# BrightSpire Capital, Inc. (BRSP) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from BrightSpire Capital, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1717547/000171754725000008/brsp-20241231.htm
Accession: 0001717547-25-000008
Filing date: 2025-02-19
Report date: 2024-12-31
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/
Previous year: /company/BRSP/mda/fy2023/ (FY 2023)
Next year: /company/BRSP/mda/fy2025/ (FY 2025)

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 is 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 were organized in the state of Maryland on August 23, 2017 and maintain key offices in New York, New York and Los Angeles, California. 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. We conduct all our activities and hold substantially all our assets and liabilities through our operating subsidiary, BrightSpire Capital Operating Company, LLC (the “OP”).

Our Business Segments

We present our business as one portfolio through the following business segments:

•Senior and Mezzanine Loans and Preferred Equity—CRE debt investments including senior and mezzanine loans, and preferred equity interests as well as participations in such loans.

•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 two investments with direct ownership in commercial real estate, with an emphasis on properties with stable cash flow, five additional properties that we acquired through foreclosure or deed-in-lieu of foreclosure and one property that we consolidate as the primary beneficiary.

•Corporate and Other—includes corporate-level asset management and other fees including expenses related to our secured revolving credit facility (the “Bank Credit Facility”) and compensation and benefits. It also includes a sub-portfolio of private equity funds.

Significant Developments

During the year ended December 31, 2024, and through February 18, 2025, significant developments affecting our business and results of operations of our portfolio included the following:

Capital Resources

•During the third quarter of 2024, we executed a $675.0 million securitization transaction through BRSP 2024-FL2 (as defined in “Liquidity and Capital Resources”), contributing 22 senior floating-rate mortgages secured by 25 properties, totaling $590.2 million, which resulted in the sale of $583.9 million of investment grade notes (the “2024-FL2 Notes”). The transaction also features a two-year reinvestment period and available proceeds of $84.8 million to be used within a six-month ramp-up acquisition period from closing. The securitization reflects an initial advance rate of 86.5% at a weighted cost of funds of Term SOFR plus 2.47% (before transaction costs). At December 31, 2024, the securitization was collateralized by a pool of 24 senior loan investments and had remaining available proceeds of $30.3 million. See “Liquidity and Capital Resources” below for further discussion;

•On August 19, 2024, we redeemed the outstanding securities under CLNC 2019-FL1, including the investment grade notes issued thereunder (the “2019-FL1 Notes”), at a redemption price of $311.6 million. The 14 senior loan investments, with an aggregate unpaid principal balance of $477.7 million, held by CLNC 2019-FL1 (as defined

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below) were refinanced by the issuance of the securities under BRSP 2024-FL2, including the 2024-FL2 Notes, and with an existing Master Repurchase Facility;

•Repurchased 1.2 million shares of our Class A common stock at a weighted average price of $5.52 for an aggregate cost of $6.6 million;

•Declared total quarterly dividends of $0.72 per share during the year ended December 31, 2024; and

•As of the date of this report, we have approximately $418.0 million of liquidity, consisting of $253.0 million cash and cash equivalents on hand and $165.0 million available on our Bank Credit Facility.

Our Portfolio

•For the year ended December 31, 2024, we:

◦Received loan repayment proceeds of $417.8 million from 22 loans;

◦Originated four senior mortgage loans with a total commitment of $75.6 million. The average initial funded amount was $15.6 million and had a weighted average spread of SOFR plus 4.06%;

◦Recorded $38.0 million in specific current expected credit loss (“CECL”) reserves related to five senior loans and one mezzanine loan. At December 31, 2024, there were no specific CECL reserves on our consolidated balance sheet;

◦Recorded a net increase in our general CECL reserves of $89.7 million. At December 31, 2024, our general CECL reserve for our outstanding loans and future loan funding commitments is $166.1 million, which is 6.34% of the aggregate commitment amount of our loan portfolio;

◦Reduced the total number of watchlist loans (loans with a risk ranking of 4 or 5) from 10 to seven (refer to “Our Portfolio” for further discussion):

▪Removed five loans with an aggregate unpaid principal balance of $152.7 million;

▪Added two loans with an unpaid principal balance of $97.5 million;

◦Extended 59 loans eligible for certain maturity events, which represent $2.0 billion of unpaid principal balance at December 31, 2024;

◦Recorded our share of GAAP impairment of $53.3 million on four office properties and $134.6 million of non-GAAP impairment of real estate on nine properties. Refer to “Non-GAAP Supplemental Financial Measures - Undepreciated Book Value Per Share” for further discussion;

◦Acquired one Fort Worth, Texas multifamily property through foreclosure with an initial fair value of $33.5 million and consolidated the assets and liabilities of one Arlington, Texas multifamily property. As a result, the properties are now classified as real estate;

◦Sold one office property for net proceeds of $19.1 million and recognized a realized gain of $0.1 million; and

•Subsequent to December 31, 2024, we:

◦Received loan repayment proceeds of $99.8 million from six loans;

◦Originated two senior mortgage loans with a total commitment of $52.7 million. The average initial funded amount was $26.0 million and had a weighted average spread of SOFR plus 2.95%; and

◦Sold one office property for a gross sales price of $5.5 million.

Financial Results

•Generated GAAP net loss of $132.0 million, or $(1.05) per basic and diluted share, Distributable Earnings of $71.2 million or $0.55 per share and Adjusted Distributable Earnings of $109.2 million or $0.84 per share for the year ended December 31, 2024. Distributable Earnings and Adjusted Distributable Earnings are non-GAAP financial measures. A reconciliation of these measures to net income/(loss) attributable to the Company’s common stockholders is in the section “Non-GAAP Supplemental Financial Measures” below.

Trends Affecting Our Business

Global Markets

Although global markets showed signs of stabilization and inflationary pressure may be moderating, CRE value uncertainties, lingering impact from COVID-19 and geopolitical unrest continue to contribute to market volatility. Generationally high interest rates have continued to negatively impact transaction activity in the real estate market and correspondingly the loan financing and refinancing opportunities. While the Federal Reserve lowered interest rates in the second half of 2024, it is uncertain as to when, how many and by how much subsequent interest rate cuts will be made in 2025. To the extent certain of our borrowers are experiencing significant financial dislocation as a result of economic conditions, we have and may continue to use interest and other reserves and/or replenishment obligations of the borrower and/or guarantors to meet current interest payment obligations for a limited period. The market for office properties was particularly negatively impacted by the COVID-19 pandemic and continues to experience headwinds driven by the normalization of work from home and hybrid work arrangements and elevated costs to operate or reconfigure office properties. Although “return to office” mandates are on the

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rise, the demand for office space generally remains lower than pre-COVID-19 pandemic levels and has driven rising vacancy rates. Given the continuing uncertainty in the office market, there is risk of future valuation impairment or investment loss on our loans secured by office properties. Similarly, these trends may impact our ability to manage debt covenant tests, maturity dates and/or seek suitable refinancing opportunities on certain of our office property equity investments, which may adversely impact valuation assessments and cash flow generated by such investments.

While macroeconomic conditions continue to be challenged, we cannot predict whether they will in fact improve or even intensify. Due to the inherent uncertainty of these conditions, their impact on our business is difficult to predict and quantify.

Factors Impacting Our Operating Results

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 loans, mezzanine loans, preferred equity, debt securities, net leased properties and our other assets, and the level of our net operating income (“NOI”). 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 and frequency on our CRE loans 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, creditworthiness of our borrowers, competition and other factors, none of which can be predicted with any certainty. 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.

Changes in fair value of our assets

We consider and treat our assets as long-term investments. As a result, we do not expect that changes in market value will impact our operating results. However, at least on a quarterly basis, we assess both our ability and intent to hold such assets for the long-term. As part of this process, we monitor our assets for impairment. A change in our ability and/or intent to continue to hold any of our assets, which includes the inability to modify, extend or refinance existing mortgage debt on our real estate portfolio, may result in our recognizing an impairment charge or realizing losses upon the sale of such investments.

Changes in market interest rates

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

•the value of our 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 to reset, although on a delayed basis, to higher interest rates;

•interest rate caps required by our borrowers to increase in cost;

•borrowers’ unwillingness to purchase new interest rate caps at loan maturity to qualify for an extension;

•financial hardship to our borrowers, whose ability to service their debt as it is due and payable and to pass maturity extension tests may be materially adversely impacted, resulting in foreclosures;

•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;

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•coupons on our floating and adjustable-rate mortgage loans 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

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 employing 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.

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.

Our Portfolio

As of December 31, 2024, our portfolio consisted of 93 investments representing approximately $3.3 billion in carrying value (based on our share of ownership and excluding cash, cash equivalents and certain other assets). Our senior and mezzanine loans consisted of 76 senior and mezzanine loans with a weighted average cash coupon of 3.4% and a weighted average all-in unlevered yield of 7.6%. Our net leased and other real estate consisted of approximately 6.9 million total square feet of space and total 2024 NOI of that portfolio was approximately $67.7 million. Refer to “Non-GAAP Supplemental Financial Measures” below for further information on NOI.

As of December 31, 2024, our portfolio consisted of the following investments (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Count(1)","","Carrying value (Consolidated)","","Carrying value(at BRSP share)(2)","","Net carrying value (Consolidated)(3)","","Net carrying value (at BRSP share)(4)"],["Our Portfolio"],["Senior loans","","74","","","$","2,473,793","","","$","2,473,793","","","$","665,353","","","$","665,353"],["Mezzanine loans","","2","","","45,132","","","45,132","","","45,132","","","45,132"],["Subtotal","","76","","","2,518,925","","","2,518,925","","","710,485","","","710,485"],["Net leased real estate","","8","","","504,494","","","504,494","","","84,218","","","84,218"],["Other real estate","","8","","","322,464","","","310,358","","","93,287","","","93,589"],["Private equity interests","","1","","","2,235","","","2,235","","","2,235","","","2,235"],["Total/Weighted average Our Portfolio","","93","","","$","3,348,118","","","$","3,336,012","","","$","890,225","","","$","890,527"]]
[[/GREPCENT_TABLE]]

________________________________________

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

(2)Carrying value at our share represents the proportionate carrying value based on ownership by asset as of December 31, 2024.

(3)Net carrying value represents carrying value less any associated financing as of December 31, 2024.

(4)Net carrying value at our share represents the proportionate carrying value based on asset ownership less any associated financing based on ownership as of December 31, 2024.

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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 held for investment for impairment quarterly, we evaluate loans held for investment to determine if a current expected credit losses reserve should be established. In conjunction with this review, we assess the risk factors of each senior and mezzanine loan 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 held for investment are rated “1” through “5,” from less risk to greater risk. At the time of origination or purchase, loans 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

2.Low Risk

3.Medium Risk

4.High Risk/Potential for Loss—A loan that has a high risk of realizing a principal loss.

5.Impaired/Loss Likely—A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss.

At December 31, 2024, our weighted average risk ranking remained unchanged at 3.2 compared to September 30, 2024. During the fourth quarter of 2024, we had the following risk ranking activity for risk ranked 4 and 5 assets:

•Upgrades: one multifamily loan and one office loan were upgraded to a risk ranking of 3 from a risk ranking of 4;

•Downgrades: one multifamily loan was downgraded to a risk ranking of 5 from a risk ranking of 4 and another multifamily loan was downgraded to a risk ranking of 4 from a risk ranking of 3;

•Other: one multifamily loan with a risk ranking of 5 was resolved when the property was acquired through a foreclosure and reclassified to real estate owned.

Senior and Mezzanine Loans

The following tables provide a summary of our senior and mezzanine loans based on our internal risk rankings, collateral property type and geographic distribution as of December 31, 2024 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","","","Carrying Value (at BRSP share)(1)"],["Risk Ranking","","Count","","Senior loans","","Mezzanine loans","","","Total","","% of Total"],["3","","69","","","$","2,062,746","","","$","45,132","","","","$","2,107,878","","","83.7","%"],["4","","5","","","217,625","","","\u2014","","","","217,625","","","8.6","%"],["5","","2","","","193,422","","","\u2014","","","","193,422","","","7.7","%"],["","","76","","","$","2,473,793","","","$","45,132","","","","$","2,518,925","","","100.0","%"],["Weighted average risk ranking","","","","","","","","","","","3.2"]]
[[/GREPCENT_TABLE]]

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(1)Carrying value at our share represents the proportionate carrying value based on ownership by asset as of December 31, 2024.

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[[GREPCENT_TABLE]]
[["","","","","Carrying value (at BRSP share)"],["Collateral property type","","Count","","Senior loans","","Mezzanine loans","","","Total","","% of Total"],["Multifamily","","43","","","$","1,261,539","","","$","30,777","","","","$","1,292,316","","","51.3","%"],["Office","","23","","","754,262","","","14,355","","","","768,617","","","30.5","%"],["Hotel","","2","","","208,131","","","\u2014","","","","208,131","","","8.3","%"],["Other (Mixed-use)(1)","","6","","","214,184","","","\u2014","","","","214,184","","","8.5","%"],["Industrial","","2","","","35,677","","","\u2014","","","","35,677","","","1.4","%"],["Total","","76","","","$","2,473,793","","","$","45,132","","","","$","2,518,925","","","100.0","%"]]
[[/GREPCENT_TABLE]]

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(1)Other includes commercial and residential development assets.

[[GREPCENT_TABLE]]
[["","","","","Carrying value (at BRSP share)"],["Region","","Count","","Senior loans","","Mezzanine loans","","","","Total","","% of Total"],["US West","","34","","","$","1,125,762","","","$","30,777","","","","","$","1,156,539","","","45.9","%"],["US Southwest","","28","","","862,078","","","\u2014","","","","","862,078","","","34.2","%"],["US Northeast","","8","","","313,255","","","14,355","","","","","327,610","","","13.0","%"],["US Southeast","","6","","","172,698","","","\u2014","","","","","172,698","","","6.9","%"],["Total","","76","","","$","2,473,793","","","$","45,132","","","","","$","2,518,925","","","100.0","%"]]
[[/GREPCENT_TABLE]]

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The following table provides asset level detail for our senior and mezzanine loans as of December 31, 2024 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Loan 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)"],["Multifamily"],["Loan 1(6)","","Senior","","6/18/2019","","Santa Clara, CA","","$","57,442","","","$","57,442","","","Floating","","5.5%","","9.8%","","2/19/2025","","69%","","5"],["Loan 2","","Senior","","5/17/2022","","Las Vegas, NV","","55,350","","","54,866","","","Floating","","2.0%","","7.9%","","6/9/2027","","74%","","4"],["Loan 3","","Senior","","3/8/2022","","Austin, TX","","50,424","","","50,324","","","Floating","","3.3%","","7.6%","","3/9/2027","","75%","","3"],["Loan 4","","Senior","","7/19/2021","","Dallas, TX","","50,333","","","50,200","","","Floating","","3.4%","","7.7%","","8/9/2026","","74%","","3"],["Loan 5","","Senior","","5/26/2021","","Las Vegas, NV","","47,476","","","47,235","","","Floating","","3.5%","","7.8%","","6/9/2026","","70%","","3"],["Loan 6","","Senior","","3/31/2022","","Louisville, KY","","43,468","","","43,371","","","Floating","","3.7%","","8.0%","","4/9/2027","","72%","","3"],["Loan 7","","Senior","","7/15/2021","","Jersey City, NJ","","43,108","","","43,000","","","Floating","","3.1%","","7.4%","","8/9/2026","","66%","","3"],["Loan 8","","Senior","","7/15/2021","","Dallas, TX","","40,338","","","40,338","","","Floating","","3.2%","","7.5%","","8/9/2026","","77%","","3"],["Loan 9","","Senior","","12/7/2021","","Denver, CO","","40,050","","","40,050","","","Floating","","3.3%","","7.6%","","12/9/2026","","74%","","4"],["Loan 10","","Senior","","3/31/2022","","Long Beach, CA","","39,536","","","39,536","","","Floating","","3.4%","","7.7%","","4/9/2027","","80%","","3"],["Subtotal top 10 multifamily","","$","467,525","","","$","466,362","","","19% of total loans"],["Loan 11","","Senior","","7/12/2022","","Irving, TX","","$","38,378","","","$","38,379","","","Floating","","3.6%","","7.9%","","8/9/2027","","75%","","3"],["Loan 12","","Senior","","12/21/2020","","Austin, TX","","37,000","","","37,000","","","Floating","","3.2%","","7.5%","","1/9/2026","","54%","","3"],["Loan 13","","Senior","","1/18/2022","","Dallas, TX","","36,704","","","36,564","","","Floating","","3.5%","","7.8%","","2/9/2027","","75%","","3"],["Loan 14","","Senior","","1/12/2022","","Los Angeles, CA","","36,341","","","36,361","","","Floating","","3.4%","","8.0%","","2/9/2027","","76%","","3"],["Loan 15","","Senior","","7/29/2021","","Phoenix, AZ","","33,325","","","33,325","","","Floating","","3.4%","","7.7%","","8/9/2026","","73%","","3"],["Loan 16","","Senior","","3/31/2021","","Mesa, AZ","","32,610","","","32,131","","","Floating","","3.8%","","11.4%","","4/9/2026","","71%","","3"],["Loan 17","","Senior","","4/29/2021","","Las Vegas, NV","","30,794","","","30,792","","","Floating","","3.2%","","7.5%","","5/9/2026","","76%","","3"],["Loan 18","","Mezzanine","","2/8/2022","","Las Vegas, NV","","30,777","","","30,782","","","Fixed","","7.0%","","12.3%","","2/8/2027","","56%-79%","","3"],["Loan 19","","Senior","","2/17/2022","","Long Beach, CA","","30,137","","","30,137","","","Floating","","3.4%","","7.7%","","3/9/2027","","71%","","3"],["Loan 20","","Senior","","4/15/2022","","Mesa, AZ","","30,134","","","30,160","","","Floating","","3.4%","","8.0%","","5/9/2027","","75%","","3"],["Subtotal top 20 multifamily","","$","803,725","","","$","801,993","","","32% of total loans"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","","Loan 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 21","","Senior","","8/31/2021","","Glendale, AZ","","$","28,820","","","$","28,802","","","Floating","","3.3%","","7.6%","","9/9/2026","","75%","","3"],["Loan 22","","Senior","","5/27/2021","","Houston, TX","","27,600","","","27,600","","","Floating","","3.1%","","7.4%","","6/9/2026","","67%","","3"],["Loan 23","","Senior","","12/16/2021","","Fort Mill, SC","","27,365","","","27,366","","","Floating","","3.3%","","7.9%","","1/9/2027","","71%","","3"],["Loan 24","","Senior","","12/21/2021","","Phoenix, AZ","","25,589","","","25,596","","","Floating","","3.6%","","8.3%","","1/9/2027","","75%","","3"],["Loan 25","","Senior","","7/12/2022","","Irving, TX","","25,433","","","25,433","","","Floating","","3.6%","","7.9%","","8/9/2027","","72%","","3"],["Loan 26","","Senior","","3/8/2022","","Glendale, AZ","","25,018","","","25,046","","","Floating","","3.5%","","8.1%","","3/9/2027","","73%","","3"],["Loan 27","","Senior","","3/31/2022","","Phoenix, AZ","","23,841","","","23,847","","","Floating","","3.7%","","8.3%","","4/9/2027","","74%","","3"],["Loan 28","","Senior","","11/4/2021","","Austin, TX","","23,353","","","23,353","","","Floating","","3.4%","","7.9%","","11/9/2026","","78%","","3"],["Loan 29","","Senior","","6/22/2021","","Phoenix, AZ","","22,292","","","22,292","","","Floating","","3.3%","","7.6%","","7/9/2026","","71%","","3"],["Loan 30","","Senior","","7/13/2021","","Oregon City, OR","","22,154","","","22,096","","","Floating","","3.4%","","7.7%","","8/9/2026","","73%","","3"],["Loan 31","","Senior","","7/1/2021","","Aurora, CO","","21,273","","","21,261","","","Floating","","3.2%","","7.6%","","7/9/2026","","73%","","3"],["Loan 32","","Senior","","12/10/2024","","Seattle, WA","","20,760","","","21,000","","","Floating","","2.8%","","7.6%","","1/9/2030","","65%","","3"],["Loan 33","","Senior","","1/12/2022","","Austin, TX","","20,187","","","20,187","","","Floating","","3.4%","","7.7%","","2/9/2027","","76%","","3"],["Loan 34","","Senior","","8/6/2021","","La Mesa, CA","","19,752","","","19,752","","","Floating","","3.0%","","7.3%","","8/9/2025","","72%","","3"],["Loan 35","","Senior","","10/18/2024","","Garland, TX","","19,655","","","19,920","","","Floating","","3.7%","","8.3%","","11/9/2029","","70%","","3"],["Loan 36","","Senior","","12/21/2021","","Gresham, OR","","19,455","","","19,455","","","Floating","","3.6%","","7.9%","","1/9/2027","","76%","","3"],["Loan 37","","Senior","","9/1/2021","","Bellevue, WA","","19,308","","","19,308","","","Floating","","3.0%","","7.3%","","9/9/2025","","71%","","3"],["Loan 38","","Senior","","5/5/2022","","Charlotte, NC","","18,500","","","18,500","","","Floating","","3.5%","","7.8%","","5/9/2027","","70%","","3"],["Loan 39","","Senior","","7/14/2021","","Salt Lake City, UT","","18,362","","","18,315","","","Floating","","3.4%","","7.7%","","8/9/2026","","73%","","3"],["Loan 40","","Senior","","4/29/2022","","Tacoma, WA","","18,331","","","18,331","","","Floating","","3.0%","","7.3%","","5/9/2027","","64%","","3"],["Loan 41","","Senior","","6/25/2021","","Phoenix, AZ","","17,650","","","17,650","","","Floating","","3.2%","","7.6%","","7/9/2026","","75%","","3"],["Loan 42","","Senior","","11/22/2024","","Garland, TX","","12,242","","","12,399","","","Floating","","3.5%","","8.1%","","12/9/2029","","63%","","3"],["Loan 43","","Senior","","3/8/2022","","Glendale, AZ","","$","11,651","","","$","11,664","","","Floating","","3.5%","","8.1%","","3/9/2027","","73%","","3"],["Total/Weighted average multifamily loans","","$","1,292,316","","","$","1,291,166","","","51% of total loans","","3.5%","","8.1%","","1.9 years","","","","3.2"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","","Loan 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)"],["Office"],["Loan 44","","Senior","","1/19/2021","","Phoenix, AZ","","$","76,325","","","$","76,325","","","Floating","","3.7%","","8.0%","","2/9/2026","","70%","","3"],["Loan 45","","Senior","","8/28/2018","","San Jose, CA","","74,070","","","74,071","","","Floating","","2.6%","","6.9%","","8/28/2025","","81%","","3"],["Loan 46","","Senior","","2/13/2019","","Baltimore, MD","","58,606","","","58,606","","","Floating","","3.6%","","7.9%","","2/9/2025","","74%","","3"],["Loan 47","","Senior","","11/23/2021","","Tualatin, OR","","42,104","","","40,961","","","Floating","","1.5%","","5.8%","","12/9/2026","","66%","","4"],["Loan 48","","Senior","","4/27/2022","","Plano, TX","","41,179","","","41,101","","","Floating","","4.1%","","8.4%","","5/9/2027","","70%","","3"],["Loan 49","","Senior","","5/23/2022","","Plano, TX","","40,802","","","40,720","","","Floating","","4.3%","","8.6%","","6/9/2027","","64%","","3"],["Loan 50","","Senior","","9/28/2021","","Reston, VA","","40,251","","","39,682","","","Floating","","2.1%","","8.4%","","10/9/2026","","71%","","4"],["Loan 51","","Senior","","11/17/2021","","Dallas, TX","","39,869","","","39,869","","","Floating","","4.0%","","8.3%","","12/9/2025","","61%","","4"],["Loan 52","","Senior","","4/7/2022","","San Jose, CA","","33,906","","","33,906","","","Floating","","4.2%","","8.5%","","4/9/2027","","70%","","3"],["Loan 53","","Senior","","4/30/2021","","San Diego, CA","","33,663","","","33,663","","","Floating","","3.6%","","8.0%","","5/9/2026","","55%","","3"],["Subtotal top 10 office loans","","$","480,775","","","$","478,904","","","19% of total loans"],["Loan 54","","Senior","","3/31/2022","","Blue Bell, PA","","$","28,854","","","$","28,854","","","Floating","","4.2%","","8.5%","","4/9/2025","","80%","","3"],["Loan 55","","Senior","","10/21/2021","","Blue Bell, PA","","28,623","","","28,624","","","Floating","","3.8%","","8.1%","","4/9/2025","","78%","","3"],["Loan 56","","Senior","","2/26/2019","","Charlotte, NC","","27,653","","","27,653","","","Floating","","3.3%","","7.7%","","7/9/2025","","72%","","3"],["Loan 57","","Senior","","12/7/2018","","Carlsbad, CA","","26,912","","","26,500","","","Floating","","3.9%","","8.2%","","12/9/2025","","73%","","3"],["Loan 58","","Senior","","12/7/2021","","Hillsboro, OR","","25,738","","","25,738","","","Floating","","4.0%","","8.3%","","2/9/2025","","77%","","3"],["Loan 59","","Senior","","7/30/2021","","Denver, CO","","24,413","","","24,413","","","Floating","","4.4%","","8.7%","","8/9/2026","","66%","","3"],["Loan 60","","Senior","","9/16/2019","","San Francisco, CA","","24,001","","","24,001","","","Floating","","3.3%","","7.6%","","1/9/2025","","54%","","3"],["Loan 61","","Senior","","8/27/2019","","San Francisco, CA","","22,716","","","22,716","","","Floating","","2.9%","","7.3%","","3/9/2025","","84%","","3"],["Loan 62","","Senior","","10/13/2021","","Burbank, CA","","18,216","","","18,216","","","Floating","","4.0%","","8.3%","","11/9/2026","","51%","","3"],["Loan 63","","Senior","","10/29/2020","","Denver, CO","","17,937","","","17,937","","","Floating","","3.7%","","8.0%","","11/9/2025","","64%","","3"],["Subtotal top 20 office loans","","$","725,838","","","$","723,556","","","29% of total loans"],["Loan 64","","Senior","","11/16/2021","","Charlotte, NC","","$","15,460","","","$","15,466","","","Floating","","4.5%","","8.8%","","12/9/2026","","67%","","3"],["Loan 65(7)","","Mezzanine","","2/13/2023","","Baltimore, MD","","14,355","","","14,355","","","n/a(7)","","n/a(7)","","n/a(7)","","2/7/2025","","74%-75%","","3"],["Loan 66","","Senior","","11/10/2021","","Richardson, TX","","12,964","","","12,932","","","Floating","","4.1%","","8.4%","","12/9/2026","","68%","","3"],["Total/Weighted average office loans","","$","768,617","","","$","766,309","","","31% of total loans","","3.4%","","7.8%","","1.1 years","","","","3.2"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","","Loan 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)"],["Hotel"],["Loan 67(8)","","Senior","","1/2/2018","","San Jose, CA","","$","135,979","","","$","135,979","","","n/a(8)","","n/a(8)","","n/a(8)","","11/9/2026","","76%","","5"],["Loan 68","","Senior","","6/25/2018","","Englewood, CO","","72,152","","","72,000","","","Floating","","3.5%","","8.1%","","5/9/2025","","68%","","3"],["Total/Weighted average hotel loans","","$","208,131","","","$","207,979","","","","","1.2%","","2.8%","","1.3 years","","","","4.3"],["Other (Mixed-use)"],["Loan 69","","Senior","","10/24/2019","","Brooklyn, NY","","$","79,308","","","$","79,308","","","Floating","","4.2%","","8.5%","","11/9/2025","","79%","","3"],["Loan 70","","Senior","","1/13/2022","","New York, NY","","46,090","","","46,090","","","Floating","","3.5%","","7.8%","","2/9/2027","","76%","","3"],["Loan 71","","Senior","","6/2/2021","","South Pasadena, CA","","33,893","","","33,808","","","Floating","","5.0%","","9.5%","","6/9/2026","","71%","","3"],["Loan 72","","Senior","","5/3/2022","","Brooklyn, NY","","28,665","","","28,665","","","Floating","","4.4%","","8.7%","","5/9/2027","","68%","","3"],["Loan 73","","Senior","","8/31/2021","","Los Angeles, CA","","15,888","","","15,888","","","Floating","","4.6%","","8.9%","","9/9/2026","","58%","","3"],["Loan 74","","Senior","","4/3/2024","","South Pasadena, CA","","$","10,340","","","$","10,340","","","Floating","","9.8%","","15.1%","","1/9/2025","","84%","","3"],["Total/Weighted average other (mixed-use) loans","","$","214,184","","","$","214,099","","","","","4.5%","","8.9%","","1.4 years","","","","3.0"],["Industrial"],["Loan 75","","Senior","","7/13/2022","","Ontario, CA","","$","24,083","","","$","24,131","","","Floating","","3.3%","","8.0%","","8/9/2027","","66%","","3"],["Loan 76","","Senior","","3/21/2022","","Commerce, CA","","11,594","","","11,594","","","Floating","","3.3%","","7.6%","","4/9/2027","","60%","","3"],["Total/Weighted average industrial loans","","$","35,677","","","$","35,725","","","","","3.3%","","7.8%","","2.5 years","","","","3.0"],["Total/Weighted average senior and mezzanine loans - Our Portfolio","","$","2,518,925","","","$","2,515,278","","","","","3.4%","","7.6%","","1.6 years","","","","3.2"]]
[[/GREPCENT_TABLE]]

_________________________________________

(1)Represents carrying values at our share as of December 31, 2024 and excludes general CECL reserves.

(2)Represents the stated coupon rate for loans; for floating rate loans, does not include Secured Overnight Financing Rate (“SOFR”), which was 4.33% as of December 31, 2024.

(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 and exit fees. Unlevered all-in yield for the loan portfolio assumes the applicable floating benchmark rate as of December 31, 2024 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 for the in place collateral 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 for the in place collateral 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

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value as of the date the loan was originated, or the cumulative principal amount divided by the appraised value for the in place collateral as of the date of the most recent appraisal.

(5)On a quarterly basis, our senior and mezzanine loans are rated “1” through “5,” from less risk to greater risk. Represents risk ranking as of December 31, 2024.

(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. 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)Loan 65 was placed on nonaccrual status in April 2024; as such, no income is being recognized.

(8)Loan 67 was placed on nonaccrual status in June 2024; as such, no income is being recognized.

At December 31, 2024, our general CECL reserve for our outstanding loans and future loan funding commitments is $166.1 million, which is 6.34% of the aggregate commitment amount of our loan portfolio. This represents an increase of $10.4 million from $155.7 million or 5.78% of the aggregate commitment amount of our loan portfolio at September 30, 2024. The increase in our general CECL reserve was primarily driven by specific inputs on certain multifamily and office loans utilized in our general CECL model. During the fourth quarter of 2024, we recorded total specific CECL reserves of $10.0 million related to one multifamily loan and one office loan which were subsequently charged off during the quarter. As a result, we have no specific CECL reserves at December 31, 2024.

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. 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. Additionally, we have two investments in direct ownership of commercial real estate and own these operating real estate investments through joint ventures with one or more partners. We also own five properties included in other real estate that were acquired through deeds-in-lieu of foreclosure and foreclosure and consolidate one property after being deemed the primary beneficiary of the variable interest entity holding it.

As of December 31, 2024, $814.9 million or 24.4% of our assets were invested in net leased and other real estate properties and these properties were 88.7% occupied. The following table presents our net leased and other real estate investments as of December 31, 2024 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Count(1)","","Carrying Value(2)","","NOI for the year ended December 31, 2024(3)"],["Net leased real estate","","8","","","$","504,494","","","$","49,455"],["Other real estate","","8","","","310,358","","","18,225"],["Total/Weighted average net leased and other real estate","","16","","","$","814,852","","","$","67,680"]]
[[/GREPCENT_TABLE]]

________________________________________

(1)Count represents the number of investments.

(2)Represents carrying values at our share as of December 31, 2024; includes real estate tangible assets, deferred leasing costs and other intangible assets less intangible liabilities.

(3)Refer to “Non-GAAP Supplemental Financial Measures” for further information on NOI.

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The following table provides asset-level detail of our net leased and other real estate as of December 31, 2024:

[[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)","","Principal amount of debt(4)","","Final debt maturity date"],["Net leased real estate"],["Net lease 1","","Industrial","","Various - U.S.","","2","","","2,787,343 RSF","","100%","","13.6","","$","200,000","","","Sep-33"],["Net lease 2(5)","","Office","","Stavanger, Norway","","1","","","1,290,926 RSF","","100%","","5.4","","132,879","","","Jun-25"],["Net lease 3","","Office","","Aurora, CO","","1","","","183,529 RSF","","100%","","2.9","","28,671","","","Aug-26"],["Net lease 4","","Office","","Indianapolis, IN","","1","","","338,000 RSF","","100%","","6.0","","21,368","","","Oct-27"],["Net lease 5(5)(6)","","Retail","","Various - U.S.","","7","","","319,600 RSF","","100%","","3.0","","27,670","","","Nov-26 & Mar-28"],["Net lease 6(5)","","Retail","","Keene, NH","","1","","","45,471 RSF","","100%","","4.1","","6,620","","","Nov-26"],["Net lease 7","","Retail","","South Portland, ME","","1","","","52,900 RSF","","100%","","7.1","","\u2014","","","\u2014"],["Net lease 8(5)","","Retail","","Fort Wayne, IN","","1","","","50,000 RSF","","100%","","0.7","","3,069","","","Nov-26"],["Total/Weighted average net leased real estate","","15","","","5,067,769 RSF","","100%","","9.0","","$","420,277"],["Other real estate"],["Other real estate 1(5)(7)","","Office","","Creve Coeur, MO","","7","","","847,604 RSF","","82%","","3.5","","$","94,263","","","Dec-28"],["Other real estate 2(5)","","Office","","Warrendale, PA","","5","","","496,440 RSF","","85%","","5.1","","60,252","","","Jan-25(8)"],["Other real estate 3","","Multifamily","","Arlington, TX","","1","","","436 Units","","72%","","n/a","","\u2014","","","\u2014"],["Other real estate 4(9)","","Multifamily","","Phoenix, AZ","","1","","","236 Units","","92%","","n/a","","\u2014","","","\u2014"],["Other real estate 5(9)","","Multifamily","","Fort Worth, TX","","1","","","354 Units","","84%","","n/a","","\u2014","","","\u2014"],["Other real estate 6(9)","","Office","","Long Island City, NY","","1","","","220,872 RSF","","31%","","4.1","","\u2014","","","\u2014"],["Other real estate 7(5)(9)","","Office","","Long Island City, NY","","1","","","128,195 RSF","","2%","","5.2","","\u2014","","","\u2014"],["Other real estate 8(5)(9)","","Office","","Oakland, CA","","1","","","90,693 RSF","","42%","","2.8","","\u2014","","","\u2014"],["Total/Weighted average other real estate","","18","","","n/a","","70%","","4.2","","$","154,515"],["Total net leased and other real estate","","33"]]
[[/GREPCENT_TABLE]]

_________________________________________

(1)Rentable square feet based on carrying value at our share as of December 31, 2024.

(2)Represents the percent leased as of December 31, 2024. Weighted average calculation based on carrying value at our share as of December 31, 2024.

(3)Based on in-place leases (defined as occupied and paying leases) as of December 31, 2024, and assumes that no renewal options are exercised. Weighted average calculation based on carrying value at our share as of December 31, 2024.

(4)Represents principal amount of debt at our share as of December 31, 2024.

(5)Represents a property where we recorded impairment during the year ended December 31, 2024. For Net lease 5, three individual properties were impaired.

(6)Net lease 5 consists of two separate mortgage notes.

(7)The mortgage payable collateralized by Other real estate 1 was extended in December 2024 to December 2027, the current maturity date. We have a one-year extension available, subject to satisfaction of certain customary conditions set forth in the governing documents.

(8)The mortgage payable collateralized by Other real estate 2 is in maturity default as of January 2025. We are currently negotiating an extension with our lender and remain current on interest payments.

(9)Property was acquired through foreclosure or deed-in-lieu of foreclosure.

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Results of Operations

The following table summarizes our portfolio results of operations for the years ended December 31, 2024, 2023 and 2022 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","Change"],["","","2024","","2023","","2022","","2024 compared to 2023","","","","2023 compared to 2022"],["Net interest income"],["Interest income","","$","244,773","","","$","298,702","","","$","236,181","","","$","(53,929)","","","","","$","62,521"],["Interest expense","","(153,910)","","","(173,309)","","","(111,806)","","","19,399","","","","","(61,503)"],["Interest income on mortgage loans held in securitization trusts","","\u2014","","","\u2014","","","32,163","","","\u2014","","","","","32,163"],["Interest expense on mortgage obligations issued by securitization trusts","","\u2014","","","\u2014","","","(29,434)","","","\u2014","","","","","(29,434)"],["Net interest income","","90,863","","","125,393","","","127,104","","","(34,530)","","","","","(1,711)"],["Property and other income"],["Property operating income","","102,443","","","93,403","","","90,191","","","9,040","","","","","3,212"],["Other income","","11,589","","","13,921","","","6,058","","","(2,332)","","","","","7,863"],["Total property and other income","","114,032","","","107,324","","","96,249","","","6,708","","","","","11,075"],["Expenses"],["Property operating expense","","33,887","","","26,640","","","24,222","","","7,247","","","","","2,418"],["Transaction, investment and servicing expense","","1,641","","","2,499","","","3,434","","","(858)","","","","","(935)"],["Interest expense on real estate","","27,026","","","25,909","","","28,717","","","1,117","","","","","(2,808)"],["Depreciation and amortization","","40,506","","","33,504","","","34,099","","","7,002","","","","","(595)"],["Increase of current expected credit loss reserve","","135,798","","","108,149","","","70,635","","","27,649","","","","","37,514"],["Impairment of operating real estate","","54,211","","","7,590","","","\u2014","","","46,621","","","","","7,590"],["Compensation and benefits","","34,644","","","39,501","","","33,031","","","(4,857)","","","","","6,470"],["Operating expense","","11,867","","","13,150","","","14,641","","","(1,283)","","","","","(1,491)"],["Total expenses","","339,580","","","256,942","","","208,779","","","82,638","","","","","48,163"],["Other income"],["Unrealized gain on mortgage loans and obligations held in securitization trusts, net","","\u2014","","","\u2014","","","854","","","\u2014","","","","","(854)"],["Realized loss on mortgage loans and obligations held in securitization trusts, net","","\u2014","","","\u2014","","","(854)","","","\u2014","","","","","854"],["Other gain, net","","228","","","613","","","34,630","","","(385)","","","","","(34,017)"],["Income (loss) before equity in earnings of unconsolidated ventures and income taxes","","(134,457)","","","(23,612)","","","49,204","","","(110,845)","","","","","(72,816)"],["Equity in earnings of unconsolidated ventures","","\u2014","","","9,055","","","25","","","(9,055)","","","","","9,030"],["Income tax expense","","(1,060)","","","(1,062)","","","(2,440)","","","2","","","","","1,378"],["Net income (loss)","","$","(135,517)","","","$","(15,619)","","","$","46,789","","","$","(119,898)","","","","","$","(62,408)"]]
[[/GREPCENT_TABLE]]

Comparison of Year Ended December 31, 2024 and Year Ended December 31, 2023

Net Interest Income

Interest income

Interest income decreased by $53.9 million to $244.8 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The decrease was primarily due to $40.4 million from loan repayments, $12.4 million from loans placed on nonaccrual status, and $8.5 million from the acquisition of six properties through deeds-in-lieu and foreclosure and one loan consolidated as real estate. This was partially offset by $3.9 million from higher interest rates, loan originations of $1.6 million, and proceeds of $1.2 million from interest on cash related to the BRSP 2024-FL2 ramp up.

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Interest expense

Interest expense decreased by $19.4 million to $153.9 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The decrease was primarily due to $30.8 million in repayments, partially offset by the net impact of the BRSP 2024-FL2 issuance and the unwinding of the CLNC 2019-FL1 securitization trust following the redemption of all outstanding securities thereunder of $12.0 million.

Property and other income

Property operating income

Property operating income increased by $9.0 million to $102.4 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase was primarily driven by property acquisitions during 2023 and 2024.

Other income

Other income decreased by $2.3 million to $11.6 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023. The decrease was primarily driven by lower income on money market investments.

Expenses

Property operating expense

Property operating expense increased by $7.2 million to $33.9 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase was primarily driven by property acquisitions during 2023 and 2024.

Transaction, investment and servicing expense

Transaction, investment and servicing expense decreased by $0.9 million to $1.6 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The decrease was primarily due to costs associated with a secondary offering of shares of our Class A common stock in the first quarter of 2023.

Interest expense on real estate

Interest expense on real estate increased by $1.1 million to $27.0 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase was primarily due to amortization income recorded on above-market debt during the year ended December 31, 2023.

Depreciation and amortization

Depreciation and amortization expense increased by $7.0 million to $40.5 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase was primarily driven by property acquisitions during 2023 and 2024.

Increase of CECL reserve

We recorded total CECL reserves of $135.8 million during the year ended December 31, 2024, which is comprised of $97.8 million of general reserves and $38.0 million of specific reserves. The increase in our general CECL reserve was primarily driven by the macroeconomic conditions, as well as specific inputs on certain office and multifamily properties utilized in our general CECL model. We recorded specific CECL reserves related to three multifamily senior loans, two office senior loans, and a development mezzanine loan during the year ended December 31, 2024. The specific reserves were charged off during the year ended December 31, 2024. We recorded total CECL reserves of $108.1 million during the year ended December 31, 2023, primarily driven by an increase of specific reserves related to three office senior loans, one multifamily senior loan, and a development mezzanine loan.

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Impairment of operating real estate

During the year ended December 31, 2024, we recorded impairment of $54.2 million on four office properties following a reduction in the current expected holding period in connection with our preparation of our quarterly financial reporting. During the year ended December 31, 2023, we recorded $7.6 million on one office property following a reduction in the current expected holding period in connection with our preparation of our quarterly financial reporting.

Compensation and benefits

Compensation and benefits decreased by $4.9 million to $34.6 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The decrease was primarily driven by lower stock compensation and payroll-related expenses.

Operating expense

Operating expense decreased by $1.3 million to $11.9 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to lower third-party costs.

Other income

Other gain, net

Other gain, net decreased by $0.4 million to $0.2 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. This was primarily due to lower unrealized gains on foreign currency hedges. As of December 31, 2024, we hold no foreign currency hedges.

Equity in earnings of unconsolidated ventures

We did not record equity in earnings of unconsolidated ventures during the year ended December 31, 2024. During the year ended December 31, 2023, we realized a one-time gain from our ratable share of dispute resolution proceeds of approximately $9.0 million from the senior mezzanine lender of the Development Mezzanine Loan in connection with our prior Los Angeles, California mixed-use project and retained B-participation investment. In connection with the settlement, effective January 26, 2023, we have no further interest in the loan or investment.

Income tax expense

Income tax expense decreased by a de minimis amount to $1.1 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023.

Comparison of Year Ended December 31, 2023 and Year Ended December 31, 2022

Net Interest Income

Interest income

Interest income increased by $62.5 million to $298.7 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022. The increase was primarily due to $72.6 million related to higher interest rates and $31.3 million due to 2022 loan originations partially offset by $36.8 million due to loan repayments.

Interest expense

Interest expense increased by $61.5 million to $173.3 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022. The increase was primarily due to $66.2 million from higher interest rates in 2023, partially offset by $7.8 million due to paydowns on financings.

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

Net interest income on mortgage loans and obligation held in securitization trusts, net decreased by $2.7 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022 due to the sale of our final retained interest in a securitization trust in November 2022.

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Property and other income

Property operating income

Property operating income increased by $3.2 million to $93.4 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022. The increase was primarily due to $4.0 million from five real estate foreclosures in 2023 and a tax refund and higher reimbursement income of $1.0 million at two office properties partially offset by $1.7 million from two real estate properties sold in the first quarter of 2022.

Other income

Other income increased by $7.9 million to $13.9 million during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to higher interest rates on money market investments.

Expenses

Property operating expense

Property operating expense increased by $2.4 million to $26.6 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022. The increase was primarily due to $2.7 million from five real estate foreclosures in 2023 and $0.8 million in higher utilities, insurance and property taxes incurred at two office properties in the year ended December 31, 2023. This was partially offset by $1.5 million from two real estate properties sold in the first quarter of 2022.

Transaction, investment and servicing expense

Transaction, investment and servicing expense decreased by $0.9 million to $2.5 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022. This was primarily due to $0.7 million related to lower loan servicing fees and $0.5 million of costs associated with the sale of a joint venture in the first quarter of 2022.

Interest expense on real estate

Interest expense on real estate decreased by $2.8 million to $25.9 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022. This decrease was primarily due to amortization income recorded on above-market debt during the year ended December 31, 2023.

Depreciation and amortization

Depreciation and amortization expense decreased by $0.6 million to $33.5 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022. The decrease was primarily due to fully depreciated and amortized assets associated with two office properties of $1.9 million and foreign currency translation of $0.9 million partially offset by $1.9 million from real estate foreclosures.

Increase of current expected credit loss reserve

During the year ended December 31, 2023, we recorded CECL reserves of $108.1 million as compared to reserves of $70.6 million for year ended December 31, 2022. The increase was primarily driven by an increase in specific reserves related to three office senior loans, one multifamily senior loan and one multifamily mezzanine loan, in addition to an increase in general reserves.

Impairment of operating real estate

We recorded impairment of $7.6 million on one office property following a reduction in the estimated holding period during the year ended December 31, 2023. We recorded no impairment for the year ended December 31, 2022.

Compensation and benefits

Compensation and benefits increased by $6.5 million to $39.5 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to fully recognizing stock compensation on performance stock units issued in March 2023 and stock compensation on restricted stock grants issued in March 2023.

Operating expense

Operating expense decreased by $1.5 million to $13.2 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to lower third-party fees.

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Other income (loss)

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

During the year ended December 31, 2022, we recorded an unrealized gain of $0.9 million on mortgage loans and obligations held in securitization trusts, net due to the sale of retained investments in the subordinate tranches of a securitization trust. Following the sale, we no longer hold any mortgage loans and obligations held in securitization trusts.

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

During the year ended December 31, 2022, we recorded a realized loss of $0.9 million on mortgage loans and obligations held in securitization trusts, net due to the sale of retained investments in the subordinate tranches of a securitization trust. Following the sale, we no longer hold any mortgage loans and obligations held in securitization trusts.

Other gain, net

Other gain, net decreased by $34.0 million to $0.6 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to $32.8 million in realized gains associated with asset sales in 2022.

Equity in earnings of unconsolidated ventures

During the year ended December 31, 2023, we realized a one-time gain from our ratable share of dispute resolution proceeds of approximately $9.0 million from the senior mezzanine lender at our prior Los Angeles, California mixed-use project construction mezzanine loan and retained B-participation investment. In connection with the settlement, effective January 26, 2023, we have no further interest in the loan or investment. We recorded de minimis equity in earnings of unconsolidated ventures during the year ended December 31, 2022.

Income tax expense

Income tax expense decreased by $1.4 million to $1.1 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022 primarily due to return to provision adjustments recorded during the year ended December 31, 2022.

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 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 GAAP adjustments that we believe are not necessarily indicative of our current portfolio and operations.

We define Distributable Earnings as 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) acquisition costs from successful acquisitions, (iv) 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, (v) general CECL reserves, (vi) depreciation and amortization, (vii) 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, (viii) one-time events pursuant to changes in GAAP and (ix) certain material non-cash income or expense items that in the judgment of management should not be included in Distributable Earnings. For clauses (viii) and (ix), such exclusions shall only be applied after approval by a majority of our independent directors. Distributable Earnings include specific CECL reserves.

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Additionally, we define Adjusted Distributable Earnings as Distributable Earnings excluding (i) realized gains and losses on asset sales, (ii) fair value adjustments, which represent mark-to-market adjustments to investments in unconsolidated ventures based on an exit price, defined as the estimated price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants, (iii) unrealized gains or losses, (iv) specific CECL reserves and (v) 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 GAAP net income or an indication of our cash flows from operating activities determined in accordance with 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 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 tables present a reconciliation of net income (loss) attributable to our common stockholders to Distributable Earnings and Adjusted Distributable Earnings attributable to our common stockholders (dollars and share amounts in thousands, except per share data) for the years ended December 31, 2024, 2023 and 2022:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","2023","","2022"],["Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders","","$","(131,979)","","","$","(15,549)","","","$","45,788"],["Adjustments:"],["Net income attributable to noncontrolling interest of the Operating Partnership","","\u2014","","","\u2014","","","1,013"],["Non-cash equity compensation expense","","11,649","","","14,056","","","7,888"],["Depreciation and amortization","","41,082","","","32,050","","","33,949"],["Net unrealized loss (gain):"],["Impairment of operating real estate","","54,211","","","7,590","","","\u2014"],["Other unrealized loss (gain) on investments","","125","","","1,747","","","(1,155)"],["General CECL reserves","","97,767","","","26,983","","","13,692"],["Gain on sales of real estate, preferred equity and investments in unconsolidated joint ventures","","(144)","","","\u2014","","","(30,709)"],["Adjustments related to noncontrolling interests","","(1,552)","","","(805)","","","(730)"],["Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders","","$","71,159","","","$","66,072","","","$","69,736"],["Distributable Earnings per share(1)","","$","0.55","","","$","0.51","","","$","0.53"],["Adjustments:"],["Specific CECL reserves","","$","38,031","","","$","81,166","","","$","56,944"],["Fair value adjustments","","\u2014","","","(9,055)","","","\u2014"],["Realized loss on CRE debt securities and B-piece","","\u2014","","","\u2014","","","797"],["Adjusted Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders","","$","109,190","","","$","138,183","","","$","127,477"],["Adjusted Distributable Earnings per share(1)","","$","0.84","","","$","1.06","","","$","0.98"],["Weighted average number of shares of Class A common stock(1)","","130,150","","","129,794","","","130,539"]]
[[/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, 2022 includes 3.1 million OP units until their redemption in May 2022.

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Undepreciated Book Value Per Share

We believe that presenting undepreciated book value per share is a more useful and consistent measure of the value of our current portfolio and operations for our investors. It additionally enhances the comparability to our peers who do not hold real estate investments. Undepreciated book value per share excludes our share of accumulated depreciation and amortization on real estate investments (including related intangible assets and liabilities). It also excludes our share of the carrying value (including any related foreign currency translation) on certain net leased and other real estate office properties whose non-recourse mortgages mature within 12 months or who have been placed in a cash flow sweep by their lender. Our ability to refinance at their maturity dates is burdened by the current interest rate environment, lenders’ aversion to finance or refinance office properties and/or associated improvements or paydowns potentially demanded at such properties. Loan maturity defaults can lead to foreclosures. Given this potential likelihood, we believe it is prudent to recognize impairments and exclude our share of the carrying value related to these properties.

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

[[GREPCENT_TABLE]]
[["","","December 31, 2024","","December 31, 2023"],["Stockholders\u2019 Equity excluding noncontrolling interests in investment entities","","$","1,048,218","","","$","1,277,335"],["Accumulated depreciation and amortization","","232,177","","","198,164"],["Non-GAAP impairment of real estate","","(134,578)","","","\u2014"],["Foreign currency translation","","6,624","","","\u2014"],["Undepreciated book value","","$","1,152,441","","","$","1,475,499"],["GAAP book value per share","","$","8.08","","","$","9.83"],["Accumulated depreciation and amortization per share","","1.79","","","1.52"],["Non-GAAP impairment of real estate","","(1.04)","","","\u2014"],["Foreign currency translation","","0.05","","","\u2014"],["Undepreciated book value per share","","$","8.89","","","$","11.35"],["Total outstanding shares - Class A common stock","","129,685","","","129,985"]]
[[/GREPCENT_TABLE]]

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 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 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 years ended December 31, 2024, 2023 and 2022:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","2023","","2022"],["Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders","","$","(131,979)","","","$","(15,549)","","","$","45,788"],["Adjustments:"],["Net (income) loss attributable to non-net leased and other real estate portfolios(1)","","79,127","","","14,426","","","(32,342)"],["Net loss attributable to noncontrolling interests in investment entities","","(3,538)","","","(70)","","","(12)"],["Amortization of above- and below-market lease intangibles","","287","","","(126)","","","(364)"],["Net interest income","","(69)","","","(71)","","","\u2014"],["Interest expense on real estate","","29,117","","","26,024","","","28,717"],["Other income","","(380)","","","(437)","","","(18)"],["Transaction, investment and servicing expense","","32","","","317","","","681"],["Depreciation and amortization","","40,381","","","33,321","","","33,886"],["Impairment of operating real estate","","54,211","","","7,590","","","\u2014"],["Operating expense","","64","","","95","","","231"],["Other gain (loss) on investments, net","","682","","","1,660","","","(10,287)"],["Income tax expense","","961","","","527","","","231"],["NOI attributable to noncontrolling interest in investment entities","","(1,216)","","","(1,204)","","","(1,200)"],["Total NOI, at share","","$","67,680","","","$","66,503","","","$","65,311"]]
[[/GREPCENT_TABLE]]

________________________________________

(1)Net (income) loss attributable to non-net leased and other real estate portfolios includes net (income) loss on our senior and mezzanine loans and preferred equity and corporate and other business segments.

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 the foreseeable future.

Financing Strategy

We have a multi-pronged financing strategy that includes an up to $165.0 million secured revolving credit facility as of December 31, 2024, up to approximately $2.0 billion in secured revolving repurchase facilities, $1.1 billion in non-recourse securitization financing, $587.2 million in commercial mortgages and $34.5 million in other asset-level financing structures.

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, 2024","","December 31, 2023"],["Debt-to-equity ratio(1)","","2.1x","","1.9x"]]
[[/GREPCENT_TABLE]]

_________________________________________

(1)Represents (i) total consolidated outstanding secured debt less cash and cash equivalents of $302.2 million and $257.5 million at December 31, 2024 and December 31, 2023, respectively to (ii) total equity, in each case, at period end.

Potential Sources of Liquidity

As discussed in greater detail above under “Trends Affecting our Business,” and “Factors Impacting Our Operating Results” overall market uncertainty coupled with rising inflation and high interest rates have tempered the loan financing markets recently. A high interest rate environment will result in increased interest expense on our variable rate debt that is not hedged and may result in disruptions to our borrowers’ and tenants’ ability to finance their activities, which would similarly adversely impact their ability to make their monthly mortgage payments and meet their loan obligations. Additionally, due to the current market conditions, warehouse lenders may take a more conservative stance by increasing funding costs, which may lead to margin calls.

Our primary sources of liquidity include borrowings available under our credit facilities, Master Repurchase Facilities and monthly mortgage payments from our borrowers.

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 January 28, 2022, the OP (together with certain subsidiaries of the OP from time to time party thereto as borrowers, collectively, the “Borrowers”) entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent (the “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 in the aggregate principal amount of up to $165.0 million, of which up to $25.0 million is available as letters of credit. Loans under the Credit Agreement may be advanced in U.S. dollars and certain foreign currencies, including euros, pounds sterling and Swiss francs. The Credit Agreement amended and restated the OP’s prior $300.0 million revolving credit facility that would have matured on February 1, 2022.

The Credit Agreement also includes an option for the Borrowers to increase the maximum available principal amount of 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 (x) an adjusted SOFR rate plus a margin of 2.25%, or (y) a base rate equal to the highest of (i) the Wall Street Journal’s prime rate, (ii) the federal funds rate plus 0.50% and (iii) the adjusted SOFR rate plus 1.00%, 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 owed 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 December 31, 2024, the borrowing base valuation is sufficient to permit borrowings of up to the entire $165.0 million. If any borrowing is outstanding for more than 180 days after its initial draw, the borrowing base valuation will be reduced by 50% until all outstanding borrowings are repaid in full. The ability to borrow new amounts under the Credit Agreement terminates on January 31, 2026, at which time the 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.

The obligations of the Borrowers under the Credit Agreement are guaranteed pursuant to a Guarantee and Collateral Agreement by substantially all material wholly owned subsidiaries of the OP (the “Guarantors”) in favor of the Administrative Agent (the “Guarantee and Collateral Agreement”) and, subject to certain exceptions, secured by a pledge of substantially all equity

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interests owned by the Borrowers and the Guarantors, as well as by a security interest in deposit accounts of the Borrowers and the Guarantors 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 Company 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 the OP and its consolidated subsidiaries: (a) minimum consolidated tangible net worth of the OP to be greater than or equal to the sum of (i) $1,112,000,000 and (ii) 70% of the net cash proceeds received by the OP from any offering of its common equity after September 30, 2021 and of the net cash proceeds from any offering by the Company of its common equity to the extent such proceeds are contributed to the OP, excluding any such proceeds that are contributed to the OP within ninety (90) days of receipt and applied to acquire capital stock of the OP; (b) the OP’s ratio of EBITDA plus lease expenses to fixed charges for any period of four consecutive fiscal quarters to be not less than 1.50 to 1.00; (c) the OP’s minimum interest coverage ratio to be not less than 3.00 to 1.00; and (d) the OP’s ratio of consolidated total debt to consolidated total assets to be not more than 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, 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 the 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.

As of December 31, 2024, we were in compliance with all of our financial covenants under the Credit Agreement.

Master Repurchase Facilities

Currently, our primary sources of financing the origination of first mortgage loans and senior loan participations secured by senior loan investments are our repurchase agreements with multiple global financial institutions (each, a “Master Repurchase Facility” and collectively, the “Master Repurchase Facilities”). The Master Repurchase Facilities, effectively allow us to borrow against loans that we own in an amount generally equal to (i) the market value of such loans multiplied by (ii) the applicable advance rate. Under these agreements, we sell our loans to a counterparty and agree to repurchase the same loans 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 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.

The following table presents a summary of our Master Repurchase Facilities and Bank Credit Facility as of December 31, 2024 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Maximum Facility Size","","Current Borrowings","","Weighted Average Final Maturity (Years)","","Weighted Average Interest Rate(1)"],["Master Repurchase Facilities"],["Bank 1","","$","600,000","","","$","422,438","","","2.2","","","SOFR + 2.47%"],["Bank 2","","600,000","","","160,847","","","2.2","","","SOFR + 2.01%"],["Bank 3","","400,000","","","177,466","","","2.4","","","SOFR + 1.78%"],["Bank 4","","400,000","","","24,432","","","4.8","","","SOFR + 1.90%"],["Total Master Repurchase Facilities","","2,000,000","","","785,183"],["Bank Credit Facility","","165,000","","","\u2014","","","2.0","","","SOFR + 2.25%"],["Total Facilities","","$","2,165,000","","","$","785,183"]]
[[/GREPCENT_TABLE]]
_________________________________________

(1)All facilities utilize Term SOFR at December 31, 2024.

The following table presents the quarterly average unpaid principal balance (“UPB”), end of period UPB and the maximum UPB at any month-end related to our Master Repurchase Facilities and Bank Credit Facility (dollars in thousands):

[[GREPCENT_TABLE]]
[["Quarter Ended","","Quarterly Average UPB","","End of Period UPB","","Maximum UPB at Any Month-End"],["December 31, 2024","","$","816,782","","","$","785,183","","","$","848,381"],["September 30, 2024","","923,540","","","848,381","","","987,017"],["June 30, 2024","","1,015,107","","","998,699","","","1,031,514"],["March 31, 2024","","1,092,119","","","1,031,516","","","1,121,264"],["December 31, 2023","","1,179,953","","","1,152,723","","","1,205,475"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["September 30, 2023","","1,212,217","","","1,207,182","","","1,208,898"],["June 30, 2023","","1,254,714","","","1,217,251","","","1,281,899"],["March 31, 2023","","1,778,135","","","1,292,176","","","1,320,246"]]
[[/GREPCENT_TABLE]]

The decrease in our end of period UPB from September 30, 2024 to December 31, 2024 was driven by financing paydowns during the period.

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.

CLNC 2019-FL1

In October 2019, we executed a securitization transaction, through wholly-owned subsidiaries, CLNC 2019-FL1, Ltd. and CLNC 2019-FL1, LLC (collectively, “CLNC 2019-FL1”), which resulted in the sale of $840.4 million of the 2019-FL1 Notes.

On August 19, 2024, we redeemed the outstanding securities under CLNC 2019-FL1, including the 2019-FL1 Notes, at a redemption price of $311.6 million. The 14 senior loan investments, with an aggregate unpaid principal balance of $477.7 million, held by CLNC 2019-FL1 were refinanced by the proceeds from the issuance of the securities under BRSP 2024-FL2 (as defined below), including the 2024-FL2 Notes (as defined below), and an existing Master Repurchase Facility.

BRSP 2021-FL1

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 $670.0 million of investment grade notes.

As of May 26, 2023, the benchmark index interest rate was converted from LIBOR to Term SOFR, plus a benchmark adjustment of 11.448 basis points, pursuant to the indenture agreement. Term SOFR for any interest accrual period shall be the one-month CME Term SOFR reference rate as published by the CME Group Benchmark Administration on each benchmark determination date.

BRSP 2021-FL1 included a two-year reinvestment feature that allowed 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. The reinvestment period for BRSP 2021-FL1 expired on July 20, 2023. During the year ended December 31, 2024, two loans held in BRSP 2021-FL1 were fully repaid, totaling $79.7 million, and four loans were partially repaid totaling $11.4 million. The proceeds from the repayments were used to amortize the securitization bonds in accordance with the securitization priority of repayments. At December 31, 2024, we had $639.5 million of unpaid principal balance of CRE debt investments financed with BRSP 2021-FL1. As of December 31, 2024, the securitization reflects an advance rate of 79.7% at a weighted average cost of funds of Term SOFR plus 1.59% (before transaction costs), and is collateralized by a pool of 24 senior loan investments.

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 did not fail any note protection tests during the years ended December 31, 2024 and December 31, 2023. While we 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.

BRSP 2024-FL2

In August 2024, we executed a $675.0 million securitization transaction through wholly-owned subsidiaries, BRSP 2024-FL2, Ltd. and BRSP 2024-FL2, LLC (collectively, “BRSP 2024-FL2”), which resulted in the sale of $583.9 million of the 2024-FL2 Notes.

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BRSP 2024-FL2 includes a six-month ramp-up acquisition period that allows us to contribute existing or newly originated loan investments in exchange for $84.8 million in unused proceeds held in BRSP 2024-FL2, subject to the satisfaction of certain conditions set forth in the indenture. BRSP 2024-FL2 also includes a two-year reinvestment feature that allows us to contribute existing or newly originated loan investments in exchange for proceeds from repayments of loans held in BRSP 2024-FL2, subject to the satisfaction of certain conditions set forth in the indenture. As of December 31, 2024, the securitization reflects an advance rate of 86.5% at a weighted average cost of funds of Term SOFR plus 2.47% (before transaction costs), and is collateralized by a pool of 24 senior loan investments and cash.

Additionally, BRSP 2024-FL2 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 BRSP 2024-FL2, a deterioration in the performance of an underlying loan could negatively impact our liquidity position.

During the year ended December 31, 2024, one loan held in BRSP 2024-FL2 was fully repaid, totaling $19.8 million. Additionally, during the year ended December 31, 2024, we contributed existing and newly originated loan investments totaling $54.5 million as part of the ramp-up acquisition period in exchange for unused proceeds. At December 31, 2024, we had $624.9 million of unpaid principal balance of senior loan investments financed with BRSP 2024-FL2.

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.

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, 2024. 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)","","$","1,238","","","$","413","","","$","825","","","$","\u2014","","","$","\u2014"],["Secured debt(2)","","1,533,333","","","1,115,959","","","152,408","","","29,327","","","235,639"],["Securitization bonds payable(3)","","1,123,285","","","1,068,146","","","55,139","","","\u2014","","","\u2014"],["Ground lease obligations(4)","","26,236","","","3,184","","","6,034","","","4,756","","","12,262"],["Office leases","","5,699","","","1,308","","","2,662","","","1,729","","","\u2014"],["","","$","2,689,791","","","$","2,189,010","","","$","217,068","","","$","35,812","","","$","247,901"],["Lending commitments(5)","","106,315"],["Total","","$","2,796,106"]]
[[/GREPCENT_TABLE]]

_________________________________________

(1)Future interest payments were estimated based on the applicable index at December 31, 2024 and unused commitment fee of 0.25% per annum, assuming principal is repaid on the current maturity date of January 2027.

(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 Term SOFR at December 31, 2024.

(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.

Share Repurchases

In April 2024, our board of directors authorized a stock repurchase program (“Stock Repurchase Program”) under which we may repurchase up to $50.0 million of our outstanding Class A common stock until April 30, 2025. The Stock Repurchase Program replaces the prior stock repurchase program authorization which expired on April 30, 2024. Under the Stock Repurchase Program, we may repurchase shares in open market purchases, in privately negotiated transactions or otherwise. We have a written trading plan as part of the Share Repurchase Program that provides for share repurchases in open market transactions that is intended to comply with Rule 10b-18 under the Exchange Act. The Stock Repurchase Program will be

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utilized at our discretion and in accordance with the requirements of the SEC. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate requirements and other conditions.

During the year ended December 31, 2024, we repurchased 1.2 million shares of Class A common stock at a weighted average price of $5.52 per share for an aggregate cost of $6.6 million.

As of December 31, 2024, there was $43.4 million remaining available to make repurchases under the Stock Repurchase Plan.

Cash Flows

The following presents a summary of our consolidated statements of cash flows for the years ended December 31, 2024, 2023, and 2022 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["Cash flow provided by (used in):","","2024","","2023","","2022"],["Operating activities","","$","103,405","","","$","137,624","","","$","125,277"],["Investing activities","","313,080","","","384,160","","","89,337"],["Financing activities","","(327,947)","","","(558,600)","","","(161,451)"]]
[[/GREPCENT_TABLE]]

Operating Activities

Cash inflows from operating activities are generated primarily through interest received from loans and preferred equity held for investment, and property operating income from our real estate portfolio. 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 provided net cash inflows of $103.4 million and $137.6 million for the years ended December 31, 2024 and 2023, respectively. Net cash provided by operating activities decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to lower net interest income recorded during the year ended December 31, 2024.

Our operating activities provided net cash inflows of $137.6 million and $125.3 million for the years ended December 31, 2023 and 2022, respectively. Net cash provided by operating activities increased for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to higher income earned as a result of higher interest rates.

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.

Investing Activities

Investing activities include cash outlays for disbursements on new and/or existing loans, which are partially offset by repayments of loans held for investment.

Investing activities generated net cash inflows of $313.1 million for the year ended December 31, 2024. Net cash provided by investing activities in 2024 resulted primarily from repayments on loans held for investment, net of $420.9 million partially offset by the origination and fundings on our loans held for investment, net of $114.3 million.

Investing activities generated net cash inflows of $384.2 million for the year ended December 31, 2023. Net cash provided by investing activities in 2023 resulted primarily from repayments on loans held for investment, net of $455.9 million partially offset by origination and fundings on our loans held for investment, net of $77.2 million.

Investing activities generated net cash inflows of $89.3 million for the year ended December 31, 2022. Net cash provided by investing activities in 2022 resulted primarily from repayments on loans held for investment of $909.8 million, proceeds from sales of real estate of $55.6 million, proceeds from sales of investments in unconsolidated ventures of $38.1 million, proceeds from sales of beneficial interests of securitization trusts of $36.2 million and repayments of principal in mortgage loans held in securitization trusts of $18.7 million, partially offset by originations and future advances on our loans held for investment, net of $972.1 million

Financing Activities

We finance our investing activities largely through borrowings secured by our investments along with capital from third party investors. We also have the ability to raise capital in the public markets through issuances of common stock, as well as draw

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upon our corporate credit facility, to finance our investing and operating activities. Accordingly, we incur cash outlays for payments on third party debt and dividends to our common stockholders.

Financing activities used net cash of $327.9 million for the year ended December 31, 2024, which resulted primarily from repayment of credit facilities of $665.4 million, repayment of securitization bonds of $403.4 million and distributions paid on common stock of $99.1 million partially offset by borrowings from securitization bonds of $582.6 million and borrowings from credit facilities $297.6 million.

Financing activities used net cash of $558.6 million for the year ended December 31, 2023, which resulted primarily from repayment of credit facilities of $320.6 million, repayment of securitization bonds of $258.8 million and distributions paid on common stock of $104.0 million partially offset by borrowings from credit facilities of $133.1 million.

Financing activities used net cash of $161.5 million for the year ended December 31, 2022, which resulted primarily from repayment of securitization bonds of $337.7 million, repayment of credit facilities of $336.8 million, distributions paid on common stock of $100.5 million, repayment of mortgage notes of $85.2 million, redemption of OP units of $25.4 million, repayment of mortgage obligations issued by securitization trusts of $18.7 million and repurchase of common stock of $18.3 million partially offset by borrowings from credit facilities of $771.5 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 and that of our investment assets and underlying collateral, 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, we 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 payoffs 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 quality not in accordance with the original business plan, the team evaluates the risks and determines 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.

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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 2024, we reviewed and evaluated our critical accounting policies and estimates and we believe they are appropriate. The following is a list of our accounting policies that may require more significant estimates and judgements: 1) Current Expected Credit Loss (“CECL” Reserve) and 2) Real Estate Impairment. We have included a summary of the accounting policies of these areas below. For more information on our critical accounting policies and other significant accounting policies, refer to the Note titled “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

CECL Reserve

The 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, as well as internal or external information relating to past events, current conditions and reasonable and supportable forecasts.

The general 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 specific 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 general 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 2024 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. Where management has determined that the credit loss model does not fully capture certain external factors, including portfolio trends or loan specific factors, a qualitative adjustment to the reserve may be recorded. This may include when management has determined a loan to be collateral dependent and elects to utilize the practical expedient when measuring the general CECL reserve.

For determining a specific CECL reserve, financial instruments are assessed outside of the PD/LGD model on an individual basis. This occurs when it is probable that we will be unable to collect the full payment of principal and interest on the instrument. We record a reserve to reduce the carrying value of the instrument to the present value of the expected future cash flows discounted at the instrument’s effective rate or to the fair value of the collateral. We apply broadly accepted and standard real estate valuation techniques, such as a discounted cash flow (“DCF”) or direct capitalization methodology, to determine the fair value of the collateral where it is probable that we will foreclose or 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. Determining fair value of the collateral, including utilization of a practical expedient, may take into account a

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number of assumptions including, but not limited to, rents and cash flow projections, market capitalization rates, discount rates and sales comps. Such assumptions are generally based on current market conditions and are subject to economic and market uncertainties.

In connection with developing the CECL reserve for our loans held for investment, we determine the risk ranking of each loan 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.

We also consider qualitative 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.

Changes in the CECL reserve for our financial instruments are recorded in increase/decrease in current expected credit loss reserve on the consolidated statement of operations with a corresponding offset to the loans held for investment or as a component of other liabilities for future loan fundings recorded on our consolidated balance sheets

Real Estate Impairment

We evaluate real estate held for investment for impairment periodically or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable, generally on an individual property basis. If an impairment indicator exists, we evaluate the undiscounted future net cash flows that are expected to be generated by the property, including any estimated proceeds from the eventual disposition of the property. If multiple outcomes are under consideration, we may apply a probability-weighted approach to the impairment analysis. Another key consideration in this assessment is the assumptions about the highest and best use of its real estate investments and its intent and ability to hold them for a reasonable period that would allow for the recovery of their carrying values. If such assumptions change and we shorten its expected hold period, this may result in the recognition of impairment losses. Based upon the analysis, if the carrying value of a property exceeds its undiscounted future net cash flows, an impairment loss is recognized for the excess, if any, of the carrying value of the property over the estimated fair value of the property. In evaluating and/or measuring impairment, we consider, among other things, current and estimated future cash flows associated with each property, market information for each sub-market, including, where applicable, competition levels, foreclosure levels, leasing trends, occupancy trends, lease or room rates, and the market prices of similar properties recently sold or currently being offered for sale, and other quantitative and qualitative factors.