# BrightSpire Capital, Inc. (BRSP) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from BrightSpire Capital, Inc.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1717547/000171754722000014/brsp-20211231.htm
Accession: 0001717547-22-000014
Filing date: 2022-02-22
Report date: 2021-12-31
Extracted from a substantive MD&A body after the formal Item 7 span was a TOC or reference stub.
Confidence: high

Company profile: /company/BRSP/
All MD&A years: /company/BRSP/mda/
Next year: /company/BRSP/mda/fy2022/ (FY 2022)

Introduction

We are a commercial real estate (“CRE”) credit real estate investment trust (“REIT”) focused on originating, acquiring, financing and managing a diversified portfolio consisting primarily of CRE debt investments and net leased properties predominantly in the United States. CRE debt investments primarily consist of first mortgage loans, which we expect to be our primary investment strategy. Additionally, we may also selectively originate mezzanine loans and preferred equity investments, which may include profit participations. The mezzanine loans and preferred equity investments may be in conjunction with our origination of corresponding first mortgages on the same properties. Net leased properties consist of CRE properties with long-term leases to tenants on a net-lease basis, where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance capital expenditures and real estate taxes. We will continue to target net leased equity investments on a selective basis. Additionally, we previously made investments in CRE debt securities primarily consisting of commercial mortgage-backed securities (“CMBS”) (including “B-pieces” of a CMBS securitization pool) or CRE collateralized loan obligations (“CLOs”) (including the junior tranches collateralized by pools of CRE debt investments). We have continued to reduce our CMBS holdings since the second quarter of 2020, and sold our last CMBS security available for sale in the fourth quarter of 2021. As of December 31, 2021 we hold only “B-pieces” of a CMBS securitization pool which are subject to risk retention provisions through June 2022.

The Internalization

On April 30, 2021, we completed the internalization of the Company’s management and operating functions and terminated our relationship with CLNC Manager, LLC (the “Manager”), a subsidiary of DigitalBridge Group, Inc. (“DigitalBridge”), formerly known as Colony Capital, Inc., in accordance with that termination agreement dated April 4, 2021 between the Company, the OP, the Manager and Colony Capital Investment Advisors, LLC (the “Termination Agreement,” and the transactions contemplated thereunder, the “Internalization”). We paid the Manager a one-time termination fee of $102.3 million. Therefore, we no longer pay management or incentive fees to the Manager for any post-closing period and we have assumed general and administrative expenses directly. We have achieved a savings in operating costs as a result of the Internalization. Further, in connection with the Internalization, certain affiliates of ours and the Manager entered into a transition services agreement (“TSA”) to facilitate an orderly internalization transition of the management of our operations. The TSA expired on September 30, 2021, at which time we fully transitioned the management of our operations.

Our executive team remains unchanged, including Michael J. Mazzei, Chief Executive Officer; Andrew E. Witt, President and Chief Operating Officer; Frank V. Saracino, Chief Financial Officer and Executive Vice President; David A. Palamé, General Counsel, Secretary and Executive Vice President; George Kok, Chief Credit Officer; and Daniel Katz, Head of Originations. As a result of the Company’s 2021 Annual Meeting of Stockholders, DigitalBridge no longer has affiliated representatives on our board of directors. The Company’s board of directors is comprised of seven members, including our six independent directors, led by Catherine D. Rice, our Independent Chairperson, Vernon Schwartz, John Westerfield, Winston W. Wilson, Kim S. Diamond, Catherine F. Long and Michael J. Mazzei, the Company’s Chief Executive Officer. Ms. Diamond and Ms. Long were appointed to the board of directors during 2021. Additionally, certain professionals that have contributed substantially to our investment, underwriting, portfolio and asset management, loan servicing, financial reporting, treasury, legal, tax, credit, risk and compliance responsibilities seamlessly moved forward as direct employees of the Company.

Our senior management team has extensive experience managing and investing in real estate-related investments through a variety of credit cycles and market conditions. The clarity in organizational structure and dedicated management and employee base achieved through the Internalization solidifies the footprint and corresponding network developed by our investment and asset management teams, with proprietary market knowledge, sourcing capabilities and the local presence required to identify, execute and manage new originations and existing investments on behalf of the Company. Our real estate investment platform and relationships allow us to source, underwrite, structure and manage investment opportunities as well as to access debt and equity capital to fund our operations. We have fully integrated investment and portfolio management, finance and administration functions, including legal, compliance, human resources, investor relations, asset valuation, credit and risk management and information technology services. The Company has a captive, fully functional, asset management company that engages primarily in loan servicing for performing, sub-performing and non-performing commercial loans, including senior

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secured loans, revolving lines of credit, loan participations, subordinated loans, unsecured loans and mezzanine debt. Our asset management subsidiary is a commercial special servicer rated by both Standard & Poor’s and Fitch’s rating services.

On June 24, 2021, BrightSpire Capital, Inc. changed its name from Colony Credit Real Estate, Inc. We also changed our principal place of business and corporate headquarters from Los Angeles to New York City, now located at 590 Madison Avenue, 33rd Floor, New York, NY 10022. We continue to be publicly traded on the New York Stock Exchange. However, concurrent with our name change, we changed our ticker symbol to BRSP.

Our Business Segments

During the first quarter of 2021, we realigned the business and reportable segment information to reflect how the Chief Operating Decision Makers (“CODM”) regularly review and manage the business. As a result, we present our business as one portfolio and the following business segments:

•Senior and Mezzanine Loans and Preferred Equity—CRE debt investments including senior mortgage loans, mezzanine loans, and preferred equity interests as well as participations in such loans. The segment also includes acquisition, development and construction (“ADC”) arrangements accounted for as equity method investments.

•Net Leased and Other Real Estate—direct investments in commercial real estate with long-term leases to tenants on a net lease basis, where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance, capital expenditures and real estate taxes. It also includes other real estate, currently consisting of three investments with direct ownership in commercial real estate, with an emphasis on properties with stable cash flow.

•CRE Debt Securities— securities investments currently consisting of BBB and some BB rated CMBS (including Non-Investment Grade “B-pieces” of a CMBS securitization pool) or CRE CLOs (including the junior tranches thereof, collateralized by pools of CRE debt investments). It also includes two sub-portfolios of private equity funds.

•Corporate—includes corporate-level asset management and other fees including expenses related to our secured revolving credit facility (the “Bank Credit Facility”), related party and general and administrative expenses.

There were no changes in the structure of our internal organization that prompted the change in reportable segments. Prior year amounts have been revised to conform to the current year presentation. Accordingly, we realigned the discussion and analysis of our portfolio and results of operations to reflect these reportable segments.

Significant Developments

During the year ended December 31, 2021 and through February 18, 2022, significant developments affecting our business and results of operations of our portfolio included the following:

Capital Resources

•We completed the Internalization, consisting of the internalization of our management and operating functions and terminated our relationship with the Manager, a subsidiary of DigitalBridge, in accordance with the Termination Agreement. We paid the Manager a one-time termination fee of $102.3 million, and we no longer pay management or incentive fees to the Manager. We have achieved a savings in operating costs as a result of the Internalization;

•Executed a securitization transaction through BRSP 2021-FL1, contributing 31 floating rate mortgages secured by 42 properties, totaling $800 million, which resulted in the sale of $670 million of investment grade notes. The securitization reflects an advance rate of 83.75% at a weighted cost of funds of LIBOR plus 1.49% (before transaction expenses). In connection with this transaction, we repaid $701.4 million under our master repurchase facilities during the third quarter of 2021. At December 31, 2021, the securitization was collateralized by a pool of 33 senior loan investments. See “Liquidity and Capital Resources” below for further discussion;

•Declared total quarterly dividends of $0.58 per share for the year ended December 31, 2021;

•In January 2022, we amended our Bank Credit Facility to reduce the aggregate amount of lender commitments from $300 million to $165 million. We also amended five of our Master Repurchase Facilities to reduce the minimum tangible net worth covenant requirement from $1.4 billion to $1.1 billion. Lastly, we amended four of our Master Repurchase Facilities to expand the eligibility criteria to allow for loans indexed to SOFR, and to allow for borrowings under those facilities indexed to SOFR. See “Liquidity and Capital Resources” below for further discussion; and

•As of the date of this report, we have approximately $434 million of liquidity, consisting of $269 million cash on hand and $165 million available on our Bank Credit Facility.

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Our Portfolio

•Generated U.S. GAAP net loss of $101.0 million, or ($0.79) per share, Distributable Earnings (Loss) of $58.7 million, or $(0.44) per share and Adjusted Distributable Earnings of $116.1 million, or $0.87 per share during the year ended December 31, 2021;

•We funded 64 senior mortgage loans with a total commitment of $1.9 billion. The average initial funded amount was $26.4 million and had a weighted average spread of 3.45% plus LIBOR;

•Received loan repayment proceeds of $519.1 million from 10 loans;

•We closed the sale of five development and/or non-accrual assets to managed vehicles of Fortress Investment Group LLC (“Fortress”), for gross proceeds of $223.0 million (the “Co-Invest Portfolio Sale”). We received net transaction proceeds of $198.3 million, primarily due to offsetting distributions from the underlying investments that we received between signing and closing. For the year ended December 31, 2021, we recorded total realized gains of $20.2 million related to this sale. See “Our Portfolio” below for further discussion;

•Following the Co-Invest Portfolio Sale, we used all the sale proceeds to substantially fund the repayment of the preferred financing arrangement (the “5-Investment Preferred Financing”) managed by Goldman Sachs (“GS”) totaling $210 million. The repayment allowed us to reclaim 100% ownership of the triple net warehouse distribution portfolio leased to a national grocery chain;

•Sold our retained investments in the subordinate tranches of one securitization trust for $28.7 million in total proceeds and deconsolidated the securitization trust with gross assets and liabilities of approximately $830.9 million and $802.2 million, respectively. In connection with the sale, we recognized a realized loss of $19.5 million and an unrealized gain of $19.5 million;

•Sold one industrial portfolio that generated gross and net proceeds of $335.0 million and $81.8 million, respectively. We recognized a gain on sale of $11.8 million;

•Recorded a fair value loss adjustment of $97.9 million on a mezzanine B-participation investment in a development project in Los Angeles, California, which represents our remaining proportionate share in the investment;

•Sold two CRE securities for $10.2 million in gross proceeds and realized a gain of $1.2 million. Following the sale, we no longer hold any CRE securities;

•Subsequent to December 31, 2021, we funded six senior mortgage loans with a total commitment of $274.9 million. The average initial funded amount was $39.9 million and had a weighted average spread of 3.55% plus SOFR. We also funded one mezzanine loan with a total commitment of $28.2 million and an initial funded amount of $7.4 million. The mezzanine loan has a fixed interest rate of 12.00%;

•Subsequent to December 31, 2021, we received loan repayment proceeds of $77.6 million from two loans;

•In January 2022, we sold one net leased real estate property for total gross proceeds of $19.6 million. In connection with the sale, we repaid $11.9 million of financing and incurred $1.0 million of selling costs. We received $6.7 million of net proceeds and will recognize a net gain of approximately $5.7 million.

Factors Impacting Our Operating Results

Overview

Our results of operations are affected by a number of factors and depend primarily on, among other things, the ability of the borrowers of our assets to service our debt as it is due and payable, the ability of our tenants to pay rent and other amounts due under their leases, our ability to actively and effectively service any sub-performing and non-performing loans and other assets we may have from time to time in our portfolio, the market value of our assets and the supply of, and demand for, CRE senior mortgage loans, mezzanine loans, preferred equity, debt securities, net leased properties and our other assets, and the level of our net operating income. Our net interest income, which includes the amortization of purchase premiums and the accretion of purchase discounts, varies primarily as a result of changes in market interest rates, prepayment rates on our CRE loans, prepayment speeds and the ability of our borrowers to make scheduled interest payments. Interest rates and prepayment rates vary according to the type of investment, conditions in the financial markets, credit-worthiness of our borrowers, competition and other factors, none of which can be predicted with any certainty. Our operating results also may be impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by borrowers whose mortgage loans are held directly by us or that are included in our CMBS. Our net property operating income depends on our ability to maintain the historical occupancy rates of our real estate equity investments, lease currently available space and continue to attract new tenants.

Impact of the COVID-19 Pandemic on Our Business

The COVID-19 pandemic has negatively impacted CRE credit REITs across the industry, as well as other companies that own and operate commercial real estate investments, including our company. As we manage the impact and uncertainties of the COVID-19 pandemic, cash preservation, liquidity and investment and portfolio management are our key priorities.

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We continue to work closely with our borrowers and tenants to address the impact of COVID-19 on their businesses. To the extent that certain borrowers are experiencing significant financial dislocation we have and may continue to consider the use of interest and other reserves and/or replenishment obligations of the borrower and/or guarantors to meet current interest payment obligations, for a limited period. Similarly, we have and may in the future evaluate converting certain current interest payment obligations to payment-in-kind as a potential bridge period solution. We have in limited cases allowed some portions of current interest to convert to payment-in-kind.

The COVID-19 pandemic has created uncertainties that have and will continue to negatively impact our future operating results, liquidity and financial condition. However, we believe there are too many uncertainties to predict and quantify the continuing impact. The potential concerns and risks include, but are not limited to, mortgage borrowers ability to make monthly payments, lessees’ capacity to pay their rent, and the resulting impact on us to meet our obligations. Therefore, there can be no assurances that we will not need to take impairment charges in future quarters or experience further declines in revenues and net income, which could be material. For more information, refer to “Part I - Item 1A. Risk Factors” of this Annual Report on Form 10-K for further discussion regarding the COVID-19 pandemic and its impact on our future operating results, liquidity and financial condition.

Changes in fair value of our assets

It is our business strategy to hold our target assets as long-term investments. As a result, we do not expect that changes in the market value of the assets will normally impact our operating results. However, at least on a quarterly basis, we assess both our ability and intent to continue to hold such assets as long-term investments. As part of this process, we monitor our target assets for “other-than-temporary” impairment. A change in our ability and/or intent to continue to hold any of our assets could result in our recognizing an impairment charge or realizing losses upon the sale of such securities.

Changes in market interest rates

With respect to our proposed business operations, increases in interest rates, in general, may over time cause:

•the value of fixed-rate investments to decrease;

•prepayments on certain assets in our portfolio to slow, thereby slowing the amortization of our purchase premiums and the accretion of our purchase discounts;

•coupons on our floating and adjustable-rate mortgage loans and CMBS to reset, although on a delayed basis, to higher interest rates;

•to the extent we use leverage to finance our assets, the interest expense associated with our borrowings to increase; and

•to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase.

Conversely, decreases in interest rates, in general, may over time cause:

•the value of the fixed-rate assets in our portfolio to increase;

•prepayments on certain assets in our portfolio to increase, thereby accelerating the amortization of our purchase premiums and the accretion of our purchase discounts;

•to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to decrease;

•coupons on our floating and adjustable-rate mortgage loans and CMBS to reset, although on a delayed basis, to lower interest rates; and

•to the extent we use leverage to finance our assets, the interest expense associated with our borrowings to decrease.

Credit risk

One objective of our strategy is to minimize credit losses. However, we are subject to varying degrees of credit risk in connection with our target assets. We seek to mitigate this risk by seeking to acquire high quality assets, at appropriate prices given anticipated and unanticipated losses and by deploying a comprehensive review and asset selection process and by careful ongoing monitoring of acquired assets. Nevertheless, unanticipated credit losses could occur, which could adversely impact our operating results.

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Size of investment portfolio

The size of our portfolio, as measured by the aggregate principal balance of our commercial mortgage loans, other commercial real estate-related debt investments and the other assets we own, is also a key revenue driver. Generally, as the size of our portfolio grows, the amount of interest income we earn increases. However, a larger portfolio may result in increased expenses to the extent that we incur additional interest expense to finance our assets.

Market conditions

We believe that market conditions impact our operating results and will cause us to adjust our investment and financing strategies over time as new opportunities emerge and risk profiles of our business change. In addition, changes in government programs could impact our ability to identify suitable investments. Except as set forth above, we are not aware of any material trends or uncertainties, other than national economic conditions affecting mortgage loans, MBSs and real estate, generally, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the acquisition of real estate-related assets, other than those referred to in this Annual Report on Form 10-K.

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Our Portfolio

As of December 31, 2021, our portfolio consisted of 115 investments representing approximately $4.4 billion in book value (based on our share of ownership and excluding cash, cash equivalents and certain other assets). Our senior and mezzanine loans and preferred equity consisted of 98 senior mortgage loans, mezzanine loans and preferred equity investments and had a weighted average cash coupon of 3.7% and a weighted average all-in unlevered yield of 4.9%. Our net leased and other real estate consisted of approximately 6.5 million total square feet of space and total 2021 net operating income (“NOI”) of that portfolio was approximately $55.3 million. Please refer to “Non-GAAP Supplemental Financial Measures” below for further information on NOI.

As of December 31, 2021, our portfolio consisted of the following investments (dollars in thousands):

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

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(1)Count for net leased real estate and other real estate represents number of investments.

(2)Book value at our share represents the proportionate book value based on ownership by asset as of December 31, 2021.

(3)Net book value represents book value less any associated financing as of December 31, 2021.

(4)Net book value at our share represents the proportionate book value based on asset ownership less any associated financing based on ownership as of December 31, 2021.

(5)Mezzanine loans and preferred equity include investments in joint ventures whose underlying interest is in a loan or preferred equity.

(6)Preferred equity balances include $16.2 million of book value at our share attributable to related equity participation interests.

Underwriting Process

We use an investment and underwriting process that has been developed by our senior management team leveraging their extensive commercial real estate expertise over many years and real estate cycles. The underwriting process focuses on some or all of the following factors designed to ensure each investment is evaluated appropriately: (i) macroeconomic conditions that may influence operating performance; (ii) fundamental analysis of underlying real estate, including tenant rosters, lease terms, zoning, necessary licensing, operating costs and the asset’s overall competitive position in its market; (iii) real estate market factors that may influence the economic performance of the investment, including leasing conditions and overall competition; (iv) the operating expertise and financial strength and reputation of a tenant, operator, partner or borrower; (v) the cash flow in place and projected to be in place over the term of the investment and potential return; (vi) the appropriateness of the business plan and estimated costs associated with tenant buildout, repositioning or capital improvements; (vii) an internal and third-party valuation of a property, investment basis relative to the competitive set and the ability to liquidate an investment through a sale or refinancing; (viii) review of third-party reports including appraisals, engineering and environmental reports; (ix) physical inspections of properties and markets; (x) the overall legal structure of the investment, contractual implications and the lenders’ rights; and (xi) the tax and accounting impact.

Loan Risk Rankings

In addition to reviewing loans and preferred equity held for investment for impairment quarterly, we evaluate loans and preferred equity held for investment to determine if an allowance for loan loss should be established. In conjunction with this review, we assess the risk factors of each senior and mezzanine loans and preferred equity and assign a risk ranking based on a variety of factors, including, without limitation, underlying real estate performance and asset value, values of comparable properties, durability and quality of property cash flows, sponsor experience and financial wherewithal, and the existence of a risk-mitigating loan structure. Additional key considerations include loan-to-value ratios, debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, our loans and preferred equity held for investment are rated “1” through “5,” from less risk to greater risk. At the time of origination or

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purchase, loans and preferred equity held for investment are ranked as a “3” and will move accordingly going forward based on the ratings which are defined as follows:

1.Very Low Risk—The loan is performing as agreed. The underlying property performance has exceeded underwritten expectations with very strong NOI, debt service coverage ratio, debt yield and occupancy metrics. Sponsor is investment grade, very well capitalized, and employs a very experienced management team.

2.Low Risk—The loan is performing as agreed. The underlying property performance has met or exceeds underwritten expectations with high occupancy at market rents, resulting in consistent cash flow to service the debt. Strong sponsor that is well capitalized with experienced management team.

3.Average Risk—The loan is performing as agreed. The underlying property performance is consistent with underwriting expectations. The property generates adequate cash flow to service the debt, and/or there is enough reserve or loan structure to provide time for sponsor to execute the business plan. Sponsor has routinely met its obligations and has experience owning/operating similar real estate.

4.High Risk/Delinquent/Potential for Loss—The loan is in excess of 30 days delinquent and/or has a risk of a principal loss. The underlying property performance is behind underwritten expectations. Loan covenants may require occasional waivers/modifications. Sponsor has been unable to execute its business plan and local market fundamentals have deteriorated. Operating cash flow is not sufficient to service the debt and debt service payments may be coming from sponsor equity/loan reserves.

5.Impaired/Defaulted/Loss Likely—The loan is in default or a default is imminent, and has a high risk of a principal loss, or has incurred a principal loss. The underlying property performance is significantly worse than underwritten expectation and sponsor has failed to execute its business plan. The property has significant vacancy and current cash flow does not support debt service. Local market fundamentals have significantly deteriorated resulting in depressed comparable property valuations versus underwriting.

As mentioned above, management considers several risk factors when assigning our risk ranking each quarter. We believe the long-term impacts of the COVID-19 pandemic remain uncertain, and therefore continue to represent a risk to our portfolio. However, the origination of 64 new loans during 2021, an improved outlook in others and certain asset resolutions, resulted in an average risk rating of 3.1 at December 31, 2021. This is an improvement as compared to the average risk ranking of 3.7 at December 31, 2020.

Senior and Mezzanine Loans and Preferred Equity

Our senior and mezzanine loans and preferred equity consists of senior mortgage loans, mezzanine loans and preferred equity interests, some of which have equity participation interests.

The following table provides a summary of our senior and mezzanine loans and preferred equity based on our internal risk rankings as of December 31, 2021 (dollars in thousands):

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

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(1)Carrying value at our share represents the proportionate book value based on ownership by asset as of December 31, 2021.

(2)Includes one mezzanine loan totaling $29.0 million where we are also the senior lender.

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The following table provides asset level detail for our senior and mezzanine loans and preferred equity as of December 31, 2021 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Collateral type","","Origination Date","","City, State","","Carrying value(1)","","Principal balance","","Coupon type","","Cash Coupon(2)","","Unlevered all-in yield(3)","","Extended maturity date","","Loan-to-value(4)","","Q4 Risk ranking(5)"],["Senior loans"],["Loan 1","","Hotel","","1/2/2018","","San Jose, CA","","$","184,959","","","$","184,959","","","Floating","","4.8%","","5.3%","","11/9/2026","","74%","","4"],["Loan 2","","Multifamily","","6/21/2019","","Milpitas, CA","","183,711","","","183,501","","","Floating","","3.1%","","5.5%","","7/9/2024","","72%","","3"],["Loan 3","","Office","","12/7/2018","","Carlsbad, CA","","120,000","","","120,000","","","Floating","","4.3%","","4.6%","","12/9/2023","","73%","","3"],["Loan 4","","Hotel","","6/28/2018","","Berkeley, CA","","119,608","","","120,000","","","Floating","","3.2%","","5.2%","","7/9/2025","","66%","","4"],["Loan 5","","Office","","5/31/2019","","Stamford, CT","","119,583","","","120,105","","","Floating","","3.5%","","5.8%","","6/9/2025","","71%","","3"],["Loan 6(6)","","Multifamily","","6/18/2019","","Santa Clara, CA","","106,679","","","106,691","","","Floating","","4.4%","","7.1%","","6/18/2024","","70%","","4"],["Loan 7","","Other (Mixed-use)","","10/24/2019","","Brooklyn, NY","","75,686","","","75,693","","","Floating","","4.0%","","4.8%","","11/9/2024","","70%","","3"],["Loan 8","","Office","","8/28/2018","","San Jose, CA","","73,147","","","73,147","","","Floating","","2.5%","","4.3%","","8/28/2025","","75%","","3"],["Loan 9","","Hotel","","6/25/2018","","Englewood, CO","","73,000","","","73,000","","","Floating","","3.5%","","5.1%","","2/9/2025","","69%","","3"],["Loan 10","","Office","","1/19/2021","","Phoenix, AZ","","71,888","","","72,460","","","Floating","","3.6%","","4.4%","","2/9/2026","","70%","","3"],["Loan 11","","Office","","5/29/2019","","Long Island City, NY","","66,244","","","66,271","","","Floating","","3.5%","","5.9%","","6/9/2024","","59%","","4"],["Loan 12","","Office","","4/5/2019","","Long Island City, NY","","65,480","","","65,480","","","Floating","","3.3%","","5.7%","","4/9/2024","","58%","","4"],["Loan 13","","Office","","2/3/2019","","Baltimore, MD","","56,980","","","57,006","","","Floating","","3.5%","","6.2%","","2/9/2024","","74%","","4"],["Loan 14","","Office","","7/12/2019","","Washington, D.C.","","56,080","","","56,081","","","Floating","","2.8%","","5.5%","","8/9/2024","","68%","","4"],["Loan 15","","Multifamily","","12/23/2020","","Salt Lake City, UT","","50,891","","","51,100","","","Floating","","3.2%","","4.0%","","1/9/2026","","68%","","2"],["Loan 16","","Multifamily","","7/19/2021","","Dallas, TX","","47,666","","","47,950","","","Floating","","3.3%","","3.9%","","8/9/2026","","74%","","3"],["Loan 17","","Multifamily","","5/26/2021","","Las Vegas, NV","","44,462","","","44,713","","","Floating","","3.4%","","3.9%","","6/9/2026","","80%","","3"],["Loan 18","","Multifamily","","11/30/2021","","Phoenix, AZ","","43,013","","","43,457","","","Floating","","3.4%","","4.0%","","12/9/2026","","74%","","3"],["Loan 19","","Multifamily","","3/1/2021","","Richardson, TX","","42,909","","","43,227","","","Floating","","3.4%","","3.8%","","3/9/2026","","75%","","3"],["Loan 20","","Multifamily","","7/15/2021","","Jersey City, NJ","","42,735","","","43,000","","","Floating","","3.0%","","3.5%","","8/9/2026","","66%","","2"],["Loan 21","","Multifamily","","12/21/2020","","Austin, TX","","42,572","","","42,850","","","Floating","","3.7%","","5.0%","","1/9/2026","","54%","","2"],["Loan 22","","Multifamily","","2/3/2021","","Arlington, TX","","41,241","","","41,335","","","Floating","","3.6%","","4.9%","","2/9/2026","","81%","","2"],["Loan 23","","Multifamily","","2/8/2019","","Las Vegas, NV","","41,099","","","41,099","","","Floating","","3.2%","","5.7%","","2/9/2024","","71%","","3"],["Loan 24","","Multifamily","","3/22/2021","","Fort Worth, TX","","38,468","","","38,682","","","Floating","","3.5%","","4.1%","","4/9/2026","","83%","","3"],["Loan 25","","Office","","11/23/2021","","Tualatin, OR","","38,104","","","38,547","","","Floating","","3.9%","","4.3%","","12/9/2026","","66%","","3"],["Loan 26","","Multifamily","","4/11/2019","","Houston, TX","","38,083","","","39,335","","","Floating","","3.0%","","5.8%","","4/9/2024","","65%","","5"],["Loan 27","","Multifamily","","3/25/2021","","Fort Worth, TX","","36,863","","","37,140","","","Floating","","3.3%","","3.9%","","4/9/2026","","82%","","3"],["Loan 28","","Multifamily","","12/7/2021","","Denver, CO","","36,459","","","36,850","","","Floating","","3.2%","","3.6%","","12/9/2026","","74%","","3"],["Loan 29","","Office","","9/28/2021","","Reston, VA","","35,226","","","35,606","","","Floating","","4.0%","","4.6%","","10/9/2026","","68%","","3"],["Loan 30","","Office","","11/17/2021","","Dallas, TX","","34,851","","","35,250","","","Floating","","3.9%","","4.3%","","12/9/2025","","61%","","3"],["Loan 31","","Multifamily","","12/29/2020","","Fullerton, CA","","34,637","","","34,860","","","Floating","","3.8%","","4.8%","","1/9/2026","","70%","","3"],["Loan 32","","Office","","6/16/2017","","Miami, FL","","34,036","","","33,696","","","Floating","","4.9%","","5.6%","","7/9/2022","","68%","","3"],["Loan 33","","Multifamily","","7/15/2021","","Dallas, TX","","33,702","","","34,036","","","Floating","","3.1%","","3.5%","","8/9/2026","","77%","","3"],["Loan 34","","Multifamily","","9/28/2021","","Carrollton, TX","","33,561","","","33,908","","","Floating","","3.1%","","3.5%","","10/9/2025","","73%","","3"],["Loan 35","","Multifamily","","3/16/2021","","Fremont, CA","","32,903","","","33,152","","","Floating","","3.5%","","4.3%","","4/9/2026","","76%","","3"],["Loan 36","","Office","","6/2/2021","","South Pasadena, CA","","32,145","","","32,302","","","Floating","","4.9%","","5.6%","","6/9/2026","","69%","","3"],["Loan 37","","Multifamily","","7/29/2021","","Phoenix, AZ","","30,896","","","31,200","","","Floating","","3.3%","","3.8%","","8/9/2026","","75%","","3"],["Loan 38","","Office","","3/28/2019","","San Jose, CA","","30,762","","","30,762","","","Floating","","3.0%","","5.7%","","4/9/2024","","64%","","2"],["Loan 39","","Office","","4/30/2021","","San Diego, CA","","30,415","","","30,700","","","Floating","","3.6%","","4.1%","","5/9/2026","","55%","","3"],["Loan 40","","Multifamily","","3/31/2021","","Mesa, AZ","","30,318","","","30,493","","","Floating","","3.7%","","4.4%","","4/9/2026","","83%","","3"],["Loan 41","","Multifamily","","5/5/2021","","Dallas. TX","","29,547","","","29,749","","","Floating","","3.4%","","4.0%","","5/9/2026","","68%","","3"],["Loan 42","","Multifamily","","4/29/2021","","Las Vegas, NV","","28,419","","","28,605","","","Floating","","3.1%","","3.6%","","5/9/2026","","76%","","2"],["Loan 43","","Office","","11/19/2021","","Gardena, CA","","28,107","","","28,505","","","Floating","","3.5%","","3.9%","","12/9/2026","","69%","","3"],["Loan 44","","Multifamily","","5/27/2021","","Houston, TX","","27,802","","","28,000","","","Floating","","3.0%","","3.7%","","6/9/2026","","67%","","3"],["Loan 45","","Office","","10/21/2021","","Blue Bell, PA","","27,743","","","27,930","","","Floating","","3.7%","","4.1%","","11/9/2023","","67%","","3"],["Loan 46","","Multifamily","","7/13/2021","","Plano, TX","","27,529","","","27,715","","","Floating","","3.1%","","3.5%","","2/9/2025","","82%","","3"],["Loan 47","","Multifamily","","12/16/2021","","Fort Mill, SC","","25,818","","","26,100","","","Floating","","3.2%","","3.6%","","1/9/2027","","71%","","3"],["Loan 48","","Office","","2/26/2019","","Charlotte, NC","","25,790","","","26,052","","","Floating","","3.3%","","3.7%","","3/9/2024","","56%","","2"]]
[[/GREPCENT_TABLE]]

52

Table of Contents

[[GREPCENT_TABLE]]
[["","","Collateral type","","Origination Date","","City, State","","Carrying value(1)","","Principal balance","","Coupon type","","Cash Coupon(2)","","Unlevered all-in yield(3)","","Extended maturity date","","Loan-to-value(4)","","Q4 Risk ranking(5)"],["Loan 49","","Multifamily","","8/31/2021","","Glendale, AZ","","25,377","","","25,649","","","Floating","","3.2%","","3.6%","","9/9/2026","","75%","","3"],["Loan 50","","Office","","11/23/2021","","Oakland, CA","","24,726","","","25,000","","","Floating","","4.2%","","4.6%","","12/9/2026","","57%","","3"],["Loan 51","","Multifamily","","5/13/2021","","Phoenix, AZ","","24,260","","","24,469","","","Floating","","3.1%","","3.5%","","6/9/2026","","76%","","2"],["Loan 52","","Office","","9/26/2019","","Salt Lake City, UT","","24,260","","","24,373","","","Floating","","2.7%","","5.0%","","10/9/2024","","72%","","4"],["Loan 53","","Office","","12/7/2021","","Hillsboro, OR","","24,236","","","24,511","","","Floating","","3.9%","","4.3%","","12/9/2024","","68%","","3"],["Loan 54","","Multifamily","","12/21/2021","","Phoenix, AZ","","24,051","","","24,325","","","Floating","","3.5%","","3.9%","","1/9/2027","","75%","","3"],["Loan 55","","Multifamily","","1/29/2021","","Charlotte, NC","","23,334","","","23,500","","","Floating","","3.5%","","4.1%","","2/9/2026","","76%","","3"],["Loan 56","","Office","","9/16/2019","","San Francisco, CA","","22,951","","","22,951","","","Floating","","3.2%","","5.7%","","10/9/2024","","72%","","3"],["Loan 57","","Multifamily","","7/1/2021","","Aurora, CO","","22,839","","","23,043","","","Floating","","3.1%","","3.6%","","7/9/2026","","73%","","3"],["Loan 58","","Multifamily","","3/25/2021","","San Jose, CA","","22,481","","","22,650","","","Floating","","3.7%","","4.1%","","4/9/2026","","70%","","2"],["Loan 59","","Multifamily","","10/7/2021","","Irving, TX","","22,313","","","22,400","","","Floating","","3.4%","","4.1%","","9/1/2024","","70%","","3"],["Loan 60","","Multifamily","","11/4/2021","","Austin, TX","","21,727","","","21,967","","","Floating","","3.3%","","3.7%","","11/9/2026","","71%","","3"],["Loan 61","","Office","","7/30/2021","","Denver, CO","","21,452","","","21,705","","","Floating","","4.3%","","4.7%","","8/9/2026","","72%","","3"],["Loan 62","","Multifamily","","7/13/2021","","Oregon City, OR","","21,209","","","21,353","","","Floating","","3.3%","","3.7%","","8/9/2026","","73%","","3"],["Loan 63","","Multifamily","","2/25/2021","","Raleigh, NC","","20,896","","","21,072","","","Floating","","3.3%","","4.0%","","3/9/2026","","76%","","2"],["Loan 64","","Office","","8/27/2019","","San Francisco, CA","","20,623","","","20,623","","","Floating","","2.8%","","5.4%","","9/9/2024","","73%","","4"],["Loan 65","","Multifamily","","6/22/2021","","Phoenix, AZ","","20,597","","","20,798","","","Floating","","3.2%","","3.6%","","7/9/2026","","75%","","2"],["Loan 66","","Multifamily","","9/22/2021","","Denton, TX","","19,209","","","19,351","","","Floating","","3.2%","","3.6%","","10/9/2025","","70%","","3"],["Loan 67(7)","","Hotel","","7/30/2020","","Bloomington, MN","","19,153","","","19,153","","","Floating","","4.0%","","5.0%","","2/9/2022","","64%","","3"],["Loan 68","","Multifamily","","3/31/2021","","San Antonio, TX","","19,044","","","19,204","","","Floating","","3.1%","","3.6%","","4/9/2026","","77%","","3"],["Loan 69","","Multifamily","","12/21/2021","","Gresham, OR","","18,996","","","19,199","","","Floating","","3.5%","","3.9%","","1/9/2027","","74%","","3"],["Loan 70","","Multifamily","","8/6/2021","","La Mesa, CA","","18,675","","","18,824","","","Floating","","2.9%","","3.5%","","8/9/2025","","70%","","3"],["Loan 71","","Office","","10/29/2020","","Denver, CO","","18,564","","","18,708","","","Floating","","3.6%","","4.7%","","11/9/2025","","64%","","3"],["Loan 72","","Multifamily","","6/24/2021","","Phoenix, AZ","","18,369","","","18,548","","","Floating","","3.4%","","4.0%","","7/9/2026","","74%","","3"],["Loan 73","","Multifamily","","9/1/2021","","Bellevue, WA","","17,849","","","18,013","","","Floating","","2.9%","","3.5%","","9/9/2025","","64%","","3"],["Loan 74","","Multifamily","","7/14/2021","","Salt Lake City, UT","","17,759","","","17,874","","","Floating","","3.3%","","3.7%","","8/9/2026","","73%","","3"],["Loan 75","","Multifamily","","6/25/2021","","Phoenix, AZ","","16,280","","","16,428","","","Floating","","3.2%","","3.6%","","7/9/2026","","75%","","3"],["Loan 76","","Multifamily","","11/24/2020","","Tucson, AZ","","15,638","","","15,662","","","Floating","","3.6%","","4.7%","","12/9/2025","","75%","","2"],["Loan 77","","Office","","10/13/2021","","Burbank, CA","","15,347","","","15,538","","","Floating","","3.9%","","4.3%","","11/9/2026","","65%","","3"],["Loan 78","","Multifamily","","6/15/2021","","Phoenix, AZ","","15,297","","","15,392","","","Floating","","3.3%","","3.7%","","7/9/2026","","74%","","3"],["Loan 79","","Multifamily","","3/5/2021","","Tucson, AZ","","15,234","","","15,289","","","Floating","","3.7%","","4.3%","","3/9/2026","","72%","","2"],["Loan 80","","Multifamily","","3/31/2021","","Albuquerque, NM","","14,694","","","14,816","","","Floating","","3.4%","","3.9%","","4/9/2026","","76%","","2"],["Loan 81","","Office","","8/31/2021","","Los Angeles, CA","","14,361","","","14,570","","","Floating","","5.0%","","5.7%","","9/9/2026","","66%","","3"],["Loan 82","","Multifamily","","2/8/2019","","Las Vegas, NV","","14,259","","","14,259","","","Floating","","3.2%","","5.7%","","2/9/2024","","71%","","2"],["Loan 83","","Office","","11/16/2021","","Charlotte, NC","","14,167","","","14,370","","","Floating","","4.4%","","4.8%","","12/9/2026","","71%","","3"],["Loan 84","","Multifamily","","5/27/2021","","Phoenix, AZ","","13,965","","","14,086","","","Floating","","3.1%","","3.5%","","6/9/2026","","72%","","3"],["Loan 85","","Multifamily","","7/21/2021","","Durham, NC","","13,799","","","13,933","","","Floating","","3.3%","","3.7%","","8/9/2026","","72%","","3"],["Loan 86","","Multifamily","","10/7/2021","","Tallahassee, FL","","13,545","","","13,650","","","Floating","","3.5%","","3.9%","","8/1/2024","","64%","","3"],["Loan 87","","Multifamily","","2/11/2021","","Provo, UT","","13,341","","","13,442","","","Floating","","3.8%","","4.6%","","3/9/2026","","71%","","3"],["Loan 88","","Office","","11/10/2021","","Richardson, TX","","13,279","","","13,400","","","Floating","","4.0%","","4.4%","","12/9/2026","","71%","","3"],["Loan 89","","Multifamily","","7/28/2021","","San Antonio, TX","","13,250","","","13,369","","","Floating","","3.3%","","4.0%","","8/9/2024","","76%","","3"],["Loan 90","","Multifamily","","2/25/2021","","Louisville, KY","","11,911","","","12,000","","","Floating","","3.9%","","4.4%","","3/9/2026","","74%","","2"],["Loan 91","","Multifamily","","4/9/2021","","Phoenix, AZ","","11,166","","","11,258","","","Floating","","3.6%","","4.1%","","4/9/2026","","75%","","3"],["Total/Weighted average senior loans","","$","3,366,300","","","$","3,383,025","","","","","3.5%","","4.7%","","8/15/2025","","70%","","3.1"],["Mezzanine loans"],["Loan 92(6)","","Multifamily","","12/3/2019","","Milpitas, CA","","$","38,796","","","$","38,885","","","Fixed","","8.0%","","13.3%","","12/3/2024","","49% \u2013 71%","","3"],["Loan 93(6)","","Multifamily","","7/11/2019","","Placentia, CA","","33,180","","","33,222","","","Fixed","","8.0%","","13.3%","","7/11/2024","","51% \u2013 84%","","4"],["Loan 94","","Hotel","","9/23/2019","","Berkeley, CA","","29,040","","","29,040","","","Fixed","","11.5%","","11.5%","","7/9/2025","","66% \u2013 81%","","4"],["Loan 95","","Hotel","","1/9/2017","","New York, NY","","12,120","","","12,000","","","Floating","","11.0%","","11.5%","","9/9/2022","","63% \u2013 76%","","4"],["Loan 96","","Multifamily","","7/30/2014","","Various - TX","","4,489","","","4,489","","","Fixed","","9.5%","","9.5%","","8/11/2024","","71% \u2013 83%","","3"]]
[[/GREPCENT_TABLE]]

53

Table of Contents

[[GREPCENT_TABLE]]
[["","","Collateral type","","Origination Date","","City, State","","Carrying value(1)","","Principal balance","","Coupon type","","Cash Coupon(2)","","Unlevered all-in yield(3)","","Extended maturity date","","Loan-to-value(4)","","Q4 Risk ranking(5)"],["Loan 97(6)(8)","","Other (Mixed-use)","","9/1/2020","","Los Angeles, CA","","\u2014","","","162,243","","","n/a (8)","","n/a (8)","","n/a (8)","","7/9/2023","","n/a","","5"],["Total/Weighted average mezzanine loans","","$","117,625","","","$","279,879","","","","","9.2%","","12.5%","","9/18/2024","","58% - 78%","","3.6"],["Preferred equity"],["Loan 98(9)","","Industrial","","9/1/2016","","Various - U.S.","","$","16,200","","","$","\u2014","","","n/a","","n/a","","n/a","","9/2/2027","","n/a","","4"],["Total/Weighted average preferred equity (10)","","$","16,200","","","$","\u2014","","","","","","","n/a","","9/2/2027","","n/a","","4.0"],["Total/Weighted average senior and mezzanine loans and preferred equity - Our Portfolio","","$","3,500,125","","","$","3,662,904","","","","","3.7%","","4.9%","","8/7/2025","","n/a","","3.1"]]
[[/GREPCENT_TABLE]]

_________________________________________

(1)Represents carrying values at our share as of December 31, 2021.

(2)Represents the stated coupon rate for loans; for floating rate loans, does not include USD 1-month London Interbank Offered Rate (“LIBOR”) which was 0.10% as of December 31, 2021.

(3)In addition to the stated cash coupon rate, unlevered all-in yield includes non-cash payment in-kind interest income and the accrual of origination, extension and exit fees. Unlevered all-in yield for the loan portfolio assumes the applicable floating benchmark rate as of December 31, 2021 for weighted average calculations.

(4)Except for construction loans, senior loans reflect the initial loan amount divided by the as-is value as of the date the loan was originated, or the principal amount divided by the appraised value as of the date of the most recent as-is appraisal. Mezzanine loans include attachment loan-to-value and detachment loan-to-value, respectively. Attachment loan-to-value reflects initial funding of loans senior to our position divided by the as-is value as of the date the loan was originated, or the principal amount divided by the appraised value as of the date of the most recent appraisal. Detachment loan-to-value reflects the cumulative initial funding of our loan and the loans senior to our position divided by the as-is value as of the date the loan was originated, or the cumulative principal amount divided by the appraised value as of the date of the most recent appraisal.

(5)On a quarterly basis, the Company’s senior and mezzanine loans and preferred equity are rated “1” through “5,” from less risk to greater risk. Represents risk ranking as of December 31, 2021.

(6)Construction senior loans’ loan-to-value reflect the total commitment amount of the loan divided by as-completed appraised value, or the total commitment amount of the loan divided by the projected total cost basis. Construction mezzanine loans include attachment loan-to-value and detachment loan-to-value, respectively. Attachment loan-to-value reflects the total commitment amount of loans senior to our position divided by as-completed appraised value, or the total commitment amount of loans senior to our position divided by projected total cost basis. Detachment loan-to-value reflect the cumulative commitment amount of our loan and the loans senior to our position divided by as-completed appraised value, or the cumulative commitment amount of our loan and loans senior to our position divided by projected total cost basis.

(7)Subsequent to December 31, 2021, the maturity date for Loan 67 was extended to May 9, 2022.

(8)Loan 97 is on nonaccrual status as of December 31, 2021; as such, no income is being recognized.

(9)Represents equity participation interest related to a preferred equity investment.

(10)Weighted average calculation for preferred equity excludes equity participation interests.

The following table details the types of properties securing our senior and mezzanine loans and preferred equity and geographic distribution as of December 31, 2021 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Book value (at BRSP share)"],["Collateral property type","","Count","","Senior mortgage loans","","Mezzanine loans and preferred equity","","Total","","% of Total"],["Multifamily","","60","","","$","1,733,353","","","$","76,465","","","$","1,809,818","","","51.6","%"],["Office","","29","","","1,160,548","","","\u2014","","","1,160,548","","","33.2","%"],["Hotel","","6","","","396,713","","","41,160","","","437,873","","","12.5","%"],["Other (Mixed-use)(1)","","2","","","75,686","","","\u2014","","","75,686","","","2.2","%"],["Industrial","","1","","","\u2014","","","16,200","","","16,200","","","0.5","%"],["Total","","98","","","$","3,366,300","","","$","133,825","","","$","3,500,125","","","100.0","%"],["","","Book value (at BRSP share)"],["Region","","Count","","Senior mortgage loans","","Mezzanine loans and preferred equity","","Total","","% of Total"],["US West","","37","","","$","1,537,178","","","$","101,015","","","$","1,638,193","","","46.8","%"],["US Southwest","","40","","","1,080,914","","","4,490","","","1,085,404","","","31.2","%"],["US Northeast","","9","","","510,533","","","12,120","","","522,653","","","14.8","%"],["US Southeast","","10","","","218,522","","","\u2014","","","218,522","","","6.2","%"],["US Midwest","","2","","","19,153","","","16,200","","","35,353","","","1.0","%"],["Total","","98","","","$","3,366,300","","","$","133,825","","","$","3,500,125","","","100.0","%"]]
[[/GREPCENT_TABLE]]
_________________________________________

(1)Other includes commercial and residential development and predevelopment assets.

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Due to the continued impact of COVID-19, we expect some borrowers may continue to experience difficulties making their loan payments over the next several quarters. Failure of our borrowers to meet their loan obligations will not only impact our financial results but may also trigger repayments under our master repurchase facilities. Our asset management team speaks with borrowers on a reasonably current basis, and seeks to identify issues and address potential value preserving solutions, which may include a loan modification.

At December 31, 2021 our current expected credit loss reserve (“CECL”) calculated by our probability of default (“PD”)/loss given default (“LGD”) model for our outstanding loans and future loan funding commitments is $35.8 million, which is 0.96% of the aggregate commitment amount of our loan portfolio. This represents a decrease of $7.9 million from $43.7 million at September 30, 2021, which was primarily driven by loan repayments and improved operating performance of the underlying collateral on certain loans, partially offset by day one reserves on newly originated loans during the fourth quarter. In addition, we individually evaluated outside of the PD/LGD model and recorded a $1.3 million allowance for loan loss on one senior loan collateralized by a student housing property.

Asset Specific Summaries: Senior and Mezzanine Loans and Preferred Equity

The Co-Invest Portfolio Sale

On December 20, 2021, we closed the sale of five legacy development and/or non-accrual assets to managed vehicles of Fortress Investment Group LLC (“Fortress”), for gross proceeds of $223 million (the “Co-Invest Portfolio Sale”). We received net transaction proceeds of $198.3 million, primarily due to offsetting distributions from the underlying investments that we received between signing and closing.

The Co-Invest Portfolio Sale included four co-investments: two Dublin, Ireland development loans and two U.S. mixed-use and single-family development loans, as well as a residual hotel loan equity participation interest in Austin, Texas. The Co-Invest Portfolio Sale resolved five of six legacy investment assets owned alongside investment vehicles managed by DigitalBridge Group, Inc.

For the year ended December 31, 2021, we recorded total realized gains of $20.2 million in connection with the Co-Invest Portfolio Sale. This included a $29.9 million gain related to designated foreign currency hedges which were settled in 2020 and released from accumulated other comprehensive income in 2021 upon the closing of the Co-Invest Portfolio Sale, a $6.4 million gain received on certain non-designated hedges that we put in place to mitigate the risk of currency translation on our foreign currency denominated assets sold and tax expense of $6.0 million.

The Co-Invest Portfolio Sale included four of the investments included in our “5-Investment Preferred Financing,” a COVID-19 related financing secured in June 2020 for balance sheet protective purposes. We used all the proceeds from the Co-Invest Portfolio Sale to substantially fund the repayment of the “5-Investment Preferred Financing” during the fourth quarter of 2021. Refer to “Liquidity and Capital Resources” section for further discussion.

Berkeley, California Hotel Senior Loan and Mezzanine Loan

[[GREPCENT_TABLE]]
[["","","Loan Type","","Collateral type","","Origination Date","","Carrying value","","Principal balance","","Coupon type","","Cash Coupon","","Unlevered all-in yield","","Extended maturity date","","Loan-to-value(1)","","Q4 Risk ranking"],["Loan 4","","Senior","","Hotel","","6/28/2018","","$","119,608","","","$","120,000","","","Floating","","3.2%","","5.2%","","7/9/2025","","66%","","4"],["Loan 94","","Mezzanine","","Hotel","","9/23/2019","","29,040","","","29,040","","","Fixed","","11.5%","","11.5%","","7/9/2025","","66% -81%","","4"]]
[[/GREPCENT_TABLE]]

______________________________________

(1)Loan-to-value is calculated using the as-is value on the date of loan origination.

We originated a $109.8 million senior loan in 2018 to replace the sponsor’s existing financing on a hotel located in Berkeley, California (the “Berkeley Hotel”). The hotel includes meeting space, full-service restaurants and tennis club facilities. The loan included an initial funding of $98.8 million with an additional $11.0 million of future advances. The sponsor purchased the Berkeley Hotel in 2014 for a purchase price of $89.5 million and has spent a significant amount on capital improvements. In September 2019, we upsized the senior loan to $120.0 million and provided a $28.3 million mezzanine loan to facilitate the sponsor’s acquisition of a third party’s equity interest in the property. Due to the COVID-19 pandemic the Berkeley Hotel was closed from April through July of 2020, during which time the loan stayed current through the combination of federal loans (Paycheck Protection Program), borrower reserves, and lender advances from the mezzanine loan.

The hotel partially re-opened in August 2020 and shortly thereafter began generating cash flow. Operating performance has steadily improved in 2021 at the Berkeley Hotel. In October 2021 the cash flow was 1.5 times the debt service, but due to seasonality, November 2021 and December 2021 cash flows were insufficient to service the debt. The borrower supported debt service shortfalls out-of-pocket, as they have previously during the pandemic. The borrower agreed to fund two additional months of interest to the interest reserve, bringing the interest reserve balance to 90 days of interest on the senior and mezzanine

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loans combined, and in exchange we delayed the debt service hurdle test until loan maturity in July 2023. COVID-19 cases in California continue to impact occupancy, which may influence future borrower actions and support at the Berkeley Hotel and have a negative impact on performance of the asset and the value of our investment interest.

Long Island City, New York Office Senior Loans

[[GREPCENT_TABLE]]
[["","","Loan Type","","Collateral type","","Origination Date","","Carrying value","","Principal balance","","Coupon type","","Cash Coupon","","Unlevered all-in yield","","Extended maturity date","","Loan-to-value(1)","","Q4 Risk ranking"],["Loan 11","","Senior","","Office","","5/29/2019","","$","66,244","","","$","66,271","","","Floating","","3.5%","","5.9%","","6/9/2024","","59%","","4"],["Loan 12","","Senior","","Office","","4/5/2019","","65,480","","","65,480","","","Floating","","3.3%","","5.7%","","4/9/2024","","58%","","4"]]
[[/GREPCENT_TABLE]]
______________________________________

(1)Loan-to-value is calculated using the as-is value on the date of loan origination.

We originated two senior mortgage loans on two transitional office properties to the same sponsorship group. However, the borrowing entities are unrelated and the loans are neither cross-collateralized nor cross defaulted.

The New York City metro office markets have experienced substantial increases in vacancy rates due to the COVID-19 pandemic. The Long Island City market has experienced further increases in vacancy as newly developed or renovated properties have become available for leasing. Additionally, the availability of significant sub-lease space in Long Island City has created additional supply at below market rents. There is increasing confidence among market participants that office demand will increase in the near future, once tenants solidify their return-to-work plans. However, the timeline may not be rapid enough to remedy the negative impact on sponsor’s business plans and leasing activity for these two properties. As such, the underlying individual property cash flows are insufficient to cover their respective debt service payments. In March 2021, we agreed to shift future funding advances from the tenant improvements and leasing costs account to be used for interest carry and operations shortfalls for a period of six months on Loan 11 and twelve months on Loan 12. The six-month shortfall future funding advance period expired in August 2021 for Loan 11 and the borrower deposited six months interest and carry in exchange for certain waivers and extensions that extend through September 2022. In January 2022, we agreed to shift additional future funding advances from the tenant improvements and leasing costs account to be used for interest carry and operations shortfalls for a period of six months for Loan 12 in exchange for a borrower deposit of six months of interest and carry.

In regards to leasing activity at these properties during the fourth quarter of 2021, Loan 11 in-place leases increased from 7% to 10% of the property and Loan 12 in-place leases increased from 21% to 30% of the property. Additionally, both loans generate incremental revenue from license agreements for rooftop signage. Loan 12 also generates incremental revenue from a license agreement for antenna space. It is possible that uncertain market conditions and borrower actions may result in a future valuation impairment or investment loss.

Payment-In-Kind (“PIK”) Interest Income

We have debt investments in our portfolio that contain a PIK provision. Contractual PIK interest, which represents contractually deferred interest added to the loan balance that is due at the end of the loan term, is generally recorded on an accrual basis to the extent such amounts are expected to be collected. During the year ended December 31, 2021, we recorded total PIK interest of $21.5 million. We will cease accruing PIK interest if there is insufficient value to support the accrual or management does not expect the borrower to be able to pay all principal and interest due.

Net Leased and Other Real Estate

Our net leased real estate investment strategy focuses on direct ownership in commercial real estate with an emphasis on properties with stable cash flow, which may be structurally senior to a third-party partner’s equity. In addition, we may own net leased real estate investments through joint ventures with one or more partners. As part of our net leased real estate strategy, we explore a variety of real estate investments including multi-tenant office, multifamily, student housing and industrial. These properties are typically well-located with strong operating partners and we believe offer both attractive cash flow and returns. Additionally, we have three investments in direct ownership of commercial real estate with an emphasis on properties with stable cash flow, which may be structurally senior to a third-party partner’s equity. We own these operating real estate investments through joint ventures with one or more partners. These properties are typically well-located with strong operating partners.

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As of December 31, 2021, $872.7 million or 19.8% of our assets were invested in net leased and other real estate properties and these properties were 97.0% occupied. The following table presents our net leased and other real estate investments as of December 31, 2021 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Count(1)","","Carrying Value(2)","","NOI for the year ended December 31, 2021(3)"],["Net leased real estate","","9","","","$","673,707","","","$","38,191"],["Other real estate","","3","","","199,003","","","17,151"],["Total/Weighted average net leased and other real estate","","12","","","$","872,710","","","$","55,342"]]
[[/GREPCENT_TABLE]]

________________________________________

(1)Count represents the number of investments.

(2)Represents carrying values at our share as of December 31, 2021; includes real estate tangible assets, deferred leasing costs and other intangible assets less intangible liabilities.

(3)Please refer to “Non-GAAP Supplemental Financial Measures” for further information on NOI. Excludes $1.6 million that relates to properties that were sold during 2021.

The following table provides asset-level detail of our net leased and other real estate as of December 31, 2021:

[[GREPCENT_TABLE]]
[["","","Collateral type","","City, State","","Number of Properties","","Rentable square feet (\u201cRSF\u201d) / units/keys(1)","","Weighted average % leased(2)","","Weighted average lease term (yrs)(3)"],["Net leased real estate"],["Net lease 1","","Office","","Stavenger, Norway","","1","","","1,290,926 RSF","","100%","","9.0"],["Net lease 2","","Industrial","","Various - U.S.","","2","","","2,787,343 RSF","","100%","","16.6"],["Net lease 3","","Office","","Aurora, CO","","1","","","183,529 RSF","","100%","","0.9"],["Net lease 4","","Office","","Indianapolis, IN","","1","","","338,000 RSF","","100%","","9.0"],["Net lease 5","","Retail","","Various - U.S.","","7","","","319,600 RSF","","100%","","2.4"],["Net lease 6","","Office","","Rockaway, NJ","","1","","","121,038 RSF","","100%","","1.1"],["Net lease 7","","Retail","","Keene, NH","","1","","","45,471 RSF","","100%","","7.1"],["Net lease 8","","Retail","","Fort Wayne, IN","","1","","","50,000 RSF","","100%","","2.7"],["Net lease 9","","Retail","","South Portland, ME","","1","","","52,900 RSF","","100%","","10.1"],["Total/Weighted average net leased real estate","","16","","","5,188,807 RSF","","100%","","11.1"],["Other real estate"],["Other real estate 1","","Office","","Creve Coeur, MO","","7","","","847,604 RSF","","87%","","3.5"],["Other real estate 2","","Office","","Warrendale, PA","","5","","","496,414 RSF","","82%","","3.9"],["Other real estate 3","","Hotel","","Coraopolis, PA","","1","","","318 Keys","","n/a","","\u2014"],["Total/Weighted average other real estate","","13","","","n/a","","85%","","3.7"],["Total/Weighted average net leased and other real estate","","29"]]
[[/GREPCENT_TABLE]]

_________________________________________

(1)Rentable square feet based on carry value at our share as of December 31, 2021.

(2)Represents the percent leased as of December 31, 2021. Weighted average calculation based on carrying value at our share as of December 31, 2021.

(3)Based on in-place leases (defined as occupied and paying leases) as of December 31, 2021 and assumes that no renewal options are exercised. Weighted average calculation based on carrying value at our share as of December 31, 2021.

Asset Specific Summaries: Net Leased and Other Real Estate

Stavenger, Norway Office Net Lease

[[GREPCENT_TABLE]]
[["","","Collateral type","","City, State","","Number of Properties","","Rentable square feet (\u201cRSF\u201d) / units/keys","","Weighted average % leased","","Weighted average lease term (yrs)"],["Net lease 1","","Office","","Stavenger, Norway","","1","","","1,290,926 RSF","","100%","","9.0"]]
[[/GREPCENT_TABLE]]

In July 2018, we acquired a class A office campus in Stavenger, Norway (the “Norway Net Lease”) for $320 million. This property is 100% occupied by a single tenant that is rated investment grade AA-/Aa2 from S&P and Moody’s, respectively. The property serves as their global headquarters. The Norway Net Lease requires the tenant to pay for all real estate related expenses, including operational expenditures, capital expenditures and municipality taxes. The Norway Net Lease has a

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weighted average remaining lease term of 9 years and the tenant has the option to extend for two 5-year periods at the same terms with rent adjusted to market rent. The Norway Net Lease also has annual rent increases based on the Norwegian CPI Index. Our tenant has injected a significant amount of capital into improvements of the property over the past 10 years. Financing on the Norway Net Lease consists of a mortgage payable of $181.5 million with a fixed rate of 3.9%, which matures in June 2025. The tenant has made all rent payments and is current on all its financial obligations under the lease. Both the lease payments and mortgage debt service are NOK denominated currency. During the second quarter of 2021, we entered into a series of USD-NOK forward swaps for the total notional amount of 274 million NOK in order to minimize our foreign currency cash flow risk. These quarterly forward swaps are over the next three years through May 2024, where we have agreed to sell NOK and buy USD at a locked in forward curve rate.

Warehouse Distribution Portfolio Net Lease

[[GREPCENT_TABLE]]
[["","","Collateral type","","City, State","","Number of Properties","","Rentable square feet (\u201cRSF\u201d) / units/keys","","Weighted average % leased","","Weighted average lease term (yrs)"],["Net lease 2","","Industrial","","Various - U.S.","","2","","","2,787,343 RSF","","100%","","16.6"]]
[[/GREPCENT_TABLE]]

In August 2018 we acquired two warehouse distribution facilities located in Tracy, California and Tolleson, Arizona (the “Warehouse Distribution Portfolio”) for $292 million. These two properties are 100% occupied by a single tenant that is rated investment grade Ba1 from Moody’s. The tenant is a national grocer and these properties form a part of its national distribution network. The Warehouse Distribution Portfolio lease (the “Warehouse Distribution Portfolio Lease”) requires the tenant to pay for all real estate related expenses, including operational expenditures, capital expenditures and taxes. The tenant has invested a significant amount of capital expenditures into each property over the past few years and has plans for additional capital expenditures in 2022. The Warehouse Distribution Portfolio Lease has a remaining lease term of 16.6 years ending in 2038. The tenant has the option to extend the lease for nine 5-year periods at the same terms with rent adjusted to market rent. The Warehouse Distribution Portfolio Lease also has annual rent increases of 1.5%. Financing on the Warehouse Distribution Portfolio consists of mortgage and mezzanine debt for a total combined amount payable of $200 million. The debt is interest only at a blended fixed rate of 4.8% and matures in September 2028. The debt has a defeasance provision for any early loan prepayment. The tenant has made all rent payments and is current on all its financial obligations under the Warehouse Distribution Portfolio Lease.

The Warehouse Distribution Portfolio has generated a net operating income for the year ended December 31, 2021 of $18.1 million; and the asset value on our consolidated balance sheet is $262.6 million as of December 31, 2021. During the second quarter of 2020, we completed an asset level preferred financing on five assets which included the Warehouse Distribution Portfolio resulting in a reduction of our at-share ownership in the Warehouse Distribution Portfolio, which was approximately 29% at September 30, 2021. During the fourth quarter of 2021 we repaid the 5-Investment Preferred Financing and repurchased the remaining interest in the investment. Refer to “Liquidity and Capital Resources” section for further discussion regarding the payoff of the “5-Investment Preferred Financing.”

CRE Debt Securities

The following table presents an overview of our CRE debt securities as of December 31, 2021 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","","","","","Weighted Average(1)"],["CRE Debt Securities by ratings category","","Number of Securities","","Book value","","Cash coupon","","Unlevered all-in yield","","Remaining term","","Ratings"],["\u201cB-pieces\u201d of CMBS securitization pools","","4","","","$","36,154","","","2.8","%","","12.9","%","","5.4","","","\u2014"],["Total/Weighted Average","","4","","","$","36,154","","","2.8","%","","12.9","%","","5.4","","","\u2014"]]
[[/GREPCENT_TABLE]]

_________________________________________

(1)Weighted average metrics weighted by book value, except for cash coupon which is weighted by principal balance.

During the year ended December 31, 2021 we recorded a realized loss of $17.1 million related to the sale of two underlying loans held within our retained investments in the subordinate tranches of a securitization trust, and we sold two CRE securities for $10.2 million in gross proceeds and recognized a gain of $1.2 million.

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Results of Operations

The following table summarizes our portfolio results of operations for the years ended December 31, 2021, 2020 and 2019 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","","","Change"],["","","2021","","2020","","2019","","","","2021 compared to 2020","","2020 compared to 2019"],["Net interest income"],["Interest income","","$","168,845","","","$","156,851","","","$","175,169","","","","","$","11,994","","","$","(18,318)"],["Interest expense","","(55,484)","","","(63,043)","","","(87,730)","","","","","7,559","","","24,687"],["Interest income on mortgage loans held in securitization trusts","","51,609","","","92,461","","","120,203","","","","","(40,852)","","","(27,742)"],["Interest expense on mortgage obligations issued by securitization trusts","","(45,460)","","","(83,952)","","","(109,964)","","","","","38,492","","","26,012"],["Net interest income","","119,510","","","102,317","","","97,678","","","","","17,193","","","4,639"],["Property and other income"],["Property operating income","","102,634","","","175,037","","","253,955","","","","","(72,403)","","","(78,918)"],["Other income","","2,333","","","1,836","","","2,333","","","","","497","","","(497)"],["Total property and other income","","104,967","","","176,873","","","256,288","","","","","(71,906)","","","(79,415)"],["Expenses"],["Management fee expense","","9,596","","","29,739","","","42,390","","","","","(20,143)","","","(12,651)"],["Property operating expense","","30,286","","","64,987","","","112,801","","","","","(34,701)","","","(47,814)"],["Transaction, investment and servicing expense","","4,556","","","9,975","","","7,191","","","","","(5,419)","","","2,784"],["Interest expense on real estate","","32,278","","","48,860","","","55,415","","","","","(16,582)","","","(6,555)"],["Depreciation and amortization","","36,399","","","59,766","","","103,220","","","","","(23,367)","","","(43,454)"],["Provision for (reversal of) loan losses, net","","(1,432)","","","78,561","","","220,572","","","","","(79,993)","","","(142,011)"],["Impairment of operating real estate","","\u2014","","","42,814","","","282,749","","","","","(42,814)","","","(239,935)"],["Administrative expense","","50,011","","","26,551","","","31,936","","","","","23,460","","","(5,385)"],["Restructuring charges","","109,321","","","\u2014","","","\u2014","","","","","109,321","","","n.m."],["Total expenses","","271,015","","","361,253","","","856,274","","","","","(90,238)","","","(495,021)"],["Other income (loss)"],["Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net","","41,904","","","(50,521)","","","4,090","","","","","92,425","","","(54,611)"],["Realized gain (loss) on mortgage loans and obligations held in securitization trusts, net","","(36,623)","","","\u2014","","","2,772","","","","","(36,623)","","","(2,772)"],["Other gain (loss), net","","74,067","","","(118,725)","","","(972)","","","","","192,792","","","(117,753)"],["Income (loss) before equity in earnings of unconsolidated ventures and income taxes","","32,810","","","(251,309)","","","(496,418)","","","","","284,119","","","245,109"],["Equity in earnings (loss) of unconsolidated ventures","","(131,115)","","","(135,173)","","","36,942","","","","","4,058","","","(172,115)"],["Income tax benefit (expense)","","(6,276)","","","10,898","","","(3,172)","","","","","(17,174)","","","14,070"],["Net loss","","$","(104,581)","","","$","(375,584)","","","$","(462,648)","","","","","$","271,003","","","$","87,064"]]
[[/GREPCENT_TABLE]]

Comparison of Year Ended December 31, 2021 and Year Ended December 31, 2020

Net Interest Income

Interest income

Interest income increased by $12.0 million to $168.8 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020. The increase was primarily due to $41.3 million related to loan originations, which was offset by $32.9 million related to loan payoffs and CMBS sales.

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Interest expense

Interest expense decreased by $7.6 million to $55.5 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020. The decrease was primarily due to $15.3 million related to paydowns on our Bank Credit Facility, Master Repurchase Facilities and CMBS Credit Facilities and $5.2 million from amortization of deferred financing costs. This was partially offset by $7.5 million relating to financings on new loans and $5.9 million related to BRSP 2021-FL1.

Net interest income on mortgage loans and obligations held in securitization trusts, net

Net interest income on mortgage loans and obligations held in securitization trusts, net decreased by $2.4 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. The decrease was primarily due to the sale of the retained interest of a securitization trust during the second quarter of 2021.

Property and other income

Property operating income

Property operating income decreased by $72.4 million to $102.6 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. The decrease was primarily due to real estate properties sold throughout 2020 and 2021.

Other income

Other income of $2.3 million was recorded for the year ended December 31, 2021. This was primarily due to a one-time reimbursement received on a previously resolved transaction.

Expenses

Management fee expense

Management fee expense decreased by $20.1 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020 due to the termination of the Management Agreement in April 2021.

Property operating expense

Property operating expense decreased by $34.7 million to $30.3 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. The decrease was primarily due to real estate properties sold throughout 2020 and 2021.

Transaction, investment and servicing expense

Transaction, investment and servicing expense decreased by $5.4 million to $4.6 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020, primarily due to higher legal costs of $2.4 million associated with exploring strategic options of the Company in the first quarter of 2020 and legal costs of $1.5 million incurred in 2020 relating to resolved investments.

Interest expense on real estate

Interest expense on real estate decreased by $16.6 million to $32.3 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. The decrease was primarily due to real estate properties sold throughout 2020 and the sale of an industrial portfolio during the first quarter of 2021.

Depreciation and amortization

Depreciation and amortization expense decreased by $23.4 million to $36.4 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. The decrease was primarily due to real estate properties sold throughout 2020 and 2021.

Provision for (reversal of) loan losses, net

During the year ended December 31, 2021, we recorded a reversal of loan losses of $1.4 million which primarily relates to net changes in our CECL reserves in accordance with ASU No. 2016-13, Financial Instruments-Credit Losses.

Impairment of operating real estate

Impairment of operating real estate was $42.8 million for the year ended December 31, 2020. The impairment resulted from a reduction in the estimated holding period of certain properties sold during the period. There was no impairment of operating real estate for the year ended December 31, 2021.

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Administrative expense

Administrative expense increased by $23.5 million to $50.0 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. This increase was primarily due to $15.0 million of compensation and benefits following the internalization of management operations on April 30, 2021 and higher stock compensation expense of $9.6 million during the year ended December 31, 2021.

Restructuring charges

During the year ended December 31, 2021, we recorded $109.3 million in restructuring costs related to the termination of our Management Agreement with our previous Manager. This consisted of a one-time cash payment of $102.3 million to our previous Manager paid on April 30, 2021 and $7.0 million in additional restructuring costs consisting primarily of fees paid for legal and investment banking advisory services.

Other income (loss)

Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net

During the year ended December 31, 2021, we recorded a $41.9 million unrealized gain on mortgage loans and obligations held in securitization trusts, net. This was primarily due to the sale of the retained investments in the subordinate tranches of one securitization trust and the sale of two underlying loans held within one of our retained investments in the subordinate tranches of another securitization trust. Upon the sales, the accumulated unrealized losses relating to the retained investments were reversed and subsequently recorded to realized loss on mortgage loans and obligations held in securitization trusts, net. During the year ended December 31, 2020, we recorded an unrealized loss of $50.5 million on mortgage loans and obligations held in securitization trusts, net which represents the change in fair value of the assets and liabilities of the securitization trusts consolidation as a result of our investment in the subordinate tranches of the securitization trusts.

Realized loss on mortgage loans and obligations held in securitization trusts, net

During the year ended December 31, 2021, we recorded a $36.6 million realized loss on mortgage loans and obligations held in securitization trusts, net, primarily due to the $19.5 million realized loss upon sale of the retained investments in the subordinate tranches of one securitization trust in the second quarter of 2021. We also recorded a realized loss of $17.1 million related to the sale of two underlying loans held within one of our retained investments in the subordinate tranches of another securitization trust.

Other gain (loss), net

During the year ended December 31, 2021, we recorded other gain, net of $74.1 million primarily due to the $52.9 million realized gain on the Co-Invest Portfolio Sale in the fourth quarter of 2021 and a realized gain of $11.8 million on the sale of an industrial portfolio in the first quarter of 2021. During the year ended December 31, 2020, we recorded other loss, net of $118.7 million primarily due to a $99.0 million realized net loss on the sale of 41 CRE securities and the realization of the fair value marks on our remaining CRE securities portfolio. Additionally, a $38.0 million provision for loan loss was recorded on one hospitality loan during 2020. This was partially offset by a realized gain of $9.3 million on the sale of an industrial portfolio during 2020.

Equity in earnings (loss) of unconsolidated ventures

Equity in earnings (loss) of unconsolidated ventures was $131.1 million and $135.2 million for the year ended December 31, 2021 and the year ended December 31, 2020, respectively. During the year ended December 31, 2021 the $131.1 million loss was comprised of our proportionate share of a $97.9 million fair value loss adjustment on the Los Angeles, California Mixed-Use Project and our proportionate share of $35.5 million in fair value loss adjustments related to three co-investments included in the Co-Investment Portfolio Sale. See “Our Portfolio” section for further details. For the year ended December 31, 2020, the $135.2 million loss was primarily due to recording our proportionate share of $162.0 million in fair value losses relating to three co-investments, partially offset by $8.4 million related to the sale and repayment of equity method investments.

Income tax benefit (expense)

Income tax benefit (expense) increased by $17.2 million to an expense of $6.3 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. This was primarily due to a $11.3 million reduction in the one-time prior year benefit from a tax capital loss carryback on private equity investments and a $6.1 million increase in current year income tax expense related to the sale of a hotel investment in Austin, TX.

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Comparison of Year Ended December 31, 2020 and Year Ended December 31, 2019

Net Interest Income

Interest income

Interest income decreased by $18.3 million to $156.9 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019. The decrease was primarily due to $54.5 million related to the repayment of loan investments and a decrease of $13.6 million related to the sale of CRE securities. This was partially offset by an increase of $52.0 million related to loan originations.

Interest expense

Interest expense decreased by $24.7 million to $63.0 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019. The decrease was primarily due to a $17.8 million reduction from the collapse of a securitization trust and repayment of loan investments and a $2.5 million decrease due to a lower borrowing base on our Bank Credit Facility.

Net interest income on mortgage loans and obligations held in securitization trusts, net

Net interest income on mortgage loans and obligations held in securitization trusts, net decreased by $1.7 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019, primarily due to the sale and deconsolidation of a retained investment in the subordinate tranches of one securitization trust in the third quarter of 2019.

Property and other income

Property operating income

Property operating income decreased by $78.9 million to $175.0 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019. The decrease was primarily due to real estate properties sold throughout 2019 and 2020.

Other income

Other income decreased by $0.5 million to $1.8 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019 primarily as a result of lower realized gains on derivatives of $0.3 million in 2020 related to an office building, a decrease of $0.4 million due to income in 2019 related to debt facility true ups not applicable to 2020 partially offset by $0.2 million in tax refunds received during 2020.

Expenses

Management fee expense

Management fee expense decreased by $12.7 million to $29.7 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019. The decrease is due to the reduction in stockholders’ equity (as defined in the Management Agreement) as of December 31, 2020 compared to December 31, 2019. The reduction in stockholders’ equity is primarily due to a fourth quarter 2019 amendment to our definition of core earnings in the Management Agreement.

Property operating expense

Property operating expense decreased by $47.8 million to $65.0 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019. The decrease was primarily due to real estate properties sold throughout 2019 and 2020.

Transaction, investment and servicing expense

Transaction, investment and servicing expense increased by $2.8 million to $10.0 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019, primarily due to a $1.7 million decrease in franchise tax refunds received and a $1.5 million increase in legal costs incurred associated with exploring the internalization of the management of the Company.

Interest expense on real estate

Interest expense on real estate decreased by $6.6 million to $48.9 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019. The decrease is due to the sale of real estate properties throughout 2020.

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Depreciation and amortization

Depreciation and amortization expense decreased by $43.5 million to $59.8 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019. The decrease was primarily due to real estate properties sold throughout 2019 and 2020.

Provision for loan losses

During the year ended December 31, 2020, we recorded a provision for loan losses of $78.6 million related to $57.3 million in specific loan impairments and $15.3 million in CECL reserves in accordance with ASU No. 2016-13, Financial Instruments-Credit Losses.

Impairment of operating real estate

During the year ended December 31, 2020, we recorded impairment of operating real estate of $42.8 million which primarily relates to the feedback received when marketing various operating real estate properties for sale. During the year ended December 31, 2019, we recorded impairment of operating real estate of $282.7 million which primarily relates to the reduction in the estimated holding period of various operating real estate properties.

Administrative expense

Administrative expense decreased by $5.4 million to $26.6 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019. This decrease was primarily due to lower stock compensation expense and lower indirect costs which are reimbursable to our former Manager.

Other income (loss)

Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net

During the years ended December 31, 2020 and December 31, 2019, we recorded an unrealized loss of $50.5 million and unrealized gain of $4.1 million, respectively, on mortgage loans and obligations held in securitization trusts, net which represents the change in fair value of the assets and liabilities of the securitization trusts consolidated as a result of our investment in the subordinate tranches of these securitization trusts.

Realized gain (loss) on mortgage loans and obligations held in securitization trusts, net

During the year ended December 31, 2019, we recorded a realized gain on mortgage loans and obligations held in securitizations trusts, net due to the sale and deconsolidation of a retained investment in the subordinate tranches of one securitization trust in the third quarter of 2019.

Other gain (loss), net

During the year ended December 31, 2020, we recorded other loss, net of $118.7 million, primarily due to a $99.0 million realized net loss on the sale of 41 CRE securities and the realization of the fair value marks on our remaining CRE securities portfolio. Additionally, a $38.0 million provision for loan loss was recorded on one hospitality loan during 2020. This was partially offset by a realized gain of $9.3 million on the sale of an industrial portfolio during 2020.

Equity in earnings (losses) of unconsolidated ventures

Equity in earnings of unconsolidated ventures decreased by $172.1 million to a loss of $135.2 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019. This was primarily due to $162.0 million in fair value losses relating to three equity method investments that were placed on nonaccrual status in 2020, partially offset by $8.4 million related to the sale and repayment of equity method investments.

Income tax benefit (expense)

Income tax expense decreased by $14.1 million to a benefit for the year ended December 31, 2020, as compared to the year ended December 31, 2019, primarily due to the Company finalizing its 2019 federal tax return and determining it would be able to carryback certain tax capital losses to prior years resulting in a refund of $11.3 million.

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Book Value Per Share

The following table calculates our GAAP book value per share ($ in thousands, except per share data):

[[GREPCENT_TABLE]]
[["","","December 31, 2021","","December 31, 2020"],["Stockholders\u2019 Equity excluding noncontrolling interests in investment entities","","$","1,489,843","","","$","1,705,453"],["Shares"],["Class A common stock","","129,770","","","128,566"],["OP units","","3,075","","","3,075"],["Total outstanding","","132,845","","","131,641"],["GAAP book value per share","","$","11.22","","","$","12.96"],["Accumulated depreciation and amortization per share","","$","1.15","","","$","1.18"],["Undepreciated book value per share","","$","12.37","","","$","14.14"]]
[[/GREPCENT_TABLE]]

Non-GAAP Supplemental Financial Measures

Distributable Earnings

We present Distributable Earnings, which is a non-GAAP supplemental financial measure of our performance. We believe that Distributable Earnings provides meaningful information to consider in addition to our net income and cash flow from operating activities determined in accordance with U.S. GAAP, and this metric is a useful indicator for investors in evaluating and comparing our operating performance to our peers and our ability to pay dividends. We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, beginning with our taxable year ended December 31, 2018. As a REIT, we are required to distribute substantially all of our taxable income and we believe that dividends are one of the principal reasons investors invest in credit or commercial mortgage REITs such as our company. Over time, Distributable Earnings has been a useful indicator of our dividends per share and we consider that measure in determining the dividend, if any, to be paid. This supplemental financial measure also helps us to evaluate our performance excluding the effects of certain transactions and U.S. GAAP adjustments that we believe are not necessarily indicative of our current portfolio and operations. For information on the fees we paid the Manager, see Note 10, “Related Party Arrangements” to our consolidated financial statements included in Item 15. Exhibits and Financial Statement Schedules of this Form 10-K.

We define Distributable Earnings as U.S. GAAP net income (loss) attributable to our common stockholders (or, without duplication, the owners of the common equity of our direct subsidiaries, such as our OP) and excluding (i) non-cash equity compensation expense, (ii) the expenses incurred in connection with our formation or other strategic transactions, (iii) the incentive fee, (iv) acquisition costs from successful acquisitions, (v) gains or losses from sales of real estate property and impairment write-downs of depreciable real estate, including unconsolidated joint ventures and preferred equity investments, (vi) CECL reserves determined by probability of default/loss given default (“PD/LGD”) model, (vii) depreciation and amortization, (viii) any unrealized gains or losses or other similar non-cash items that are included in net income for the current quarter, regardless of whether such items are included in other comprehensive income or loss, or in net income, (ix) one-time events pursuant to changes in U.S. GAAP and (x) certain material non-cash income or expense items that in the judgment of management should not be included in Distributable Earnings. For clauses (ix) and (x), such exclusions shall only be applied after approval by a majority of our independent directors. Distributable Earnings include provision for loan losses when realized. Loan losses are realized when such amounts are deemed nonrecoverable at the time the loan is repaid, or if the underlying asset is sold following foreclosure, or if we determine that it is probable that all amounts due will not be collected; realized loan losses to be included in Distributable Earnings is the difference between the cash received, or expected to be received, and the book value of the asset.

Additionally, we define Adjusted Distributable Earnings as Distributable Earnings excluding (i) realized gains and losses on asset sales, (ii) fair value adjustments or unrealized gains or losses, (iii) realized provision for loan losses and (iv) one-time gains or losses that in the judgement of management should not be included in Adjusted Distributable Earnings. We believe Adjusted Distributable Earnings is a useful indicator for investors to further evaluate and compare our operating performance to our peers and our ability to pay dividends, net of the impact of any gains or losses on assets sales or fair value adjustments, as described above.

Distributable Earnings and Adjusted Distributable Earnings do not represent net income or cash generated from operating activities and should not be considered as an alternative to U.S. GAAP net income or an indication of our cash flows from operating activities determined in accordance with U.S. GAAP, a measure of our liquidity, or an indication of funds available to fund our cash needs. In addition, our methodology for calculating Distributable Earnings and Adjusted Distributable Earnings may differ from methodologies employed by other companies to calculate the same or similar non-GAAP supplemental

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financial measures, and accordingly, our reported Distributable Earnings and Adjusted Distributable Earnings may not be comparable to the Distributable Earnings and Adjusted Distributable Earnings reported by other companies.

The following table presents a reconciliation of net income (loss) attributable to our common stockholders to Distributable Earnings and Adjusted Distributable Earnings attributable to our common stockholders and noncontrolling interest of the Operating Partnership (dollars and share amounts in thousands, except per share data) for the year ended December 31, 2021:

[[GREPCENT_TABLE]]
[["","","","Year Ended December 31, 2021"],["Net loss attributable to BrightSpire Capital, Inc. common stockholders","","","$","(101,046)"],["Adjustments:"],["Net loss attributable to noncontrolling interest of the Operating Partnership","","","(1,803)"],["Non-cash equity compensation expense","","","14,016"],["Transaction costs","","","109,321"],["Depreciation and amortization","","","36,447"],["Net unrealized loss (gain):"],["Other unrealized gain on investments","","","(47,352)"],["CECL reserves","","","(2,684)"],["Gain on sales of real estate, preferred equity and investments in unconsolidated joint ventures","","","(66,827)"],["Adjustments related to noncontrolling interests","","","1,254"],["Distributable Earnings (Loss) attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership","","","$","(58,674)"],["Adjustments:"],["Fair value adjustments","","","133,200"],["Realized loss on CRE debt securities and B-pieces","","","38,842"],["Specific loan reserves","","","1,251"],["Realized loss on hedges","","","1,466"],["Adjusted Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership","","","$","116,085"],["Distributable Earnings (Loss) per share(1)","","","$","(0.44)"],["Adjusted Distributable Earnings per share(1)","","","$","0.87"],["Weighted average number of common shares and OP units(1)","","","132,807"]]
[[/GREPCENT_TABLE]]
________________________________________

(1)We calculate Distributable Earnings (Loss) per share, and Adjusted Distributable Earnings per share, non-GAAP financial measures, based on a weighted-average number of common shares and OP units (held by members other than us or our subsidiaries). For the year ended December 31, 2021, weighted average number of common shares includes 3.1 million OP units.

NOI

We believe NOI to be a useful measure of operating performance of our net leased and other real estate portfolios as they are more closely linked to the direct results of operations at the property level. NOI excludes historical cost depreciation and amortization, which are based on different useful life estimates depending on the age of the properties, as well as adjustments for the effects of real estate impairment and gains or losses on sales of depreciated properties, which eliminate differences arising from investment and disposition decisions. Additionally, by excluding corporate level expenses or benefits such as interest expense, any gain or loss on early extinguishment of debt and income taxes, which are incurred by the parent entity and are not directly linked to the operating performance of the Company’s properties, NOI provides a measure of operating performance independent of the Company’s capital structure and indebtedness. However, the exclusion of these items as well as others, such as capital expenditures and leasing costs, which are necessary to maintain the operating performance of the Company’s properties, and transaction costs and administrative costs, may limit the usefulness of NOI. NOI may fail to capture significant trends in these components of U.S. GAAP net income (loss) which further limits its usefulness.

NOI should not be considered as an alternative to net income (loss), determined in accordance with U.S. GAAP, as an indicator of operating performance. In addition, our methodology for calculating NOI involves subjective judgment and discretion and may differ from the methodologies used by other companies, when calculating the same or similar supplemental financial measures and may not be comparable with other companies.

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The following tables present a reconciliation of net income (loss) on our net leased and other real estate portfolios attributable to our common stockholders to NOI attributable to our common stockholders (dollars in thousands) for the year ended December 31, 2021:

[[GREPCENT_TABLE]]
[["","","","","Year Ended December 31, 2021"],["Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders(1)","","","","$","8,519"],["Adjustments:"],["Net income (loss) attributable to noncontrolling interests in investment entities","","","","(79)"],["Amortization of above- and below-market lease intangibles","","","","(97)"],["Interest income","","","","18"],["Interest expense on real estate","","","","32,278"],["Other income","","","","(3)"],["Transaction, investment and servicing expense","","","","(35)"],["Depreciation and amortization","","","","36,162"],["Administrative expense","","","","233"],["Other gain on investments, net","","","","(4,691)"],["Income tax benefit / expense","","","","(68)"],["NOI attributable to noncontrolling interest in investment entities","","","","(15,323)"],["Total NOI, at share","","","","$","56,914"]]
[[/GREPCENT_TABLE]]

_________________________________________

(1)Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders excludes $109.5 million of net loss attributable to non-net leased and other real estate investments for the year ended December 31, 2021. The total net loss attributable to BrightSpire Capital, Inc.’s common stockholders was $101.0 million for the year ended December 31, 2021.

Liquidity and Capital Resources

Overview

Our material cash commitments include commitments to repay borrowings, finance our assets and operations, meet future funding obligations, make distributions to our stockholders and fund other general business needs. We use significant cash to make investments, meet commitments to existing investments, repay the principal of and interest on our borrowings and pay other financing costs, make distributions to our stockholders and fund our operations.

Our primary sources of liquidity include cash on hand, cash generated from our operating activities and cash generated from asset sales and investment maturities. However, subject to maintaining our qualification as a REIT and our Investment Company Act exclusion, we may use several sources to finance our business, including bank credit facilities (including term loans and revolving facilities), master repurchase facilities and securitizations, as described below. In addition to our current sources of liquidity, there may be opportunities from time to time to access liquidity through public offerings of debt and equity securities. We have sufficient sources of liquidity to meet our material cash commitments for the next 12 months and beyond.

Financing Strategy

We have a multi-pronged financing strategy that included an up to $300 million secured revolving credit facility as of December 31, 2021, up to approximately $2.1 billion in secured revolving repurchase facilities, $1.5 billion in non-recourse securitization financing, $695 million in commercial mortgages and $65 million in other asset-level financing structures (refer to “Bank Credit Facility” section below for further discussion). In addition, we may use other forms of financing, including additional warehouse facilities, public and private secured and unsecured debt issuances and equity or equity-related securities issuances by us or our subsidiaries. We may also finance a portion of our investments through the syndication of one or more interests in a whole loan. We will seek to match the nature and duration of the financing with the underlying asset’s cash flow, including using hedges, as appropriate.

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Debt-to-Equity Ratio

The following table presents our debt-to-equity ratio:

[[GREPCENT_TABLE]]
[["","","December 31, 2021","","December 31, 2020"],["Debt-to-equity ratio(1)","","2.0x","","1.0x"]]
[[/GREPCENT_TABLE]]

_________________________________________

(1)Represents (i) total outstanding secured debt less cash and cash equivalents of $259.7 million and $474.8 million at December 31, 2021 and December 31, 2020, respectively to (ii) total equity, in each case, at period end.

Potential Sources of Liquidity

The COVID-19 pandemic has had a significant impact on our business, and we have taken actions since its onset to protect our liquidity. However, there is still uncertainty regarding the pandemic’s impact on the financial condition of our borrowers and their ability to make their monthly mortgage payments and remain in compliance with loan covenants and terms. The failure of our borrowers to meet their loan obligations may trigger repayments under our Bank Credit Facility and Master Repurchase Facilities.

Additionally, if our operating real estate lessees are unable to make monthly rent payments, we would be unable to make our monthly mortgage payments which could result in defaults under these obligations or trigger repayments under our Bank Credit Facility. If these events were to occur, we may not have sufficient available cash to repay amounts due.

Our primary sources of liquidity include borrowings available under our credit facilities, master repurchase facilities and CMBS facilities and monthly mortgage payments.

Bank Credit Facilities

We use bank credit facilities (including term loans and revolving facilities) to finance our business. These financings may be collateralized or non-collateralized and may involve one or more lenders. Credit facilities typically have maturities ranging from two to five years and may accrue interest at either fixed or floating rates.

On February 1, 2018, the OP (together with certain subsidiaries of the OP from time to time party thereto as borrowers, collectively, the “Borrowers”) entered into a credit agreement (the “Bank Credit Facility”) with JPMorgan Chase Bank, N.A., as administrative agent, and the several lenders from time to time party thereto (the “Lenders”), pursuant to which the Lenders agreed to provide a revolving credit facility.

On April 5, 2021, we entered into a fourth amendment to the Bank Credit Facility to: (i) permit the OP to consummate the Internalization; (ii) reduce the minimum tangible net worth covenant requirement from $1.5 billion to $1.35 billion upon consummation of the Internalization; (iii) increase our ability to make restricted payments including additional dividends and stock buybacks and the removal all material restrictions on new investments, in each case, so long as no default exists and the OP is in compliance with the financial covenants; (iv) increase the maximum amount available for borrowing from 90% to 100% of borrowing base value; and (v) reduce the aggregate amount of lender commitments from $450 million to $300 million.

On January 28, 2022, we, through our subsidiaries, including the OP, entered into the Credit Agreement, pursuant to which the Lenders agreed to provide a revolving credit facility to reduce availability to an aggregate principal amount of up to $165 million, of which up to $25 million is available as letters of credit. The Credit Agreement also includes an option for us to increase the maximum available principal amount up to $300.0 million, subject to one or more new or existing lenders agreeing to provide such additional loan commitments and satisfaction of other customary conditions.

Advances under the Credit Agreement accrue interest at a per annum rate equal to, at the applicable Borrower’s election, either a SOFR rate plus a margin of 2.25% and applicable credit spread adjustment, or a base rate determined according to a prime rate or federal funds rate plus a margin of 1.25%. An unused commitment fee at a rate of 0.25% or 0.35%, per annum, depending on the amount of facility utilization, applies to un-utilized borrowing capacity under the Credit Agreement. Amounts owing under the Credit Agreement may be prepaid at any time without premium or penalty, subject to customary breakage costs in the case of borrowings with respect to which a SOFR rate election is in effect.

The maximum amount available for borrowing at any time under the Credit Agreement is limited to a borrowing base valuation of certain investment assets, with the valuation of such investment assets generally determined according to a percentage of adjusted net book value. As of the date hereof, the borrowing base valuation is sufficient to permit borrowings of up to the entire $165.0 million commitment. The ability to borrow new amounts under the Credit Agreement terminates on January 31, 2026, at which time our OP may, at its election and by written notice to the administrative agent, extend the termination date for two additional terms of six months each, subject to the terms and conditions in the Credit Agreement, resulting in a latest termination date of January 31, 2027.

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The obligations of the Borrowers under the Credit Agreement are guaranteed pursuant to a Guarantee and Collateral Agreement with certain subsidiaries of our OP in favor of JPMorgan Chase Bank, N.A. (the “Guarantee and Collateral Agreement”) by substantially all material wholly owned subsidiaries of our OP and, subject to certain exceptions, secured by a pledge of substantially all equity interests owned by the Borrowers and the guarantors, as well as by a security interest in deposit accounts of the Borrowers and the Guarantors (as such terms are defined in the Guarantee and Collateral Agreement) in which the proceeds of investment asset distributions are maintained.

The Credit Agreement contains various affirmative and negative covenants, including, among other things, the obligation of the us to maintain REIT status and be listed on the New York Stock Exchange, and limitations on debt, liens and restricted payments. In addition, the Credit Agreement includes the following financial covenants applicable to our OP and our consolidated subsidiaries: (a) minimum consolidated tangible net worth of our OP greater than or equal to the sum of (i) $1,112,000,000 and (ii) 70% of the net cash proceeds received by our OP from any offering of our common equity after September 30, 2021 and of the net cash proceeds from any offering by us of our common equity to the extent such proceeds are contributed to our OP, excluding any such proceeds that are contributed to our OP within ninety days of receipt and applied to acquire capital stock of our OP; (b) our OP’s EBITDA plus lease expenses to fixed charges for any period of four consecutive fiscal quarters not less than 1.50 to 1.00; (c) our OP’s minimum interest coverage ratio not less than 3.00 to 1.00; and (d) our OP’s ratio of consolidated total debt to consolidated total assets must not exceed 0.80 to 1.00. The Credit Agreement also includes customary events of default, including, among other things, failure to make payments when due, breach of covenants or representations, cross default to material indebtedness or material judgment defaults, bankruptcy matters involving any Borrower or any Guarantor and certain change of control events. The occurrence of an event of default will limit the ability of our OP and its subsidiaries to make distributions and may result in the termination of the credit facility, acceleration of repayment obligations and the exercise of remedies by the Lenders with respect to the collateral.

Master Repurchase Facilities and CMBS Credit Facilities

Currently, our primary source of financing is our Master Repurchase Facilities, which we use to finance the origination of senior loans, and CMBS Credit Facilities, which we use to finance the purchase of securities. Repurchase agreements effectively allow us to borrow against loans, participations and securities that we own in an amount generally equal to (i) the market value of such loans, participations and/or securities multiplied by (ii) the applicable advance rate. Under these agreements, we sell our loans, participations and securities to a counterparty and agree to repurchase the same loans and securities from the counterparty at a price equal to the original sales price plus an interest factor. During the term of a repurchase agreement, we receive the principal and interest on the related loans, participations and securities and pay interest to the lender under the master repurchase agreement. We intend to maintain formal relationships with multiple counterparties to obtain master repurchase financing of favorable terms.

During the first quarter of 2021, we entered into an amendment under our Master Repurchase Facility with Bank 3 and Bank 7 to extend the maturity date by two years and three years, respectively.

During the second quarter of 2021, we entered into an amendment under our Master Repurchase Facility with Bank 1, Bank 8 and Bank 9 to extend the maturity date by three years, two years and two and a half years, respectively.

During the second quarter of 2021, we entered into amendments under our six Master Repurchase Facilities to: (i) permit the guarantor to consummate the Internalization; and (ii) reduce the minimum tangible net worth covenant requirement from $1.5 billion to $1.35 billion upon consummation of the Internalization.

In October 2021, upon reaching the maturity date of Bank 2 Facility 3, we elected not to exercise the extension option and therefore terminated the facility.

Subsequent to December 31, 2021, we entered into amendments under our five remaining Master Repurchase Facilities to reduce the minimum tangible net worth covenant requirement from $1.35 billion to $1.11 billion.

Additionally, subsequent to December 31, 2021, we entered into amendments under four of our Master Repurchase Facilities to expand the eligibility criteria to allow for loans indexed to SOFR, and to allow for borrowings under those facilities to also be indexed to SOFR.

As of December 31, 2021 we had entered into eight master repurchase agreements (collectively the “CMBS Credit Facilities”) to finance CMBS investments. The CMBS Credit Facilities are on a recourse basis and contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of this type. The CMBS Credit Facilities were undrawn as of December 31, 2021.

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The following table presents a summary of our Master Repurchase and Bank Credit Facilities as of December 31, 2021 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Maximum Facility Size","","Current Borrowings","","Weighted Average Final Maturity (Years)","","Weighted Average Interest Rate"],["Master Repurchase Facilities"],["Bank 1","","$","400,000","","","$","109,915","","","4.3","","","LIBOR + 1.91%"],["Bank 3","","600,000","","","157,409","","","1.2","","","LIBOR + 1.81%"],["Bank 7","","500,000","","","358,181","","","3.3","","","LIBOR + 1.77%"],["Bank 8","","250,000","","","177,519","","","1.4","","","LIBOR + 1.98%"],["Bank 9","","300,000","","","102,098","","","4.3","","","LIBOR + 1.87%"],["Total Master Repurchase Facilities","","2,050,000","","","905,122"],["Bank Credit Facility","","300,000","","","\u2014","","","1.1","","","LIBOR + 2.25%"],["Total Facilities","","$","2,350,000","","","$","905,122"]]
[[/GREPCENT_TABLE]]

Securitizations

We may seek to utilize non-recourse long-term securitizations of our investments in mortgage loans, especially loan originations, to the extent consistent with the maintenance of our REIT qualification and exclusion from the Investment Company Act in order to generate cash for funding new investments. This would involve conveying a pool of assets to a special purpose vehicle (or the issuing entity), which would issue one or more classes of non-recourse notes pursuant to the terms of an indenture. The notes would be secured by the pool of assets. In exchange for the transfer of assets to the issuing entity, we would receive the cash proceeds on the sale of non-recourse notes and a 100% interest in the equity of the issuing entity. The securitization of our portfolio investments might magnify our exposure to losses on those portfolio investments because any equity interest we retain in the issuing entity would be subordinate to the notes issued to investors and we would, therefore, absorb all of the losses sustained with respect to a securitized pool of assets before the owners of the notes experience any losses.

In October 2019, we executed a securitization transaction through our subsidiaries, CLNC 2019-FL1, Ltd. and CLNC 2019-FL1, LLC, which resulted in the sale of $840.4 million of investment grade notes. The securitization reflects an advance rate of 83.5% at a weighted average cost of funds of SOFR plus 1.59% (before transaction expenses) and is collateralized by a pool of 26 senior loan investments.

On March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”) announced that LIBOR tenors relevant to CLNC 2019-FL1 would cease to be published or no longer be representative after June 30, 2023. The Alternative Reference Rates Committee (the “ARRC”) interpreted this announcement to constitute a benchmark transition event. As of June 17, 2021, the benchmark index interest rate was converted from LIBOR to SOFR, plus a benchmark adjustment of 11.448 basis points with a lookback period equal to the number of calendar days in the applicable Interest Accrual Period plus two SOFR business days, conforming with the indenture agreement and recommendations from the ARRC. Compounded SOFR for any interest accrual period shall be the “30-Day Average SOFR” as published by the Federal Reserve Bank of New York on each benchmark determination date.

As of December 31, 2021, the CLNC 2019-FL1 mortgage assets are indexed to LIBOR and the borrowings under CLNC 2019-FL are indexed to compounded SOFR, creating an underlying benchmark index rate basis difference between CLNC 2019-FL1 assets and liabilities, which is meant to be mitigated by the benchmark replacement adjustment described above. We have the right to transition the CLNC 2019-FL1 mortgage assets to SOFR, eliminating the basis difference between CLNC 2019-FL1 assets and liabilities, and will make the determination taking into account the loan portfolio as a whole. The transition to SOFR is not expected to have a material impact to CLNC 2019-FL1’s assets and liabilities and related interest expense.

CLNC 2019-FL1 includes a two-year reinvestment feature that allows us to contribute existing or newly originated loan investments in exchange for proceeds from repayments or repurchases of loans held in CLNC 2019-FL1, subject to the satisfaction of certain conditions set forth in the indenture. In addition to existing eligible loans available for reinvestment, the continued origination of securitization eligible loans is required to ensure that we reinvest the available proceeds within CLNC 2019-FL1. During the year ended December 31, 2021 and through February 18, 2022, six loans held in CLNC 2019-FL1 were repaid, totaling $249.6 million. Additionally, during the year ended December 31, 2021 two loan investments held in CLNC 2019-FL1 were removed as a result of the loans becoming a credit risk collateral interest and a defaulted collateral interest, totaling $125.0 million. We replaced the credit risk and defaulted assets by contributing existing loan investments of equal value. The reinvestment period for CLNC 2019-FL1 expired on October 19, 2021. Five of the repaid assets were replaced by

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contributing existing loan investments of equal value. Subsequent to December 31, 2021, one of the repayments occurred after the reinvestment period ended and the proceeds were used to amortize the securitization bonds in accordance with the securitization priority of payments.

Additionally, CLNC 2019-FL1 contains note protection tests that can be triggered as a result of contributed loan defaults, losses, and certain other events outlined in the indenture, beyond established thresholds. A note protection test failure that is not remedied can result in the redirection of interest proceeds from the below investment grade tranches to amortize the most senior outstanding tranche. While we continue to closely monitor all loan investments contributed to CLNC 2019-FL1, a deterioration in the performance of an underlying loan could negatively impact our liquidity position.

In July 2021, we executed a securitization transaction through our subsidiaries BRSP 2021-FL1 Ltd. and BRSP 2021-FL1, LLC, which resulted in the sale of $670 million of investment grade notes. The securitization reflects an advance rate of 83.75% at a weighted costs of funds of LIBOR plus 1.49% (before transaction expenses) and is collateralized by a pool of 33 senior loan investments.

BRSP 2021-FL1 includes a two-year reinvestment feature that allows us to contribute existing or newly originated loan investments in exchange for proceeds from repayments or repurchases of loans held in BRSP 2021-FL1, subject to the satisfaction of certain conditions set forth in the indenture. In addition to existing eligible loans available for reinvestment, the continued origination of securitization eligible loans is required to ensure that we reinvest the available proceeds within BRSP 2021-FL1. During the year ended December 31, 2021 and through February 18, 2022, two loans held in BRSP 2021-FL1 were fully repaid, totaling $126.2 million. We replaced the repaid loans by contributing existing loan investments of equal value.

Additionally, BRSP 2021-FL1 contains note protection tests that can be triggered as a result of contributed loan defaults, losses, and certain other events outlined in the indenture, beyond established thresholds. A note protection test failure that is not remedied can result in the redirection of interest proceeds from the below investment grade tranches to amortize the most senior outstanding tranche. We will continue to closely monitor all loan investments contributed to BRSP 2021-FL1, a deterioration in the performance of an underlying loan could negatively impact our liquidity position.

5-Investment Preferred Financing

During the second quarter of 2020, we entered into a preferred financing arrangement (on a portfolio of five of our underlying investment interests) (the “5-Investment Preferred Financing”) from investment vehicles managed by Goldman Sachs (“GS”). The preferred financing provided $200 million of proceeds at closing.

The preferred financing was limited to (i) our interests in four co-investments alongside investment funds managed by affiliates of the Manager, each of which are financings on underlying development projects (including residential, office and/or mixed-use components), and (ii) a wholly-owned triple-net warehouse distribution portfolio leased to a national grocery chain. The preferred financing provided GS a 10% preferred return and certain other minimum returns, as well as a minority interest in future cash flows.

During the fourth quarter of 2021, the four co-investments were sold in the Co-invest Portfolio Sale (refer to “Our Portfolio” section for further discussion) and we used all the sale proceeds to substantially fund the repayment of the 5-Investment Preferred Financing totaling $210 million. The payoff allowed us to reclaim 100% ownership of the triple net warehouse distribution portfolio leased to a national grocery chain.

Other potential sources of financing

In the future, we may also use other sources of financing to fund the acquisition of our target assets, including secured and unsecured forms of borrowing and selective wind-down and dispositions of assets. We may also seek to raise equity capital or issue debt securities in order to fund our future investments.

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Liquidity Needs

In addition to our loan origination activity and general operating expenses, our primary liquidity needs include interest and principal payments under our Bank Credit Facility, securitization bonds, and secured debt. Information concerning our contractual obligations and commitments to make future payments, including our commitments to repay borrowings, is included in the following table as of December 31, 2021. This table excludes our obligations that are not fixed and determinable (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Payments Due by Period"],["","","Total","","Less than a Year","","1-3 Years","","3-5 Years","","More than 5 Years"],["Bank credit facility(1)","","$","88","","","$","88","","","$","\u2014","","","$","\u2014","","","$","\u2014"],["Secured debt(2)","","1,924,108","","","417,989","","","745,654","","","463,780","","","296,685"],["Securitization bonds payable(3)","","1,588,378","","","217,369","","","1,291,645","","","79,364","","","\u2014"],["Ground lease obligations(4)","","29,897","","","3,099","","","5,323","","","4,221","","","17,254"],["Office lease","","5,387","","","798","","","1,596","","","1,596","","","1,397"],["","","$","3,547,858","","","$","639,343","","","$","2,044,218","","","$","548,961","","","$","315,336"],["Lending commitments(5)","","264,882"],["Total","","$","3,812,740"]]
[[/GREPCENT_TABLE]]

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(1)Future interest payments were estimated based on the applicable index at December 31, 2021 and unused commitment fee of 0.35% per annum, assuming principal is repaid on the current maturity date of February 2022.

(2)Amounts include minimum principal and interest obligations through the initial maturity date of the collateral assets. Interest on floating rate debt was determined based on the applicable index at December 31, 2021.

(3)The timing of future principal payments was estimated based on expected future cash flows of underlying collateral loans. Repayments are estimated to be earlier than contractual maturity only if proceeds from underlying loans are repaid by the borrowers.

(4)The amounts represent minimum future base rent commitments through initial expiration dates of the respective noncancellable operating ground leases, excluding any contingent rent payments. Rents paid under ground leases are recoverable from tenants.

(5)Future lending commitments may be subject to certain conditions that borrowers must meet to qualify for such fundings. Commitment amount assumes future fundings meet the terms to qualify for such fundings.

Cash Flows

The following presents a summary of our consolidated statements of cash flows for the years ended December 31, 2021, 2020 and 2019 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["Cash flow provided by (used in):","","2021","","2020","","2019"],["Operating activities","","$","(21,270)","","","$","96,356","","","$","137,176"],["Investing activities","","(555,789)","","","1,002,742","","","(416,025)"],["Financing activities","","384,356","","","(754,062)","","","286,783"]]
[[/GREPCENT_TABLE]]

Operating Activities

Cash inflows from operating activities are generated primarily through interest received from loans receivable and securities, property operating income from our real estate portfolio, and distributions of earnings received from unconsolidated ventures. This is partially offset by payment of interest expenses for credit facilities and mortgages payable, and operating expenses supporting our various lines of business, including property management and operations, loan servicing and workout of loans in default, investment transaction costs, as well as general administrative costs.

Our operating activities used net cash outflows of $21.3 million for the year ended December 31, 2021 and provided net cash inflows of $96.4 million and $137.2 million for the years ended December 31, 2021, 2020 and 2019, respectively. Net cash provided by operating activities decreased $117.6 million for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily due to lower net property operating income and net interest income earned resulting from sales of real estate properties and loans throughout 2021. Net cash provided by operating activities decreased by $40.8 million for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to lower property operating income following sales of real estate properties during the year ended December 31, 2020.

We believe cash flows from operations, available cash balances and our ability to generate cash through short and long-term borrowings are sufficient to fund our operating liquidity needs.

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Investing Activities

Investing activities include cash outlays for acquisition of real estate, disbursements on new and/or existing loans, and contributions to unconsolidated ventures, which are partially offset by repayments and sales of loan receivables, distributions of capital received from unconsolidated ventures, proceeds from sale of real estate, as well as proceeds from maturity or sale of securities.

Investing activities used net cash outflows of $555.8 million for the year ended December 31, 2021. Net cash used in investing activities in 2021 resulted primarily from originations and future advances on our loans and preferred equity held for investment, net of $1.8 billion partially offset by repayments on loan and preferred equity held for investment of $485.4 million, proceeds from sales of real estate of $332.0 million, proceeds from the sale of investments in unconsolidated ventures of $198.3 million and repayments of principal in mortgage loans held in securitization trusts of $78.9 million.

Investing activities generated net cash inflows of $1.0 billion for the year ended December 31, 2020. Net cash provided by investing activities in 2020 resulted primarily from proceeds from repayments on loan and preferred equity held for investment of $434.7 million, sales of real estate of $454.6 million, proceeds from sales of loans held for sale of $137.1 million, proceeds from sale of real estate securities, available for sale of $149.6 million and proceeds from sale of investments in unconsolidated ventures of $108.4 million partially offset by originations and future advances on our loans and preferred equity held for investment, net of $297.0 million, and contributions to investments in unconsolidated ventures of $48.9 million.

Investing activities in 2019 used net cash outflows of $416.0 million, resulting from acquisition, origination and funding of loans and preferred equity held for investment, net of $1.4 billion, partially offset by repayment on loan and preferred equity held for investment of $465.6 million, distributions in excess of cumulative earnings from unconsolidated ventures of $212.6 million, proceeds from sale of investments in unconsolidated ventures of $115.3 million, proceeds from sale of real estate of $85.4 million, repayment of principal in mortgage loans held in securitization trusts of $47.5 million, proceeds from sale of mortgage loans held in securitization trusts of $39.8 million and net receipts on settlement of derivative instruments of $28.9 million.

Financing Activities

We finance our investing activities largely through borrowings secured by our investments along with capital from third party or affiliated co-investors. We also have the ability to raise capital in the public markets through issuances of common stock, as well as draw upon our corporate credit facility, to finance our investing and operating activities. Accordingly, we incur cash outlays for payments on third party debt, dividends to our common stockholders as well as distributions to our noncontrolling interests.

Financing activities provided net cash of $384.4 million for the year ended December 31, 2021. Net cash provided by financing activities in 2021 resulted primarily from borrowings from credit facilities and securitization bonds of $1.3 billion and of $670.0 million, respectively, partially offset by repayment of credit facilities of $955.3 million, repayment of mortgage notes of $266.6 million, repayment of mortgage obligations issued by securitization trusts of $78.9 million, and distributions noncontrolling interests of $255.5 million.

Financing activities used net cash of $754.1 million for the year ended December 31, 2020. Net cash used in financing activities in 2020 resulted primarily from repayment of credit facilities of $862.6 million, repayment of mortgage notes of $240.1 million, distributions paid on common stock and to noncontrolling interests of $52.6 million and distributions to noncontrolling interests of $31.3 million. This was partially offset by of borrowings from credit facilities of $298.6 million, contributions to the 5-Investment Preferred Financing of $200.0 million, and borrowings from mortgage notes of $18.6 million.

Our financing activities provided net cash inflow of $286.8 million for the year ended December 31, 2019. Net cash provided by financing activities in 2019 resulted primarily from borrowings from credit facilities of $1.4 billion, borrowings from securitization bonds of $840.4 million and borrowings from mortgage notes of $93.6 million, partially offset by repayment of credit facilities of $1.7 billion, distributions paid on common stock and noncontrolling interests of $222.8 million and repayment of securitization bonds of $81.4 million.

Underwriting, Asset and Risk Management

We closely monitor our portfolio and actively manage risks associated with, among other things, our assets and interest rates. Prior to investing in any particular asset, the underwriting team, in conjunction with third party providers, undertakes a rigorous asset-level due diligence process, involving intensive data collection and analysis, to ensure that we understand fully the state of the market and the risk-reward profile of the asset. Beginning in 2021, our investment and portfolio management and risk assessment practices diligence the environmental, social and governance (“ESG”) standards of our business counterparties, including borrowers, sponsors, partners and service providers, and that of our investment assets and underlying collateral,

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which may include sustainability initiatives, recycling, energy efficiency and water management, volunteer and charitable efforts, anti-money laundering and know-your-client policies, and diversity, equity and inclusion practices in workforce leadership, composition and hiring practices. Prior to making a final investment decision, we focus on portfolio diversification to determine whether a target asset will cause our portfolio to be too heavily concentrated with, or cause too much risk exposure to, any one borrower, real estate sector, geographic region, source of cash flow for payment or other geopolitical issues. If we determine that a proposed acquisition presents excessive concentration risk, it may determine not to acquire an otherwise attractive asset.

For each asset that we acquire, our asset management team engages in active management of the asset, the intensity of which depends on the attendant risks. The asset manager works collaboratively with the underwriting team to formulate a strategic plan for the particular asset, which includes evaluating the underlying collateral and updating valuation assumptions to reflect changes in the real estate market and the general economy. This plan also generally outlines several strategies for the asset to extract the maximum amount of value from each asset under a variety of market conditions. Such strategies may vary depending on the type of asset, the availability of refinancing options, recourse and maturity, but may include, among others, the restructuring of non-performing or sub-performing loans, the negotiation of discounted pay-offs or other modification of the terms governing a loan, and the foreclosure and management of assets underlying non-performing loans in order to reposition them for profitable disposition. We continuously track the progress of an asset against the original business plan to ensure that the attendant risks of continuing to own the asset do not outweigh the associated rewards. Under these circumstances, certain assets will require intensified asset management in order to achieve optimal value realization.

Our asset management team engages in a proactive and comprehensive on-going review of the credit quality of each asset it manages. In particular, for debt investments on at least an annual basis, the asset management team will evaluate the financial wherewithal of individual borrowers to meet contractual obligations as well as review the financial stability of the assets securing such debt investments. Further, there is ongoing review of borrower covenant compliance including the ability of borrowers to meet certain negotiated debt service coverage ratios and debt yield tests. For equity investments, the asset management team, with the assistance of third-party property managers, monitors and reviews key metrics such as occupancy, same store sales, tenant payment rates, property budgets and capital expenditures. If through this analysis of credit quality, the asset management team encounters declines in credit not in accord with the original business plan, the team evaluates the risks and determine what changes, if any, are required to the business plan to ensure that the attendant risks of continuing to hold the investment do not outweigh the associated rewards.

In addition, the audit committee of our Board of Directors, in consultation with management, periodically reviews our policies with respect to risk assessment and risk management, including key risks to which we are subject, including credit risk, liquidity risk and market risk, and the steps that management has taken to monitor and control such risks.

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance significantly more than inflation does. A change in interest rates may correlate with the inflation rate. Substantially all of the leases at our multifamily properties allow for monthly or annual rent increases which provide us with the opportunity to achieve increases, where justified by the market, as each lease matures. Such types of leases generally minimize the risks of inflation on our multifamily properties.

Refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” for additional details.

Critical Accounting Policies and Estimates

Preparation of financial statements in accordance with U.S. generally accepted accounting principles requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Certain accounting policies are considered to be critical accounting policies. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require subjective and complex judgments, and for which the impact of changes in estimates and assumptions could have a material effect on our financial statements.

During 2021, we reviewed and evaluated our critical accounting policies and estimates and we believe they are appropriate. The following is a summary of our credit losses policy, which we believe is the most affected by our judgments, estimates, and assumptions.

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Credit Losses

The current expected credit loss (“CECL”) reserve for our financial instruments carried at amortized cost and off-balance sheet credit exposures, such as loans, loan commitments and trade receivables represents a lifetime estimate of expected credit losses. Factors considered by us when determining the CECL reserve include loan-specific characteristics such as loan-to-value (“LTV”) ratio, vintage year, loan term, property type, occupancy and geographic location, financial performance of the borrower, expected payments of principal and interest, current and stabilized property value, stabilized net operating income, as well as internal or external information relating to past events, current conditions and reasonable and supportable forecasts.

The CECL reserve is measured on a collective (pool) basis when similar risk characteristics exist for multiple financial instruments. If similar risk characteristics do not exist, we measure the CECL reserve on an individual instrument basis. The determination of whether a particular financial instrument should be included in a pool can change over time. If a financial asset’s risk characteristics change, we evaluate whether it is appropriate to continue to keep the financial instrument in its existing pool or evaluate it individually.

In measuring the CECL reserve for financial instruments that share similar risk characteristics, we primarily apply a probability of default (“PD”)/loss given default (“LGD”) model for instruments that are collectively assessed, whereby the CECL reserve is calculated as the product of PD, LGD and exposure at default (“EAD”). Our model principally utilizes historical loss rates derived from a commercial mortgage backed securities database with historical losses from 1998 through December 2021 provided by a third party, Trepp LLC, forecasting the loss parameters using a scenario-based statistical approach over a reasonable and supportable forecast period of twelve months, followed by a straight-line reversion period of twelve-months back to average historical losses.

For financial instruments assessed outside of the PD/LGD model on an individual basis, including when it is probable that we will be unable to collect the full payment of principal and interest on the instrument, we apply a discounted cash flow (“DCF”) methodology. For financial instruments where the borrower is experiencing financial difficulty based on our assessment at the reporting date and the repayment is expected to be provided substantially through the operation or sale of the collateral, we may elect to use as a practical expedient the fair value of the collateral at the reporting date when determining the provision for loan losses.

In developing the CECL reserve for our loans and preferred equity held for investment, we consider the risk ranking of each loan and preferred equity as a key credit quality indicator. The risk rankings are based on a variety of factors, including, without limitation, underlying real estate performance and asset value, values of comparable properties, durability and quality of property cash flows, sponsor experience and financial wherewithal, and the existence of a risk-mitigating loan structure. Additional key considerations include loan-to-value ratios, debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, our loans and preferred equity held for investment are rated “1” through “5,” from less risk to greater risk, and the ratings are updated quarterly. At the time of origination or purchase, loans and preferred equity held for investment are ranked as a “3” and will move accordingly going forward based on the ratings which are defined as follows:

1.Very Low Risk-The loan is performing as agreed. The underlying property performance has exceeded underwritten expectations with very strong net operating income (”NOI”), debt service coverage ratio, debt yield and occupancy metrics. Sponsor is investment grade, very well capitalized, and employs very experienced management team.

2.Low Risk-The loan is performing as agreed. The underlying property performance has met or exceeds underwritten expectations with high occupancy at market rents, resulting in consistent cash flow to service the debt. Strong sponsor that is well capitalized with experienced management team.

3.Average Risk-The loan is performing as agreed. The underlying property performance is consistent with underwriting expectations. The property generates adequate cash flow to service the debt, and/or there is enough reserve or loan structure to provide time for sponsor to execute the business plan. Sponsor has routinely met its obligations and has experience owning/operating similar real estate.

4.High Risk/Delinquent/Potential for Loss-The loan is in excess of 30 days delinquent and/or has a risk of a principal loss. The underlying property performance is behind underwritten expectations. Loan covenants may require occasional waivers/modifications. Sponsor has been unable to execute its business plan and local market fundamentals have deteriorated. Operating cash flow is not sufficient to service the debt and debt service payments may be coming from sponsor equity/loan reserves.

5.Impaired/Defaulted/Loss Likely-The loan is in default or a default is imminent, and has a high risk of a principal loss, or has incurred a principal loss. The underlying property performance is significantly worse than underwritten expectation and sponsor has failed to execute its business plan. The property has significant vacancy and current cash flow does not support

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debt service. Local market fundamentals have significantly deteriorated resulting in depressed comparable property valuations versus underwriting.

We also consider qualitative and environmental factors, including, but not limited to, economic and business conditions, nature and volume of the loan portfolio, lending terms, volume and severity of past due loans, concentration of credit and changes in the level of such concentrations in its determination of the CECL reserve.

We have elected to not measure a CECL reserve for accrued interest receivable as it is reversed against interest income when a loan or preferred equity investment is placed on nonaccrual status. Loans and preferred equity investments are charged off against the provision for loan losses when all or a portion of the principal amount is determined to be uncollectible.

Changes in the CECL reserve for our financial instruments are recorded in provision for loan losses on the consolidated statements of operations with a corresponding offset to the loans and preferred equity held for investment or as a component of other liabilities for future loan fundings recorded on our consolidated balance sheets.

The CECL accounting estimate is subject to uncertainty from quarter to quarter as our loan portfolio changes and market and economic conditions evolve. The sensitivity of each assumption and its impact on the CECL reserve may change over time and from period to period.