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Claros Mortgage Trust, Inc.

Claros Mortgage Trust, Inc.CMTG财报

NYSE · 房地产 · 房地产

Claros Mortgage Trust, Inc. is a U.S.-based real estate investment trust that invests in diversified mortgage-related assets, including residential and commercial mortgage loans and mortgage-backed securities. It pursues stable, risk-adjusted long-term returns for shareholders via rigorous asset evaluation and active portfolio management.

What changed in Claros Mortgage Trust, Inc.'s 10-K — 2024 vs 2025

Top changes in Claros Mortgage Trust, Inc.'s 2025 10-K

534 paragraphs added · 501 removed · 402 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

28 edited+9 added−17 removed49 unchanged
In addition to our primary focus on major U.S. markets, we also seek to originate senior and subordinate loans on transitional CRE assets located in other markets that we believe demonstrate favorable demographic trends as a result of, among other factors, de‑urbanization, migration to states with lower tax rates, and perceived higher quality of life.
In addition to our primary focus on major U.S. markets, we also seek to originate senior and subordinate loans on transitional CRE assets located in other markets that we believe demonstrate favorable demographic trends as a result of, among other factors, de‑urbanization and migration to states with lower tax rates and perceived higher quality of life.
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.
Adjusted LTV should not be assumed to reflect our judgment of 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.
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.
We 11 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.
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.
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”). Our Investment Strategy We seek primarily to originate, co-originate and acquire senior and subordinate loans on transitional CRE assets located in major U.S. markets and generally intend to hold our loans to maturity.
We believe that this experience of our Sponsor and its affiliates enables our Manager to 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.
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 7 origination. Neither we nor our Manager employs personnel directly.
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 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.
Current market conditions, as well as changing marketing conditions from time to time, may attract more competitors, which may increase the supply of financing sources, which could adversely affect the volume and cost of our loans, and thereby adversely affect the market price of our common stock.
Current market conditions, as well as changing marketing conditions from time to time, may attract more competitors, which may increase the supply of financing sources, which could adversely affect our origination volume and cost of our loans, and thereby adversely affect the market price of our common stock.
Following the closing of an investment, the asset management team rigorously monitors the loan, with an emphasis on ongoing analyses of both quantitative and qualitative matters, including financial, legal, and market conditions.
Following the closing of an investment, the asset management team rigorously monitors the investment, with an emphasis on ongoing analyses of both quantitative and qualitative matters, including financial, legal, and market conditions.
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 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 in order to maximize recovery from a defaulted loan, assuming legal title and/or physical possession of the collateral property.
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.
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, 2025, we had $830.0 million of non-consolidated senior interests.
We seek to minimize the risks associated with recourse borrowings and generally seek to fund our loans on a term and benchmark index matched basis which seeks to minimize the differences between the durations and indices of our loans and those of the related financings, respectively, including in certain cases the potential use of derivatives.
We seek to minimize the risks associated with recourse borrowings and generally seek to fund our investments on a term and benchmark rate index matched basis which seeks to minimize the differences between the durations and rate indices of our investments and those of the related financings, respectively, including in certain cases the potential use of derivatives.
The allocation of our capital among our target assets will depend on prevailing market conditions at the time we invest and may change over time in response to changes in prevailing market conditions, including with respect to interest rates and general economic and capital market conditions as well as local economic conditions in markets where we are active.
The allocation of our capital among our target assets will depend on prevailing market conditions at the time we invest and may change over time in response to changes in prevailing market conditions, including with respect to interest rates and general economic and capital market conditions as well as local economic conditions in markets where we are active, or other conditions inherent in our portfolio.
The amount and type of leverage we may employ for particular loans will depend on our Manager’s assessment of such loan’s characteristics, including the level of in-place, if any, and projected stabilized operating cash flow, credit quality, liquidity, price volatility and other risks of the underlying collateral as well as the availability and attractiveness of particular types of financing at the relevant time.
The amount and type of leverage we may employ for particular investments will depend on our Manager’s assessment of such investments’ characteristics, including the level of in-place cash flow, if any, and projected stabilized operating cash flow, credit quality, liquidity, price volatility and other risks of the collateral property as well as the availability and attractiveness of particular types of financing at the relevant time.
(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.
(2) Net of specific CECL reserves of $365.4 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, 2025.
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.
To date, we have only invested in the U.S. Asset Management Our Manager proactively manages our portfolio from each investment’s closing to final resolution and our Sponsor has dedicated asset management employees to perform asset management services.
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.
Through the final resolution, the asset management team maintains regular contact with borrowers, servicers, property managers, and local market experts while monitoring the performance of the asset, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.
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.
As of December 31, 2025, our net debt-to-equity ratio was 1.9x. As of December 31, 2025, our Total Leverage Ratio was 2.5x, and we expect that, going forward, our Total Leverage Ratio will range from 2.0x to 3.0x.
Our Portfolio” in this Annual Report on Form 10-K. Our Financing Strategy We use diverse financing sources as part of a disciplined financing strategy. To date, we have financed our business through a combination of common stock issuances, repurchase agreements, a term participation facility, asset-specific financings, debt related to real estate owned, and a secured term loan.
Our Financing Strategy We seek diverse financing sources as part of a disciplined financing strategy. To date, we have financed our business through a combination of common stock issuances, repurchase agreements, a term participation facility, asset-specific financings, debt related to our real estate owned hotel portfolio, and a secured term loan.
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.
As of December 31, 2025, we had $4.2 billion of capacity under our repurchase agreements and term participation facility, of which $2.2 billion was outstanding. We currently have four master repurchase agreements with three counterparties.
Prior to the deployment of capital into investments, our Manager may cause our capital to be invested in any interest‑bearing short‑term investments, including money market funds, treasury bills, overnight repurchase agreements with primary federal reserve bank dealers collateralized by direct U.S. government obligations, and other instruments or investments reasonably determined by our Manager to be of high quality.
Investment Guidelines Our Board has established the following investment guidelines: • No investment will be made that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes; • No investment will be made that would require us to register as an investment company under the 1940 Act. 10 Prior to the deployment of capital into investments, our Manager may cause our capital to be invested in any interest‑bearing short‑term investments, including money market funds, treasury bills, overnight repurchase agreements with primary federal reserve bank dealers collateralized by direct U.S. government obligations, and other instruments or investments reasonably determined by our Manager to be of high quality.
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.
As of December 31, 2025, the loans receivable securing the outstanding borrowings under these facilities had a weighted average term to initial maturity and fully extended maturity of 0.5 years and 1.1 years, respectively, assuming all conditions to extend are met.
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 $6.1 billion diversified loan portfolio, based on carrying value, of senior and subordinate loans.
In addition, we may invest in assets other than our target assets, in each case subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and our exclusion from registration under the 1940 Act.
During the years ended December 31, 2024 and 2023 and in cooperation with our various financing counterparties, we made deleveraging payments to certain of our financing counterparties and expect to continue to do so as agreed with our lenders or on an as-needed basis.
However, under certain circumstances, we may determine not to do so or we may otherwise be unable to do so. We also seek to diversify our financing counterparties. During the years ended December 31, 2025 and 2024, we made deleveraging payments to certain of our financing counterparties and expect to continue to do so as agreed with our lenders.
The below table summarizes our loans receivable held-for-investment as of December 31, 2024 ($ 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.
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. 8 The table below summarizes our loans receivable held-for-investment as of December 31, 2025 ($ 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 33 $ 4,329,235 $ 4,057,357 $ 3,688,729 6.2 % 0.5 years 1.1 years 71.2% 76.3% (1) Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
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.
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, 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.
As of December 31, 2025, we had total capacity and unpaid principal balance of $195.8 million and $178.0 million, respectively, related to asset-specific financings in the form of notes payable. Subsequent to December 31, 2025, our notes payable were fully extinguished.
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.
Such real estate owned assets are not included in the summary of our loan portfolio table above. For additional information about our loan portfolio and real estate owned assets, refer to Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – II. Our Portfolio” in this Annual Report on Form 10-K.
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%.
Furthermore, as of December 31, 2025, we had debt related to our real estate owned hotel portfolio with an unpaid principal balance of $235.0 million and a secured term loan with an unpaid principal balance of $556.2 million.
Removed
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.
Added
Our Portfolio We began operations in August 2015 and, as of December 31, 2025, had a $3.7 billion diversified loan portfolio, based on carrying value, of senior and subordinate loans.
Removed
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.
Added
Loans with specific CECL reserves are reflected as 100% LTV.
Removed
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.
Added
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, 2025, based on carrying value: During the year ended December 31, 2025, we resolved $2.6 billion of unpaid principal balance prior to charge-offs, including $1.3 billion of watchlist loans and $324.6 million of loans classified as held-for-sale as of the prior year-end.
Removed
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.
Added
Total 2025 resolutions include (i) $863.9 million of full loan repayments, (ii) $93.8 million of partial loan repayments, (iii) $101.1 million of loan sales at par, (iv) $333.9 million of loan sales below par, (v) $811.6 million of discounted payoffs prior to charge-offs, and (vi) $392.8 million of mortgage or Uniform Commercial Code (“UCC”) foreclosures prior to charge-offs.
Removed
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.
Added
Subsequent to December 31, 2025, we resolved $388.7 million of unpaid principal balance prior to charge-offs, including $214.9 million of watchlist loans.
Removed
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.
Added
Total 2026 resolutions to date include (i) $240.8 million of full loan repayments, (ii) $76.6 million of mortgage foreclosures prior to charge-offs, and (iii) $71.3 9 million related to the assignment of our right, title, and interest in a loan receivable and the collateral property to our financing counterparty in exchange for the full extinguishment of amounts due under the related financing.
Removed
(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.
Added
To maximize recovery from certain defaulted loans, we have assumed legal title and/or physical possession of the collateral property underlying such loan receivables.
Removed
(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
As of December 31, 2025, our portfolio includes eight real estate owned assets with a total carrying value of $746.8 million (including related net lease intangible assets), of which six were acquired through mortgage or UCC foreclosures during the year ended December 31, 2025.
Removed
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
In January 2026, we refinanced our secured term loan with a new secured term loan which provides for an aggregate principal amount of $500.0 million and a maturity date of January 30, 2030. See Note 6 - Debt Obligations - Secured Term Loan to our consolidated financial statements for further detail.
Removed
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.
Removed
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
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.
Removed
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.
Removed
Investment Guidelines Our Board has established the following investment guidelines: • No investment will be made that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes; • No investment will be made that would require us to register as an investment company under the 1940 Act.
Removed
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.
Removed
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.
Removed
To the extent warranted by ongoing conditions specific to our borrowers or overall market conditions, we may make additional modifications when and if appropriate, and depending on the business plans, financial condition, liquidity and results of operations of our borrowers, among other factors.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

208 edited+54 added−30 removed500 unchanged
In addition, even if we are able to foreclose on the underlying collateral following a default on a mezzanine loan, we would be substituted for the defaulting borrower and, to the extent income generated on the underlying property is insufficient to meet outstanding debt obligations on the property, we may need to commit substantial additional capital and/or deliver a replacement guarantee by a creditworthy entity, which could include us, to stabilize the property and prevent additional defaults to lenders with existing liens on the property.
In addition, even if we are able to foreclose on the collateral property following a default on a mezzanine loan, we would be substituted for the defaulting borrower and, to the extent income generated on the underlying property is insufficient to meet outstanding debt obligations on the property, we may need to commit substantial additional capital and/or deliver a replacement guarantee by a creditworthy entity, which could include us, to stabilize the property and prevent additional defaults to lenders with existing liens on the property.
Our provisions for current expected credit loss reserve are evaluated on a quarterly basis. The determination of our provision for credit losses requires us to make certain estimates and judgments, which may be difficult to determine.
Our provisions for our current expected credit loss reserve are evaluated on a quarterly basis. The determination of our provision for credit losses requires us to make certain estimates and judgments, which may be difficult to determine.
In certain instances, we may be need to find replacement financing, if available, which could be on less favorable terms, or pledge additional collateral to our financing facilities, all of which may reduce available liquidity.
In certain instances, we may need to find replacement financing, if available, which could be on less favorable terms, or pledge additional collateral to our financing facilities, all of which may reduce available liquidity.
Although we maintain insurance policies, we cannot be certain that any or all of the costs and liabilities incurred in relation any cybersecurity attack or incident will be covered or that applicable insurance will be available to us in the future on economically reasonable terms or at all.
Although we maintain insurance policies, we cannot be certain that any or all of the costs and liabilities incurred in relation to any cybersecurity attack or incident will be covered or that applicable insurance will be available to us in the future on economically reasonable terms or at all.
Our charter authorizes our Board, without stockholder approval, to authorize the issuance of up to 500,000,000 shares of common stock, $0.01 par value per share, and up to 10,000,000 shares of preferred stock, $0.01 par value per share, of which 125 shares are classified as 12.5% Series A Redeemable Cumulative Preferred Stock.
Issuance of Stock Without Stockholder Approval . Our charter authorizes our Board, without stockholder approval, to authorize the issuance of up to 500,000,000 shares of common stock, $0.01 par value per share, and up to 10,000,000 shares of preferred stock, $0.01 par value per share, of which 125 shares are classified as 12.5% Series A Redeemable Cumulative Preferred Stock.
Certain provisions of the MGCL may have the effect of inhibiting a third-party from acquiring us or of impeding a change of control under circumstances that otherwise could provide our stockholders with the opportunity to realize a premium over the then-prevailing market price of the shares, including: • “business combination” provisions that, subject to limitations, prohibit certain business combinations between an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding shares of voting stock or an affiliate or associate of the corporation who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding stock of the corporation) or an affiliate of any interested stockholder and us for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes two super-majority stockholder voting requirements on these combinations; and • “control share” provisions that provide that holders of “control shares” of our company (defined as voting shares of stock that, if aggregated with all other shares of stock owned or controlled by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of issued and outstanding “control shares,” subject to certain exceptions) have no voting rights except to the extent approved by stockholders by the affirmative vote of at least two-thirds of all of the votes entitled to be cast on the matter, excluding all interested shares.
Certain provisions of the MGCL may have the effect of inhibiting a third-party from acquiring us or of impeding a change of control under circumstances that otherwise could provide our stockholders with the opportunity to realize a premium over the then-prevailing market price of the shares, including: • “business combination” provisions that, subject to limitations, prohibit certain business combinations between an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding shares of voting stock or an affiliate or associate of the corporation who, at any time within the two-year period immediately prior to the 47 date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding stock of the corporation) or an affiliate of any interested stockholder and us for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes two super-majority stockholder voting requirements on these combinations; and • “control share” provisions that provide that holders of “control shares” of our company (defined as voting shares of stock that, if aggregated with all other shares of stock owned or controlled by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of issued and outstanding “control shares,” subject to certain exceptions) have no voting rights except to the extent approved by stockholders by the affirmative vote of at least two-thirds of all of the votes entitled to be cast on the matter, excluding all interested shares.
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.
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; 23 • 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.
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.
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.
Federal 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.
Federal 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, North Africa, and South America 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 or capital markets; • 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.
See “—Risks Related to Our Company—Changes in laws or regulations governing our operations or those of our competitors, banks or other of our capital providers, or changes in the interpretation thereof, or newly enacted laws or regulations, could result in increased competition for our target assets or reduced access to capital, require changes to our business practices and collectively could adversely impact our revenues and impose additional costs on us, which could materially and adversely affect us.” Our investments are and may be concentrated in certain markets, property types and borrowers, among other factors, and will be subject to risk of default.
See “—Risks Related to Our Company—Changes in laws or regulations governing our operations or those of our competitors, banks or other of our capital providers, or changes in the interpretation thereof, or newly enacted laws or regulations, could result in increased competition for our target assets or reduced access to capital, require changes to our 14 business practices and collectively could adversely impact our revenues and impose additional costs on us, which could materially and adversely affect us.” Our investments are and may be concentrated in certain markets, property types and borrowers, among other factors, and will be subject to risk of default.
We have agreed to indemnify our Manager, its officers, stockholders, members, managers, directors, employees, consultants, personnel, any person controlling or controlled by our Manager and any of those person’s officers, stockholders, members, managers, directors, employees, consultants and personnel and any person providing sub-advisory services to our Manager with respect to all expenses, losses, damages, liabilities, demands, charges and claims arising from acts or omissions of our Manager or such person made in good faith in the performance of our Manager’s duties under the Management Agreement and not constituting fraud or gross negligence in the performance of our Manager’s duties under the Management Agreement.
We have agreed to indemnify our Manager, its officers, stockholders, members, managers, directors, employees, consultants, personnel, any person controlling or controlled by our Manager and any of those person’s officers, stockholders, members, managers, directors, employees, consultants and personnel and any person providing sub-advisory services to our Manager with respect to all expenses, losses, damages, liabilities, demands, charges and claims arising from acts or omissions of our Manager or such person 41 made in good faith in the performance of our Manager’s duties under the Management Agreement and not constituting fraud or gross negligence in the performance of our Manager’s duties under the Management Agreement.
This would involve creating a special-purpose vehicle, contributing a pool of our assets to the entity, and selling interests in the entity on a non-recourse basis to purchasers (whom we would expect to be willing to accept a lower interest rate to invest in investment-grade loan pools) and may require us to retain a portion of the risk of the assets in accordance with risk retention laws and regulations, which would not allow us to sell or hedge our risk retention interests.
This would involve creating a special-purpose vehicle, contributing a pool of our assets to the entity, and selling interests in the entity on a non-recourse basis to purchasers (whom we would expect to be willing to accept a lower interest rate to invest in investment-grade loan pools) and may require us to retain a portion of the risk of the assets in accordance with risk retention laws and regulations, which 33 would not allow us to sell or hedge our risk retention interests.
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.
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.
Prepayment rates on loans may be affected by a number of factors, including the then-current level and trajectory of interest rates, the availability of mortgage credit, the relative economic vitality of the area in which the related properties are located, the servicing of the loans, possible changes in tax laws, other opportunities for investment, and other economic, social, geographic, demographic and legal factors and other factors beyond our control.
Prepayment rates on loans may be affected by a number of factors, including the then-current level and trajectory of interest rates, the availability of mortgage credit, the relative economic vitality of the area in which the related properties are located, the servicing of the loans, possible changes in tax laws, other opportunities for investment, and other economic, social, geographic, demographic and 21 legal factors and other factors beyond our control.
Other factors beyond our control, such as changes in interest rates, government regulations (such as rent control, zoning laws, and bank reserve requirements), changes in real property tax rates and operating expenses, changes in the general availability of debt financing (which may render the sale or refinancing of properties difficult or impracticable) may likewise have a material and adverse effect on our business.
Other factors beyond our control, such as changes in interest rates, government laws, regulations, and actions (such as rent control, zoning laws, and bank reserve requirements), changes in real property tax rates and operating expenses, changes in the general availability of debt financing (which may render the sale or refinancing of properties difficult or impracticable) may likewise have a material and adverse effect on our business.
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.
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.
In addition, losses in a TRS will generally not provide any tax benefit, except for being carried forward against future taxable income in such TRS. The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing mortgage loans, that would be treated as sales for U.S. federal income tax purposes.
In addition, losses in a TRS will generally not provide any tax benefit, except for being carried forward against future taxable income in such TRS. 51 The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing mortgage loans, that would be treated as sales for U.S. federal income tax purposes.
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 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).
As noted above, the interest earned on investments and incurred on debt that carry a fixed rate would not change. Certain of our financings may have interest rate floors, which if the index rate were to fall below such floor our interest expense would essentially remain fixed. Consequently, changes in interest rates may significantly influence our net interest income.
As noted above, the interest earned on investments and incurred on debt that carry a fixed rate would not change. Certain of our financings may have interest rate floors, which if the index rate were to fall below such floor our interest expense would essentially remain fixed. Consequently, 30 changes in interest rates may significantly influence our net interest income.
Furthermore, if “regulatory capital” or “capital adequacy” requirements—whether under the Dodd-Frank Act, Basel III, or other regulatory action—are further strengthened or expanded with respect to lenders that provide us with debt financing, or were to be imposed on us directly, they or we may be required to limit or increase the cost of financing they provide to us or that we provide to others.
Furthermore, if “regulatory capital” or “capital adequacy” requirements—whether under the Dodd-Frank Act, Basel III, or other 35 regulatory action—are further strengthened or expanded with respect to lenders that provide us with debt financing, or were to be imposed on us directly, they or we may be required to limit or increase the cost of financing they provide to us or that we provide to others.
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.
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.
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.
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.
The failure of these systems or of disaster recovery plans for any reason could cause significant interruptions in our operations and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to stockholders, material non-public information and the intellectual property and trade secrets and other sensitive information in the possession of us or our Manager.
The failure of these systems or of disaster recovery plans for any reason could cause significant interruptions in our operations and result in a failure to maintain the security, confidentiality or privacy of sensitive 37 data, including personal information relating to stockholders, material non-public information and the intellectual property and trade secrets and other sensitive information in the possession of us or our Manager.
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.
Therefore, we and/or our Manager may not have access to material non-public information in the possession of our Sponsor or its other affiliates which might be relevant to an investment decision to be made by our Manager on our behalf, and our Manager may initiate a transaction or purchase or sell an investment which, if the information had been known to it, may not have been undertaken.
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.
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.
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.
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 certain instances, we may be required to de-lever our financing specifically related to, or otherwise impacted by, such 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 could materially and adversely affect us.
In certain instances, 15 we may be required to de-lever our financing specifically related to, or otherwise impacted by, such 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 could materially and adversely affect us.
Further, although a loan may provide for limited recourse to a principal, parent or other affiliate of the borrower, there is no assurance that we will be able to recover our deficiency from any such party or that its assets would be sufficient to pay any otherwise recoverable claim.
Further, although a loan may provide for limited recourse to a principal, parent, sponsor, or other affiliate of the borrower, there is no assurance that we will be able to recover our deficiency from any such party or that its assets would be sufficient to pay any otherwise recoverable claim.
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. 21 Provisions for current expected credit loss reserve are difficult to estimate.
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. Provisions for current expected credit loss reserve are difficult to estimate.
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.
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.
Changes in accounting interpretations or assumptions could impact our ability to timely prepare consolidated financial statements, which could materially and adversely affect us. Accounting rules for transfers of financial assets, securitization transactions, credit loss reserves and other potential aspects of our operations are highly complex and involve significant judgment and assumptions.
Changes in accounting interpretations or assumptions could impact our ability to timely prepare consolidated financial statements, which could materially and adversely affect us. Accounting rules for transfers of financial assets, securitization transactions, estimates of credit loss reserves and other potential aspects of our operations are highly complex and involve significant judgment and assumptions.
Our Sponsor and its affiliates, including our Manager, are not legally prohibited from forming or managing investment vehicles or accounts that would have an investment strategy that is substantially similar to our core investment strategy and, regardless, the existing and future investment vehicles or accounts managed by our Sponsor or its affiliates may from time to time invest in assets that overlap with our target assets.
Our Sponsor and its affiliates, including our Manager, 39 are not legally prohibited from forming or managing investment vehicles or accounts that would have an investment strategy that is substantially similar to our core investment strategy and, regardless, the existing and future investment vehicles or accounts managed by our Sponsor or its affiliates may from time to time invest in assets that overlap with our target assets.
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.
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.
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.
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, North Africa, and South America 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.
Foreclosure may create a negative public perception of the related property, resulting in a diminution of its value. Even if we are successful in foreclosing on a loan, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis in the loan, resulting in a loss to us.
Foreclosure may create a negative public perception of the related property, resulting in a diminution of its value. Even if we are successful in foreclosing on a loan, the liquidation proceeds upon the eventual sale of the underlying real estate may not be sufficient to recover our cost basis in the loan, resulting in a loss to us.
In addition, we may be limited in our ability to make certain investments, and these limitations could result in a subsidiary holding assets we might wish to sell or selling assets we might wish to hold. We may hold a portion of our investments through partnerships, joint ventures, securitization vehicles or other entities with third-party investors.
In addition, we may be limited in our ability 43 to make certain investments, and these limitations could result in a subsidiary holding assets we might wish to sell or selling assets we might wish to hold. We may hold a portion of our investments through partnerships, joint ventures, securitization vehicles or other entities with third-party investors.
No assurance can be given that the SEC staff will concur with our classification of our or our subsidiaries’ assets or that the SEC staff will not, in the future, issue further guidance that may require us to reclassify those assets for purposes of qualifying for an exclusion or exemption from registration under the 1940 Act.
No assurance can be given that the SEC staff will concur with our classification of our or our subsidiaries’ assets or that the SEC staff will not, in the future, issue further guidance that may require us to reclassify those assets for purposes of qualifying for an exclusion 44 or exemption from registration under the 1940 Act.
This may result in us having to expend significant funds, which will reduce the available cash for distribution to our stockholders. Our charter contains provisions that are designed to reduce or eliminate duties of our non-employee directors with respect to corporate opportunities and competitive activities.
This may result in us having to expend significant funds, which will reduce the available cash for distribution to our stockholders. 45 Our charter contains provisions that are designed to reduce or eliminate duties of our non-employee directors with respect to corporate opportunities and competitive activities.
Consequently, such prepayment rates cannot be predicted with certainty and no strategy can completely insulate us from prepayment or other such risks. Difficulty in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to investors to suffer.
Consequently, such prepayment rates cannot be predicted with certainty and no strategy can completely insulate us from prepayment or other such risks. Difficulty in redeploying the proceeds from repayments or sales of our existing loans and investments may cause our financial performance and returns to investors to suffer.
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.
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 each case, such instrument is properly identified under applicable Treasury Regulations.
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.
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 contractually obligated payments on our loan or may experience a prolonged reduction of net operating income and may not be able to make contractually obligated payments on our loan on a timely basis or at all, which could materially and adversely affect us.
The departure of any of the officers, key personnel or investment professionals of our Sponsor or its affiliates could have a material adverse effect on us and our operations and/or subject us to compensation-related claims in connection with our 2016 Incentive Award Plan (the “2016 Plan”).
The departure of any of the officers, key personnel or 38 investment professionals of our Sponsor or its affiliates could have a material adverse effect on us and our operations and/or subject us to compensation-related claims in connection with our 2016 Incentive Award Plan (the “2016 Plan”).
These regulations could increase the operational and transactional cost of derivatives contracts in the form of intermediary fees and additional margin requirements imposed by DCOs and the clearing members of the DCOs through which we may clear derivatives, and affect the number and/or creditworthiness of available counterparties.
These regulations could increase the operational and transactional cost of derivatives contracts in the form of intermediary fees and additional margin requirements imposed by DCOs and the clearing members of the DCOs through which we may clear derivatives, and affect the number and/or creditworthiness of available 32 counterparties.
If we are unable to maintain or refinance such debt at appropriate times, we may be required to sell assets at a loss or on terms that are not advantageous to us or take action that could result in other negative consequences.
If we are unable to maintain or refinance such debt at appropriate times, or are unable to refinance such debt on similar terms, we may be required to sell assets at a loss or on terms that are not advantageous to us or take action that could result in other negative consequences.
Our inability to timely prepare our consolidated financial statements in the future could materially and adversely affect us. 36 Risks Related to Our Relationship with Our Manager and its Affiliates Our future success depends on our Manager and its access to the key personnel and investment professionals of our Sponsor and its affiliates.
Our inability to timely prepare our consolidated financial statements in the future could materially and adversely affect us. Risks Related to Our Relationship with Our Manager and its Affiliates Our future success depends on our Manager and its access to the key personnel and investment professionals of our Sponsor and its affiliates.
Principal payments on certain loans are made monthly, and consequently accrued market discount may have to be included in income each month as if the debt instrument were assured of ultimately being collected in full.
Principal payments on certain loans are made monthly, and consequently accrued market discount may have to be 49 included in income each month as if the debt instrument were assured of ultimately being collected in full.
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.
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.
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.
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 investments.
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.
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.
Additionally, any such securities litigation and shareholder activism could give rise to actual or perceived business uncertainties, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel.
Additionally, 54 any such securities litigation and shareholder activism could give rise to actual or perceived business uncertainties, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel.
We may realize 13 losses related to foreclosures, sales of loans receivable, 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 may realize losses related to foreclosures, sales of loans receivable, 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.
In addition, we intend to structure our transactions with any TRSs that we own to ensure that they are entered into on arm’s-length terms to avoid incurring the 100% excise tax described above.
In addition, we intend to structure our transactions with any TRSs that we own to ensure that they are entered into on arm’s-length terms to avoid incurring the 100% excise 50 tax described above.
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.
We may employ various hedging strategies to limit the effects of changes in interest rates (and in some cases credit spreads), including engaging in interest rate swaps, caps, floors and other interest rate derivative products.
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 16 determination of LTV.
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.
While our Sponsor is generally responsible for such costs in the first instance, we have indemnified the Sponsor for certain losses that it may incur in connection with the operation of the Company’s business.
While our Sponsor is generally responsible for such costs in the first instance, we have indemnified the Sponsor for certain losses that it may incur in connection with the operation of our business.
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.
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.
Some of the factors that could negatively affect the market price of our common stock include: • our actual or projected operating results, financial condition, cash flows and liquidity, or changes in investment strategy or prospects; • our ability to pay dividends; • 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; 50 • 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; • changes to benchmark interest rates as determined by the U.S.
Some of the factors that could negatively affect the market price of our common stock include: • our actual or projected operating results, financial condition, cash flows and liquidity, or changes in investment strategy or prospects; • our ability to resume paying dividends; • 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 or terms of financings we enter 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; 53 • changes to benchmark interest rates as determined by the U.S.
Securities litigation and shareholder activism, including potential proxy contests, could result 51 in substantial costs and legal fees and divert management’s and our Board’s attention and resources from our business.
Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and legal fees and divert management’s and our Board’s attention and resources from our business.
No assurance can be given that we will be able to obtain or maintain financing on favorable terms or at all. In addition, although we plan to seek to reduce our exposure to lender concentration-related risk by entering into financings with various counterparties, we are not required to observe specific lending counterparty diversification criteria.
No assurance can be given that we will be able to obtain or maintain financing on favorable terms or at all. In addition, although we generally seek to reduce our exposure to lender concentration-related risk by entering into financings with various counterparties, we are not required to observe specific lending counterparty diversification criteria.
We may find it necessary or desirable to foreclose on certain of the loans we originate or acquire in order to preserve our investment. Any foreclosure process may be lengthy and expensive. Among the expenses that are likely to occur in any foreclosure would be the incurrence of substantial legal fees and potentially significant transfer taxes.
We may find it necessary or desirable to foreclose on certain of the loans we originate or acquire in order to preserve our investment and maximize our recovery. Any foreclosure process may be lengthy and expensive. Among the expenses that are likely to occur in any foreclosure would be the incurrence of substantial legal fees and potentially significant transfer taxes.
In the event of the bankruptcy of a loan borrower, the loan to that borrower will be deemed to be secured only to the extent of the value of any underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
In the event of the bankruptcy of a loan borrower, the loan to that borrower will be deemed to be secured only to the extent of the value of any collateral property at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
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.
Furthermore, construction projects have faced delays, which may continue, 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.
As a result, we and our Sponsor may face a heightened risk of a security breach or disruption with respect to this information.
As a result, we and our Sponsor face a heightened risk of a security breach or disruption with respect to this information.
Fluctuations in interest rates and credit spreads could increase our financing costs and/or reduce our ability to generate income on our investments, which could lead to a significant decrease in our results of operations, cash flows and the value of our investments or the underlying collateral and may limit our ability to pay distributions to our stockholders.
Fluctuations in interest rates and credit spreads could increase our financing costs and/or reduce our ability to generate income on our investments, which could lead to a significant decrease in our results of operations, cash flows and the value of our investments or the collateral properties and may limit our ability to pay distributions to our stockholders.
Set forth below are some (but not all) of the risk factors that could adversely affect our business, financial condition, liquidity, results of operations and prospects and our ability to service our debt and pay dividends to our stockholders (which we refer to collectively as “materially and adversely affecting us” or having “a material adverse effect on us,” and comparable phrases) and the market price of our common stock.
Set forth below are some (but not all) of the risk factors that could adversely affect our business, financial condition, liquidity, results of operations and prospects and our ability to service our debt and resume paying dividends to our stockholders (which we refer to collectively as “materially and adversely affecting us” or having “a material adverse effect on us,” and comparable phrases) and the market price of our common stock.
The nature and scope of our Manager’s ESG-related diligence, if any, will vary based on the nature of the investment opportunity and what our Manager deems appropriate under the circumstances, which may not reflect the preferred practices of any particular investor and may differ from other market practices.
The nature and scope of our Manager’s ESG-related diligence, if any, will vary based on the nature of the investment opportunity and what our Manager deems appropriate or necessary under the circumstances, which may not reflect the preferred practices of any particular investor and may differ from other market practices.
Further, we cannot predict the ultimate timing, direction or extent of legislative, regulatory, and other actions under the new administration and congress, the effect of which could have a material impact on our business, results of operations, and financial conditions and that of our borrowers.
Further, we cannot predict the ultimate timing, direction or extent of further legislative, regulatory, and other actions under the current administration and congress, the effect of which could have a material impact on our business, results of operations, and financial conditions and that of our borrowers.
Our information and technology systems as well as those of our Sponsor and other related parties, such as service providers, may be vulnerable to damage or interruption from cybersecurity breaches, computer viruses or other malicious code, network failures, computer and telecommunication failures, infiltration by unauthorized persons and other security breaches, usage errors by their respective professionals or service providers, power, communications or other service outages and catastrophic events such as fires, tornadoes, floods, hurricanes and earthquakes.
Our information and technology systems as well as those of our Sponsor and other related parties, such as service providers, are vulnerable to damage or interruption from cybersecurity breaches, computer viruses or other malicious code, network failures, computer and telecommunication failures, infiltration by unauthorized persons and other security breaches, usage errors by their respective professionals or service providers, power, communications or other service outages and catastrophic events such as fires, tornadoes, floods, hurricanes and earthquakes.
Federal Reserve has indicated that further changes in benchmark interest rates are dependent upon changes in prices and employment markets. The timing, direction, and extent of any future adjustment to benchmark interest rates by the U.S. Federal Reserve remain uncertain. Inflation above the U.S.
Federal Reserve has indicated that further changes in benchmark interest rates are dependent upon changes in prices and employment markets. The timing, direction, and extent of any future adjustment to benchmark interest rates by the U.S. Federal Reserve is uncertain. Rates of inflation above the U.S.
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 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 hotel portfolio.
In the event of a default by a borrower on a non-recourse loan, we generally will have recourse only to the underlying asset (including any escrowed funds and reserves) collateralizing that loan, except to the extent of any creditwort hy guarantees as discussed in “—Risks Related to Our Investments—Most of the CRE loans that we originate or acquire are non-recourse loans and the assets securing these loans may not be sufficient to protect us from a partial or complete loss if the borrower defaults on the loan, which could materially and adversely affect us.” In addition, declines in real estate values may induce mortgagors to voluntarily default on their loans, increasing the risk of foreclosure and loss of capital.
In the event of a default by a borrower on a non-recourse loan, we generally will have recourse only to the underlying asset (including any escrowed funds and reserves) collateralizing that loan, except to the extent of any creditworthy guarantees as discussed in “—Risks Related to Our Investments—Most of the CRE loans that we originate or acquire are non-recourse loans and the assets securing these loans may not have sufficient value to protect us from a partial or complete loss if the borrower defaults on the loan, which could materially and adversely affect us.” In addition, declines in real estate values may induce mortgagors to voluntarily default on their loans, increasing the risk of foreclosure and loss of capital.
In addition, such above-target inflation and high benchmark interest rates relative to recent historical standards may materially and adversely impact the ability of our borrowers to make required payments on our loans.
In addition, such above-target inflation and elevated benchmark interest rates relative to recent historical standards may materially and adversely impact the ability of our borrowers to make required payments on our loans.
The inaccuracy of any these opinions, advice or statements may adversely affect our REIT qualification and result in significant corporate-level tax. Legislative or other actions affecting REITs may materially and adversely affect our stockholders and us.
The inaccuracy of any such opinions, advice or statements may adversely affect our REIT qualification and result in significant corporate-level tax. Legislative or other actions affecting REITs may materially and adversely affect our stockholders and us.
In periods of increasing or generally high interest rates and/or credit spreads, prepayment rates on loans will generally decrease, which could impact our liquidity, or increase our potential exposure to loan non-performance.
In periods of increasing or generally elevated interest rates and/or credit spreads, prepayment rates on loans will generally decrease, which could impact our liquidity, or increase our potential exposure to loan non-performance.
Increases in interest rates and credit spreads may also negatively affect demand for loans and could result in higher borrower default rates. 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.
Increases in interest rates and credit spreads may also negatively affect demand for loans and could result in higher borrower default rates. In early 2022, the U.S. Federal Reserve began a campaign to combat inflation by increasing interest rates, ultimately resulting in benchmark interest rates increasing by 5.25% by the end of 2023. Although the U.S.
The current period of high interest rates relative to recent historical standards has caused and may continue to cause our borrowers to become unwilling or unable to make payments on their loans, increasing default risk and making it more difficult for us to generate attractive risk-adjusted returns.
The current period of elevated interest rates relative to recent historical standards has caused and may continue to cause our borrowers to become unwilling or unable 13 to make payments on their loans, increasing default risk and making it more difficult for us to generate attractive risk-adjusted returns.
These restrictive covenants and operating restrictions could have a material adverse effect on us, cause us to lose our REIT status, restrict our ability to finance or securitize new originations and acquisitions, force us to liquidate collateral and negatively affect the market price of our common stock and our ability to pay dividends to our stockholders.
These restrictive covenants and operating restrictions could have a material adverse effect on us, cause us to lose our REIT status, restrict our ability to finance or securitize new originations and acquisitions, force us to liquidate collateral and negatively affect the market price of our common stock and our ability to resume paying dividends to our stockholders.
This could result in increased risk to our loan portfolio. Accordingly, the structure of our Manager’s fees may fail to promote effective alignment of interests between our Manager and us at any given time, which could materially and adversely affect us. Termination of the Management Agreement would be costly. Termination of the Management Agreement would be costly.
This could result in increased risk to our loan portfolio. Accordingly, the structure of our Manager’s fees may fail to promote effective alignment of interests between our Manager and us at any given time, which could materially and adversely affect us. Termination of the Management Agreement may be costly in certain circumstances.
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 resume paying 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.
If there is a limited liquidity in the trading market for our common stock, a sale of a large number of shares or four common stock could be adversely disruptive to the market price of our common stock.
If there is a limited liquidity in the trading market for our common stock, a sale of a large number of shares of our common stock could be adversely disruptive to the market price of our common stock.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Audit 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.
Audit 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. 55 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.
Our Manager’s cybersecurity risk management program includes the following key elements: • risk assessments designed to help identify material cybersecurity risks to critical systems, information, services, and our Manager’s broader enterprise information technology (“IT”) environment; • a team comprised of IT and Legal & Compliance personnel of our Manager principally responsible for directing (1) the cybersecurity risk assessment processes, (2) our Manager’s security processes, and (3) our response to cybersecurity incidents; • the use of external cybersecurity service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes or those of our Manager ; • cybersecurity awareness training of employees with access to our Manager’s IT systems; • a cybersecurity incident response plan; and • a third-party risk assessment process for key service providers.
Our Manager’s cybersecurity risk management program includes the following key elements: • risk assessments designed to help identify material cybersecurity risks to critical systems, information, services, and our Manager’s broader enterprise information technology (“IT”) environment; • a team comprised of IT and Legal & Compliance personnel of our Manager principally responsible for directing (1) the cybersecurity risk assessment processes, (2) our Manager’s security processes, and (3) our response to cybersecurity incidents; • the use of external cybersecurity service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes or those of our Manager ; • cybersecurity awareness training of employees with access to our Manager’s IT systems or our critical information; • a cybersecurity incident response plan; and • a third-party risk assessment process for key service providers based on our Manager’s assessment of each provider’s operational criticality and respective risk profile.
Item 1C. Cybers ecurity. Cybersecurity Risk Management and Strategy Our Manager has developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of its critical systems and our critical information. Our Manager’s cybersecurity risk management program includes a cybersecurity incident response plan.
Item 1C. Cybers ecurity. Cybersecurity Risk Management and Strategy Our Manager has developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of its critical systems and our critical information.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings. From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of December 31, 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.
Item 3. Legal Proceedings. From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of December 31, 2025, 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. 53 PART II
Mine Safe ty Disclosures. Not applicable. 56 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
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, 2025.
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.
The following table sets forth the dividends declared per share during each calendar quarter for 2025, 2024, and 2023: First Quarter Second Quarter Third Quarter Fourth Quarter 2025 Cash dividend $ - $ - $ - $ - 2024 Cash dividend $ 0.25 $ 0.25 $ 0.10 $ - 2023 Cash dividend $ 0.37 $ 0.37 $ 0.25 $ 0.25 RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED 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 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.
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 2026 Annual Meeting of Stockholders and is incorporated herein by reference. 57 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.
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.
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 17, 2026, there were approximately 15 stockholders of record of our common stock.
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
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.
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.
Such action was taken to preserve capital and create added financial flexibility for capital allocation decisions, including to effectuate the refinancing of our prior secured term loan and reduce leverage on other financings, with the objective of enhancing stockholder value over the long-term.

Item 7. Management's Discussion & Analysis

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

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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 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 collateral property of a defaulted loan.
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.
Adjusted LTV should not be assumed to reflect our judgment of 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.
Floating and Fixed Rate Portfolio Our business model seeks to minimize our exposure to changing interest rates by originating floating rate loans and financing them with floating rate liabilities. Further, we seek to match the benchmark index in the floating rate loans we originate with the benchmark index used in the related floating rate financings.
Floating and Fixed Rate Portfolio Our business model seeks to minimize our exposure to changing interest rates by originating floating rate loans and financing them with floating rate liabilities. Further, we seek to match the benchmark rate index in the floating rate loans we originate with the benchmark rate index used in the related floating rate financings.
Liquidity and Capital Resources Capitalization We have capitalized our business to date primarily through the issuance of shares of our common stock and borrowings under our secured financings and our secured term loan.
Liquidity and Capital Resources Capitalization We have capitalized our business to date primarily through the issuance of shares of our common stock and borrowings under our secured financings and secured term loan.
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, 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.
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.
(Loss) Gain on Extinguishment of Debt During the year ended December 31, 2024, we recognized a loss on extinguishment of debt of $4.1 million, inclusive of a $1.6 million spread maintenance payment and $2.7 million of unamortized deferred financing costs, resulting from the repayment of financing balances prior to maturity and following a refinancing or a sale of the associated loan, partially offset by the $0.2 million reversal of previously recognized financing costs that were ultimately not owed upon the payoff of a loan participation.
During the year ended December 31, 2024, we recognized a loss on extinguishment of debt of $4.1 million, inclusive of a $1.6 million spread maintenance payment and $2.7 million of unamortized deferred financing costs, resulting from the repayment of financing balances prior to maturity and following a refinancing or a sale of the associated loan, partially offset by the $0.2 million reversal of previously recognized financing costs that were ultimately not owed upon the payoff of a loan participation.
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.
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 60 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.
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.
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.
We utilize the grading system to determine each loan’s risk of loss and to provide a determination as to whether an individual loan is impaired and whether a specific CECL reserve is necessary. Based on a 5-point scale, the loans are graded “1” through “5,” from less risk to greater risk, respectively.
We utilize the grading system to determine each loan’s risk of loss and to provide a determination as to whether an individual loan is impaired and whether a specific CECL reserve is necessary. Based on a 5-point scale, 65 the loans are graded “1” through “5,” from less risk to greater risk, respectively.
Our general CECL reserve reflects our forecast of the current and future macroeconomic conditions that may impact the performance of the commercial real estate assets securing our loans and the borrower’s ultimate ability to repay.
Our general CECL reserve reflects our forecast of the current and future macroeconomic conditions that may impact the performance of the commercial real estate assets securing our loans and each borrower’s ultimate ability to repay.
(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.
(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, 2025 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.
We believe that our investors and lenders consider book value excluding these items as an important metric related to our overall capitalization.
Further, we believe that our investors and lenders consider book value excluding these items as an important metric related to our overall capitalization.
(4) Fully extended maturity assumes all extension options are exercised by the borrower upon satisfaction of the applicable conditions. (5) Classification of property type and construction status reflect the state of collateral as of December 31, 2024. (6) Percent of total construction loans based on loan commitments as of December 31, 2024.
(4) Fully extended maturity assumes all extension options are exercised by the borrower upon satisfaction of the applicable conditions. (5) Classification of property type and construction status reflect the state of collateral as of December 31, 2025. (6) Percent of total construction loans based on loan commitments as of December 31, 2025.
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.
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 such gains and losses includes charge-offs of principal, accrued interest receivable, and/or exit fees, dividends declared per share, book value per share, adjusted book value per share, Net Debt-to-Equity Ratio and Total Leverage Ratio.
In these instances, there have been diminutions in the fair value and performance of the underlying collateral asset primarily as a result of reduced tenant and/or capital markets demand for such property types in the markets in which these assets and borrowers operate in.
In these instances, there have been diminutions in the fair value and performance of the collateral property primarily as a result of reduced tenant and/or capital markets demand for such property types in the markets in which these assets and borrowers operate.
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.
While Distributable Earnings (Loss) excludes the impact of our provision for or reversal of current expected credit loss reserve, charge-offs of principal, accrued interest receivable, and/or exit fees are recognized through Distributable Earnings (Loss) when deemed non-recoverable.
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.
Derivatives On June 2, 2021 and in connection with our debt related to real estate owned hotel portfolio, 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.
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 of 70.4% is based on loan commitment, including non-consolidated senior interests and pari passu interests, and excludes risk rated 5 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. Weighted average origination LTV of 71.2% is based on loan commitment, including non-consolidated senior interests and pari passu interests, and excludes risk rated 5 loans.
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.
Furthermore, we present Distributable Earnings prior to realized gains and losses, which such gains and losses includes charge-offs of principal, accrued interest receivable, and/or exit fees, 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.
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.
Debt related to real estate owned hotel portfolio is initially recorded at its estimated fair value at the time of foreclosure, deed-in-lieu of foreclosure, or assignment-in-lieu of foreclosure.
Such interest rate cap effectively limited the maximum interest rate of our debt related to real estate owned to 5.83% through its then maturity.
Such interest rate cap effectively limited the maximum interest rate of our debt related to real estate owned hotel portfolio to 5.83% through its then maturity.
On May 10, 2024, we entered into an equity distribution agreement with certain sales agents, pursuant to which we may sell, from time to time, up to an aggregate sales price of $150.0 million of our common stock pursuant to a continuous offering program (the “ATM Agreement”) under our Shelf.
On May 10, 2024, we entered into an equity distribution agreement with certain sales agents, pursuant to which we may sell, from time to time, up to an aggregate sales price of $150.0 million of our common stock pursuant to a continuous offering program (the “ATM Agreement”) under our in place effective shelf registration.
Loss on Real Estate Owned Held-for-Sale As of December 31, 2024, we determined that our hotel portfolio real estate owned asset has met the held-for-sale criteria and concurrently recognized a $80.5 million loss based upon anticipated sales price, less estimated costs to sell.
Valuation Adjustment for Real Estate Owned Held-for-Sale As of December 31, 2024, we determined that our hotel portfolio real estate owned asset met the held-for-sale criteria and concurrently recognized a $80.5 million loss based upon anticipated sales price, less estimated costs to sell.
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 circumstances warrant and to the extent permissible, we and our subsidiaries may also issue common equity, preferred equity, warrants, 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.
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.
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 collateral property, borrower, or sponsor.
Our secured term loan is presented net of any original issue discount and transaction expenses which are deferred and recognized as interest expense over the life of the loan using the effective interest method.
Our prior secured term loan is presented net of any original issue discount and transaction expenses which were deferred and recognized as interest expense over the life of the prior secured term loan using the effective interest method.
Therefore, the exact timing and amounts of such future loan fundings are uncertain and will depend on the current and future performance of the underlying collateral assets, but are expected to occur over the remaining loan term.
Therefore, the exact timing and amounts of such future loan fundings are uncertain and will depend on the current and future performance of the collateral property, but are expected to occur over the remaining loan term.
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.
As of December 31, 2025, the loans receivable securing the outstanding borrowings under these facilities had a weighted average term to initial maturity and fully extended maturity of 0.5 years and 1.1 years, respectively, assuming all conditions to extend are met.
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.
Generally, we use SOFR as the benchmark rate index in both our floating rate loans and floating rate financings. As of December 31, 2025, 96.9% of our loans receivable held-for-investment based on unpaid principal balance were floating rate and indexed to SOFR.
Net Debt-to-Equity Ratio is calculated as the ratio of asset-specific debt (repurchase agreements, term participation facility, loan participations sold, net, notes payable, net, and debt related to real estate owned, net) and secured term loan, less cash and cash equivalents to total equity.
Net Debt-to-Equity Ratio is calculated as the ratio of asset-specific debt (repurchase agreements, term participation facility, notes payable, net, and debt related to real estate owned hotel portfolio, net) and secured term loan, less cash and cash equivalents to total equity.
Upon the occurrence of certain events or the borrower meeting prescribed conditions in accordance with the terms of the loan agreement, these funds may be transferred by the third-party loan servicers to the borrower subject to our approval.
Upon the occurrence of certain events or the borrower meeting prescribed conditions in accordance with the terms of the loan agreement, these funds may be transferred by the third-party loan servicers to the borrower or to other third parties, subject to our approval, to satisfy certain obligations.
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.
Fair values of collateral assets used to determine specific CECL reserves are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Year Ended December 31, 2024 and 2023” in our Form 10-K for the year ended December 31, 2024, filed with the SEC on February 19, 2025, which is accessible on the SEC’s website at www.sec.gov , for a discussion of the year ended December 31, 2024 compared to the year ended 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.
(2) Net of specific CECL reserves of $365.4 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, 2025.
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.
As of December 31, 2025, aggregate borrowings outstanding under our repurchase agreements and term participation facility totaled $2.2 billion, with a weighted average spread of SOFR plus 2.92% per annum based on unpaid principal balance.
Fair values used to determine specific reserves are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach.
Fair values of collateral assets used to determine specific CECL reserves are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach.
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.
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. 80 Real Estate Owned To maximize recovery from certain defaulted loans, we may from time to time assume legal title and/or physical possession of the collateral property of a defaulted loan through foreclosure, a deed-in-lieu of foreclosure, or an assignment-in-lieu of foreclosure.
(2) Reflects total gain on foreclosure of our hotel portfolio real estate owned asset, which is classified as real estate owned held-for-sale as of December 31, 2024. Amount not previously recognized in Distributable (Loss) Earnings. (3) Reflects previously recognized depreciation on real estate owned classified as held-for-sale as of December 31, 2024. Amount not previously recognized in Distributable (Loss) Earnings.
Amounts not previously recognized in Distributable (Loss) Earnings. 61 (3) Reflects total gain on foreclosure of our hotel portfolio real estate owned asset, which was classified as held-for-sale as of December 31, 2024. Amount not previously recognized in Distributable (Loss) Earnings.
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.
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 the 1990s through December 31, 2025.
The increase in general CECL reserves was primarily attributable to changes in the historical loss rate of the analogous dataset, changes in risk ratings and non-accrual status, changes to the expected remaining duration within our loan portfolio, and consideration of a contingent discounted loan payoff, partially offset by the reduction in the size of our loan portfolio.
The increase in our general CECL reserves was primarily attributable to changes in the historical loss rate of the analogous data set, consideration of a contingent discounted loan payoff, and changes in risk ratings, non-accrual status, and expected remaining duration within our loan portfolio, offset in part by the reduction in the size of our loan portfolio subject to determination of the general CECL reserve.
Book Value Per Share We believe that presenting book value per share adjusted for our general current expected credit loss reserve and accumulated depreciation and amortization on our real estate owned held-for-investment and related lease intangibles is useful for investors as it enhances the comparability to our peers.
Book Value Per Share We believe that presenting book value per share adjusted for our general current expected credit loss reserve and accumulated depreciation and amortization on our real estate owned held-for-investment is useful for investors as it enhances the comparability to our peers who may not hold real estate investments.
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.
Additionally, further adjustments may 79 be made based upon loan positions senior to ours, the risk rating of a loan, whether a loan is a construction loan, timing of the loan’s initial maturity, or the economic conditions specific to the property type of a loan’s collateral property.
Factors that we may consider in our impairment analysis include, among others: (1) significant underperformance relative to historical or anticipated operating results; (2) significant negative industry or economic trends; (3) costs necessary to extend the life or improve the real estate asset; (4) significant increase in competition; and (5) ability to hold and dispose of the real estate asset in the ordinary course of business.
Factors that we may consider in our impairment analysis include, among others: (i) significant underperformance relative to historical or anticipated operating results; (ii) significant negative industry or economic trends; (iii) costs necessary to extend the life or improve the real estate asset; (iv) significant increase in competition; and (v) ability to hold and dispose of the real estate asset in the ordinary course of business.
(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.
(2) The allocation of our secured financings and prior 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 nine loans with an aggregate unpaid principal balance of $1.4 billion that are in maturity default that represent collateral for aggregate borrowings outstanding of $779.7 million have a contractual obligation to pay in less than one year.
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.
Through the final resolution, the asset management team maintains regular contact with borrowers, servicers, property managers, and local market experts while monitoring the performance of the asset, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.
Valuation Adjustment on Loans Receivable Held-for-Sale During the year ended December 31, 2024, we recognized a valuation adjustment of $7.2 million for loans receivable held-for-sale as a result of additional protective advances made and a reduction in anticipated proceeds from the sale of such loan. During the year ended December 31, 2023, there was no such valuation adjustment.
During the year ended December 31, 2024, we recognized a valuation adjustment of $7.2 million for a loan receivable held-for sale as a result of additional protective advances made and a reduction in anticipated proceeds from the sale of such loan. See “Item 7.
The following table summarizes our non-consolidated senior interests and related retained subordinate interests, excluding for loans classified as held-for-sale, as of December 31, 2024 ($ in thousands): Loan Count Loan Commitment Unpaid Principal Balance Carrying Value Weighted Average Spread (1) Term to Initial Maturity (in years) Term to Fully Extended Maturity (in years) (2) Fixed rate non-consolidated senior loans 1 $ 830,000 $ 830,000 N/A 3.47% 2.0 2.0 Retained fixed rate subordinate loans 1 $ 125,000 $ 125,000 $ 124,878 8.50% 2.0 2.0 (1) Weighted average is based on unpaid principal balance.
The following table summarizes our non-consolidated senior interest and related retained subordinate interest as of December 31, 2025 ($ in thousands): Loan Count Loan Commitment Unpaid Principal Balance Carrying Value Weighted Average Interest Rate (1) Term to Initial Maturity (in years) Term to Fully Extended Maturity (in years) (2) Fixed rate non-consolidated senior loans 1 $ 830,000 $ 830,000 N/A 3.47% 1.0 1.0 Retained fixed rate subordinate loans 1 $ 125,000 $ 125,000 $ 124,939 8.50% 1.0 1.0 70 (1) Weighted average is based on unpaid principal balance.
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.
In certain circumstances, we may determine that a loan is no longer suited for the WARM method because (i) it has 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, (iii) we anticipate assuming legal title and/or physical possession of the collateral property and the fair value of the collateral property is determined to be below the carrying value of our loan, and/or (iv) recovery of our loan may occur at an amount below our loan’s carrying value.
The decrease is primarily due to a decrease in net interest income of $66.3 million, which was driven by a decrease in interest income of $96.5 million, as a result of a reduction in the size of our loan portfolio and an increase in the portion of loans on non-accrual status during the year ended December 31, 2024 as compared to the year ended December 31, 2023, partially offset by a decrease in interest expense of $30.2 million primarily as a result of lower average borrowing levels.
The decrease is primarily due to a decrease in net interest income of $76.5 million, which was driven by a decrease in interest income of $211.9 million as a result of a reduction in the size of our loan portfolio and an increase in the portion of loans on non-accrual status during the year ended December 31, 2025 as compared to the year ended December 31, 2024, partially offset by a decrease in interest expense of $135.4 million primarily as a result of lower average borrowing levels.
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.
Off-Balance Sheet Arrangements As of December 31, 2025, 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 to our consolidated financial statements.
As of December 31, 2024, we had aggregate unfunded loan commitments of $498.3 million which is comprised of funding for capital expenditures and construction, leasing costs, and carry costs.
As of December 31, 2025, we had aggregate unfunded loan commitments of $271.9 million which is comprised of funding for capital expenditures and construction, leasing costs, and carry costs.
Expenses Expenses are primarily comprised of base management fees payable to our Manager, incentive fees payable to our Manager, general and administrative expenses, stock-based compensation expense, operating expenses from real estate owned, interest expense from debt related to real estate owned, and depreciation and amortization on real estate owned.
Expenses Expenses are primarily comprised of base management fees payable to our Manager, general and administrative expenses, stock-based compensation expense, operating expenses from real estate owned, interest expense from real estate owned, and depreciation and amortization on real estate owned and related in-place and other lease intangible values.
During the year ended December 31, 2024, we recorded a provision for current expected credit losses of $212.6 million, which consisted of a $65.4 million increase in our general CECL reserve and a $147.3 million increase in our specific CECL reserve prior to principal and accrued interest receivable charge-offs.
During the year ended December 31, 2024, we recorded a provision for current expected credit losses of $212.6 million, which consisted of a $47.6 million increase in our general CECL reserves, a $124.0 million increase in our specific CECL reserves prior to principal charge-offs, and a $41.0 million increase in CECL reserves on accrued interest receivable prior to charge-offs.
These assumptions are based upon the nature of the properties, recent sales and lease comparables, recent and projected property cash flows, and anticipated real estate and capital market conditions.
These assumptions are based upon the nature of the properties, recent and projected property cash flows, recent sales and lease comparables, and anticipated real estate and capital market conditions, among other factors which we may deem relevant.
Totals exclude non-consolidated senior interests. In certain circumstances, conditions to funding may not be met by our borrowers and portions of our unfunded loan commitments may not become eligible to be drawn on.
In certain circumstances, conditions to funding may not be met by our borrowers and portions of our unfunded loan commitments may not become eligible to be or expected to be drawn on.
Our Portfolio The below table summarizes our loans receivable held-for-investment as of December 31, 2024 ($ 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.
Our Portfolio The table below summarizes our loans receivable held-for-investment as of December 31, 2025 ($ 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 33 $ 4,329,235 $ 4,057,357 $ 3,688,729 6.2 % 0.5 years 1.1 years 71.2% 76.3% (1) Loan commitment represents principal outstanding plus remaining unfunded loan commitments.
Our ability to make any future deleveraging payments or required principal repayments will depend upon the results of our operating activities, our financial condition, and the overall market conditions in which we operate, among other factors.
Our ability to make any future deleveraging payments or required principal repayments will depend upon the results of our operating activities, our total sources of liquidity, the timing, amount, and pace of resolutions of our loans and real estate owned assets, our financial condition, and the overall market conditions in which we operate, among other factors.
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 of December 31, 2025, we are in compliance with all financial covenants under our financing agreements. 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 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.
As of December 31, 2025, our debt related to real estate owned hotel portfolio has an unpaid principal balance of $235.0 million, a carrying value of $231.0 million and a stated rate of SOFR plus 3.18%. See Derivatives below for further detail of our interest rate cap.
Proceeds received from our counterparty related to the interest rate cap are recorded as proceeds from interest rate cap on our consolidated statements of operations. As of December 31, 2024, the fair value of our interest rate cap was de minimis, and as of December 31, 2023, the fair value of our interest rate cap was $0.9 million.
Proceeds received from our counterparty related to the interest rate cap are recorded as proceeds from interest rate cap on our consolidated statements of operations. As of December 31, 2025 and 2024, the fair values of our interest rate caps were de minimis.
Cash Flows The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash for the years ended December 31, 2024 and 2023 ($ 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 $133.3 million during the year ended December 31, 2023.
Cash Flows The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash for the years ended December 31, 2025 and 2024 ($ in thousands): December 31, 2025 December 31, 2024 Net cash flows (used in) provided by operating activities $ (30,460 ) $ 84,517 Net cash flows provided by investing activities 1,867,721 779,911 Net cash flows used in financing activities (1,779,976 ) (945,817 ) Net increase (decrease) in cash and cash equivalents and restricted cash $ 57,285 $ (81,389 ) We experienced a net increase in cash, cash equivalents, and restricted cash of $57.3 million during the year ended December 31, 2025, compared to a net decrease of $81.4 million during the year ended December 31, 2024.
Furthermore, we may recognize a specific CECL reserve if 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.
If we anticipate assuming legal title and/or physical possession of the collateral property and the fair value of the collateral property is determined to be below the carrying value of our loan, we may recognize a specific CECL reserve. Furthermore, in certain circumstances, we may recognize a specific CECL reserve based upon anticipated proceeds from the disposition of our loan.
As of December 31, 2024, we have $298.9 million of in-place financings to fund our remaining commitments, excluding $2.6 million of approved and undrawn credit capacity based on existing collateral.
As of December 31, 2025, we have $139.8 million of in-place financings to fund our remaining commitments, excluding $11.4 million of approved and undrawn credit capacity based on existing collateral.
The following table sets forth the calculation of our book value and our adjusted book value per share as of December 31, 2024 and 2023 ($ 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.
The following table sets forth the calculation of our book value and our adjusted book value per share, a non-GAAP financial measure, as of December 31, 2025 and 2024 ($ in thousands, except share and per share data): December 31, 2025 December 31, 2024 Total Equity $ 1,531,895 $ 2,008,086 Number of shares of common stock outstanding and RSUs 143,285,119 142,187,015 Book Value per share (1) $ 10.69 $ 14.12 Add back: accumulated depreciation and amortization on real estate owned and related lease intangibles 0.10 0.03 Add back: general CECL reserve 0.54 1.02 Adjusted Book Value per share $ 11.33 $ 15.17 (1) Calculated as (i) total equity divided by (ii) number of shares of common stock outstanding and RSUs at period end.
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.
Year Ended December 31, 2024 December 31, 2023 Ordinary dividends 50.6 % 30.9 % Capital gain dividends 0.0 % 0.0 % Nondividend distributions 49.4 % 69.1 % Total 100.0 % 100.0 % See Note 13 - Income Taxes to our consolidated financial statements for further detail.
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.
If the estimated fair value of the collateral or anticipated proceeds from the disposition of our loan 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.
(2) Reflects a loan receivable acquired in connection with a full loan repayment. (3) Excludes loss in connection with the reclassification of our real estate owned hotel portfolio to held-for-sale. Portfolio Financing Our financing arrangements include repurchase arrangements, a term participation facility, asset-specific financings, debt related to real estate owned and secured term loan borrowings.
(4) Excludes loss recognized in connection with the reclassification of our real estate owned hotel portfolio to held-for-sale and loss on partial sales of our mixed-use real estate owned asset, net. Portfolio Financing Our financing arrangements include repurchase arrangements, a term participation facility, asset-specific financings, debt related to real estate owned hotel portfolio and secured term loan borrowings.
The increase in general CECL reserves was primarily attributable to changes in the historical loss rate of the analogous dataset, changes in risk ratings and non-accrual status, changes to the expected remaining duration within our loan portfolio, and consideration of a contingent discounted loan payoff, partially offset by the reduction in the size of our loan portfolio.
The decrease in our general CECL reserves was primarily attributable to the reduction in the size of our loan portfolio subject to determination of the general CECL reserve and the resolution of a contingent discounted loan payoff, offset in part by changes in risk ratings, non-accrual status, and expected remaining duration within our loan portfolio.
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.
If recovery of our loan is expected from the sale of the collateral, specific reserves are equal to the excess of a loan’s carrying value over the estimated fair value of the collateral less estimated costs to sell.
As market conditions evolve, we may continue to work with our counterparties on modifying financial covenants as needed; however, there is no assurance that our counterparties will agree to such modifications.
As the results of our operating activities, our financial condition, and the overall market conditions in which we and our borrowers operate evolve, we may continue to work with our counterparties on modifying financial covenants as needed; however, there is no assurance that our counterparties will agree to such modifications.
The interest rate cap effectively limits the maximum interest rate of our debt related to real estate owned to 7.94% through its maturity.
Through the contractual maturity of our debt related to real estate owned hotel portfolio, the interest rate caps effectively limited the maximum interest rate of our debt related to real estate owned hotel portfolio to 7.94%.
In instances where the borrower is in default under the terms of the loan agreement, we have the ability to direct the third-party loan servicers to release such reserve funds to us to satisfy past due amounts.
In instances where the borrower is in monetary default under the terms of the loan agreement, we have the ability to direct the third-party loan servicers to release such reserve funds to us to satisfy past due amounts. To date, funds held in such reserve accounts are not and have not been reflected on our consolidated balance sheets.
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.
Subsequently, we entered into modifications of our debt related to real estate owned hotel portfolio to provide for, among other things, total principal payments of $25.0 million, an extension of the contractual maturity date to February 9, 2025, and the designation of a portion of the loan becoming partial recourse to us.
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.
As of December 31, 2025, our debt related to real estate owned hotel portfolio had an outstanding balance of $235.0 million and our prior secured term loan had an outstanding balance of $556.2 million.
Our qualification as a REIT also depends on our ability to meet various other requirements imposed by the Internal Revenue Code, which relate to organizational structure, diversity of stock ownership and certain restrictions with regard to the nature of our assets and the sources of our income.
For financial reporting purposes, a provision or benefit for current and deferred taxes is established for the portion of earnings or expense recognized by us with respect to our TRS. 78 Our qualification as a REIT also depends on our ability to meet various other requirements imposed by the Internal Revenue Code, which relate to organizational structure, diversity of stock ownership and certain restrictions with regard to the nature of our assets and the sources of our income.
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 (the “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. I.
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.
As of December 31, 2025, we had 140,218,764 shares of our common stock outstanding, representing $1.5 billion of equity, and also had $3.2 billion of outstanding borrowings under our secured financings, our prior secured term loan, and our debt related to real estate owned hotel portfolio.
The impact of macroeconomic conditions on the commercial 65 real estate and capital markets, including high benchmark interest rates compared to recent historical standards, may make it more difficult for us to satisfy these covenants in the future. Non-compliance with financial covenants may result in our lenders exercising their rights and remedies as provided for in the respective agreements.
The impact of macroeconomic conditions on the commercial real estate and capital markets, including elevated benchmark interest rates compared to recent historical standards and the effects thereof on our and our borrowers’ operating performance, may make it more difficult for us to satisfy these financial covenants in the future.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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In addition, decreases in property values reduce the value of the loan collateral and the potential proceeds available and to a borrower to repay the underlying loans, which could also cause us to suffer losses.
In addition, decreases in property values reduce the value of the loan collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses.
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.
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.
By its very nature, our investment strategy emphasizes prudent risk management and capital preservation by primarily originating senior loans utilizing underwriting techniques requiring relatively conservative loan-to-value ratio levels to insulate us from credit losses absent a significant diminution in collateral value.
By its nature, our investment strategy emphasizes prudent risk management and capital preservation by primarily originating senior loans utilizing underwriting techniques requiring relatively conservative loan-to-value ratio levels to insulate us from credit losses absent a significant diminution in collateral value.
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.
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. Elevated 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 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.
Elevated 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.
To monitor this risk, our Sponsor’s asset management team monitors the performance of our loan portfolio and our Sponsor’s asset management and origination teams maintain regular contact with borrowers, co-lenders and local market experts to monitor the performance of the underlying loan collateral, anticipate borrower, property and market issues and, to the extent necessary or appropriate, enforce our rights as the lender.
To monitor this risk, our Sponsor’s asset management team rigorously monitors the performance of our loan portfolio and our Sponsor’s asset management and origination teams maintain regular contact with borrowers, property managers, co-lenders and local market experts to monitor the performance of the underlying loan collateral, anticipate borrower, property and market issues and, to the extent necessary or appropriate, enforce our rights as the lender.
We seek to manage this risk through a comprehensive credit analysis prior to making an investment and rigorous monitoring of our borrowers’ progress in executing their business plans as well as market conditions that may affect the underlying collateral, through our asset management process.
We seek to manage this risk through a comprehensive credit analysis prior to making an investment and rigorous monitoring of our borrowers’ progress in executing their business plans as well as market conditions that may affect the collateral property, through our asset management process.
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.
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, ultimately resulting in benchmark interest rates increasing by 5.25% by the end of 2023. Although the U.S.
The performance and value of our loans and investments depend upon the borrower’s ability to improve and operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us.
The performance and value of our loans and investments depend upon, among other things, the borrower’s ability to improve and operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us.
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.
The timing, direction, and extent of any future adjustment to benchmark interest rates by the U.S. Federal Reserve is uncertain. Elevated 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.
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.
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 collateral property, borrower, or sponsor.
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.
Weakness or volatility in the debt capital markets, the CRE and mortgage markets, changes in regulatory requirements, geopolitical volatility, global trade tensions, and fluctuation in interest rates and the resulting market disruptions therefrom, among other things, 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.
A substantial deterioration in the commercial real estate capital markets may negatively impact the value of assets financed with lenders that have margin maintenance provisions in their facilities.
A substantial deterioration in the commercial real estate capital markets, among other things, may negatively impact the value of assets financed with lenders that have margin maintenance provisions in their facilities.
As of December 31, 2024, we have not received any margin calls under any of our repurchase agreements.
As of December 31, 2025, we have not received any margin calls under any of our repurchase agreements.
We seek to mitigate these risks by constantly monitoring the debt and equity capital markets, the maturity profile of our in-place loan portfolio and financings, and future funding requirements on our loan portfolio to inform our decisions on the amount, timing, and terms of any capital we may raise.
We seek to mitigate these risks by constantly monitoring the debt and equity capital markets, the maturity profile of our in-place loan portfolio and financings, and other potential liquidity requirements to inform our decisions on the amount, timing, and terms of any capital we may raise.
Financing Risk We finance our business through a variety of means, including the syndication of non-consolidated senior interests, notes payable, borrowings under our repurchase and participation facilities, the syndication of pari passu portions of our loans, the syndication of senior participations in our originated senior loans, and our secured term loan.
Financing Risk We finance and have financed our business through a variety of means, including the syndication of non-consolidated senior interests, notes payable, borrowings under our repurchase and participation facilities, the syndication of senior participations in our originated senior loans, and secured term loan.
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.
Real Estate Risk The market values of loans secured directly or indirectly by CRE assets and CRE assets themselves 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, global trade tensions, and other factors); changes in government laws, regulations, and actions (such as tax, real estate, environmental and climate, rent control, zoning laws, bank reserve requirements, and changes in monetary policy); supply chain and labor market disruptions; changes in social conditions; changes in employment 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 changes in real property tax rates.
We seek to manage this risk by diversifying our financing sources across counterparties and financing types and generally obtaining financing from high credit quality institutions.
We manage this risk by seeking diverse financing sources across counterparties and financing types and generally obtaining financing from high credit quality institutions.
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.
Federal Reserve has reduced benchmark interest rates between September 2024 and December 2025, such benchmark rates remain elevated 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.
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.
We seek to manage these risks through our underwriting, loan structuring, financing structuring, and asset management processes. 82 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.
Rising interest rates will generally increase our net interest income, while declining interest rates will generally decrease our net interest income.
Exclusive of the impact of non-accrual loans, rising interest rates will generally increase our net interest income, while declining interest rates will generally decrease our net interest income.
In addition, we are exposed to the risks generally associated with the CRE market, including variances in occupancy rates, capitalization rates, absorption rates and other macroeconomic factors (including interest rates) beyond our control. We seek to manage these risks through our underwriting, loan structuring, financing structuring, and asset management processes.
In addition, we are exposed to the risks generally associated with the CRE market, including variances in occupancy rates, capitalization rates, absorption rates and other macroeconomic factors beyond our control, including changes in benchmark interest rates, cost increases associated with construction materials, employment conditions, and supply chain and labor market disruptions.
Prepayment Risk Prepayment risk is the risk that principal will be repaid prior to initial maturity, which may require us to identify new investment opportunities to deploy such capital at a similar rate of return in order to avoid an overall reduction in our net interest income.
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. 83 Prepayment Risk Prepayment risk is the risk that principal will be repaid prior to initial maturity, which may require us to identify new investment opportunities to deploy such capital at a similar rate of return in order to avoid an overall reduction in our net interest income.
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
We may realize losses related to foreclosures, repayments of our loans at an amount below our carrying value, the sale of our loans, the restructuring of the loans in our investment portfolio on terms that may be more favorable to borrowers than those underwritten at origination, or the sale of real estate owned assets.
The 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 $85.9 million.
The following table illustrates as of December 31, 2025 the impact on our net interest income and net interest income per share for loans receivable held-for-investment for the twelve-month period following December 31, 2025, assuming a decrease in SOFR of 50 and 100 basis points and an increase in SOFR of 50 and 100 basis points in the applicable interest rate benchmark (based on SOFR of 3.69% as of December 31, 2025) ($ in thousands, except per share data): Net Floating Decrease Increase Rate Exposure Change in 100 Basis Points 50 Basis Points 50 Basis Points 100 Basis Points $ 774,497 Net interest income $ 7,110 $ 3,957 $ (3,603 ) $ (7,206 ) Net interest income per share $ 0.05 $ 0.03 $ (0.03 ) $ (0.05 ) 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
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.
Added
Capital Markets Risk We are exposed to risks related to the equity and debt capital markets which impact our related ability to raise capital through the issuance of our common stock or other debt or equity-related instruments.
Removed
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.
Added
We seek to manage these risks through our underwriting, loan structuring, financing structuring and asset management processes. 84

Other CMTG 10-K year-over-year comparisons