover our debt may make it more difficult and costly for us to access capital.
Consequently, in such circumstances, increases in interest rates, particularly short-term interest rates, may immediately and significantly decrease our results of operations and cash flows, the market value of our investments and may adversely impact our ability to comply with covenants under our financings. 27 Our use of leverage may create a mismatch with the duration and interest rate reference index of the investments that we are financing.
Consequently, in such circumstances, increases in interest rates, particularly short-term interest rates, may immediately and significantly decrease our results of operations and cash flows, the market value of our investments and may adversely impact our ability to comply with covenants under our financings. 29 Our use of leverage may create a mismatch with the duration and interest rate reference index of the investments that we are financing.
The costs to mitigate network security problems, bugs, viruses, worms, malicious software programs, and 33 security vulnerabilities could be significant and are likely to increase in the future.
The costs to mitigate network security problems, bugs, viruses, worms, malicious software programs, and security vulnerabilities could be significant and are likely to increase in the future.
Therefore, we and/or our Manager may not have access to material non-public information in the possession of our Sponsor or its 36 other affiliates which might be relevant to an investment decision to be made by our Manager on our behalf, and our Manager may initiate a transaction or purchase or sell an investment which, if the information had been known to it, may not have been undertaken.
Therefore, we and/or our Manager may not have access to material non-public information in the possession of our Sponsor or its 38 other affiliates which might be relevant to an investment decision to be made by our Manager on our behalf, and our Manager may initiate a transaction or purchase or sell an investment which, if the information had been known to it, may not have been undertaken.
These characteristics and restrictions could result in losses that would adversely affect our results of operations, liquidity and financial condition, potentially materially. We may also be required to expend funds to correct defects or to make improvements before a real estate owned investment can be sold.
These characteristics and restrictions could result in losses that would adversely affect our results of operations, liquidity and financial condition, potentially materially. We may also be required to expend funds to correct defects or to make improvements before a real estate owned asset can be sold.
Further, to the extent our borrowing costs increase faster than the interest income earned from our floating-rate loans, such increases may adversely affect our cash flows, our ability to meet the financial covenants in the agreements governing our indebtedness, or our ability to refinance maturing debt as it comes due.
Further, to the extent our borrowing costs remain high or further increase faster than the interest income earned from our floating-rate loans, such increases may adversely affect our cash flows, our ability to meet the financial covenants in the agreements governing our indebtedness, or our ability to refinance maturing debt as it comes due.
Further, our equity interest in our current, or any future, real estate owned investment is subordinate to any indebtedness secured by such property. To the extent that we decide or are required to take ownership of one or more additional properties, these risks will be heightened.
Further, our equity interest in our current, or any future, real estate owned asset is subordinate to any indebtedness secured by such property. To the extent that we decide or are required to take ownership of one or more additional properties, these risks will be heightened.
Furthermore, construction projects have faced delays, including as a result of disruptions in supply chains, cost increases associated with building materials and construction services necessary for construction, and delays and costs associated with obtaining construction permits and complying with local regulations, all of which can result in cost overruns to complete such projects.
Furthermore, construction projects have faced delays, including as a result of disruptions in supply chains and labor markets, cost increases associated with building materials and construction services necessary for construction, and delays and costs associated with obtaining construction permits and complying with local regulations, all of which can result in cost overruns to complete such projects.
Our financing strategy may cause us to incur significant losses, which could materially and adversely affect us. Our secured term loan, debt related to real estate owned, current financing facilities, derivative instruments, and secured loans impose, and additional lending facilities may impose, financial and other covenants that restrict our operational flexibility, which could materially and adversely affect us.
Our financing strategy may cause us to incur significant losses, which could materially and adversely affect us. Our secured term loan, debt related to real estate owned, current financing facilities, derivative instruments, and secured loans contain, and additional lending facilities may contain, financial and other covenants that restrict our operational flexibility, which could materially and adversely affect us.
We cannot predict the length of time needed to find a willing purchaser and to close the sale of a real estate owned investment. We may acquire properties that are subject to contractual “lock-out” provisions that could restrict our ability to dispose of the real estate owned investment for a period of time.
We cannot predict the length of time needed to find a willing purchaser and to close the sale of a real estate owned asset. We may acquire properties that are subject to contractual “lock-out” provisions that could restrict our ability to dispose of the real estate owned asset for a period of time.
In the event of the insolvency of a counterparty to a derivative transaction, the derivative transaction would typically be terminated at its fair market value.
In the event of the insolvency of a counterparty to a derivative transaction, the derivative transaction would typically be terminated at its fair value.
In acquiring a real estate owned investment, we may agree or otherwise become subject to restrictions that prohibit the sale of that real estate owned investment for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that real estate owned investment.
In acquiring a real estate owned asset, we may agree or otherwise become subject to restrictions that prohibit the sale of that real estate owned asset for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that real estate owned asset.
The coupons earned by the floating rate loans fluctuate based upon interest rate reference indices (again, typically one-month SOFR) and, in a declining and/or low interest rate environment, these loans will earn lower rates of interest and this will impact our operating performance.
The coupons earned by the floating rate loans fluctuate based upon interest rate reference indices (again, typically 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 may be unable to maintain or refinance debt incurred to finance our loans and our operations, thereby increasing the amount of equity capital risk we bear with respect to particular loans or preventing us from deploying our equity capital in the optimal manner.
We may be unable to maintain or refinance debt incurred to finance our investments and our operations, thereby increasing the amount of equity capital risk we bear with respect to particular investments or preventing us from deploying our equity capital in the optimal manner.
We may be unable to maintain or refinance debt incurred to finance our loans and our operations, thereby increasing the amount of equity capital risk we bear with respect to particular loans or preventing us from deploying our equity capital in the optimal manner.
We may be unable to maintain or refinance debt incurred to finance our investments and our operations, thereby increasing the amount of equity capital risk we bear with respect to particular investments or preventing us from deploying our equity capital in the optimal manner.
As of December 31, 2023, based on unpaid principal balance, over 50% of our loans were open to repayment by the borrower without penalty. In periods of declining interest rates, prepayment rates on loans will generally increase.
As of December 31, 2024, based on unpaid principal balance, over 50% of our loans were open to repayment by the borrower without penalty. In periods of declining interest rates, prepayment rates on loans will generally increase.
We believe that we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and that our intended manner of operation will enable us to meet the requirements for qualification and taxation as a REIT.
We believe that we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code, and that our intended manner of operation will enable us to meet the requirements for qualification and taxation as a REIT.
Furthermore, we have from time to time owned direct or indirect interests in one or more entities that elected to be taxed as REITs under the Code. We refer to each such entity as a Subsidiary REIT.
Furthermore, we have from time to time owned direct or indirect interests in one or more entities that elected to be taxed as REITs under the Internal Revenue Code. We refer to each such entity as a Subsidiary REIT.
We cannot predict whether we will be able to sell any real estate owned investment for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us.
We cannot predict whether we will be able to sell any real estate owned assets for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us.
We may employ various hedging strategies to limit the effects of changes in interest rates (and in some cases credit spreads), including engaging in interest rate swaps, caps, floors 29 and other interest rate derivative products.
We may employ various hedging strategies to limit the effects of changes in interest rates (and in some cases credit spreads), including engaging in interest rate swaps, caps, floors and other interest rate 31 derivative products.
The assets in our portfolio are relatively illiquid investments due to their relatively short expected lives, lack of (or limited) cash flow from property that is collateral for those loans, their potential unsuitability for securitization and the greater difficulty of recovery in the event of a borrower’s default.
The assets in our portfolio are relatively illiquid investments due to their relatively short expected lives, lack of (or limited) cash flow from property that is collateral for those loans, their potential unsuitability for securitization and the greater difficulty of recovery in the event of a borrower’s default or a diminution in the value of the collateral asset.
As a result, no assurance can be given that we will be able to pay dividends to our stockholders at any time in the future or that the level of any distributions we do make to our stockholders will achieve our targeted yield or increase or even be maintained over time, any of which could materially and adversely affect us.
No assurance can be given that we will be able to pay dividends to our stockholders at any time in the future or that the level of any distributions we do make to our stockholders will achieve our targeted yield or increase or even be maintained over time, any of which could materially and adversely affect us.
In addition, certain of our investments may become less liquid after our investment as a result of periods of delinquencies or defaults or turbulent market conditions. For example, there is an inverse relationship between credit spreads and the value of our existing assets such that widening in credit spreads diminishes the value of existing assets.
In addition, certain of our investments may become less liquid after our investment as a result of periods of delinquencies or defaults or turbulent market conditions. There is generally an inverse relationship between credit spreads and the value of our existing assets such that widening in credit spreads generally diminishes the value of existing assets.
In addition to these types of financings, we may also use other forms of leverage, including secured and unsecured credit arrangements, structured financings such as CMBS and CLOs, derivative instruments, public and private secured and unsecured debt issuances by us or our subsidiaries.
In addition to these types of financings, we may also use other forms of leverage, including but not limited to secured and unsecured credit arrangements, structured financings such as CMBS and CLOs, derivative instruments, public and private secured and unsecured debt issuances by us or our subsidiaries.
In the event of borrower distress or a default, we may lack the liquidity necessary to protect our investment or avoid a corresponding default on any obligations we may have with respect to our own financing specifically related to, or otherwise impacted by, such investment.
In the event of borrower distress or a default, we may lack the liquidity necessary to protect our investment or avoid a corresponding default on any obligations we may have with respect to our financing against our investments specifically related to, or otherwise impacted by, such investment.
As a public company with listed equity securities, we are required to comply with new laws, regulations and requirements, including the requirements of the Exchange Act, certain corporate governance provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, related regulations of the SEC and requirements of the NYSE.
As a public company with listed equity securities, we are required to comply with new laws, regulations and requirements, including the requirements of the Exchange Act, certain corporate governance provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), related regulations of the SEC and requirements of the NYSE.
We may only be able to partly replace or refinance such debt if underwriting standards, including loan-to-value ratios and yield requirements, among other requirements, are stricter than when we originally financed our loans.
We may only be able to partly 15 replace or refinance such debt if underwriting standards, including loan-to-value ratios and yield requirements, among other requirements, are stricter than when we originally financed our investments.
Difficult conditions in the commercial mortgage and real estate market, the capital markets and the economy generally, as a result of recent and drastic increases in interest rates, recent inflationary pressures and other factors, could make it difficult for our borrowers to satisfy their repayment obligations and may materially and adversely affect us.
Difficult conditions in the commercial mortgage and real estate market, the capital markets and the economy generally, as a result of fluctuations in interest rates, inflationary pressures and other factors, could make it difficult for our borrowers to satisfy their repayment obligations and may materially and adversely affect us.
If the market in which the asset is located fails to materialize according to the borrower’s projections, or if the borrower fails to improve the quality of the asset’s management and/or the value of the asset, or if it costs the borrower more than estimated or takes longer to execute its business plan than estimated, including as a result of supply chain disruptions, the borrower may not receive a sufficient return on the asset to satisfy our loan or may experience a prolonged reduction of net operating income and may not be able to make payments on our loan on a timely basis or at all, which could materially and adversely affect us.
If the market in which the asset is located fails to materialize according to the borrower’s projections, or if the borrower fails to improve the quality of the asset’s management and/or the value of the asset, or if it costs the borrower more than estimated or takes longer to execute its business plan than estimated, including as a result of supply chain and labor market disruptions or changes in their capital position and available liquidity, the borrower may not receive a sufficient return on the asset to satisfy our loan or may experience a prolonged reduction of net operating income and may not be able to make payments on our loan on a timely basis or at all, which could materially and adversely affect us.
The capital and credit markets have recently experienced a period of extreme volatility and disruption. The market price and liquidity of the market for shares of our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance.
The capital and credit markets have experienced a period of extreme volatility and disruption in recent years. The market price and liquidity of the market for shares of our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance.
Instability in the U.S. and global financial markets in the future could be caused by any number of factors beyond our control, including, without 17 limitation, pandemics, terrorist attacks or other acts of war or military activities, prolonged civil unrest, political instability or uncertainty, including the military conflicts between Russia and Ukraine, Israel and Hamas, and other conflicts throughout the Middle East and North Africa more broadly, some of which may impact global supply chains, tensions involving Russia, China, and Iran, or broad-based sanctions, should they continue for the long term or escalate, and adverse changes in national or international economic, market and political conditions.
Instability in the U.S. and global financial systems and economies in the future could be caused by any number of factors beyond our control, including, without limitation, deglobalization trends, legislative and regulatory uncertainty, pandemics, terrorist attacks or other acts of war or military activities, prolonged civil unrest, political instability or uncertainty, including the military conflicts between Russia and Ukraine, Israel and Hamas, and other conflicts throughout the Middle East and North Africa more broadly, some of which may impact global supply chains, tensions involving Russia, China, and Iran, or broad-based sanctions, should they continue for the long term or escalate, and adverse changes in national or international economic, market and political conditions.
Floating rate investments earn interest at rates that adjust from time to time (typically monthly) based upon an index (typically one-month SOFR).
Floating rate investments earn interest at rates that adjust from time to time (typically monthly) based upon an index (typically SOFR).

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAudit Committee members also receive presentations on cybersecurity topics from our Manager’s Director of Technology or external experts as part of the Board’s continuing education on topics that impact public companies. 50 Our Manager’s Director of Technology leads our Manager’s overall cybersecurity function and supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, including alerts and reports produced by security tools deployed in our Manager’s IT environment.
Biggest changeAudit Committee members also receive presentations on cybersecurity topics from our Manager’s Director of Technology or external experts as part of our Board’s continuing education on topics that impact public companies. 52 Our Manager’s Director of Technology leads our Manager’s overall cybersecurity function and supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, including alerts and reports produced by security tools deployed in our Manager’s IT environment.

Item 2. Properties

Properties — owned and leased real estate

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For an overview of our real estate owned assets, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Portfolio Activity and Overview - Real Estate Owned.”

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of December 31, 2023, we were not involved in any material legal proceedings. Refer to Note 14 to our consolidated financial statements for information on our commitments and contingencies. Item 4.
Biggest changeItem 3. Legal Proceedings. From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of December 31, 2024, we were not involved in any material legal proceedings. Refer to Note 14 to our consolidated financial statements for information on our commitments and contingencies. Item 4.
Mine Safe ty Disclosures. Not applicable. 51 PART II
Mine Safe ty Disclosures. Not applicable. 53 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePERFORMANCE GRAPH The information below shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
Biggest changeEQUITY COMPENSATION PLAN INFORMATION Our equity compensation plan information required by this item will be included in the Proxy Statement to be filed relating to our 2025 Annual Meeting of Stockholders and is incorporated herein by reference. 54 PERFORMANCE GRAPH The information below shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
The following table sets forth the dividends declared per share during each calendar quarter for 2023, 2022, and 2021: First Quarter Second Quarter Third Quarter Fourth Quarter 2023 Cash dividend $ 0.37 $ 0.37 $ 0.25 $ 0.25 2022 Cash dividend $ 0.37 $ 0.37 $ 0.37 $ 0.37 2021 Cash dividend $ 0.37 $ 0.37 $ 0.37 $ 0.37 RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED SECURITIES None.
The following table sets forth the dividends declared per share during each calendar quarter for 2024, 2023, and 2022: First Quarter Second Quarter Third Quarter Fourth Quarter 2024 Cash dividend $ 0.25 $ 0.25 $ 0.10 $ - 2023 Cash dividend $ 0.37 $ 0.37 $ 0.25 $ 0.25 2022 Cash dividend $ 0.37 $ 0.37 $ 0.37 $ 0.37 RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED SECURITIES None.
There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted in the graph below. 52 Item 6. [R eserved] 53
There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted in the graph below. Item 6. [R eserved] 55
Item 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities. MARKET INFORMATION FOR COMMON STOCK, HOLDERS OF RECORD AND DIVIDEND POLICY On November 3, 2021, our common stock began trading on the NYSE under the symbol “CMTG.” As of February 16, 2024, there were approximately 21 stockholders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities. MARKET INFORMATION FOR COMMON STOCK, HOLDERS OF RECORD AND DIVIDEND POLICY On November 3, 2021, our common stock began trading on the NYSE under the symbol “CMTG.” As of February 18, 2025, there were approximately 17 stockholders of record of our common stock.
The graph assumes that $100 was invested on November 3, 2021 in our common stock, the Russell 2000 and the Bloomberg REIT Mortgage Index and that all dividends were reinvested without the payment of any commissions.
The graph assumes that $100 was invested on November 3, 2021 in our common stock, the Russell 2000 and the Dow Jones U.S. Mortgage REIT Index and that all dividends were reinvested without the payment of any commissions.
The following graph is a comparison of the cumulative total stockholder return on shares of our common stock, the Russell 2000 Index (the “Russell 2000”), and the Bloomberg REIT Mortgage Index, a published industry index, from November 3, 2021 (the date our common stock began trading on the NYSE) to December 31, 2023.
The following graph is a comparison of the cumulative total stockholder return on shares of our common stock, the Russell 2000 Index (the “Russell 2000”), and the Dow Jones U.S. Mortgage REIT Index, a published industry index, from November 3, 2021 (the date our common stock began trading on the NYSE) to December 31, 2024.
We intend to declare and pay regular quarterly dividends to our stockholders, although all future distributions will be declared and paid at the discretion of the Board of Directors and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Directors deems relevant.
The timing and amount of any future dividends declared by our Board depend on a variety of factors, including cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code, and such other factors as our Board deems relevant.
This does not include the number of stockholders that hold shares in “street name” through banks or broker-dealers.
This does not include the number of stockholders that hold shares in “street name” through banks or broker-dealers. On December 16, 2024, our Board paused our quarterly dividend on our common stock commencing with the fourth quarter dividend that would have otherwise been paid in January 2025.
Removed
ISSUER PURCHASES OF EQUITY SECURITIES None. EQUITY COMPENSATION PLAN INFORMATION Our equity compensation plan information required by this item will be included in the Proxy Statement to be filed relating to our 2024 Annual Meeting of Stockholders and is incorporated herein by reference.
Added
Such action was taken to preserve capital and create added financial flexibility for capital allocation decisions with the objective of enhancing stockholder value over the long-term. During the year ended December 31, 2024, our Board declared three quarterly dividends totaling $0.60 per share of common stock, which exceeds our 2024 taxable income.

Item 7. Management's Discussion & Analysis

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

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Biggest changePortfolio Activity and Overview The following table summarizes changes in unpaid principal balance for our loans receivable held-for-investment ($ in thousands): Three Months Ended December 31, 2023 Year Ended December 31, 2023 Year Ended December 31, 2022 Unpaid principal balance, beginning of period $ 7,185,948 $ 7,538,525 $ 6,441,238 Initial funding of loans - 101,059 2,030,456 Advances on loans 168,012 730,350 679,258 Loan repayments (37,903 ) (584,970 ) (1,484,880 ) Sales of loans receivable - (260,110 ) (116,020 ) Transfer to real estate owned (See Note 5) - (208,797 ) - Transfer to loans held-for-sale (271,533 ) (271,533 ) - Principal charge-offs - - (11,527 ) Total net fundings/(repayments/sales/transfers) (141,424 ) (494,001 ) 1,097,287 Unpaid principal balance, end of period $ 7,044,524 $ 7,044,524 $ 7,538,525 57 The following table details our individual loan receivables held-for-investment based on unpaid principal balances as of December 31, 2023 ($ in thousands): Loan Number Loan type Origination Date Loan Commitment (1) Unpaid Principal Balance Carrying Value (2) Fully Extended Maturity (3) Property Type (4) Construction (4, 5) Location Risk Rating 1 Senior 12/16/2021 $ 405,000 $ 401,157 $ 399,441 6/16/2027 Multifamily - CA 3 2 Senior 11/1/2019 390,000 390,000 389,508 11/1/2026 Multifamily - NY 3 3 Senior 7/12/2018 265,000 265,000 266,350 8/1/2028 Hospitality - NY 3 4 Senior 7/26/2021 225,000 225,000 224,789 7/26/2026 Hospitality - GA 3 5 Senior 6/30/2022 227,000 216,186 214,947 6/30/2029 Hospitality - CA 3 6 Senior 2/15/2022 262,122 214,480 212,877 2/15/2027 Multifamily Y CA 4 7 Senior 8/17/2022 235,000 213,831 212,751 8/17/2027 Hospitality - CA 3 8 Senior 10/18/2019 247,260 208,928 208,928 10/18/2024 For Sale Condo - CA 3 9 Senior 10/4/2019 197,332 189,047 188,796 10/1/2025 Mixed-Use - DC 3 10 Senior 9/7/2018 182,970 182,970 182,723 10/18/2024 Land - NY 3 11 Senior 9/26/2019 319,900 174,201 174,201 3/31/2026 Office - GA 4 12 Senior 1/14/2022 170,000 170,000 169,420 1/14/2027 Multifamily - CO 3 13 Senior 4/14/2022 193,400 168,941 168,116 4/14/2027 Multifamily - MI 3 14 Senior 9/8/2022 160,000 155,000 154,111 9/8/2027 Multifamily - AZ 3 15 Senior 1/9/2018 151,326 151,326 120,100 1/9/2024 Land - VA 5 16 Senior 2/28/2019 150,000 150,000 149,938 2/28/2024 Office - CT 4 17 Senior 12/30/2021 136,500 136,500 136,160 12/30/2025 Multifamily - PA 3 18 Senior 4/26/2022 151,698 133,630 132,807 4/26/2027 Multifamily - TX 3 19 Senior 12/10/2021 130,000 130,000 129,652 12/10/2026 Multifamily - VA 3 20 Subordinate 12/9/2021 125,000 125,000 124,817 1/1/2027 Office - IL 3 21 Senior 6/17/2022 127,250 123,346 122,488 6/17/2027 Multifamily - TX 3 22 Senior 9/30/2019 122,500 122,500 122,490 2/9/2027 Office - NY 4 23 Senior 4/29/2019 122,123 119,643 119,543 4/29/2025 Mixed-Use - NY 3 24 Senior 3/1/2022 122,000 119,084 118,522 2/28/2027 Multifamily - TX 4 25 Senior 8/8/2022 115,000 115,000 114,787 8/8/2027 Multifamily - CO 3 26 Senior 7/20/2021 113,500 113,500 113,637 7/20/2026 Multifamily - IL 3 27 Senior 2/13/2020 124,810 112,442 91,640 2/13/2025 Office - CA 5 28 Senior 5/13/2022 202,500 112,303 110,418 5/13/2027 Mixed-Use Y VA 3 29 Senior 6/7/2018 104,250 104,250 105,343 1/15/2022 Hospitality Y NY 4 30 Senior 12/15/2021 103,000 103,000 102,709 12/15/2026 Mixed-Use - TN 3 31 Senior 3/21/2023 101,059 101,059 100,886 4/1/2028 Hospitality - CA 3 32 Senior 3/22/2021 148,303 99,131 98,566 3/22/2026 Other - MA 3 33 Senior 8/2/2021 100,000 98,214 97,827 8/2/2026 Office - CA 4 34 Senior 1/27/2022 100,800 96,529 96,082 1/27/2027 Multifamily - NV 3 35 Senior 3/31/2020 87,750 87,750 87,750 2/9/2025 Office - TX 4 36 Senior 12/21/2018 87,741 87,741 88,166 6/21/2022 Land - NY 4 37 Senior 8/1/2022 115,250 78,500 78,390 7/30/2026 Hospitality Y NY 4 38 Senior 11/4/2022 140,000 78,018 76,951 11/9/2026 Other Y MA 3 39 Senior 1/10/2022 130,461 77,560 76,463 1/9/2027 Other - PA 3 40 Senior 7/10/2018 76,369 76,369 76,369 6/10/2024 Hospitality - CA 4 41 Senior 7/27/2022 76,000 75,550 75,303 7/27/2027 Multifamily - UT 3 42 Senior 4/5/2019 75,500 75,500 75,453 4/5/2024 Mixed-Use - NY 3 43 Senior 8/27/2021 84,810 71,492 51,140 8/27/2026 Office - GA 5 44 Senior 6/3/2021 79,600 70,654 70,449 6/3/2026 Other - MI 3 45 Senior 12/22/2021 83,901 67,742 67,439 12/22/2026 Multifamily - TX 4 46 Senior 7/31/2019 67,000 67,000 67,000 10/31/2021 Land - NY 4 47 Senior 10/13/2022 106,500 66,606 65,637 10/13/2026 Other Y NV 3 48 Senior 9/2/2022 176,257 65,991 64,270 9/2/2027 Multifamily Y UT 3 49 Senior 2/2/2022 90,000 62,712 61,941 2/2/2027 Office - WA 3 50 Senior 1/19/2022 73,677 59,607 59,242 1/19/2027 Hospitality - TN 3 51 Senior 11/24/2021 60,255 53,035 52,662 11/24/2026 Multifamily - NV 3 52 Senior 3/15/2022 53,300 50,164 49,957 3/15/2027 Multifamily - AZ 4 53 Senior 2/4/2022 44,768 38,753 38,560 2/4/2027 Multifamily - TX 4 54 Subordinate 7/2/2021 30,200 30,200 30,313 7/2/2024 Land - FL 3 55 Senior 4/18/2019 30,000 30,000 29,950 5/1/2024 Land - MA 3 56 Senior 1/4/2022 32,795 29,519 29,263 1/4/2027 Other Y GA 3 57 Senior 2/17/2022 28,479 24,865 24,758 2/17/2027 Multifamily - TX 3 58 Senior 2/25/2022 53,984 22,396 21,898 2/25/2027 Other Y GA 3 59 Senior 4/19/2022 23,378 16,174 15,971 4/19/2027 Other Y GA 3 60 Senior 2/18/2022 32,083 14,882 14,593 2/18/2027 Other Y FL 3 61 Senior 4/19/2022 24,245 11,116 10,892 4/19/2027 Other Y GA 3 62 Senior 8/2/2019 10,645 10,645 10,868 2/2/2024 For Sale Condo - NY 3 63 Senior 7/1/2019 1,899 1,899 1,899 12/30/2020 Other - Other 5 64 Subordinate 8/2/2018 886 886 - 7/9/2023 Other - NY 5 65 Senior 12/21/2022 112,100 - (1,121 ) 12/21/2027 Multifamily Y WA 3 Total $ 8,121,436 $ 7,044,524 $ 6,947,796 General CECL reserve (70,371 ) Grand Total/Weighted Average $ 8,121,436 $ 7,044,524 $ 6,877,425 17.1% 3.3 (1) Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
Biggest changePortfolio Activity and Overview The following table summarizes changes in unpaid principal balance for our loans receivable held-for-investment ($ in thousands): Three Months Ended December 31, 2024 Year Ended December 31, 2024 Year Ended December 31, 2023 Unpaid principal balance, beginning of period $ 6,384,893 $ 7,044,524 $ 7,538,525 Initial funding of new loan origination - - 101,059 Loan receivable acquired in connection with a full loan repayment - 100,007 - Advances on existing loans 75,347 448,293 730,350 Repayments of loans receivable (98,635 ) (659,202 ) (584,970 ) Sales of loans receivable (60,256 ) (60,256 ) (260,110 ) Transfer to loans held-for-sale (101,059 ) (673,076 ) (271,533 ) Transfer to real estate owned (See Note 5) - - (208,797 ) Total net fundings/(repayments/sales/transfers) (184,603 ) (844,234 ) (494,001 ) Unpaid principal balance, end of period $ 6,200,290 $ 6,200,290 $ 7,044,524 60 The following table details our individual loans receivable held-for-investment based on unpaid principal balances as of December 31, 2024 ($ in thousands): Loan Number Loan Type Origination Date Loan Commitment (1) Unpaid Principal Balance Carrying Value (2) Origination LTV (3) Fully Extended Maturity (4) Property Type (5) Construction (5,6) Location Risk Rating 1 Senior 12/16/2021 $ 405,000 $ 402,339 $ 401,520 70.0% 7/31/2025 Multifamily - CA 4 2 Senior 11/1/2019 390,000 390,000 390,000 74.3% 8/1/2025 Multifamily - NY 4 3 Senior 7/12/2018 245,000 245,000 246,350 52.9% 8/1/2028 Hospitality - NY 3 4 Senior 7/26/2021 225,000 225,000 225,169 65.1% 7/26/2026 Hospitality - GA 3 5 Senior 6/30/2022 227,000 224,615 224,412 63.9% 6/30/2029 Hospitality - CA 3 6 Senior 8/17/2022 235,000 217,303 217,111 68.3% 8/17/2027 Hospitality - CA 3 7 Senior 9/26/2019 319,900 199,953 199,953 68.0% 3/31/2026 Office - GA 4 8 Senior 9/7/2018 182,970 182,970 183,427 78.7% 4/18/2026 Land - NY 3 9 Senior 10/4/2019 177,044 177,044 177,044 74.8% 10/1/2025 Mixed-Use - DC 3 10 Senior 4/14/2022 193,400 172,141 171,976 55.7% 4/14/2027 Multifamily - MI 3 11 Senior 1/14/2022 170,000 170,000 170,000 64.8% 1/14/2027 Multifamily - CO 4 12 Senior 9/8/2022 160,000 155,000 154,645 63.5% 9/8/2027 Multifamily - AZ 4 13 Senior 1/9/2018 152,834 152,834 120,100 n/m 1/9/2024 Land - VA 5 14 Senior 9/2/2022 176,257 150,080 148,728 60.0% 9/2/2027 Multifamily Y UT 3 15 Senior 2/28/2019 150,000 150,000 150,000 72.2% 2/28/2024 Office - CT 4 16 Senior 5/13/2022 173,601 142,335 140,986 67.6% 5/13/2027 Mixed-Use Y VA 3 17 Senior 12/30/2021 136,500 136,500 136,500 76.7% 12/30/2025 Multifamily - PA 3 18 Senior 4/26/2022 151,698 136,355 135,840 66.7% 4/26/2027 Multifamily - TX 4 19 Senior 12/10/2021 130,000 130,000 130,000 75.6% 12/10/2026 Multifamily - VA 3 20 Subordinate 12/9/2021 125,000 125,000 124,878 80.3% 1/1/2027 Office - IL 3 21 Senior 6/17/2022 127,250 123,346 123,094 62.8% 6/17/2027 Multifamily - TX 3 22 Senior 4/29/2019 122,123 120,289 120,281 61.5% 4/29/2025 Mixed-Use - NY 3 23 Senior 3/1/2022 122,000 119,084 118,100 n/m 2/28/2027 Multifamily - TX 5 24 Senior 7/20/2021 113,500 113,500 113,841 76.2% 7/20/2026 Multifamily - IL 3 25 Senior 2/13/2020 123,910 111,542 90,800 n/m 2/13/2025 Office - CA 5 26 Senior 12/15/2021 103,000 103,000 103,000 58.5% 12/15/2026 Mixed-Use - TN 3 27 Senior 7/30/2024 104,455 101,604 99,755 82.4% 10/21/2026 Other - NJ 3 28 Senior 11/4/2022 135,000 100,555 100,150 43.1% 11/9/2026 Other Y MA 3 29 Senior 1/27/2022 100,800 96,529 79,400 n/m 1/27/2027 Multifamily - NV 5 30 Senior 8/2/2021 97,000 95,214 94,827 68.5% 8/2/2026 Office - CA 4 31 Senior 1/10/2022 130,461 89,464 88,729 65.0% 1/9/2027 Other - PA 3 32 Senior 3/31/2020 87,750 87,750 87,750 50.2% 2/9/2025 Office - TX 4 33 Senior 12/21/2018 87,741 87,741 88,166 50.6% 6/21/2022 Land - NY 4 34 Senior 7/10/2018 78,552 78,552 78,552 79.2% 6/10/2024 Hospitality - CA 4 35 Senior 8/1/2022 115,250 78,500 78,500 82.1% 7/30/2026 Hospitality Y NY 4 36 Senior 6/3/2021 79,600 76,075 76,029 68.3% 6/3/2026 Other - MI 3 37 Senior 12/22/2021 83,901 75,937 75,772 69.5% 12/22/2026 Multifamily - TX 4 38 Senior 7/27/2022 76,000 75,550 75,531 66.1% 7/27/2027 Multifamily - UT 3 39 Senior 2/2/2022 90,000 71,172 70,677 66.3% 2/2/2027 Office - WA 3 40 Senior 12/21/2022 112,100 68,521 67,583 60.9% 12/21/2027 Multifamily Y WA 3 41 Senior 8/27/2021 81,810 68,492 40,200 n/m 8/27/2026 Office - GA 5 42 Senior 7/31/2019 67,000 67,000 67,000 42.4% 1/30/2022 Land - NY 4 43 Senior 1/19/2022 73,677 59,825 59,570 51.2% 1/19/2027 Hospitality - TN 3 44 Senior 3/15/2022 53,300 50,164 42,800 n/m 3/15/2027 Multifamily - AZ 5 45 Senior 2/4/2022 44,768 39,279 28,200 n/m 2/4/2027 Multifamily - TX 5 46 Senior 4/5/2019 38,345 38,345 38,345 n/m 4/5/2028 Other - Other 3 47 Senior 2/18/2022 32,083 31,389 31,280 66.0% 2/18/2027 Other Y FL 3 48 Senior 4/5/2019 30,000 30,000 30,000 49.0% 4/6/2026 Other - NY 3 49 Senior 4/18/2019 30,000 30,000 29,950 n/m 5/1/2025 Land - MA 3 50 Senior 2/17/2022 28,479 24,865 21,200 n/m 2/17/2027 Multifamily - TX 5 51 Senior 7/1/2019 1,651 1,651 1,651 n/m 12/30/2020 Other - Other 5 52 Subordinate 8/2/2018 886 886 - n/m 7/9/2023 Other - NY 5 Total 6,698,596 6,200,290 6,069,372 General CECL reserve (122,110 ) Grand Total/Weighted Average $ 6,698,596 $ 6,200,290 $ 5,947,262 11% 3.6 (1) Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
Fair market values used to determine specific CECL reserves are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach.
Fair values used to determine specific CECL reserves are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach.
While evaluating the credit quality of each loan within our portfolio, we assess these quantitative and qualitative factors as a whole and with no pre-prescribed weight on their impact to our determination of a loan’s risk rating.
While evaluating the credit quality of each loan within our portfolio, we assess these quantitative and qualitative factors as a whole and with no pre-prescribed weight on their impact to our determination of a loan’s risk rating.
However, based upon the facts and circumstances for each loan and the overall market conditions, we may consider certain previously mentioned factors more or less relevant than others.
However, based upon the facts and circumstances for each loan and the overall market conditions, we may consider certain previously mentioned factors more or less relevant than others.
In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay (or are treated as paying) out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. Our real estate owned hotel portfolio is held in a TRS.
In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay (or are treated as paying) out to our stockholders in a calendar year is less than a minimum amount specified under 73 U.S. federal tax laws. Our real estate owned hotel portfolio is held in a TRS.
Significant judgment is required in determining impairment and in estimating the resulting credit loss reserve, and actual losses, if any, could materially differ from those estimates. 70 Real Estate Owned We may assume legal title and/or physical possession of the underlying collateral property of a defaulted loan through foreclosure, a deed-in-lieu of foreclosure, or an assignment-in-lieu of foreclosure.
Significant judgment is required in determining impairment and in estimating the resulting credit loss reserve, and actual losses, if any, could materially differ from those estimates. 75 Real Estate Owned We may assume legal title and/or physical possession of the underlying collateral property of a defaulted loan through foreclosure, a deed-in-lieu of foreclosure, or an assignment-in-lieu of foreclosure.
Each repurchase agreement contains “margin maintenance” provisions, which are designed to allow the counterparty to require the delivery of cash or other assets to de-lever financings on assets that are determined to have experienced a diminution in value. Since inception through December 31, 2023, we have not received any margin calls under any of our repurchase agreements.
Each repurchase agreement contains “margin maintenance” provisions, which are designed to allow the counterparty to require the delivery of cash or other assets to de-lever financings on assets that are determined to have experienced a diminution in value. Since inception through December 31, 2024, we have not received any margin calls under any of our repurchase agreements.
Distributable Earnings (Loss) is a non-GAAP measure, which we define as net income (loss) in accordance with GAAP, excluding (i) non-cash stock-based compensation expense, (ii) real estate depreciation and amortization, (iii) any unrealized gains or losses from mark-to-market valuation changes (other than permanent impairments) that are included in net income (loss) for the applicable period, (iv) one-time events pursuant to changes in GAAP and (v) certain non-cash items, which in the judgment of our Manager, should not be included in Distributable Earnings (Loss).
Distributable Earnings (Loss) is a non-GAAP measure, which we define as net income (loss) in accordance with GAAP, excluding (i) non-cash stock-based compensation expense, (ii) real estate owned held-for-investment depreciation and amortization, (iii) any unrealized gains or losses from mark-to-market valuation changes (other than permanent impairments) that are included in net income (loss) for the applicable period, (iv) one-time events pursuant to changes in GAAP and (v) certain non-cash items, which in the judgment of our Manager, should not be included in Distributable Earnings (Loss).
To estimate an annual historical loss rate, we obtained historical loss rate data for loans most comparable to our loan portfolio from a commercial mortgage-backed securities database licensed by a third party, Trepp, LLC, which contains historical loss data from January 1, 1999 through December 31, 2023.
To estimate an annual historical loss rate, we obtained historical loss rate data for loans most comparable to our loan portfolio from a commercial mortgage-backed securities database licensed by a third party, Trepp, LLC, which contains historical loss data from January 1, 1999 through December 31, 2024.
(6) LTV represents “loan-to-value” or “loan-to-cost,” which is calculated as our total loan commitment from time to time, as if fully funded, plus any financings that are pari passu with or senior to our loan, divided by our estimate of either (1) the value of the underlying real estate, determined in accordance with our underwriting process (typically consistent with, if not less than, the value set forth in a third-party appraisal) or (2) the borrower’s projected, fully funded cost basis in the asset, in each case as we deem appropriate for the relevant loan and other loans with similar characteristics.
(6) Origination LTV represents “loan-to-value” or “loan-to-cost,” which is calculated as our total loan commitment upon origination, as if fully funded, plus any financings that are pari passu with or senior to our loan, divided by our estimate of either (1) the value of the underlying real estate, determined in accordance with our underwriting process (typically consistent with, if not less than, the value set forth in a third-party appraisal) or (2) the borrower’s projected, fully funded cost basis in the asset, in each case as we deem appropriate for the relevant loan and other loans with similar characteristics.
The WARM method requires us to reference historical loan loss data from a comparable data set and apply such loss rate to each of our loans over their expected remaining term, taking into consideration expected economic conditions over the forecasted timeframe.
The WARM method requires us to reference historical loan loss data from a comparable data set and apply such loss rate to each of our loans over their expected remaining duration, taking into consideration expected economic conditions over the forecasted timeframe.
Through the final repayment of a loan, the asset management team maintains regular contact with borrowers, servicers and local market experts monitoring performance of the collateral, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.
Through the final repayment or resolution of a loan, the asset management team maintains regular contact with borrowers, servicers and local market experts monitoring performance of the collateral, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.
Specific reserves are equal to the excess of a loan’s carrying value to the estimated fair value of the collateral, less estimated costs to sell, if recovery of our investment is expected from the sale of the collateral and such costs will reduce amounts recoverable by us.
If recovery of our investment is expected from the sale of the collateral and such costs will reduce amounts recovered by us, specific reserves are equal to the excess of a loan’s carrying value to the estimated fair value of the collateral less estimated costs to sell.
Assets acquired and liabilities assumed generally include land, building, building improvements, tenant improvements, furniture, fixtures and equipment, mortgages payable, and identified intangible assets and liabilities, which generally consist of above or below market lease values, in-place lease values, and other lease-related values.
Assets acquired and liabilities assumed generally include land, building, building improvements, tenant improvements, furniture, fixtures and equipment, mortgages payable, and identified intangible assets and liabilities, which generally consists of above or below market lease values, in-place lease values, and other lease-related values.
Off-Balance Sheet Arrangements As of December 31, 2023, we had no off-balance sheet arrangements aside from those discussed in Note 3 - Loan Portfolio, Note 4 - Equity Method Investment, and Note 14 - Commitments and Contingencies.
Off-Balance Sheet Arrangements As of December 31, 2024, we had no off-balance sheet arrangements aside from those discussed in Note 3 - Loan Portfolio, Note 4 - Equity Method Investment, and Note 14 - Commitments and Contingencies.
On June 2, 2021, the terms of the securitized senior mortgage were modified to include an extension of the maturity date to February 9, 2024 and a principal repayment of $10.0 million.
On June 1, 2021, the terms of the securitized senior mortgage were modified to include an extension of the maturity date to February 9, 2024 and a principal repayment of $10.0 million.
During the year ended December 31, 2023, we recorded a provision for current expected credit losses of $153.7 million, which consisted of a $159.6 million increase in our specific CECL reserve prior to principal charge-offs, and a reversal of $6.0 million of general CECL reserves.
During the year ended December 31, 2023, we recorded a provision for current expected credit losses of $153.7 million, which consisted of a $6.0 million reversal of our general CECL reserve and a $159.6 million increase in our specific CECL reserve prior to a principal charge-off.
Asset Management Our Manager proactively manages the loans in our portfolio from closing to final repayment and our Sponsor has dedicated asset management employees to perform asset management services.
Asset Management Our Manager proactively manages the loans in our portfolio from closing to final repayment or resolution and our Sponsor has dedicated asset management employees to perform asset management services.
Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses are key factors, among others, considered by the Board in setting the dividend each quarter and as such we believe Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses are also useful to investors.
Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses are key factors, among others, considered by our Board in determining the dividend each quarter and as such we believe Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses are also useful to investors.
Key Financial Measures and Indicators As a CRE finance company, we believe the key financial measures and indicators for our business are net income (loss) per share, Distributable Earnings (Loss) per share, Distributable Earnings per share prior to realized gains and losses, which includes principal charge-offs, dividends declared per share, book value per share, adjusted book value per share, Net Debt-to-Equity Ratio and Total Leverage Ratio.
Key Financial Measures and Indicators As a CRE finance company, we believe the key financial measures and indicators for our business are net income (loss) per share, Distributable Earnings (Loss) per share, Distributable Earnings per share prior to realized gains and losses, which includes charge-offs of principal and/or accrued interest receivable, dividends declared per share, book value per share, adjusted book value per share, Net Debt-to-Equity Ratio and Total Leverage Ratio.
As a transitional lender, we may from time to time execute loan modifications with borrowers when and if appropriate, which may include additional equity contributions from them, repurposing of reserves, pledge of additional collateral or other forms of credit support, provide additional guarantees, temporary deferrals of interest or principal, and/or partial deferral of coupon interest as payment-in-kind interest.
As a transitional lender, we may from time to time execute loan modifications with borrowers when and if appropriate, which may include additional equity contributions from them, repurposing of reserves, pledges of additional collateral or other forms of credit support, additional guarantees, temporary deferrals of interest or principal, partial deferral of coupon interest as payment-in-kind interest, and/or a discounted loan payoff.
Income from Equity Method Investment During the year ended December 31, 2023, we recognized income from equity method investment of $0.6 million compared to $2.5 million recognized during the year ended December 31, 2022 as a result of a decline in income earned by our investee, driven primarily by the loans held by the equity method investee being placed on non-accrual status effective April 1, 2023.
Loss (Income) from Equity Method Investment During the year ended December 31, 2024, we recognized loss from equity method investment of $0.2 million compared to income of $0.6 million recognized during the year ended December 31, 2023 as a result of a decline in income earned by our investee, driven primarily by the loan held by the investee being placed on non-accrual status effective April 1, 2023.
While Distributable Earnings (Loss) excludes the impact of our provision for or reversal of current expected credit loss reserve, principal charge-offs are recognized through Distributable Earnings (Loss) when deemed non-recoverable.
While Distributable Earnings (Loss) excludes the impact of our provision for or reversal of current expected credit loss reserve, charge-offs of principal and/or accrued interest receivable are recognized through Distributable Earnings (Loss) when deemed non-recoverable.
Real estate assets are evaluated for indicators of impairment on a quarterly basis.
Real estate assets held-for-investment are evaluated for indicators of impairment on a quarterly basis.
On June 30, 2023, we acquired legal title to a mixed-use property located in New York, NY and the equity interests therein through an assignment-in-lieu of foreclosure. The mixed-use property contains office, retail, and signage components.
On June 30, 2023, we acquired legal title to a mixed-use property located in New York, NY and the equity interests in the borrower through an assignment-in-lieu of foreclosure and is comprised of office, retail, and signage components.
As of December 31, 2023, the mixed-use property appears as part of real estate owned, net and related lease intangibles, net appear within other assets and other liabilities on our consolidated balance sheet and is unencumbered. Refer to Note 5 to our consolidated financial statements for additional details.
As of December 31, 2024, the mixed-use property appears as part of real estate owned, net and related lease intangibles, net appear within other assets and other liabilities on our consolidated balance sheet. See Note 5 to our consolidated financial statements for additional details.
As of December 31, 2023, we were in compliance with all REIT requirements.
As of December 31, 2024, we were in compliance with all REIT requirements.
We may instead elect to employ different methods to estimate credit losses that also conform to ASU 2016-13 and related guidance. For such loan we would separately measure the specific reserve for each loan by using the estimated fair value of the loan’s collateral.
We may instead elect to employ different methods to estimate credit losses that also conform to ASC 326 and related guidance. For such loans, we would separately measure the specific reserve for each loan by using the estimated fair value of the loan’s collateral.
Following a reasonable and supportable forecast period, we use a straight-line method of reverting to the historical loss rate. Additionally, we assess the obligation to extend credit through our unfunded loan commitments over each loan’s contractual period, adjusted for projected fundings from interest reserves, if applicable, which is considered in the estimate of the general CECL reserve.
Following a reasonable and supportable forecast period, we use a straight-line method of reverting to the historical loss rate. Additionally, we assess the obligation to extend credit through our unfunded loan commitments through their expected remaining duration, adjusted for projected fundings from interest reserves, if applicable, which is considered in the estimate of the general CECL reserve.
Debt related to real estate owned is non-recourse to us and is initially recorded at its estimated fair value at the time of foreclosure, deed-in-lieu of foreclosure, or assignment-in-lieu of foreclosure.
Debt related to real estate owned is initially recorded at its estimated fair value at the time of foreclosure, deed-in-lieu of foreclosure, or assignment-in-lieu of foreclosure.
(2) Weighted average is based on unpaid principal balance. (3) Term to fully extended maturity is determined based on the maximum maturity of each of the corresponding loans, assuming all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date.
(2) Term to fully extended maturity is determined based on the maximum maturity of each of the corresponding loans, assuming all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date.
These estimates include unemployment rates, price indices for commercial properties, and market liquidity, all of which may influence the likelihood and magnitude of potential credit losses for our loans during their anticipated term.
These estimates include unemployment rates, price indices for commercial properties, and market liquidity, all of which may influence the likelihood and magnitude of potential credit losses for our loans during their expected remaining duration.
If the estimated fair value of the loan's collateral is less than the carrying value of the loan, an asset-specific reserve is created as a component of our overall current expected credit loss reserve.
If the estimated fair value of the collateral is less than the carrying value of the loan, an asset-specific reserve is created as a component of our overall current expected credit loss reserve. Specific reserves are equal to the excess of a loan’s carrying value to the estimated fair value of the collateral.
Estimates of fair market values used to determine specific CECL reserves as of December 31, 2023 include assumptions of property specific cash flows over estimated holding periods, assumptions of property redevelopment costs, discount rates ranging from 7.5% to 9.5%, and market and terminal capitalization rates ranging from 6.0% to 8.3%.
Estimates of fair values used to determine specific CECL reserves as of December 31, 2024 include assumptions of property specific cash flows over estimated holding periods, assumptions of property redevelopment costs, assumptions of leasing activities, discount rates ranging from 6.0% to 9.5%, and market and terminal capitalization rates ranging from 5.0% to 8.25%.
Gain on Extinguishment of Debt During the year ended December 31, 2023, we recognized a gain on extinguishment of debt of $2.2 million, inclusive of $0.5 million of unamortized deferred financing costs, as a result of the retirement of $22.0 million of principal of our secured term loan for a price of $19.3 million.
During the year ended December 31, 2023, we recognized a gain on extinguishment of debt of $2.2 million as a result of the retirement of $22.0 million of principal of our secured term loan for a price of $19.3 million.
Some of our borrowers may experience delays in the execution of their business plans or changes in market conditions which may impact the performance of the underlying collateral asset, borrower, or sponsor.
Some of our borrowers may experience delays in the execution of their business plans, changes in their capital position and available liquidity, and/or changes in market conditions which may impact the performance of the underlying collateral asset, borrower, or sponsor.
As of December 31, 2023, five of our loans were financed with notes payable. Secured Term Loan We have a secured term loan which we originally entered into on August 9, 2019.
As of December 31, 2024, three of our loans were financed with notes payable. 64 Secured Term Loan We have a secured term loan which we originally entered into on August 9, 2019.
Additionally, further adjustments may be made based upon loan positions senior to ours, the risk rating of a loan, whether a loan is a construction loan, or the economic conditions specific to the property type of a loan’s underlying collateral.
Additionally, further adjustments may be 74 made based upon loan positions senior to ours, the risk rating of a loan, whether a loan is a construction loan and whether the loan’s initial maturity is near-term, or the economic conditions specific to the property type of a loan’s underlying collateral.
In instances where we have multiple loan participations with the same lender, the financings are generally not cross-collateralized. Each of our loan participations sold is generally term-matched to its underlying loan.
In instances where we have multiple loan participations with the same lender, the financings are generally not cross-collateralized. Each of our loan participations sold is generally term-matched to its underlying loan. As of December 31, 2024, we had no loan participations sold.
Non-recoverability is determined (i) upon the resolution of a loan (i.e., when the loan is repaid, fully or partially, or when we acquire title in the case of foreclosure, deed-in-lieu of foreclosure, or assignment-in-lieu of foreclosure), or (ii) with respect to any amount due under any loan, when such amount is determined to be uncollectible.
Non-recoverability is determined (i) upon the resolution of a loan (i.e., when the loan is repaid, fully or partially, when we acquire title in the case of foreclosure, deed-in-lieu of foreclosure, or assignment-in-lieu of foreclosure, or when the loan is sold or anticipated to be sold for an amount less than its carrying value), or (ii) with respect to any amount due under any loan, when such amount is determined to be uncollectible.
As of December 31, 2023, aggregate borrowings outstanding under our repurchase agreements and term participation facility totaled $4.3 billion, with a weighted average coupon of SOFR plus 2.76% per annum based on unpaid principal balance.
As of December 31, 2024, aggregate borrowings outstanding under our repurchase agreements and term participation facility totaled $3.7 billion, with a weighted average spread of SOFR plus 2.75% per annum based on unpaid principal balance.
(3) Weighted averages are based on unpaid principal balance. (4) Represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon, and fees received, based on the applicable floating benchmark rate/floors (if applicable), in place as of December 31, 2023.
(2) Net of specific CECL reserve of $120.9 million. (3) Weighted averages are based on unpaid principal balance. (4) Represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon, and fees received, based on the applicable floating benchmark rate/floors (if applicable), in place as of December 31, 2024.
Grading criteria include, but are not limited to, as-is or as-stabilized debt yield, term of loan, property type, property or collateral location, loan type and other more subjective variables that include, but is not limited to, as-is or as-stabilized collateral value, market conditions, industry conditions and sponsor’s financial stability.
Grading criteria include, but are not limited to, as-is or as-stabilized debt yield, term of loan, property type, property or collateral location, loan type, structure, collateral cash flow volatility and other more subjective variables that include, but are not limited to, as-is or as-stabilized collateral value, market conditions, industry conditions, borrower/sponsor financial stability, and borrower/sponsor exit plan.
Grading criteria include, but are not limited to, as-is or as-stabilized debt yield, term of loan, property type, property or collateral location, loan type and other more subjective variables that include, but is not limited to, as-is or as-stabilized collateral value, market conditions, industry conditions and sponsor’s financial stability.
Grading criteria include, but are not limited to, as-is or as-stabilized debt yield, term of loan, property type, property or collateral location, loan type, structure, collateral cash flow volatility and other more subjective variables that include, but are not limited to, as-is or as-stabilized collateral value, market conditions, industry conditions, borrower/sponsor financial stability, and borrower/sponsor exit plan.
The following table details the income tax treatment for our common stock dividends: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Ordinary dividends 30.9 % 100.0 % 98.2 % Capital gain dividends 0.0 % 0.0 % 1.8 % Nondividend distributions 69.1 % 0.0 % 0.0 % Total 100.0 % 100.0 % 100.0 % Refer to Note 13 to our consolidated financial statements for additional information about our income taxes.
The following table details the income tax treatment for our common stock dividends: Year Ended December 31, 2024 December 31, 2023 December 31, 2022 Ordinary dividends 50.6 % 30.9 % 100.0 % Capital gain dividends 0.0 % 0.0 % 0.0 % Nondividend distributions 49.4 % 69.1 % 0.0 % Total 100.0 % 100.0 % 100.0 % See Note 13 - Income Taxes to our consolidated financial statements for additional information about our income taxes.
As circumstances warrant, we and our subsidiaries may also issue common equity, preferred equity and/or debt, incur other debt, including term loans, or explore sales of certain of our loan receivables 66 or real estate owned properties from time to time on an opportunistic basis, dependent upon market conditions and available pricing.
As circumstances warrant, we and our subsidiaries may also issue common equity, preferred equity and/or debt, incur other debt, including term loans, or explore sales of certain of our loans receivable or real estate owned assets from time to time, dependent upon market conditions and available pricing.
As of December 31, 2023, six of our loans were financed under the term participation facility. Loan Participations Sold We finance certain of our loans via the sale of a participation in such loans, and we present the loan participations sold as a liability on our consolidated balance sheet when such arrangements do not qualify as sales under GAAP.
Loan Participations Sold We may finance certain of our loans via the sale of a participation in such loans, and we present the loan participations sold as a liability on our consolidated balance sheet when such arrangements do not qualify as sales under GAAP.
(2) The allocation of our secured financings and secured term loan is based on the earlier of the fully extended maturity date (assuming conditions to extend are met) of each individual borrowing or the maximum maturity date under the respective agreement, and assumes five loans with aggregate borrowings outstanding of $250.7 million that are in maturity default have a contractual obligation to pay in less than one year.
(2) The allocation of our secured financings and secured term loan is based on the earlier of the fully extended maturity date (assuming conditions to extend are met) of each individual corresponding loan receivable or the maximum maturity date under the respective financing agreement, and assumes seven loans that are in maturity default that represent collateral for aggregate borrowings outstanding of $354.1 million that are in maturity default have a contractual obligation to pay in less than one year.
The majority of our floating rate loans were financed with floating rate liabilities indexed to SOFR, which resulted in approximately $1.2 billion of net floating rate exposure.
All of our encumbered floating rate loans were financed with floating rate liabilities indexed to SOFR, which resulted in approximately $1.3 billion of net floating rate exposure.
The following table sets forth, as of December 31, 2023 and 2022, our sources of available liquidity ($ in thousands): December 31, 2023 December 31, 2022 Cash and cash equivalents $ 187,301 $ 306,456 Loan principal payments held by servicer (1) 2,200 - Approved and undrawn credit capacity (2) 48,055 213,113 Total sources of liquidity $ 237,556 $ 519,569 (1) Represents loan principal payments held in lockboxes or by our third-party loan servicer as of the balance sheet date which were remitted to us during the subsequent remittance cycle, net of the related secured debt balance.
The following table sets forth, as of December 31, 2024 and 2023, our sources of available liquidity ($ in thousands): December 31, 2024 December 31, 2023 Cash and cash equivalents $ 99,075 $ 187,301 Loan principal payments held by servicer (1) - 2,200 Approved and undrawn credit capacity (2) 2,599 48,055 Total sources of liquidity $ 101,674 $ 237,556 (1) Represents loan principal payments held in lockboxes or by our third-party loan servicer as of the balance sheet date which were remitted to us during the subsequent remittance cycle, net of the related financing balance if applicable.
The following table sets forth the calculation of our book value and our adjusted book value per share as of December 31, 2023 and 2022 ($ in thousands, except share and per share data): December 31, 2023 December 31, 2022 Equity $ 2,299,900 $ 2,456,471 Number of shares of common stock outstanding and RSUs 141,313,339 140,542,274 Book Value per share (1) $ 16.28 $ 17.48 Add back: accumulated depreciation on real estate owned and accumulated amortization of related lease intangibles $ 0.18 $ 0.11 Add back: general CECL reserve $ 0.57 $ 0.61 Adjusted Book Value per share $ 17.03 $ 18.20 (1) Calculated as (i) total equity divided by (ii) number of shares of common stock outstanding and RSUs at period end.
The following table sets forth the calculation of our book value and our adjusted book value per share as of December 31, 2024 and 2023 ($ in thousands, except share and per share data): December 31, 2024 December 31, 2023 Equity $ 2,008,086 $ 2,299,900 Number of shares of common stock outstanding and RSUs 142,187,015 141,313,339 Book Value per share (1) $ 14.12 $ 16.28 Add back: accumulated depreciation and amortization on real estate owned and related lease intangibles 0.03 0.18 Add back: general CECL reserve 1.02 0.57 Adjusted Book Value per share $ 15.17 $ 17.03 (1) Calculated as (i) total equity divided by (ii) number of shares of common stock outstanding and RSUs at period end. 58 II.
In determining Distributable Earnings (Loss) per share and Distributable Earnings per share prior to realized gains and losses, the dilutive effect of unvested RSUs is considered. The weighted average diluted shares outstanding used for Distributable Earnings (Loss) has been adjusted from weighted average diluted shares under GAAP to include weighted average unvested RSUs.
The weighted average diluted shares outstanding used for Distributable Earnings (Loss) and Distributable Earnings per share prior to realized gains and losses have been adjusted from weighted average diluted shares under GAAP to include weighted average unvested RSUs.
Unrealized (Loss) Gain on Interest Rate Cap During the year ended December 31, 2023, we recognized a $5.2 million unrealized loss on interest rate cap, compared to a $6.0 million unrealized gain on interest rate cap during the year ended December 31, 2022.
Unrealized Loss on Interest Rate Cap During the year ended December 31, 2024, we recognized a $1.4 million unrealized loss on interest rate cap, compared to a $5.2 million unrealized loss on interest rate cap during the year ended December 31, 2023.
Derivatives As part of the agreement to amend the terms of our debt related to real estate owned on June 2, 2021, we acquired an interest rate cap with a notional amount of $290.0 million, a strike rate of 3.00%, and a maturity date of February 15, 2024 for $275,000.
Derivatives On June 2, 2021 and in connection with a modification our debt related to real estate owned, we acquired an interest rate cap with a notional amount of $290.0 million, a strike rate of 3.00%, and a maturity date of February 15, 2024.
On February 7, 2024, we modified this loan agreement to provide for, among other things, an extension of the contractual maturity date to November 9, 2024, a $10.0 million principal paydown, and partial recourse to us.
On February 7, 2024, we modified our debt related to real estate owned to provide for, among other things, an extension of the contractual maturity date to November 9, 2024, a $10.0 million principal paydown, and the designation of a portion of the loan becoming partial recourse to us.
As of December 31, 2023, outstanding borrowings under these facilities had a weighted average term to initial maturity and fully extended maturity of 1.2 years and 2.7 years, respectively, assuming all conditions to extend are met.
As of December 31, 2024, the loans receivable securing the outstanding borrowings under these facilities had a weighted average term to initial maturity and fully extended maturity of 0.6 years and 1.6 years, respectively, assuming all conditions to extend are met.
Additionally, certain financial covenants in our financing agreements require us to maintain minimum levels of liquidity. We currently maintain, and seek to maintain, cash and liquidity to comply with minimum liquidity requirements under our financings, and we also maintain and seek to maintain excess cash and liquidity to, if necessary, de-lever certain of our secured financings, including our repurchase agreements.
Additionally, certain financial covenants in our financing agreements require us to maintain minimum levels of liquidity. We currently maintain, and seek to maintain, cash and liquidity to comply with minimum liquidity requirements under our financings.
As of December 31, 2023, our book value per share was $16.28, our adjusted book value per share was $17.03, our Net-Debt-to-Equity Ratio was 2.4x, and our Total Leverage Ratio was 2.8x.
As of December 31, 2024, our book value per share was $14.12, our adjusted book value per share was $15.17, our Net Debt-to-Equity Ratio was 2.4x, and our Total Leverage Ratio was 2.8x.
Concurrent with this modification, we purchased an interest rate cap for $0.5 million which provides for a strike rate of 5.00% through the extended contractual maturity date.
Concurrent with this modification, we purchased an interest rate cap with a notional amount of $280.0 million and a strike rate of 5.00% through the then extended contractual maturity date.
Generally, we use SOFR as the benchmark index in both our floating rate loans and floating rate financings. As of December 31, 2023, 98.0% of our loans based on unpaid principal balance were floating rate and indexed to SOFR.
Generally, we use SOFR as the benchmark index in both our floating rate loans and floating rate financings. As of December 31, 2024, 97.9% of our loans receivable held-for-investment based on unpaid principal balance were floating rate and indexed to SOFR.
Future compliance with our financial covenants is dependent upon the results of our operating activities, our financial condition, and the overall market conditions in which we and our borrowers operate. As market conditions evolve, we may work with our counterparties to request modifications of financial covenants as needed.
Future compliance with our financial covenants is dependent upon the results of our operating activities, our financial condition, and the overall market conditions in which we and our borrowers operate.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Year Ended December 31, 2022 and 2021” in our Form 10-K, which is accessible on the SEC’s website at www.sec.gov , for a comparison of year ended December 2022 and 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Year Ended December 31, 2023 and 2022” in our Form 10-K for the year ended December 31, 2023, filed with the SEC on February 20, 2024, which is accessible on the SEC’s website at www.sec.gov , for a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022.
As of December 31, 2023, our secured term loan had an outstanding balance of $725.5 million and our debt related to real estate owned had an outstanding balance of $290.0 million.
As of December 31, 2024, our secured term loan had an outstanding balance of $717.8 million and our debt related to real estate owned had an outstanding balance of $275.0 million.
Further, (i) our tangible net worth, as defined in the agreements, shall not be less than $2.06 billion as of each measurement date plus 75% of proceeds from future equity issuances; (ii) cash liquidity shall not be less than the greater of (x) $50 million or (y) 5% of our recourse indebtedness; and (iii) our indebtedness shall not exceed 77.8% of our total assets.
Further, (i) our tangible net worth, as defined in the agreements, shall not be less than $1.86 billion as of each measurement date; (ii) cash liquidity shall not be less than the greater of (x) $50 million or (y) 5% of our recourse indebtedness (which includes our secured term loan); and (iii) our indebtedness shall not exceed 77.8% of our total assets.
Expenses increased by $25.5 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to: (i) an increase in interest expense on debt related to real estate owned of $9.5 million primarily as a result of reference rate increases over the comparative period; (ii) an increase in stock-based compensation of $9.1 million during the comparative period, due to restricted stock units granted in June 2022 being outstanding for the full period in 2023 and additional awards granted in 2023; 64 (iii) an increase in operating expenses from real estate owned of $7.5 million during the comparative period, due to increased variable operating expenses in connection with higher occupancy levels at the hotel portfolio during the comparative period and expenses incurred at the mixed-use property we acquired legal title to on June 30, 2023; (iv) an increase in incentive fees of $1.6 million as a result of core earnings over the trailing four quarters being in excess of a 7% hurdle as of March 31, 2023; (v) partially offset by a decrease in general and administrative expenses of $2.1 million primarily as a result of decreases in non-recurring charges as well as certain corporate overhead items incurred compared to the comparative period; (vi) further offset by a decrease in management fees of $1.3 million as a result of lower stockholders’ equity over the comparative period due to shares repurchased in 2022 and principal charge-offs taken.
Expenses increased by $9.6 million during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to: (i) an increase in operating expenses from real estate owned of $8.3 million during the comparative period, due to an increase in professional fees incurred primarily as a result of the modification of our debt related to real estate owned, an increase in variable operating expenses in connection with higher occupancy levels at our hotel portfolio, and expenses incurred at the mixed-use property we acquired legal title to on June 30, 2023 being included for the full year; 67 (ii) an increase in interest expense on debt related to real estate owned of $3.0 million primarily as a result of increased deferred financing costs recognized from fees incurred upon the modification of our debt related to real estate owned over the comparative period; (iii) an increase in stock-based compensation of $1.5 million during the comparative period, due to restricted stock units granted during the year ended December 31, 2024, net of restricted stock grant forfeitures; (iv) an increase in depreciation and amortization from real estate owned of $1.2 million during the comparative period, primarily due to a full year of depreciation and amortization recognized at the mixed-use property we acquired legal title to on June 30, 2023; (v) offset by a decrease in management fees of $1.9 million as a result of lower stockholders’ equity over the comparative period; (vi) further offset by a decrease in incentive fees of $1.6 million as a result of core earnings over the trailing four quarters being in excess of a 7% hurdle as of March 31, 2023 but below the hurdle on a trailing four quarters basis in all subsequent periods; (vii) further offset by a decrease in general and administrative expenses of $0.9 million primarily as a result of decreases in non-recurring charges and certain corporate overhead items incurred.
Furthermore, the Company presents Distributable Earnings prior to realized gains and losses, which includes principal charge-offs, as the Company believes this more easily allows our Board, Manager, and investors to compare our operating performance to our peers, to assess our ability to declare and pay dividends, and to determine our compliance with certain financial covenants.
Furthermore, we present Distributable Earnings prior to realized gains and losses, which such gains and losses include charge-offs of principal and/or accrued interest receivable, as we believe this more easily allows our Board, Manager, and investors to compare our operating performance to our peers, to assess our ability to declare and pay dividends, and to determine our compliance with certain financial covenants.
(4) Amounts include the related future interest payment obligations, which are estimated by assuming the amounts outstanding under our secured financing agreements and SOFR in effect as of December 31, 2023 will remain constant into the future. This is only an estimate, as actual amounts borrowed and rates will vary over time.
(3) Amounts include the related future interest payment obligations, which are estimated by assuming the amounts outstanding under our secured financing agreements and SOFR in effect as of December 31, 2024 will remain constant into the future. Actual amounts borrowed and rates will vary over time. Our floating rate loans and related liabilities are indexed to SOFR.
As of December 31, 2023, our debt related to real estate owned has an unpaid principal balance of $290.0 million, a carrying value of $289.9 million and a stated rate of one-month SOFR plus 2.83%, subject to a one-month SOFR floor of 0.75%. See Derivatives below for further detail of our interest rate cap.
As of December 31, 2024, our debt related to real estate owned has an unpaid principal balance of $275.0 million, a carrying value of $274.6 million and a stated rate of SOFR plus 2.94%. See Derivatives below for further detail of our interest rate cap.
During the year ended 2022, there was no such adjustment.
During the year ended December 31, 2024, there was no such adjustment.
Cash Flows The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash for the years ended December 31, 2023 and 2022 ($ in thousands): December 31, 2023 December 31, 2022 Net cash flows provided by operating activities $ 111,140 $ 111,028 Net cash flows used in investing activities (39,337 ) (773,302 ) Net cash flows (used in) provided by financing activities (205,073 ) 676,297 Net (decrease) increase in cash and cash equivalents and restricted cash $ (133,270 ) $ 14,023 68 We experienced a net decrease in cash and cash equivalents and restricted cash of $133.3 million during the year ended December 31, 2023, compared to a net increase of $14.0 million during the year ended December 31, 2022.
Cash Flows The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash for the years ended December 31, 2024 and 2023 ($ in thousands): December 31, 2024 December 31, 2023 Net cash flows provided by operating activities $ 84,517 $ 111,140 Net cash flows provided by (used in) investing activities 779,911 (39,337 ) Net cash flows used in financing activities (945,817 ) (205,073 ) Net decrease in cash and cash equivalents and restricted cash $ (81,389 ) $ (133,270 ) We experienced a net decrease in cash, cash equivalents, and restricted cash of $81.4 million during the year ended December 31, 2024, compared to a net decrease of $133.3 million during the year ended December 31, 2023.
For both the funded and unfunded portions of our loans, we consider our internal risk rating of each loan as the primary credit quality indicator underlying our assessment.
For both the funded and unfunded portions of our loans, we consider our internal risk rating of each loan as the primary credit quality indicator underlying our assessment. We evaluate the credit quality of each of our loans receivable on an individual basis and assign a risk rating at least quarterly.
(5) Percent of total construction loans based on loan commitments as of December 31, 2023. Real Estate Owned On February 8, 2021, we acquired legal title to a portfolio of seven limited service hotels located in New York, NY through a foreclosure.
Real Estate Owned On February 8, 2021, we acquired legal title to a portfolio of seven limited service hotels located in New York, NY through a foreclosure.
The increase is primarily due to an increase in revenue from real estate owned of $15.7 million due to higher overall average occupancy, ADR, and RevPAR levels at the hotel portfolio compared to the year ended December 31, 2022 and revenue generated from the mixed-use property we acquired legal title to on June 30, 2023.
The decrease in total net revenue was partially offset by an increase in revenue from real estate owned of $8.2 million due to revenue generated from the mixed-use property we acquired legal title to on June 30, 2023 being included for the full year and higher overall average occupancy, RevPAR, and ADR levels at our hotel portfolio compared to the year ended December 31, 2023.
The weighted average risk rating of our total loan portfolio was 3.3 at December 31, 2023. Current Expected Credit Losses The current expected credit loss reserve required under GAAP reflects our current estimate of potential credit losses related to our loan commitments.
The weighted average risk rating of our total loan portfolio was 3.6 at December 31, 2024. Current Expected Credit Losses The current expected credit loss reserve required under GAAP reflects our current estimate of potential credit losses related to our loan portfolio, which may fluctuate depending on market conditions and changes in our loan portfolio.
As of December 31, 2023, we had 138,745,357 shares of our common stock outstanding, representing $2.3 billion of equity, and also had $5.7 billion of outstanding borrowings under our secured financings, our secured term loan, and our debt related to real estate owned.
As of December 31, 2024, we had 139,362,657 shares of our common stock outstanding, representing $2.0 billion of equity, and also had $4.9 billion of outstanding borrowings under our secured financings, our secured term loan, and our debt related to real estate owned.
In certain circumstances we may determine that a loan is no longer suited for the WARM method due to its unique risk characteristics or where we have deemed the borrower/sponsor to be experiencing financial difficulty and the repayment of the loan’s principal is collateral-dependent.
In certain circumstances, we may determine that a loan is no longer suited for the WARM method due to (i) its unique risk characteristics, (ii) we have deemed the borrower/sponsor to be experiencing financial difficulty and the repayment of the loan’s principal is collateral-dependent and/or (iii) we anticipate assuming legal title/and or physical possession of the underlying collateral property and the fair value of the collateral asset is determined to be below our carrying value.
During the year ended December 31, 2022, we recorded a provision for current expected credit losses of $84.4 million, which consisted of a $65.5 million increase in our specific CECL reserve prior to a principal charge-off, and an increase of $18.9 million in 59 our general CECL reserve.
During the year ended December 31, 2023, we recorded a provision for current expected credit losses of $153.7 million, which consisted of a $6.0 million reversal of our general CECL reserve and a $159.6 million increase in our specific CECL reserve prior to a principal charge-off.
During the year ended December 31, 2023, we had net income per share of $0.02, Distributable Earnings (Loss) per share of $0.28, and Distributable Earnings per share prior to realized gains and principal charge-offs of $1.31, and dividends declared per share of $1.24.
During the year ended December 31, 2024, we had net loss per share of $1.60, Distributable Loss per share of $0.67, Distributable Earnings per share prior to realized gains and losses of $0.81, and dividends declared per share of $0.60.
Our Portfolio The below table summarizes our loans receivable held-for-investment as of December 31, 2023 ($ in thousands): Weighted Average (3) Number of Loans Loan Commitment (1) Unpaid Principal Balance Carrying Value (2) Yield to Maturity (4) Term to Initial Maturity (in years) Term to Fully Extended Maturity (in years) (5) LTV (6) Senior and subordinate loans 65 $ 8,121,436 $ 7,044,524 $ 6,947,796 9.1 % 1.2 2.6 69.2 % (1) Loan commitment represents principal outstanding plus remaining unfunded loan commitments. 56 (2) Net of specific CECL reserve of $72.6 million.
Our Portfolio The below table summarizes our loans receivable held-for-investment as of December 31, 2024 ($ in thousands): Weighted Average (3) Number of Loans Loan Commitment (1) Unpaid Principal Balance Carrying Value (2) Yield to Maturity (4) Term to Initial Maturity Term to Fully Extended Maturity (5) Weighted Average Origination LTV (6) Weighted Average Adjusted LTV (7) Senior and subordinate loans 52 $ 6,698,596 $ 6,200,290 $ 6,069,372 7.6 % 0.7 years 1.7 years 70.4% 72.2 % (1) Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
LTV is updated only in connection with a partial loan paydown and/or release of collateral, material changes to expected project costs, the receipt of a new appraisal (typically in connection with financing or refinancing activity) or a change in our loan commitment. Totals represent weighted average based on loan commitment, including non-consolidated senior interests and pari passu interests.
(7) Adjusted LTV represents origination LTV updated only in connection with a partial loan paydown and/or release of collateral, material changes to expected project costs, the receipt of a new appraisal (typically in connection with financing or refinancing activity) or a change in our loan commitment.

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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 as of December 31, 2023 the impact on our interest income and interest expense for the twelve-month period following December 31, 2023, excluding loans classified as held-for-sale as of December 31, 2023, assuming a decrease in SOFR of 50 and 100 basis points and an increase in SOFR of 50 and 100 basis points in the applicable interest rate benchmark (based on SOFR of 5.35% as of December 31, 2023) ($ in thousands, except per share data): 71 Net Floating Decrease Increase Rate Exposure Change in 100 Basis Points 50 Basis Points 50 Basis Points 100 Basis Points $ 1,232,069 Net interest income $ (8,071 ) $ (4,036 ) $ 4,036 $ 8,071 Net interest income per share $ (0.06 ) $ (0.03 ) $ 0.03 $ 0.06 Risks related to fluctuations in cash flows and asset values associated with movements in interest rates may also contribute to the risk of nonperformance on floating rate assets.
Biggest changeThe following table illustrates as of December 31, 2024 the impact on our net interest income and net interest income per share for loans receivable held-for-investment for the twelve-month period following December 31, 2024, assuming a decrease in SOFR of 50 and 100 basis points and an increase in SOFR of 50 and 100 basis points in the applicable interest rate benchmark (based on SOFR of 4.33% as of December 31, 2024) ($ in thousands, except per share data): Net Floating Decrease Increase Rate Exposure (1) Change in 100 Basis Points 50 Basis Points 50 Basis Points 100 Basis Points $ 1,258,968 Net interest income $ (1,187 ) $ (697 ) $ 697 $ 2,308 Net interest income per share $ (0.01 ) $ (0.00 ) $ 0.00 $ 0.02 (1) Excludes two loans receivable classified as held-for-sale as of December 31, 2024 with an associated financing of $85.9 million.
Real Estate Risk The market values of loans secured directly or indirectly by CRE assets are subject to volatility and may be adversely affected by a number of factors, including the interest rate environment; persistent inflation; increases in remote work trends; natural disasters or pandemics; national, regional, local and foreign economic conditions (which may be adversely affected by industry slowdowns and other factors); changes in social conditions; regional or local real estate conditions; geopolitical volatility, changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; changes to building or similar codes and government regulatory requirements (such as rent control and zoning laws); and changes in real property tax rates.
Real Estate Risk The market values of loans secured directly or indirectly by CRE assets are subject to volatility and may be adversely affected by a number of factors, including the interest rate environment; persistent inflation; increases in remote work trends; natural disasters or pandemics; national, regional, local and foreign economic conditions (which may be adversely affected by industry slowdowns and other factors); changes in social conditions; regional or local real estate conditions; geopolitical volatility, changes or continued weakness in specific industry segments; construction quality, age and design; changes to construction costs; demographic factors; changes to building or similar codes and government regulatory requirements (such as rent control and zoning laws); and changes in real property tax rates.
In general, an increase in prepayment rates accelerates the accretion of deferred income, including origination fees and exit fees, which increases interest income earned on the asset during the period of repayment. Conversely, if capital that is repaid is not subsequently redeployed into investment opportunities generating a similar return, future periods may experience reduced net interest income.
In general, an increase in prepayment rates accelerates the accretion of deferred income, 78 including origination fees and exit fees, which increases interest income earned on the asset during the period of repayment. Conversely, if capital that is repaid is not subsequently redeployed into investment opportunities generating a similar return, future periods may experience reduced net interest income.
Repayment / Extension Risk Loans are expected to be repaid at maturity, unless the borrower repays early or meets contractual conditions to qualify for a maturity extension. The granting of these extensions may cause a loan’s term to extend beyond the term of its related secured financing. Higher interest rates recently imposed by the U.S.
Repayment / Extension Risk Loans are generally expected to be repaid at maturity, unless the borrower repays early or meets contractual conditions to qualify for a maturity extension. The granting of these extensions may cause a loan’s term to extend beyond the term of its related secured financing. Higher interest rates recently imposed by the U.S.
Higher interest rates may also increase the number of our borrowers who may default because, among other things, they may 73 not be able to find replacement financing for our loan. Furthermore, there may be certain instances where, for loans which have been modified, we may not be able to maintain the associated financing on its existing terms.
Higher interest rates may also increase the number of our borrowers who may default because, among other things, they may not be able to find replacement financing for our loan. Furthermore, there may be certain instances where, for loans which have been modified, we may not be able to maintain the associated financing on its existing terms.
We may realize losses related to foreclosures or to the restructuring of the loans in our investment portfolio on terms that may be more favorable to borrowers than those underwritten at origination. We seek to manage these risks through our underwriting, loan structuring, financing structuring and asset management processes. 74
We may realize losses related to foreclosures or to the restructuring of the loans in our investment portfolio on terms that may be more favorable to borrowers than those underwritten at origination. We seek to manage these risks through our underwriting, loan structuring, financing structuring and asset management processes. 79
Weakness or volatility in the debt capital markets, the CRE and mortgage markets, changes in regulatory requirements, geopolitical volatility, and recent rapid increase in interest rates and the resulting market disruptions therefrom could adversely affect one or more of our lenders or potential lenders and could cause one or more of our lenders or potential lenders to be unwilling or unable to provide us with financing, increase the costs of or reduce the advance rate on existing financing or otherwise offer unattractive terms for that financing.
Weakness or volatility in the debt capital markets, the CRE and mortgage markets, changes in regulatory requirements, geopolitical volatility, and fluctuation in interest rates and the resulting market disruptions therefrom could adversely affect one or more of our lenders or potential lenders and could cause one or more of our lenders or potential lenders to be unwilling or unable to provide us with financing, increase the costs of or reduce the advance rate on existing financing or otherwise offer unattractive terms for that financing.
Federal Reserve may lead to an increase in the number of our borrowers who exercise or request additional extension options, or who may become unwilling or unable to make contractual payments when due.
Federal Reserve relative to recent historical standards may lead to an increase in the number of our borrowers who exercise or request additional extension options, or who may become unwilling or unable to make contractual payments when due.
In the case of a significant increase in interest rates, the cash flows of the collateral real estate assets to our loans may be insufficient to pay debt service due, which may contribute to nonperformance of, or in severe cases default on, our loans.
In the case of a significant increase in interest rates, the cash flows of the collateral real estate assets to our loans may be insufficient to pay debt service due, which may contribute to nonperformance of our loans.
Some of our borrowers may experience delays in the execution of their business plans or changes in market conditions which may impact the performance of the underlying collateral asset, borrower, or sponsor.
Some of our borrowers may experience delays in the execution of their business plans, changes in their capital position and available liquidity, and/or changes in market conditions which may impact the performance of the underlying collateral asset, borrower, or sponsor.
Such protections may include, without limitation: cash management accounts, “bad boy” carveout guarantees, completion guarantees, guarantor minimum net worth and liquidity requirements, approval rights over major decisions, and performance tests throughout the loan term.
Such protections may include, without limitation: cash management accounts, “bad boy” carveout guarantees, completion guarantees, guarantor minimum net worth and liquidity requirements, partial or full recourse to sponsors and/or guarantors, approval rights over major decisions, and performance tests throughout the loan term.
In the event that we are forced to foreclose, our broader Sponsor platform includes professionals experienced in CRE development, ownership, property management, and asset management which enables us to execute the workout of a troubled loan and protect investors’ capital in a way that we believe many non-traditional lenders cannot.
In the event that we are forced to foreclose, our broader Sponsor platform includes professionals experienced in CRE development, ownership, property management, and asset management which enables us to execute the workout of a troubled loan and protect investors’ capital in a way that we believe many non-traditional lenders cannot. 77 Capital Markets Risks We are exposed to risks related to the equity and debt capital markets which impact our related ability to raise capital through the issuance of our common stock or other debt or equity-related instruments.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk. Interest Rate Risk In early 2022, the U.S. Federal Reserve began a campaign to combat inflation by increasing interest rates. By the end of 2022, the U.S. Federal Reserve had raised interest rates by a total of 4.25%. While there still remains a risk that the U.S.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk. Interest Rate Risk In early 2022, the U.S. Federal Reserve began a campaign to combat inflationary pressures by increasing interest rates, ultimately resulting in benchmark interest rates increasing by 5.25% by the end of 2023. Although the U.S.
Despite this potential reversal in policy, rates have risen 5.25% since 2022 and remain high relative to recent historical trends. Higher interest rates imposed by the U.S. Federal Reserve may continue to increase our interest expense, negatively impact the ability of our borrowers to service their debt, and reduce the value of the CRE collateral underlying our loans.
The timing, direction, and extent of any future adjustment to benchmark interest rates by the U.S. Federal Reserve remain uncertain. High benchmark interest rates imposed by the U.S. Federal Reserve may continue to increase our interest expense, negatively impact the ability of our borrowers to service their debt, and reduce the value of the CRE collateral underlying our loans.
Removed
Federal Reserve will continue to increase interest rates if inflation persists or accelerates, recent moderation in inflationary pressures have reduced likelihood of such increases. Through recent public statements, the U.S. Federal Reserve has indicated that if inflation continues to moderate, it will consider cutting interest rates during 2024.
Added
Federal Reserve has reduced benchmark interest rates in recent months as a result of moderating inflation pressures, such benchmark rates remain high relative to recent historical standards. Additionally, the U.S. Federal Reserve has indicated that further changes in benchmark interest rates are dependent upon changes in prices and employment markets.
Removed
Capital Markets Risks We are exposed to risks related to the equity and debt capital markets which impact our related ability to raise capital through the issuance of our common stock or other debt or equity-related instruments.
Added
Conversely, in a period of declining interest rates, the interest income on floating rate investments would decline, while any decline in the interest we are charged on our floating rate debt may not equal or exceed the decrease in interest income and the interest expense we incur.
Removed
As of December 31, 2023, we have not received any margin calls under any of our repurchase agreements. During 2023, there was significant volatility in the banking sector resulting from several bank failures. Substantially all of our cash and cash equivalents currently on deposit with major financial institutions exceed insured limits.
Added
Risks related to fluctuations in cash flows and asset values associated with movements in interest rates may also contribute to the risk of nonperformance on floating rate assets.
Removed
Such deposits are redeemable upon demand and are maintained with financial institutions with strong credit profiles and we therefore believe bear minimal risk. 72 Further, we do not and have not had any financing relationships with any of the banks that have recently failed, and thus none of our future fundings are subject to the risk that one of the failed banks will not fund.
Added
As of December 31, 2024, we have not received any margin calls under any of our repurchase agreements.

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