# Claros Mortgage Trust, Inc. (CMTG) FY 2024 MD&A

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

SEC filing source: https://www.sec.gov/Archives/edgar/data/1666291/000095017025023258/cmtg-20241231.htm
Accession: 0000950170-25-023258
Filing date: 2025-02-19
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/CMTG/
All MD&A years: /company/CMTG/mda/
Previous year: /company/CMTG/mda/fy2023/ (FY 2023)
Next year: /company/CMTG/mda/fy2025/ (FY 2025)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those in this discussion as a result of various factors, including those discussed in Part I. Item 1A, “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K.

Introduction

We are a CRE finance company focused primarily on originating senior and subordinate loans on transitional CRE assets located in major U.S. markets, including mortgage loans secured by a first priority or subordinate mortgage on transitional CRE assets, and subordinate loans including mezzanine loans secured by a pledge of equity ownership interests in the direct or indirect property owner rather than directly in the underlying commercial properties. These loans are subordinate to a mortgage loan but senior to the property owner’s equity ownership interests. Transitional CRE assets are properties that require repositioning, renovation, rehabilitation, leasing, development or redevelopment or other value-added elements in order to maximize value. We believe our Sponsor’s real estate development, ownership and operations experience, and infrastructure differentiates us in lending on these transitional CRE assets. Our objective is to be a premier provider of debt capital for transitional CRE assets and, in doing so, to generate attractive risk-adjusted returns for our stockholders over time, primarily through dividends. We strive to create a diversified investment portfolio of CRE loans that we generally intend to hold to maturity. We focus primarily on originating loans ranging from $50 million to $300 million on transitional CRE assets located in U.S. markets with attractive fundamental characteristics supported by macroeconomic tailwinds.

Our loan origination and repayment volume may fluctuate based on market conditions or other conditions inherent in our portfolio. As such, we may modify our investment strategy from time to time by shifting focus to optimizing outcomes within our existing portfolio, which may include actions such as selling a loan or syndicating a portion of a loan, working with our borrowers to enhance the value of underlying properties that constitute our collateral, and in certain circumstances assuming legal title and/or physical possession of the underlying collateral property of a defaulted loan.

We were organized as a Maryland corporation on April 29, 2015 and commenced operations on August 25, 2015, and our common stock is traded on the New York Stock Exchange, or NYSE, under the symbol “CMTG.” We have elected and believe we have qualified to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2015. We are externally managed and advised by our Manager, an investment adviser registered with the Securities and Exchange Commission (“SEC”) pursuant to the Investment Advisers Act of 1940, as amended, (the “Advisers Act”). We operate our business in a manner that permits us to maintain our exclusion from registration under the Investment Company Act of 1940, as amended (the “1940 Act”).

I. Key Financial Measures and Indicators

As a CRE finance company, we believe the key financial measures and indicators for our business are net income (loss) per share, Distributable Earnings (Loss) per share, Distributable Earnings per share prior to realized gains and losses, which includes charge-offs of principal and/or accrued interest receivable, dividends declared per share, book value per share, adjusted book value per share, Net Debt-to-Equity Ratio and Total Leverage Ratio. During the year ended December 31, 2024, we had net loss per share of $1.60, Distributable Loss per share of $0.67, Distributable Earnings per share prior to realized gains and losses of $0.81, and dividends declared per share of $0.60. As of December 31, 2024, our book value per share was $14.12, our adjusted book value per share was $15.17, our Net Debt-to-Equity Ratio was 2.4x, and our Total Leverage Ratio was 2.8x. We use Net Debt-to-Equity Ratio and Total Leverage Ratio, financial measures which are not prepared in accordance with GAAP, to evaluate our financial leverage, which in the case of our Total Leverage Ratio, makes certain adjustments that we believe provide a more conservative measure of our financial condition.

Net (Loss) Income Per Share and Dividends Declared Per Share

The following table sets forth the calculation of basic and diluted net (loss) income per share and dividends declared per share ($ in thousands, except share and per share data):

[[GREPCENT_TABLE]]
[["","","Three Months Ended","","","Year Ended"],["","","December 31, 2024","","","December 31, 2024","","","December 31, 2023"],["Net (loss) income","","$","(100,698",")","","$","(221,265",")","","$","6,027"],["Weighted average shares of common stock outstanding, basic and diluted","","","139,464,720","","","","139,225,441","","","","138,617,043"],["Basic and diluted net (loss) income per share of common stock","","$","(0.72",")","","$","(1.60",")","","$","0.02"],["Dividends declared per share of common stock","","$","-","","","$","0.60","","","$","1.24"]]
[[/GREPCENT_TABLE]]

On December 16, 2024, our Board paused our quarterly dividend on our common stock commencing with the fourth quarter dividend that would have otherwise been paid in January 2025. Such action was taken to preserve capital and create added financial

56

flexibility for capital allocation decisions with the objective of enhancing stockholder value over the long-term. During the year ended December 31, 2024, our Board declared three quarterly dividends totaling $0.60 per share of common stock, which exceeds our 2024 taxable income. The timing and amount of any future dividends declared by our Board depend on a variety of factors, including cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code, and such other factors as our Board deems relevant.

Distributable Earnings (Loss)

Distributable Earnings (Loss) is a non-GAAP measure used to evaluate our performance excluding the effects of certain transactions, non-cash items and GAAP adjustments, as determined by our Manager. Distributable Earnings (Loss) is a non-GAAP measure, which we define as net income (loss) in accordance with GAAP, excluding (i) non-cash stock-based compensation expense, (ii) real estate owned held-for-investment depreciation and amortization, (iii) any unrealized gains or losses from mark-to-market valuation changes (other than permanent impairments) that are included in net income (loss) for the applicable period, (iv) one-time events pursuant to changes in GAAP and (v) certain non-cash items, which in the judgment of our Manager, should not be included in Distributable Earnings (Loss). Furthermore, we present Distributable Earnings prior to realized gains and losses, which such gains and losses include charge-offs of principal and/or accrued interest receivable, as we believe this more easily allows our Board, Manager, and investors to compare our operating performance to our peers, to assess our ability to declare and pay dividends, and to determine our compliance with certain financial covenants. Pursuant to the Management Agreement, we use Core Earnings, which is substantially the same as Distributable Earnings (Loss) excluding incentive fees, to determine the incentive fees we pay our Manager.

We believe that Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses provide meaningful information to consider in addition to our net income (loss) and cash flows from operating activities in accordance with GAAP. Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses do not represent net income (loss) or cash flows from operating activities in accordance with GAAP and should not be considered as an alternative to GAAP net income (loss), an indication of our cash flows from operating activities, a measure of our liquidity or an indication of funds available for our cash needs. In addition, our methodology for calculating these non-GAAP measures may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures and, accordingly, our reported Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses may not be comparable to the Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses reported by other companies.

In order to maintain our status as a REIT, we are required to distribute at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain, as dividends. Distributable Earnings (Loss), Distributable Earnings prior to realized gains and losses, and other similar measures, have historically been a useful indicator over time of a mortgage REIT’s ability to cover its dividends, and to mortgage REITs themselves in determining the amount of any dividends to declare. Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses are key factors, among others, considered by our Board in determining the dividend each quarter and as such we believe Distributable Earnings (Loss) and Distributable Earnings prior to realized gains and losses are also useful to investors.

While Distributable Earnings (Loss) excludes the impact of our provision for or reversal of current expected credit loss reserve, charge-offs of principal and/or accrued interest receivable are recognized through Distributable Earnings (Loss) when deemed non-recoverable. Non-recoverability is determined (i) upon the resolution of a loan (i.e., when the loan is repaid, fully or partially, when we acquire title in the case of foreclosure, deed-in-lieu of foreclosure, or assignment-in-lieu of foreclosure, or when the loan is sold or anticipated to be sold for an amount less than its carrying value), or (ii) with respect to any amount due under any loan, when such amount is determined to be uncollectible.

In determining Distributable Earnings (Loss) per share and Distributable Earnings per share prior to realized gains and losses, the dilutive effect of unvested RSUs is considered. The weighted average diluted shares outstanding used for Distributable Earnings (Loss) and Distributable Earnings per share prior to realized gains and losses have been adjusted from weighted average diluted shares under GAAP to include weighted average unvested RSUs.

The table below summarizes the reconciliation from weighted average diluted shares under GAAP to the weighted average diluted shares used for Distributable (Loss) Earnings and Distributable Earnings prior to realized gains and losses for the years ended December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["Weighted Averages","","December 31, 2024","","","December 31, 2023"],["Diluted Shares - GAAP","","","139,225,441","","","","138,617,043"],["Unvested RSUs","","","2,689,202","","","","2,637,717"],["Diluted Shares - Distributable (Loss) Earnings","","","141,914,643","","","","141,254,760"]]
[[/GREPCENT_TABLE]]

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The following table provides a reconciliation of net (loss) income to Distributable (Loss) Earnings and Distributable Earnings prior to realized gains and losses ($ in thousands, except share and per share data):

[[GREPCENT_TABLE]]
[["","","Three Months Ended","","","Year Ended"],["","","December 31, 2024","","","December 31, 2024","","","December 31, 2023"],["Net (loss) income","","$","(100,698",")","","$","(221,265",")","","$","6,027"],["Adjustments:"],["Non-cash stock-based compensation expense","","","4,777","","","","18,101","","","","16,599"],["Provision for current expected credit loss reserve","","","29,976","","","","212,620","","","","153,683"],["Depreciation and amortization expense","","","2,639","","","","10,489","","","","9,287"],["Amortization of above and below market lease values, net","","","354","","","","1,416","","","","708"],["Unrealized loss on interest rate cap","","","27","","","","1,406","","","","5,157"],["Loss (gain) on extinguishment of debt","","","630","","","","4,135","","","","(2,217",")"],["Gain on sale of loan","","","-","","","","-","","","","(575",")"],["Gain on foreclosure of real estate owned","","","-","","","","-","","","","(4,162",")"],["Valuation adjustment for loan receivable held-for-sale","","","7,227","","","","7,227","","","","-"],["Loss on real estate owned held-for-sale","","","80,461","","","","80,461","","","","-"],["Distributable Earnings prior to realized gains and losses","","$","25,393","","","$","114,590","","","$","184,507"],["Gain on sale of loan","","","-","","","","-","","","","575"],["(Loss) gain on extinguishment of debt","","","(630",")","","","(4,135",")","","","2,217"],["Principal charge-offs (1)","","","(756",")","","","(98,934",")","","","(147,361",")"],["Previously recognized gain on foreclosure of real estate owned held-for-sale (2)","","","5,592","","","","5,592","","","","-"],["Loss on real estate owned held-for-sale","","","(80,461",")","","","(80,461",")","","","-"],["Previously recognized depreciation on real estate owned held-for-sale (3)","","","(32,302",")","","","(32,302",")","","","-"],["Distributable (Loss) Earnings","","$","(83,164",")","","$","(95,650",")","","$","39,938"],["Weighted average diluted shares - Distributable (Loss) Earnings","","","141,955,621","","","","141,914,643","","","","141,254,760"],["Diluted Distributable Earnings per share prior to realized gains and losses","","$","0.18","","","$","0.81","","","$","1.31"],["Diluted Distributable (Loss) Earnings per share","","$","(0.59",")","","$","(0.67",")","","$","0.28"]]
[[/GREPCENT_TABLE]]

(1)
For the year ended December 31, 2024, amount includes a $23.2 million charge-off of accrued interest receivable related to the reclassification of a for sale condo loan to held-for-sale.

(2)
Reflects total gain on foreclosure of our hotel portfolio real estate owned asset, which is classified as real estate owned held-for-sale as of December 31, 2024. Amount not previously recognized in Distributable (Loss) Earnings.

(3)
Reflects previously recognized depreciation on real estate owned classified as held-for-sale as of December 31, 2024. Amount not previously recognized in Distributable (Loss) Earnings.

Book Value Per Share

We believe that presenting book value per share adjusted for our general current expected credit loss reserve and accumulated depreciation and amortization on our real estate owned held-for-investment and related lease intangibles is useful for investors as it enhances the comparability to our peers. We believe that our investors and lenders consider book value excluding these items as an important metric related to our overall capitalization.

The following table sets forth the calculation of our book value and our adjusted book value per share as of December 31, 2024 and 2023 ($ in thousands, except share and per share data):

[[GREPCENT_TABLE]]
[["","","December 31, 2024","","","December 31, 2023"],["Equity","","$","2,008,086","","","$","2,299,900"],["Number of shares of common stock outstanding and RSUs","","","142,187,015","","","","141,313,339"],["Book Value per share(1)","","$","14.12","","","$","16.28"],["Add back: accumulated depreciation and amortization on real estate owned and related lease intangibles","","","0.03","","","","0.18"],["Add back: general CECL reserve","","","1.02","","","","0.57"],["Adjusted Book Value per share","","$","15.17","","","$","17.03"]]
[[/GREPCENT_TABLE]]

(1)
Calculated as (i) total equity divided by (ii) number of shares of common stock outstanding and RSUs at period end.

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II. Our Portfolio

The below table summarizes our loans receivable held-for-investment as of December 31, 2024 ($ in thousands):

[[GREPCENT_TABLE]]
[["","","","","","","","","","","","","","","Weighted Average(3)"],["","","Number of Loans","","","Loan Commitment(1)","","","Unpaid Principal Balance","","","Carrying Value (2)","","","Yield to Maturity (4)","","","Term to Initial Maturity","","Term to Fully Extended Maturity (5)","","Weighted Average Origination LTV (6)","","Weighted Average Adjusted LTV (7)"],["Senior and subordinate loans","","","52","","","$","6,698,596","","","$","6,200,290","","","$","6,069,372","","","","7.6","%","","0.7 years","","1.7 years","","70.4%","","","72.2","%"]]
[[/GREPCENT_TABLE]]

(1)
Loan commitment represents principal outstanding plus remaining unfunded loan commitments.

(2)
Net of specific CECL reserve of $120.9 million.

(3)
Weighted averages are based on unpaid principal balance.

(4)
Represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon, and fees received, based on the applicable floating benchmark rate/floors (if applicable), in place as of December 31, 2024. For loans placed on non-accrual, the annualized yield to initial maturity used in calculating the weighted average annualized yield to initial maturity is 0%.

(5)
Fully extended maturity assumes all extension options are exercised by the borrower upon satisfaction of the applicable conditions.

(6)
Origination LTV represents “loan-to-value” or “loan-to-cost,” which is calculated as our total loan commitment upon origination, as if fully funded, plus any financings that are pari passu with or senior to our loan, divided by our estimate of either (1) the value of the underlying real estate, determined in accordance with our underwriting process (typically consistent with, if not less than, the value set forth in a third-party appraisal) or (2) the borrower’s projected, fully funded cost basis in the asset, in each case as we deem appropriate for the relevant loan and other loans with similar characteristics. Underwritten values and projected costs should not be assumed to reflect our judgment of current market values or project costs, which may have changed materially since the date of origination. Weighted average origination LTV is based on loan commitment, including non-consolidated senior interests and pari passu interests, and excludes risk rated 5 loans.

(7)
Adjusted LTV represents origination LTV updated only in connection with a partial loan paydown and/or release of collateral, material changes to expected project costs, the receipt of a new appraisal (typically in connection with financing or refinancing activity) or a change in our loan commitment. Adjusted LTV should not be assumed to reflect our judgment or current market values or project costs, which may have changed materially since the date of the most recent determination of LTV. Weighted average adjusted LTV is based on loan commitment, including non-consolidated senior interests, pari passu interests, and risk rated 5 loans. Loans with specific CECL reserves are reflected as 100% LTV.

Sales of Loans Receivable

The following table summarizes loans receivable held-for-sale as of December 31, 2024 and 2023, and loans receivable sold during the year ended December 31, 2024 ($ in thousands):

[[GREPCENT_TABLE]]
[["Property Type","","Location","","Loan Commitment","","","Unpaid Principal Balance","","","Carrying Value Before Principal Charge-Off","","","Principal Charge-Off","","","Held-For-Sale Carrying Value (1)","","","Risk Rating (2)"],["For Sale Condo (6)","","CA","","$","247,260","","","$","211,412","","","$","211,412","","","$","(28,107",")","","$","176,078","","","4"],["Hospitality (4)","","CA","","","101,059","","","","101,059","","","","101,299","","","","(315",")","","","100,984","","","3"],["Total held-for-sale, December 31, 2024","","$","348,319","","","$","312,471","","","$","312,711","","","$","(28,422",")","","$","277,062"],["Multifamily (5)","","NV","","$","60,255","","","$","60,255","","","$","60,049","","","$","(440",")","","$","59,609","","","3"],["Multifamily (5)","","CO","","","115,000","","","","115,000","","","","115,173","","","","(3,657",")","","","111,516","","","3"],["Land (5)","","FL","","","30,200","","","","30,200","","","","30,351","","","","(343",")","","","30,008","","","3"],["Multifamily (7)","","CA","","","260,899","","","","216,045","","","","214,443","","","","(42,827",")","","","171,616","","","4"],["For Sale Condo (3)","","FL","","","160,000","","","","158,180","","","","157,346","","","","-","","","","157,346","","","2"],["Multifamily (3)","","FL","","","77,115","","","","76,580","","","","76,275","","","","-","","","","76,275","","","3"],["Mixed-Use (3) (8)","","FL","","","141,791","","","","36,773","","","","35,556","","","","(7,468",")","","","28,088","","","3"],["Total sold, year ended December 31, 2024","","$","845,260","","","$","693,033","","","$","689,193","","","$","(54,735",")","","$","634,458"]]
[[/GREPCENT_TABLE]]

(1)
For loans sold during a quarter which were not previously reflected as held-for-sale, amount reflects carrying value of the loan receivable upon sale.

(2)
Reflects risk rating of the loan receivable prior to the loan sale or reclassification to held-for-sale.

(3)
Loan classified as held-for-sale as of December 31, 2023 and sold in January 2024.

(4)
Loan sold in January 2025.

(5)
Loan sold during the quarter ended December 31, 2024.

(6)
Upon reclassification to held-for-sale as of September 30, 2024, we recognized an additional $23.2 million charge-off of accrued interest receivable. The principal charge-offs were attributable to the delinquency of the loan and its $35.8 million of remaining unfunded commitments. During the three months ended December 31, 2024, we recognized a further adjustment to the held-for-sale carrying value of $7.2 million as a result of additional protective advances made and a reduction in anticipated proceeds from the sale, which is reflected as a valuation adjustment for loans receivable held-for-sale on our consolidated statement of operations. Effective October 1, 2024, this loan was placed on non-accrual status.

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(7)
Principal charge-off attributable to the construction status of the loan’s collateral asset and its $44.9 million of remaining unfunded commitments. During the three months ended June 30, 2024, we recorded an additional principal charge-off of $0.6 million relating to transaction costs incurred. The loan was on non-accrual status effective October 1, 2023 and was sold in April 2024.

(8)
Principal charge-off attributable to the construction status of the loan’s collateral asset and its $105.0 million of remaining unfunded commitments.

Portfolio Activity and Overview

The following table summarizes changes in unpaid principal balance for our loans receivable held-for-investment ($ in thousands):

[[GREPCENT_TABLE]]
[["","","Three Months Ended December 31, 2024","","","Year Ended December 31, 2024","","","Year Ended December 31, 2023"],["Unpaid principal balance, beginning of period","","$","6,384,893","","","$","7,044,524","","","$","7,538,525"],["Initial funding of new loan origination","","","-","","","","-","","","","101,059"],["Loan receivable acquired in connection with a full loan repayment","","","-","","","","100,007","","","","-"],["Advances on existing loans","","","75,347","","","","448,293","","","","730,350"],["Repayments of loans receivable","","","(98,635",")","","","(659,202",")","","","(584,970",")"],["Sales of loans receivable","","","(60,256",")","","","(60,256",")","","","(260,110",")"],["Transfer to loans held-for-sale","","","(101,059",")","","","(673,076",")","","","(271,533",")"],["Transfer to real estate owned (See Note 5)","","","-","","","","-","","","","(208,797",")"],["Total net fundings/(repayments/sales/transfers)","","","(184,603",")","","","(844,234",")","","","(494,001",")"],["Unpaid principal balance, end of period","","$","6,200,290","","","$","6,200,290","","","$","7,044,524"]]
[[/GREPCENT_TABLE]]

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The following table details our individual loans receivable held-for-investment based on unpaid principal balances as of December 31, 2024 ($ in thousands):

[[GREPCENT_TABLE]]
[["Loan Number","","Loan Type","","Origination Date","","Loan Commitment(1)","","","Unpaid Principal Balance","","","Carrying Value (2)","","","Origination LTV(3)","","Fully Extended Maturity(4)","","Property Type (5)","","Construction (5,6)","","Location","","Risk Rating"],["1","","Senior","","12/16/2021","","$","405,000","","","$","402,339","","","$","401,520","","","70.0%","","7/31/2025","","Multifamily","","-","","CA","","4"],["2","","Senior","","11/1/2019","","","390,000","","","","390,000","","","","390,000","","","74.3%","","8/1/2025","","Multifamily","","-","","NY","","4"],["3","","Senior","","7/12/2018","","","245,000","","","","245,000","","","","246,350","","","52.9%","","8/1/2028","","Hospitality","","-","","NY","","3"],["4","","Senior","","7/26/2021","","","225,000","","","","225,000","","","","225,169","","","65.1%","","7/26/2026","","Hospitality","","-","","GA","","3"],["5","","Senior","","6/30/2022","","","227,000","","","","224,615","","","","224,412","","","63.9%","","6/30/2029","","Hospitality","","-","","CA","","3"],["6","","Senior","","8/17/2022","","","235,000","","","","217,303","","","","217,111","","","68.3%","","8/17/2027","","Hospitality","","-","","CA","","3"],["7","","Senior","","9/26/2019","","","319,900","","","","199,953","","","","199,953","","","68.0%","","3/31/2026","","Office","","-","","GA","","4"],["8","","Senior","","9/7/2018","","","182,970","","","","182,970","","","","183,427","","","78.7%","","4/18/2026","","Land","","-","","NY","","3"],["9","","Senior","","10/4/2019","","","177,044","","","","177,044","","","","177,044","","","74.8%","","10/1/2025","","Mixed-Use","","-","","DC","","3"],["10","","Senior","","4/14/2022","","","193,400","","","","172,141","","","","171,976","","","55.7%","","4/14/2027","","Multifamily","","-","","MI","","3"],["11","","Senior","","1/14/2022","","","170,000","","","","170,000","","","","170,000","","","64.8%","","1/14/2027","","Multifamily","","-","","CO","","4"],["12","","Senior","","9/8/2022","","","160,000","","","","155,000","","","","154,645","","","63.5%","","9/8/2027","","Multifamily","","-","","AZ","","4"],["13","","Senior","","1/9/2018","","","152,834","","","","152,834","","","","120,100","","","n/m","","1/9/2024","","Land","","-","","VA","","5"],["14","","Senior","","9/2/2022","","","176,257","","","","150,080","","","","148,728","","","60.0%","","9/2/2027","","Multifamily","","Y","","UT","","3"],["15","","Senior","","2/28/2019","","","150,000","","","","150,000","","","","150,000","","","72.2%","","2/28/2024","","Office","","-","","CT","","4"],["16","","Senior","","5/13/2022","","","173,601","","","","142,335","","","","140,986","","","67.6%","","5/13/2027","","Mixed-Use","","Y","","VA","","3"],["17","","Senior","","12/30/2021","","","136,500","","","","136,500","","","","136,500","","","76.7%","","12/30/2025","","Multifamily","","-","","PA","","3"],["18","","Senior","","4/26/2022","","","151,698","","","","136,355","","","","135,840","","","66.7%","","4/26/2027","","Multifamily","","-","","TX","","4"],["19","","Senior","","12/10/2021","","","130,000","","","","130,000","","","","130,000","","","75.6%","","12/10/2026","","Multifamily","","-","","VA","","3"],["20","","Subordinate","","12/9/2021","","","125,000","","","","125,000","","","","124,878","","","80.3%","","1/1/2027","","Office","","-","","IL","","3"],["21","","Senior","","6/17/2022","","","127,250","","","","123,346","","","","123,094","","","62.8%","","6/17/2027","","Multifamily","","-","","TX","","3"],["22","","Senior","","4/29/2019","","","122,123","","","","120,289","","","","120,281","","","61.5%","","4/29/2025","","Mixed-Use","","-","","NY","","3"],["23","","Senior","","3/1/2022","","","122,000","","","","119,084","","","","118,100","","","n/m","","2/28/2027","","Multifamily","","-","","TX","","5"],["24","","Senior","","7/20/2021","","","113,500","","","","113,500","","","","113,841","","","76.2%","","7/20/2026","","Multifamily","","-","","IL","","3"],["25","","Senior","","2/13/2020","","","123,910","","","","111,542","","","","90,800","","","n/m","","2/13/2025","","Office","","-","","CA","","5"],["26","","Senior","","12/15/2021","","","103,000","","","","103,000","","","","103,000","","","58.5%","","12/15/2026","","Mixed-Use","","-","","TN","","3"],["27","","Senior","","7/30/2024","","","104,455","","","","101,604","","","","99,755","","","82.4%","","10/21/2026","","Other","","-","","NJ","","3"],["28","","Senior","","11/4/2022","","","135,000","","","","100,555","","","","100,150","","","43.1%","","11/9/2026","","Other","","Y","","MA","","3"],["29","","Senior","","1/27/2022","","","100,800","","","","96,529","","","","79,400","","","n/m","","1/27/2027","","Multifamily","","-","","NV","","5"],["30","","Senior","","8/2/2021","","","97,000","","","","95,214","","","","94,827","","","68.5%","","8/2/2026","","Office","","-","","CA","","4"],["31","","Senior","","1/10/2022","","","130,461","","","","89,464","","","","88,729","","","65.0%","","1/9/2027","","Other","","-","","PA","","3"],["32","","Senior","","3/31/2020","","","87,750","","","","87,750","","","","87,750","","","50.2%","","2/9/2025","","Office","","-","","TX","","4"],["33","","Senior","","12/21/2018","","","87,741","","","","87,741","","","","88,166","","","50.6%","","6/21/2022","","Land","","-","","NY","","4"],["34","","Senior","","7/10/2018","","","78,552","","","","78,552","","","","78,552","","","79.2%","","6/10/2024","","Hospitality","","-","","CA","","4"],["35","","Senior","","8/1/2022","","","115,250","","","","78,500","","","","78,500","","","82.1%","","7/30/2026","","Hospitality","","Y","","NY","","4"],["36","","Senior","","6/3/2021","","","79,600","","","","76,075","","","","76,029","","","68.3%","","6/3/2026","","Other","","-","","MI","","3"],["37","","Senior","","12/22/2021","","","83,901","","","","75,937","","","","75,772","","","69.5%","","12/22/2026","","Multifamily","","-","","TX","","4"],["38","","Senior","","7/27/2022","","","76,000","","","","75,550","","","","75,531","","","66.1%","","7/27/2027","","Multifamily","","-","","UT","","3"],["39","","Senior","","2/2/2022","","","90,000","","","","71,172","","","","70,677","","","66.3%","","2/2/2027","","Office","","-","","WA","","3"],["40","","Senior","","12/21/2022","","","112,100","","","","68,521","","","","67,583","","","60.9%","","12/21/2027","","Multifamily","","Y","","WA","","3"],["41","","Senior","","8/27/2021","","","81,810","","","","68,492","","","","40,200","","","n/m","","8/27/2026","","Office","","-","","GA","","5"],["42","","Senior","","7/31/2019","","","67,000","","","","67,000","","","","67,000","","","42.4%","","1/30/2022","","Land","","-","","NY","","4"],["43","","Senior","","1/19/2022","","","73,677","","","","59,825","","","","59,570","","","51.2%","","1/19/2027","","Hospitality","","-","","TN","","3"],["44","","Senior","","3/15/2022","","","53,300","","","","50,164","","","","42,800","","","n/m","","3/15/2027","","Multifamily","","-","","AZ","","5"],["45","","Senior","","2/4/2022","","","44,768","","","","39,279","","","","28,200","","","n/m","","2/4/2027","","Multifamily","","-","","TX","","5"],["46","","Senior","","4/5/2019","","","38,345","","","","38,345","","","","38,345","","","n/m","","4/5/2028","","Other","","-","","Other","","3"],["47","","Senior","","2/18/2022","","","32,083","","","","31,389","","","","31,280","","","66.0%","","2/18/2027","","Other","","Y","","FL","","3"],["48","","Senior","","4/5/2019","","","30,000","","","","30,000","","","","30,000","","","49.0%","","4/6/2026","","Other","","-","","NY","","3"],["49","","Senior","","4/18/2019","","","30,000","","","","30,000","","","","29,950","","","n/m","","5/1/2025","","Land","","-","","MA","","3"],["50","","Senior","","2/17/2022","","","28,479","","","","24,865","","","","21,200","","","n/m","","2/17/2027","","Multifamily","","-","","TX","","5"],["51","","Senior","","7/1/2019","","","1,651","","","","1,651","","","","1,651","","","n/m","","12/30/2020","","Other","","-","","Other","","5"],["52","","Subordinate","","8/2/2018","","","886","","","","886","","","","-","","","n/m","","7/9/2023","","Other","","-","","NY","","5"],["Total","","","","","","","6,698,596","","","","6,200,290","","","","6,069,372"],["General CECL reserve","","","","","","","","","(122,110",")"],["Grand Total/Weighted Average","","","","$","6,698,596","","","$","6,200,290","","","$","5,947,262","","","","","","","","","11%","","","","3.6"]]
[[/GREPCENT_TABLE]]

(1)
Loan commitment represents principal outstanding plus remaining unfunded loan commitments.

(2)
Net of specific CECL reserve of $120.9 million.

(3)
Origination LTV represents “loan-to-value” or “loan-to-cost,” which is calculated as our total loan commitment upon origination, as if fully funded, plus any financings that are pari passu with or senior to our loan, divided by our estimate of either (1) the value of the underlying real estate, determined in accordance with our underwriting process (typically consistent with, if not less than, the value set forth in a third-party appraisal) or (2) the borrower’s projected, fully funded cost basis in the asset, in each case as we deem appropriate for the relevant loan and other loans with similar characteristics. Underwritten values and projected costs should not be assumed to reflect our judgment of current market values or project costs, which may have changed materially since the date of origination. Weighted average origination LTV of 70.4% is based on loan commitment, including non-consolidated senior interests and pari passu interests, and excludes risk rated 5 loans.

(4)
Fully extended maturity assumes all extension options are exercised by the borrower upon satisfaction of the applicable conditions.

(5)
Classification of property type and construction status reflect the state of collateral as of December 31, 2024.

(6)
Percent of total construction loans based on loan commitments as of December 31, 2024.

Real Estate Owned

On February 8, 2021, we acquired legal title to a portfolio of seven limited service hotels located in New York, NY through a foreclosure. As of December 31, 2024, the hotel portfolio appears as real estate owned held-for-sale on our consolidated balance sheet and is encumbered by a $275.0 million securitized senior mortgage, which is included as a liability on our consolidated balance sheets.

61

As of December 31, 2024, we determined that our hotel portfolio real estate owned asset has met the held-for-sale criteria and we have reclassified this asset to real estate owned held-for-sale on our consolidated balance sheet and concurrently recognized a $80.5 million loss based upon anticipated sales price, less estimated costs to sell. We have determined this anticipated sale does not reflect a strategic shift and therefore does not qualify for presentation as a discontinued operation.

On June 30, 2023, we acquired legal title to a mixed-use property located in New York, NY and the equity interests in the borrower through an assignment-in-lieu of foreclosure and is comprised of office, retail, and signage components. As of December 31, 2024, the mixed-use property appears as part of real estate owned, net and related lease intangibles, net appear within other assets and other liabilities on our consolidated balance sheet.

See Note 5 to our consolidated financial statements for additional details.

Asset Management

Our Manager proactively manages the loans in our portfolio from closing to final repayment or resolution and our Sponsor has dedicated asset management employees to perform asset management services. Following the closing of an investment, the asset management team rigorously monitors the loan, with an emphasis on ongoing analyses of both quantitative and qualitative matters, including financial, legal, and market conditions. Through the final repayment or resolution of a loan, the asset management team maintains regular contact with borrowers, servicers and local market experts monitoring performance of the collateral, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.

Some of our borrowers may experience delays in the execution of their business plans, changes in their capital position and available liquidity, and/or changes in market conditions which may impact the performance of the underlying collateral asset, borrower, or sponsor. As a transitional lender, we may from time to time execute loan modifications with borrowers when and if appropriate, which may include additional equity contributions from them, repurposing of reserves, pledges of additional collateral or other forms of credit support, additional guarantees, temporary deferrals of interest or principal, partial deferral of coupon interest as payment-in-kind interest, and/or a discounted loan payoff. To the extent warranted by ongoing conditions specific to our borrowers or overall market conditions, we may make additional modifications when and if appropriate, and depending on the business plans, financial condition, liquidity and results of operations of our borrowers, among other factors.

Our Manager evaluates the credit quality of each of our loans receivable on an individual basis and assigns a risk rating at least quarterly. We have developed a loan grading system for all of our outstanding loans receivable that are collateralized directly or indirectly by real estate. Grading criteria include, but are not limited to, as-is or as-stabilized debt yield, term of loan, property type, property or collateral location, loan type, structure, collateral cash flow volatility and other more subjective variables that include, but are not limited to, as-is or as-stabilized collateral value, market conditions, industry conditions, borrower/sponsor financial stability, and borrower/sponsor exit plan. While evaluating the credit quality of each loan within our portfolio, we assess these quantitative and qualitative factors as a whole and with no pre-prescribed weight on their impact to our determination of a loan’s risk rating. However, based upon the facts and circumstances for each loan and the overall market conditions, we may consider certain previously mentioned factors more or less relevant than others. We utilize the grading system to determine each loan’s risk of loss and to provide a determination as to whether an individual loan is impaired and whether a specific CECL reserve is necessary. Based on a 5-point scale, the loans are graded “1” through “5,” from less risk to greater risk, respectively. The weighted average risk rating of our total loan portfolio was 3.6 at December 31, 2024.

Current Expected Credit Losses

The current expected credit loss reserve required under GAAP reflects our current estimate of potential credit losses related to our loan portfolio, which may fluctuate depending on market conditions and changes in our loan portfolio. See Note 2 to our consolidated financial statements for further detail of our current expected credit loss reserve methodology.

During the year ended December 31, 2024, we recorded a provision for current expected credit losses of $212.6 million, which consisted of a $65.4 million increase in our general CECL reserve and a $147.3 million increase in our specific CECL reserve prior to principal and accrued interest receivable charge-offs. The increase in general CECL reserves was primarily attributable to changes in the historical loss rate of the analogous dataset, changes in risk ratings and non-accrual status, changes to the expected remaining duration within our loan portfolio, and consideration of a contingent discounted loan payoff, partially offset by the reduction in the size of our loan portfolio. As of December 31, 2024, our total current expected credit loss reserve was $266.4 million.

During the year ended December 31, 2023, we recorded a provision for current expected credit losses of $153.7 million, which consisted of a $6.0 million reversal of our general CECL reserve and a $159.6 million increase in our specific CECL reserve prior to a principal charge-off. This reversal of general CECL reserves was primarily attributable to the seasoning of our loan portfolio and a reduction in the size of our loan portfolio, partially offset by deteriorating macroeconomic conditions. As of December 31, 2023, our total current expected credit loss reserve was $152.7 million.

62

Specific CECL Reserves

In certain circumstances, we may determine that a borrower is experiencing financial difficulty, and, if the repayment of the loan’s principal is collateral dependent, the loan is no longer suited for the WARM model. In these instances, there have been diminutions in the fair value and performance of the underlying collateral asset primarily as a result of reduced tenant and/or capital markets demand for such property types in the markets in which these assets and borrowers operate in. Furthermore, we may recognize a specific CECL reserve if we anticipate assuming legal title and/or physical possession of the underlying collateral property and the fair value of the collateral asset is determined to be below our carrying value. The following table presents a summary of our loans receivable held-for-investment with specific CECL reserves as of December 31, 2024 ($ in thousands):

[[GREPCENT_TABLE]]
[["Property Type","","Location","","Unpaid Principal Balance","","","Carrying Value Before Specific CECL Reserve","","","Specific CECL Reserve","","","Net Carrying Value"],["Land","","VA","","$","152,834","","","$","152,834","","","$","32,734","","","$","120,100"],["Total Land","","","152,834","","","","152,834","","","","32,734","","","","120,100"],["Multifamily","","TX","","","119,084","","","","118,717","","","","617","","","","118,100"],["Multifamily","","NV","","","96,529","","","","96,082","","","","16,682","","","","79,400"],["Multifamily","","AZ","","","50,164","","","","49,957","","","","7,157","","","","42,800"],["Multifamily","","TX","","","39,279","","","","39,085","","","","10,885","","","","28,200"],["Multifamily","","TX","","","24,865","","","","24,804","","","","3,604","","","","21,200"],["Total Multifamily (1)","","329,921","","","","328,645","","","","38,945","","","","289,700"],["Office","","CA","","","111,542","","","","111,263","","","","20,463","","","","90,800"],["Office","","GA","","","68,492","","","","68,094","","","","27,894","","","","40,200"],["Total Office","","180,034","","","","179,357","","","","48,357","","","","131,000"],["Other","","NY","","","886","","","","884","","","","884","","","","-"],["Total Other","","886","","","","884","","","","884","","","","-"],["Total","","","","$","663,675","","","$","661,720","","","$","120,920","","","$","540,800"]]
[[/GREPCENT_TABLE]]

(1)
Represents loans which we anticipate assuming legal title and/or physical possession of the underlying collateral properties.

Fair values used to determine specific CECL reserves are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach. Estimates of fair values used to determine specific CECL reserves as of December 31, 2024 include assumptions of property specific cash flows over estimated holding periods, assumptions of property redevelopment costs, assumptions of leasing activities, discount rates ranging from 6.0% to 9.5%, and market and terminal capitalization rates ranging from 5.0% to 8.25%. These assumptions are based upon the nature of the properties, recent sales and lease comparables, recent and projected property cash flows, and anticipated real estate and capital market conditions.

63

The following table presents our loan commitment originations, loan commitment realizations, and the amount of principal charge-offs recognized for each origination vintage year as of December 31, 2024 by year of origination ($ in thousands):

[[GREPCENT_TABLE]]
[["","","","","","Total by Origination Year as of December 31, 2024"],["","","Total","","","2024(2)","","","2023","","","2022","","","2021","","","2020","","","2019","","","2018","","","2017 and Prior"],["Loan Commitment Originations (1)","","$","18,123,884","","","$","104,455","","","$","101,059","","","$","3,463,564","","","$","2,959,122","","","$","401,743","","","$","4,056,115","","","$","4,079,201","","","$","2,958,625"],["Loan Commitment Realizations","","","10,649,279","","","","-","","","","-","","","","701,542","","","","1,361,811","","","","189,183","","","","2,293,592","","","","3,144,526","","","","2,958,625"],["Principal Charge-offs (3)","","","236,365","","","","-","","","","315","","","","46,484","","","","8,251","","","","-","","","","112,592","","","","66,935","","","","1,788"]]
[[/GREPCENT_TABLE]]

(1)
Loan commitment upsizes and protective advances subsequent to origination are reflected as increases in loan commitment in the year that the loan was originated.

(2)
Reflects a loan receivable acquired in connection with a full loan repayment.

(3)
Excludes loss in connection with the reclassification of our real estate owned hotel portfolio to held-for-sale.

Portfolio Financing

Our financing arrangements include repurchase arrangements, a term participation facility, asset-specific financings, debt related to real estate owned and secured term loan borrowings.

The following table summarizes our loans portfolio financing ($ in thousands):

[[GREPCENT_TABLE]]
[["","","December 31, 2024"],["","","Capacity","","","Borrowings Outstanding","","","Weighted Average Spread (1)"],["Repurchase agreements and term participation facility","","$","5,454,083","","","$","3,667,923","","","+ 2.75%"],["Notes payable","","","273,330","","","","238,938","","","+ 3.57%"],["Secured term loan","","","717,825","","","","717,825","","","+ 4.50%"],["Debt related to real estate owned","","","275,000","","","","275,000","","","+ 2.94%"],["Total / weighted average","","$","6,720,238","","","$","4,899,686","","","+ 3.05%"]]
[[/GREPCENT_TABLE]]

(1)
Weighted average spread over the applicable benchmark rate is based on unpaid principal balance. SOFR as of December 31, 2024 was 4.33%.

See Note 6 to our consolidated financial statements for additional details.

Repurchase Agreements and Term Participation Facility

We finance certain of our loans using repurchase agreements and a term participation facility. As of December 31, 2024, aggregate borrowings outstanding under our repurchase agreements and term participation facility totaled $3.7 billion, with a weighted average spread of SOFR plus 2.75% per annum based on unpaid principal balance. As of December 31, 2024, the loans receivable securing the outstanding borrowings under these facilities had a weighted average term to initial maturity and fully extended maturity of 0.6 years and 1.6 years, respectively, assuming all conditions to extend are met.

Each repurchase agreement contains “margin maintenance” provisions, which are designed to allow the counterparty to require the delivery of cash or other assets to de-lever financings on assets that are determined to have experienced a diminution in value. Since inception through December 31, 2024, we have not received any margin calls under any of our repurchase agreements.

Loan Participations Sold

We may finance certain of our loans via the sale of a participation in such loans, and we present the loan participations sold as a liability on our consolidated balance sheet when such arrangements do not qualify as sales under GAAP. In instances where we have multiple loan participations with the same lender, the financings are generally not cross-collateralized. Each of our loan participations sold is generally term-matched to its underlying loan. As of December 31, 2024, we had no loan participations sold.

Notes Payable

We finance certain of our loans via secured financings that are term-matched to the underlying loan, some of which are partially recourse to us. We refer to such financings as notes payable and they are secured by the related loans receivable. As of December 31, 2024, three of our loans were financed with notes payable.

64

Secured Term Loan

We have a secured term loan which we originally entered into on August 9, 2019. Our secured term loan is presented net of any original issue discount and transaction expenses which are deferred and recognized as interest expense over the life of the loan using the effective interest method. The secured term loan matures on August 9, 2026 and as of December 31, 2024 has an unpaid principal balance of $717.8 million and a carrying value of $709.8 million.

Debt Related to Real Estate Owned

On February 8, 2021 we assumed a $300.0 million securitized senior mortgage in connection with a foreclosure of a hotel portfolio. On June 1, 2021, the terms of the securitized senior mortgage were modified to include an extension of the maturity date to February 9, 2024 and a principal repayment of $10.0 million. On February 7, 2024, we modified our debt related to real estate owned to provide for, among other things, an extension of the contractual maturity date to November 9, 2024, a $10.0 million principal paydown, and the designation of a portion of the loan becoming partial recourse to us. Concurrent with this modification, we purchased an interest rate cap with a notional amount of $280.0 million and a strike rate of 5.00% through the then extended contractual maturity date. We subsequently further extended the contractual maturity date to February 9, 2025 and concurrently purchased an interest rate cap with a notional amount of $275.0 million and a strike rate through the further extended contractual maturity date. As of December 31, 2024, our debt related to real estate owned has an unpaid principal balance of $275.0 million, a carrying value of $274.6 million and a stated rate of SOFR plus 2.94%. See Derivatives below for further detail of our interest rate cap. Upon maturity of our debt related to real estate owned, we entered into a forbearance agreement with our lender which expires on May 9, 2025.

Derivatives

On June 2, 2021 and in connection with a modification our debt related to real estate owned, we acquired an interest rate cap with a notional amount of $290.0 million, a strike rate of 3.00%, and a maturity date of February 15, 2024. Such interest rate cap effectively limited the maximum interest rate of our debt related to real estate owned to 5.83% through its then maturity. On February 7, 2024 and in connection with the modification of our debt related to real estate owned, we acquired an interest rate cap with a notional amount of $280.0 million, a strike rate of 5.00%, and a maturity date of November 15, 2024. Upon further extension of our debt related to real estate owned, we acquired an interest rate cap with a notional amount of $275.0 million, a strike rate of 5.00%, and a maturity date of February 9, 2025. The interest rate cap in place at December 31, 2024 effectively limits the maximum interest rate of our debt related to real estate owned to 7.94% through its maturity.

Changes in the fair value of our interest rate cap are recorded as an unrealized gain or loss on interest rate cap on our consolidated statements of operations and the fair value is recorded in other assets on our consolidated balance sheets. Proceeds received from our counterparty related to the interest rate cap are recorded as proceeds from interest rate cap on our consolidated statements of operations. As of December 31, 2024, the fair value of our interest rate cap was de minimis, and as of December 31, 2023, the fair value of our interest rate cap was $0.9 million. During the years ended December 31, 2024, 2023, and 2022, we recognized $1.3 million, $6.1 million, and $0.5 million, respectively, of proceeds from interest rate cap.

Short-Term Funding Facility

On June 29, 2022, we entered into a full recourse revolving credit facility with $150.0 million in capacity, which generally provided interim financing for eligible loans for up to 180 days at an initial advance rate of up to 75%. As of December 31, 2023, we had no outstanding balance on the facility. On September 25, 2024, we terminated this facility, at which point we had no outstanding balance.

Financial Covenants

Our financing agreements generally contain certain financial covenants. For example, our ratio of earnings before interest, taxes, depreciation, and amortization to interest charges (“Interest Coverage Ratio”), as defined in our repurchase agreements, and term participation facility shall not be less than 1.1 to 1.0, whereas our ratio of earnings before interest, taxes, depreciation, and amortization to interest charges as defined in our secured term loan shall not be less than 1.5 to 1.0. Further, (i) our tangible net worth, as defined in the agreements, shall not be less than $1.86 billion as of each measurement date; (ii) cash liquidity shall not be less than the greater of (x) $50 million or (y) 5% of our recourse indebtedness (which includes our secured term loan); and (iii) our indebtedness shall not exceed 77.8% of our total assets. As of December 31, 2024, we are in compliance with all covenants under our financing agreements. The requirements set forth in (i) through (iii) above are based upon the most restrictive financial covenants in place as of the reporting date. Commencing with the quarter ended December 31, 2025, our Interest Coverage Ratio shall not be less than 1.3 to 1.0. Further, we have modified our covenants to provide that for the quarters ended March 31, 2025 and June 30, 2025, our cash liquidity shall not be less than the greater of (x) $20 million or (y) 3% of our recourse indebtedness (which includes our secured term loan).

Future compliance with our financial covenants is dependent upon the results of our operating activities, our financial condition, and the overall market conditions in which we and our borrowers operate. The impact of macroeconomic conditions on the commercial

65

real estate and capital markets, including high benchmark interest rates compared to recent historical standards, may make it more difficult for us to satisfy these covenants in the future. Non-compliance with financial covenants may result in our lenders exercising their rights and remedies as provided for in the respective agreements. As market conditions evolve, we may continue to work with our counterparties on modifying financial covenants as needed; however, there is no assurance that our counterparties will agree to such modifications.

Non-Consolidated Senior Interests Sold and Non-Consolidated Senior Interests Held by Third Parties

In certain instances, we use structural leverage through the non-recourse syndication of a match-term senior loan interest to a third party which qualifies for sale accounting under GAAP, or through the acquisition of a subordinate loan for which a non-recourse senior interest is retained by a third party. In such instances, the senior loan is not included on our consolidated balance sheet.

The following table summarizes our non-consolidated senior interests and related retained subordinate interests, excluding for loans classified as held-for-sale, as of December 31, 2024 ($ in thousands):

[[GREPCENT_TABLE]]
[["","","Loan Count","","Loan Commitment","","","Unpaid Principal Balance","","","Carrying Value","","","Weighted Average Spread (1)","","Term to Initial Maturity (in years)","","","Term to Fully Extended Maturity (in years) (2)"],["Fixed rate non-consolidated senior loans","","1","","$","830,000","","","$","830,000","","","N/A","","","3.47%","","","2.0","","","","2.0"],["Retained fixed rate subordinate loans","","1","","$","125,000","","","$","125,000","","","$","124,878","","","8.50%","","","2.0","","","","2.0"]]
[[/GREPCENT_TABLE]]

(1)
Weighted average is based on unpaid principal balance.

(2)
Term to fully extended maturity is determined based on the maximum maturity of each of the corresponding loans, assuming all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date.

Floating and Fixed Rate Portfolio

Our business model seeks to minimize our exposure to changing interest rates by originating floating rate loans and financing them with floating rate liabilities. Further, we seek to match the benchmark index in the floating rate loans we originate with the benchmark index used in the related floating rate financings. Generally, we use SOFR as the benchmark index in both our floating rate loans and floating rate financings. As of December 31, 2024, 97.9% of our loans receivable held-for-investment based on unpaid principal balance were floating rate and indexed to SOFR. All of our encumbered floating rate loans were financed with floating rate liabilities indexed to SOFR, which resulted in approximately $1.3 billion of net floating rate exposure.

The following table details our net floating rate exposure as of December 31, 2024 ($ in thousands):

[[GREPCENT_TABLE]]
[["","","Net Floating Rate Exposure(1)"],["Floating rate assets","","$","6,072,753"],["Floating rate liabilities","","","(4,813,785",")"],["Net floating rate exposure","","$","1,258,968"]]
[[/GREPCENT_TABLE]]

(1)
SOFR as of December 31, 2024 was 4.33%. Net floating rate exposure includes $522.7 million related to loans on non-accrual status. Excludes two loans receivable classified as held-for-sale as of December 31, 2024 with an associated financing of $85.9 million.

As of December 31, 2024, we have an interest rate cap on our debt related to real estate owned with a notional amount of $275.0 million, a strike rate of 5.00%, and a maturity date of February 9, 2025. The interest rate cap effectively limits the maximum interest rate of our debt related to real estate owned to 7.94% through its maturity. We have not employed other interest rate derivatives (interest rate swaps, caps, collars or floors) to hedge our asset or liability portfolio, but we may do so in the future.

66

Results of Operations – Years Ended December 31, 2024 and 2023:

Operating Results

The following table sets forth information regarding our consolidated results of operations for the years ended December 31, 2024 and 2023 ($ in thousands, except per share data):

[[GREPCENT_TABLE]]
[["","","Year Ended"],["","","December 31, 2024","","","December 31, 2023","","","$ Change"],["Revenue"],["Interest and related income","","$","601,409","","","$","697,874","","","$","(96,465",")"],["Less: interest and related expense","","","440,344","","","","470,512","","","","(30,168",")"],["Net interest income","","","161,065","","","","227,362","","","","(66,297",")"],["Revenue from real estate owned","","","87,350","","","","79,190","","","","8,160"],["Total net revenue","","","248,415","","","","306,552","","","","(58,137",")"],["Expenses"],["Management fees - affiliate","","","36,230","","","","38,153","","","","(1,923",")"],["Incentive fees - affiliate","","","-","","","","1,558","","","","(1,558",")"],["General and administrative expenses","","","15,707","","","","16,605","","","","(898",")"],["Stock-based compensation expense","","","18,101","","","","16,599","","","","1,502"],["Real estate owned:"],["Operating expenses","","","57,835","","","","49,502","","","","8,333"],["Interest expense","","","26,612","","","","23,630","","","","2,982"],["Depreciation and amortization","","","10,489","","","","9,287","","","","1,202"],["Total expenses","","","164,974","","","","155,334","","","","9,640"],["Gain on sale of loan","","","-","","","","575","","","","(575",")"],["Proceeds from interest rate cap","","","1,297","","","","6,101","","","","(4,804",")"],["Unrealized loss on interest rate cap","","","(1,406",")","","","(5,157",")","","","3,751"],["Gain on foreclosure of real estate owned","","","-","","","","4,162","","","","(4,162",")"],["(Loss) income from equity method investment","","","(154",")","","","594","","","","(748",")"],["(Loss) gain on extinguishment of debt","","","(4,135",")","","","2,217","","","","(6,352",")"],["Loss on real estate owned held-for-sale","","","(80,461",")","","","-","","","","(80,461",")"],["Provision for current expected credit loss reserve","","","(212,620",")","","","(153,683",")","","","(58,937",")"],["Valuation adjustment for loans receivable held-for-sale","","","(7,227",")","","","-","","","","(7,227",")"],["Net (loss) income","","$","(221,265",")","","$","6,027","","","$","(227,292",")"],["Net (loss) income per share of common stock:"],["Basic and diluted","","$","(1.60",")","","$","0.02","","","$","(1.62",")"]]
[[/GREPCENT_TABLE]]

Comparison of the Years Ended December 31, 2024 and 2023

Net Revenue

Total net revenue decreased $58.1 million during the year ended December 31, 2024, compared to the year ended December 31, 2023. The decrease is primarily due to a decrease in net interest income of $66.3 million, which was driven by a decrease in interest income of $96.5 million, as a result of a reduction in the size of our loan portfolio and an increase in the portion of loans on non-accrual status during the year ended December 31, 2024 as compared to the year ended December 31, 2023, partially offset by a decrease in interest expense of $30.2 million primarily as a result of lower average borrowing levels. The decrease in total net revenue was partially offset by an increase in revenue from real estate owned of $8.2 million due to revenue generated from the mixed-use property we acquired legal title to on June 30, 2023 being included for the full year and higher overall average occupancy, RevPAR, and ADR levels at our hotel portfolio compared to the year ended December 31, 2023.

Expenses

Expenses are primarily comprised of base management fees payable to our Manager, incentive fees payable to our Manager, general and administrative expenses, stock-based compensation expense, operating expenses from real estate owned, interest expense from debt related to real estate owned, and depreciation and amortization on real estate owned. Expenses increased by $9.6 million during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to:

(i)
an increase in operating expenses from real estate owned of $8.3 million during the comparative period, due to an increase in professional fees incurred primarily as a result of the modification of our debt related to real estate owned, an increase in variable operating expenses in connection with higher occupancy levels at our hotel portfolio, and expenses incurred at the mixed-use property we acquired legal title to on June 30, 2023 being included for the full year;

67

(ii)
an increase in interest expense on debt related to real estate owned of $3.0 million primarily as a result of increased deferred financing costs recognized from fees incurred upon the modification of our debt related to real estate owned over the comparative period;

(iii)
an increase in stock-based compensation of $1.5 million during the comparative period, due to restricted stock units granted during the year ended December 31, 2024, net of restricted stock grant forfeitures;

(iv)
an increase in depreciation and amortization from real estate owned of $1.2 million during the comparative period, primarily due to a full year of depreciation and amortization recognized at the mixed-use property we acquired legal title to on June 30, 2023;

(v)
offset by a decrease in management fees of $1.9 million as a result of lower stockholders’ equity over the comparative period;

(vi)
further offset by a decrease in incentive fees of $1.6 million as a result of core earnings over the trailing four quarters being in excess of a 7% hurdle as of March 31, 2023 but below the hurdle on a trailing four quarters basis in all subsequent periods;

(vii)
further offset by a decrease in general and administrative expenses of $0.9 million primarily as a result of decreases in

non-recurring charges and certain corporate overhead items incurred.

Gain on Sale of Loan

During the year ended December 31, 2023, we realized a gain on the sale of a loan of $0.6 million. During the year ended December 31, 2024, losses on loan sales were recognized through our provision for current expected credit loss reserve.

Proceeds from Interest Rate Cap

Proceeds from interest rate cap decreased $4.8 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023, due to the interest rate caps in-place during the year ended December 31, 2024 having a higher strike rate than the interest rate cap in place during the year ended December 31, 2023.

Unrealized Loss on Interest Rate Cap

During the year ended December 31, 2024, we recognized a $1.4 million unrealized loss on interest rate cap, compared to a $5.2 million unrealized loss on interest rate cap during the year ended December 31, 2023. In both cases, the unrealized loss was driven by a reduction in the remaining duration of the interest rate cap; however, the interest rate cap held prior to its February 15, 2024 maturity had a strike rate of 3.0%, which resulted in a higher value and therefore a greater decline in value compared to the current interest rate cap that has a strike rate of 5.0%. The fair value of the interest rate cap increases as interest rates increase, decreases as the interest rate cap approaches maturity, and further fluctuates following shifts in the forward curve.

Gain on Foreclosure of Real Estate Owned

During the year ended December 31, 2023, we recorded an out-of-period adjustment of $4.2 million, representing an over accrual of accounts payable assumed upon foreclosure of our hotel portfolio in 2021 and, accordingly, we recorded an adjustment on our consolidated statement of operations during the year ended December 31, 2023 to correct the prior period understatement of the gain on foreclosure. During the year ended December 31, 2024, there was no such adjustment.

Loss (Income) from Equity Method Investment

During the year ended December 31, 2024, we recognized loss from equity method investment of $0.2 million compared to income of $0.6 million recognized during the year ended December 31, 2023 as a result of a decline in income earned by our investee, driven primarily by the loan held by the investee being placed on non-accrual status effective April 1, 2023.

(Loss) Gain on Extinguishment of Debt

During the year ended December 31, 2024, we recognized a loss on extinguishment of debt of $4.1 million, inclusive of a $1.6 million spread maintenance payment and $2.7 million of unamortized deferred financing costs, resulting from the repayment of financing balances prior to maturity and following a refinancing or a sale of the associated loan, partially offset by the $0.2 million reversal of previously recognized financing costs that were ultimately not owed upon the payoff of a loan participation. During the year ended December 31, 2023, we recognized a gain on extinguishment of debt of $2.2 million as a result of the retirement of $22.0 million of principal of our secured term loan for a price of $19.3 million.

Loss on Real Estate Owned Held-for-Sale

As of December 31, 2024, we determined that our hotel portfolio real estate owned asset has met the held-for-sale criteria and concurrently recognized a $80.5 million loss based upon anticipated sales price, less estimated costs to sell. During the year ended December 31, 2023, there were no such losses.

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Provision for Current Expected Credit Loss Reserve

During the year ended December 31, 2024, we recorded a provision for current expected credit losses of $212.6 million, which consisted of a $65.4 million increase in our general CECL reserve and a $147.3 million increase in our specific CECL reserve prior to principal and accrued interest receivable charge-offs. The increase in general CECL reserves was primarily attributable to changes in the historical loss rate of the analogous dataset, changes in risk ratings and non-accrual status, changes to the expected remaining duration within our loan portfolio, and consideration of a contingent discounted loan payoff, partially offset by the reduction in the size of our loan portfolio. During the year ended December 31, 2023, we recorded a provision for current expected credit losses of $153.7 million, which consisted of a $6.0 million reversal of our general CECL reserve and a $159.6 million increase in our specific CECL reserve prior to a principal charge-off. This reversal of general CECL reserves was primarily attributable to the seasoning of our loan portfolio and a reduction in the size of our loan portfolio, partially offset by deteriorating macroeconomic conditions.

Valuation Adjustment on Loans Receivable Held-for-Sale

During the year ended December 31, 2024, we recognized a valuation adjustment of $7.2 million for loans receivable held-for-sale as a result of additional protective advances made and a reduction in anticipated proceeds from the sale of such loan. During the year ended December 31, 2023, there was no such valuation adjustment.

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Year Ended December 31, 2023 and 2022” in our Form 10-K for the year ended December 31, 2023, filed with the SEC on February 20, 2024, which is accessible on the SEC’s website at www.sec.gov, for a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022.

Liquidity and Capital Resources

Capitalization

We have capitalized our business to date primarily through the issuance of shares of our common stock and borrowings under our secured financings and our secured term loan. As of December 31, 2024, we had 139,362,657 shares of our common stock outstanding, representing $2.0 billion of equity, and also had $4.9 billion of outstanding borrowings under our secured financings, our secured term loan, and our debt related to real estate owned. As of December 31, 2024, our secured financings consisted of five repurchase agreements with capacity of $4.9 billion and a combined outstanding balance of $3.2 billion, a term participation facility with a capacity of $555.7 million and an outstanding balance of $477.6 million, and three asset-specific financings with capacity of $273.3 million and an outstanding balance of $238.9 million. As of December 31, 2024, our secured term loan had an outstanding balance of $717.8 million and our debt related to real estate owned had an outstanding balance of $275.0 million.

Net Debt-to-Equity Ratio and Total Leverage Ratio

Net Debt-to-Equity Ratio and Total Leverage Ratio are non-GAAP measures that we use to evaluate our financial leverage, which in the case of our Total Leverage Ratio, makes certain adjustments that we believe provide a more conservative measure of our financial condition.

Net Debt-to-Equity Ratio is calculated as the ratio of asset-specific debt (repurchase agreements, term participation facility, loan participations sold, net, notes payable, net, and debt related to real estate owned, net) and secured term loan, less cash and cash equivalents to total equity.

Total Leverage Ratio is similar to Net Debt-to-Equity Ratio; however, it includes non-consolidated senior interests sold and non-consolidated senior interests held by third parties. Non-consolidated senior interests sold and non-consolidated senior interests held by third parties, as applicable, are secured by the same collateral as our loan and are structurally senior in repayment priority relative to our loan. We believe the inclusion of non-consolidated senior interests sold and non-consolidated senior interests held by third parties provides a meaningful measure of our financial leverage.

69

The following table presents our Net Debt-to-Equity Ratios and Total Leverage Ratios as of December 31, 2024 and 2023 ($ in thousands):

[[GREPCENT_TABLE]]
[["","","December 31, 2024","","","December 31, 2023"],["Asset-specific debt","","$","4,179,372","","","$","4,964,874"],["Secured term loan, net","","","709,777","","","","712,576"],["Total debt","","","4,889,149","","","","5,677,450"],["Less: cash and cash equivalents","","","(99,075",")","","","(187,301",")"],["Net Debt","","","4,790,074","","","","5,490,149"],["Total Equity","","$","2,008,086","","","$","2,299,900"],["Net Debt-to-Equity Ratio","","2.4x","","","2.4x"],["Non-consolidated senior loans","","$","830,000","","","$","887,300"],["Total Leverage","","$","5,620,074","","","$","6,377,449"],["Total Leverage Ratio","","2.8x","","","2.8x"]]
[[/GREPCENT_TABLE]]

Sources of Liquidity

Our primary sources of liquidity include cash and cash equivalents, interest income from our loans, proceeds from loan repayments, available borrowings under our repurchase agreements based on existing collateral, identified borrowing capacity related to our asset-specific financings based on existing collateral, proceeds from the issuance of incremental secured term loan or other corporate debt issuances, and proceeds from the issuance of our common stock. As circumstances warrant, we and our subsidiaries may also issue common equity, preferred equity and/or debt, incur other debt, including term loans, or explore sales of certain of our loans receivable or real estate owned assets from time to time, dependent upon market conditions and available pricing.

Although we generally intend to hold our loans to maturity, sales of loans receivable, which may result in realized losses, discounted loan payoffs, and/or sales of real estate owned assets may occur in order to redeploy capital to more accretive opportunities, meet operating objectives, adapt to market conditions, and/or manage liquidity needs. Furthermore, we cannot predict the timing or impact of future asset sales or loan repayments, and, since many of our loans are financed, a portion, or in some cases all, of the net proceeds from the sales or repayments of our loans are expected to be used to de-lever our secured financings.

The following table sets forth, as of December 31, 2024 and 2023, our sources of available liquidity ($ in thousands):

[[GREPCENT_TABLE]]
[["","","December 31, 2024","","","December 31, 2023"],["Cash and cash equivalents","","$","99,075","","","$","187,301"],["Loan principal payments held by servicer(1)","","","-","","","","2,200"],["Approved and undrawn credit capacity(2)","","","2,599","","","","48,055"],["Total sources of liquidity","","$","101,674","","","$","237,556"]]
[[/GREPCENT_TABLE]]

(1)
Represents loan principal payments held in lockboxes or by our third-party loan servicer as of the balance sheet date which were remitted to us during the subsequent remittance cycle, net of the related financing balance if applicable.

(2)
Amounts based on existing collateral.

Under the terms of our loan agreements with certain of our borrowers, we require and have oversight of borrower funds held in reserve accounts with third-party loan servicers for our benefit which provide additional collateral support for our loans. Upon the occurrence of certain events or the borrower meeting prescribed conditions in accordance with the terms of the loan agreement, these funds may be transferred by the third-party loan servicers to the borrower subject to our approval. In instances where the borrower is in default under the terms of the loan agreement, we have the ability to direct the third-party loan servicers to release such reserve funds to us to satisfy past due amounts. As of December 31, 2024 and 2023, reserve balances for loans on non-accrual status or delinquent, loans in maturity default, and/or loans risk rated 5 totaled $22.2 million and $16.3 million, respectively, and such amounts are not reflected on our consolidated balance sheets.

70

The following table presents a summary of our unencumbered loans receivable as of December 31, 2024 ($ in thousands):

[[GREPCENT_TABLE]]
[["Loan Type","","Loan Commitment","","","Unpaid Principal Balance (1)","","","Carrying Value (2)","","","Property Type","","Construction","","Location","","Risk Rating"],["Senior","","$","115,250","","","$","78,500","","","$","78,500","","","Hospitality","","Y","","NY","","4"],["Senior","","","97,000","","","","95,214","","","","94,827","","","Office","","-","","CA","","4"],["Senior","","","81,810","","","","68,492","","","","40,200","","","Office","","-","","GA","","5"],["Senior","","","1,651","","","","1,651","","","","1,651","","","Other","","-","","Other","","5"],["Subordinate","","","886","","","","886","","","","-","","","Other","","-","","NY","","5"],["Total, held-for-investment","","296,597","","","","244,743","","","","215,178"],["Senior","","","247,260","","","","211,412","","","","176,078","","","For Sale Condo","","-","","CA"],["Total, held-for-sale","","247,260","","","","211,412","","","","176,078"],["Total","$","543,857","","","$","456,155","","","$","391,256"]]
[[/GREPCENT_TABLE]]

(1)
For loans receivable held-for-sale, reflects amounts prior to principal charge-offs.

(2)
For loans receivable held-for-investment, reflects amounts net of specific CECL reserves of $28.8 million.

The ability to finance or sell certain of these unencumbered assets is subject to one or more counterparties’ willingness to finance or purchase such loans.

As of December 31, 2024, our mixed-use real estate owned asset with a carrying value of $143.9 million (including related net lease intangible assets) was pledged as collateral to our term participation facility.

To facilitate future offerings of equity, debt and other securities, we have in place an effective shelf registration statement (the “Shelf”) with the SEC. The amount of securities to be issued pursuant to this Shelf was not specified when it was filed and there is no specific dollar limit on the amount of securities we may issue. The securities covered by this Shelf include: (i) common stock, (ii) preferred stock, (iii) debt securities, (iv) depositary shares, (v) warrants, (vi) purchase contracts, and (vii) units. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering material, at the time of any offering.

On May 10, 2024, we entered into an equity distribution agreement with certain sales agents, pursuant to which we may sell, from time to time, up to an aggregate sales price of $150.0 million of our common stock pursuant to a continuous offering program (the “ATM Agreement”) under our Shelf. Sales of our common stock made pursuant to the ATM Agreement may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended. The timing and amount of actual sales will depend on a variety of factors, including market conditions, the trading price of our common stock, our capital needs, and our determination of the appropriate sources of funding to meet such needs. During the year ended December 31, 2024, we did not issue any shares of our common stock pursuant to the ATM Agreement, and we incurred $0.5 million of professional and legal fees to establish the program which are included in general and administrative expense on our consolidated statement of operations. As of December 31, 2024, the ATM Agreement has not been utilized, and $150.0 million remained available for issuance of our common stock pursuant to the ATM Agreement.

71

Liquidity Needs

In addition to our loan origination and acquisition activity, our primary liquidity needs include future fundings to our borrowers on our unfunded loan commitments, interest and principal payments on outstanding borrowings under our financings, operating expenses, accrued management fees, and dividend payments to our stockholders necessary to satisfy REIT dividend requirements. Additionally, certain financial covenants in our financing agreements require us to maintain minimum levels of liquidity. We currently maintain, and seek to maintain, cash and liquidity to comply with minimum liquidity requirements under our financings. We also seek to maintain excess cash and liquidity to meet our primary liquidity needs, which include principal repayment obligations under certain of our secured financings, and seek to meet such liquidity needs through our primary sources of liquidity as noted above.

As of December 31, 2024, we had approximately $606.0 million of indebtedness scheduled to mature in the coming year with no further maturity extension options available on the respective financings. Of such amount, $85.9 million was repaid in January 2025 in connection with the sale of a loan and $275.0 million relates to our real estate owned hotel portfolio. During the years ended December 31, 2024 and 2023, we made deleveraging payments to certain of our financing counterparties in the amounts of $286.1 million and $357.0 million, respectively, and expect to continue to do so as agreed with our lenders or on an as-needed basis. Our ability to make any future deleveraging payments or required principal repayments will depend upon the results of our operating activities, our financial condition, and the overall market conditions in which we operate, among other factors. In addition, as market conditions evolve, we expect to continue to work with our secured financing counterparties as needed to seek adjustments to the timing and amount of any required principal repayment obligations; however, there is no assurance that such counterparties will agree to modify the required amount or timing of such repayments.

As of December 31, 2024, we had aggregate unfunded loan commitments of $498.3 million which is comprised of funding for capital expenditures and construction, leasing costs, and carry costs. The timing of these fundings will vary depending on the progress of capital projects, leasing, and cash flows at the properties securing our loans and equity contributions from our borrowers, if required. Therefore, the exact timing and amounts of such future loan fundings are uncertain and will depend on the current and future performance of the underlying collateral assets, but are expected to occur over the remaining loan term. In certain circumstances, conditions to funding may not be met by our borrowers and portions of our unfunded loan commitments may never become eligible to be drawn on.

We may from time to time use capital to retire, redeem, or repurchase our equity or debt securities, term loans or other debt instruments through open market purchases, privately negotiated transactions or otherwise. The execution of such retirements, redemptions or repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and/or other factors deemed relevant.

Contractual Obligations and Commitments

Our contractual obligations and commitments as of December 31, 2024 were as follows ($ in thousands):

[[GREPCENT_TABLE]]
[["","","Payment Timing"],["","","Total Obligations","","","Less than 1 year","","","1 to 3 years","","","3 to 5 years","","","More than 5 years"],["Unfunded loan commitments (1)","","$","498,306","","","$","251,113","","","$","113,086","","","$","134,107","","","$","-"],["Unfunded loan commitments for non-accrual, maturity default, risk rated 5 and/or delinquent loans (1)","","","(109,616",")","","","(3,102",")","","","-","","","","(106,514",")","","","-"],["Secured financings, term loan agreement, and debt related to real estate owned - principal (2) (3)","","","4,899,686","","","","1,910,193","","","","2,699,884","","","","289,609","","","","-"],["Secured financings, term loan agreement, and debt related to real estate owned - interest (2) (3)","","","548,071","","","","299,766","","","","234,727","","","","13,578","","","","-"],["Total","","$","5,836,447","","","$","2,457,970","","","$","3,047,697","","","$","330,780","","","$","-"]]
[[/GREPCENT_TABLE]]

(1)
The estimated allocation of our unfunded loan commitments for loans receivable held-for-investment is based on the earlier of our expected funding date and the commitment expiration date. As of December 31, 2024, we have $298.9 million of in-place financings to fund our remaining commitments, excluding $2.6 million of approved and undrawn credit capacity based on existing collateral.

(2)
The allocation of our secured financings and secured term loan is based on the earlier of the fully extended maturity date (assuming conditions to extend are met) of each individual corresponding loan receivable or the maximum maturity date under the respective financing agreement, and assumes seven loans that are in maturity default that represent collateral for aggregate borrowings outstanding of $354.1 million that are in maturity default have a contractual obligation to pay in less than one year.

(3)
Amounts include the related future interest payment obligations, which are estimated by assuming the amounts outstanding under our secured financing agreements and SOFR in effect as of December 31, 2024 will remain constant into the future. Actual amounts borrowed and rates will vary over time. Our floating rate loans and related liabilities are indexed to SOFR. Totals exclude non-consolidated senior interests.

In certain circumstances, conditions to funding may not be met by our borrowers and portions of our unfunded loan commitments may not become eligible to be drawn on. Of the $498.3 million of unfunded loan commitments for our loans receivable held-for-investment as of December 31, 2024, the following table details the portion of unfunded loan commitments and in-place financings to fund our remaining commitments for loans receivable held-for-investment whereby conditions to funding are not currently being met,

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including loans on non-accrual status, in maturity default, risk rated 5, and/or which are delinquent in accordance with our revenue recognition policy ($ in thousands):

[[GREPCENT_TABLE]]
[["","","Unfunded Loan Commitments","","","In-place Financing Commitments","","","Net Loan Commitment"],["Gross total commitment","","$","498,306","","","$","298,916","","","$","199,390"],["Non-accrual, maturity default, risk rated 5 and/or delinquent loans","","","(109,616",")","","","(68,179",")","","","(41,437",")"],["Net loan commitment","","$","388,690","","","$","230,737","","","$","157,953"]]
[[/GREPCENT_TABLE]]

Subject to borrowers meeting future funding conditions provided for in our loan agreements, we expect to fund our $158.0 million of net loan commitments over the remaining maximum term of the related loans, which have a weighted average future funding period of 1.9 years.

We incur to our Manager, payable in cash, a base management fee and incentive fee (to the extent earned), which are generally paid quarterly, in arrears. The tables above do not include the amounts payable to our Manager under the Management Agreement which are reflected as management fee payable - affiliate on our consolidated balance sheet.

Loan Maturities

The following table summarizes the future scheduled repayments of principal for loans receivable held-for-investment as of December 31, 2024 ($ in thousands):

[[GREPCENT_TABLE]]
[["","","Initial Maturity","","","Fully Extended Maturity"],["Year","","Unpaid Principal Balance(1)","","","Loan Commitment(1)","","","Unpaid Principal Balance(1)","","","Loan Commitment(1)"],["2025","","$","3,892,684","","","$","4,119,534","","","$","1,455,465","","","$","1,472,326"],["2026","","","1,584,116","","","","1,841,720","","","","1,580,800","","","","1,801,386"],["2027","","","184,825","","","","198,677","","","","2,117,402","","","","2,375,874"],["2028","","","-","","","","-","","","","283,345","","","","283,345"],["2029","","","-","","","","-","","","","224,613","","","","227,000"],["Thereafter","","","-","","","","-","","","","-","","","","-"],["Total","","$","5,661,625","","","$","6,159,931","","","$","5,661,625","","","$","6,159,931"]]
[[/GREPCENT_TABLE]]

(1)
Excludes $538.7 million in unpaid principal balance and loan commitments of loans receivable held-for-investment that are in maturity default with no available extension options.

Cash Flows

The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash for the years ended December 31, 2024 and 2023 ($ in thousands):

[[GREPCENT_TABLE]]
[["","","December 31, 2024","","","December 31, 2023"],["Net cash flows provided by operating activities","","$","84,517","","","$","111,140"],["Net cash flows provided by (used in) investing activities","","","779,911","","","","(39,337",")"],["Net cash flows used in financing activities","","","(945,817",")","","","(205,073",")"],["Net decrease in cash and cash equivalents and restricted cash","","$","(81,389",")","","$","(133,270",")"]]
[[/GREPCENT_TABLE]]

We experienced a net decrease in cash, cash equivalents, and restricted cash of $81.4 million during the year ended December 31, 2024, compared to a net decrease of $133.3 million during the year ended December 31, 2023.

During the year ended December 31, 2024, we received $647.2 million from loan repayments, received $636.8 million of loan sale proceeds, and received $1.4 billion of proceeds from borrowings under our financing arrangements, net of payments for deferred financing costs. Additionally, we acquired a loan receivable of $100.0 million in connection with a full loan repayment, made $404.7 million of advances on existing loans, made repayments on financings arrangements of $2.3 billion (inclusive of $286.1 million of deleveraging repayments), and made dividend payments of $120.7 million.

Income Taxes

We have elected and believe we have qualified to be taxed as a REIT for U.S. federal income tax purposes, commencing with our initial taxable year ended December 31, 2015. We generally must distribute annually at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain, to maintain our REIT status. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay (or are treated as paying) out to our stockholders in a calendar year is less than a minimum amount specified under

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U.S. federal tax laws. Our real estate owned hotel portfolio is held in a TRS. Our TRS is not consolidated for U.S. federal income tax purposes and is taxed separately as a corporation. For financial reporting purposes, a provision or benefit for current and deferred taxes is established for the portion of earnings or expense recognized by us with respect to our TRS.

Our qualification as a REIT also depends on our ability to meet various other requirements imposed by the Internal Revenue Code, which relate to organizational structure, diversity of stock ownership and certain restrictions with regard to the nature of our assets and the sources of our income. Even if we qualify as a REIT, we may be subject to certain U.S. federal income and excise taxes and state and local taxes on our income and assets. If we fail to maintain our qualification as a REIT for any taxable year, we may be subject to material penalties as well as federal, state and local income tax on our REIT taxable income at regular corporate rates and we would not be able to qualify as a REIT for the subsequent four full taxable years. As of December 31, 2024, we were in compliance with all REIT requirements.

The following table details the income tax treatment for our common stock dividends:

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 31, 2024","","","December 31, 2023","","","December 31, 2022"],["Ordinary dividends","","50.6","%","","","30.9","%","","","100.0","%"],["Capital gain dividends","","0.0","%","","","0.0","%","","","0.0","%"],["Nondividend distributions","","49.4","%","","","69.1","%","","","0.0","%"],["Total","","100.0","%","","","100.0","%","","","100.0","%"]]
[[/GREPCENT_TABLE]]

See Note 13 - Income Taxes to our consolidated financial statements for additional information about our income taxes.

Off-Balance Sheet Arrangements

As of December 31, 2024, we had no off-balance sheet arrangements aside from those discussed in Note 3 - Loan Portfolio, Note 4 - Equity Method Investment, and Note 14 - Commitments and Contingencies.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires our Manager to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. We believe that all of the decisions and estimates are reasonable, based upon the information available to us. We believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements. The assumptions within our accounting policies may vary from quarter to quarter as our portfolio changes and market and economic conditions evolve.

See Note 2 to our consolidated financial statements for a description of our significant accounting policies.

Current Expected Credit Losses

The CECL reserve required under ASC 326, Financial Instruments – Credit Losses, reflects our current estimate of potential credit losses related to our loan portfolio. Changes to the CECL reserve are recognized through a provision for or reversal of current expected credit loss reserve on our consolidated statements of operations. ASC 326 specifies the reserve should be based on relevant information about past events, including historical loss experience, current loan portfolio, market conditions and reasonable and supportable macroeconomic forecasts for the duration of each loan.

For our loan portfolio, we perform a quantitative assessment of the impact of CECL primarily using the Weighted Average Remaining Maturity, or WARM, method. The application of the WARM method to estimate a general CECL reserve requires judgment, including the appropriate historical loan loss reference data, the expected timing and amount of future loan fundings and repayments, the current credit quality of our portfolio, and our expectations of performance and market conditions over the relevant time period.

The WARM method requires us to reference historical loan loss data from a comparable data set and apply such loss rate to each of our loans over their expected remaining duration, taking into consideration expected economic conditions over the forecasted timeframe. Our general CECL reserve reflects our forecast of the current and future macroeconomic conditions that may impact the performance of the commercial real estate assets securing our loans and the borrower’s ultimate ability to repay. These estimates include unemployment rates, price indices for commercial properties, and market liquidity, all of which may influence the likelihood and magnitude of potential credit losses for our loans during their expected remaining duration. Additionally, further adjustments may be

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made based upon loan positions senior to ours, the risk rating of a loan, whether a loan is a construction loan and whether the loan’s initial maturity is near-term, or the economic conditions specific to the property type of a loan’s underlying collateral.

To estimate an annual historical loss rate, we obtained historical loss rate data for loans most comparable to our loan portfolio from a commercial mortgage-backed securities database licensed by a third party, Trepp, LLC, which contains historical loss data from January 1, 1999 through December 31, 2024. We believe this CMBS data is the most relevant, available, and comparable dataset to our portfolio.

When evaluating the current and future macroeconomic environment, we consider the aforementioned macroeconomic factors. Historical data for each metric is compared to historical commercial real estate credit losses in order to determine the relationship between the two variables. We use projections of each macroeconomic factor, obtained from a third party, to approximate the impact the macroeconomic outlook may have on our loss rate. Selections of these economic forecasts require judgment about future events that, while based on the information available to us as of the balance sheet date, are ultimately subjective and uncertain, and the actual economic conditions could vary significantly from the estimates we made. Following a reasonable and supportable forecast period, we use a straight-line method of reverting to the historical loss rate. Additionally, we assess the obligation to extend credit through our unfunded loan commitments through their expected remaining duration, adjusted for projected fundings from interest reserves, if applicable, which is considered in the estimate of the general CECL reserve. For both the funded and unfunded portions of our loans, we consider our internal risk rating of each loan as the primary credit quality indicator underlying our assessment.

We evaluate the credit quality of each of our loans receivable on an individual basis and assign a risk rating at least quarterly. We have developed a loan grading system for all of our outstanding loans receivable that are collateralized directly or indirectly by real estate. Grading criteria include, but are not limited to, as-is or as-stabilized debt yield, term of loan, property type, property or collateral location, loan type, structure, collateral cash flow volatility and other more subjective variables that include, but are not limited to, as-is or as-stabilized collateral value, market conditions, industry conditions, borrower/sponsor financial stability, and borrower/sponsor exit plan. While evaluating the credit quality of each loan within our portfolio, we assess these quantitative and qualitative factors as a whole and with no pre-prescribed weight on their impact to our determination of a loan’s risk rating. However, based upon the facts and circumstances for each loan and the overall market conditions, we may consider certain previously mentioned factors more or less relevant than others. We utilize the grading system to determine each loan’s risk of loss and to provide a determination as to whether an individual loan is impaired and whether a specific CECL reserve is necessary.

In certain circumstances, we may determine that a loan is no longer suited for the WARM method due to (i) its unique risk characteristics, (ii) we have deemed the borrower/sponsor to be experiencing financial difficulty and the repayment of the loan’s principal is collateral-dependent and/or (iii) we anticipate assuming legal title/and or physical possession of the underlying collateral property and the fair value of the collateral asset is determined to be below our carrying value. We may instead elect to employ different methods to estimate credit losses that also conform to ASC 326 and related guidance.

For such loans, we would separately measure the specific reserve for each loan by using the estimated fair value of the loan’s collateral. If the estimated fair value of the collateral is less than the carrying value of the loan, an asset-specific reserve is created as a component of our overall current expected credit loss reserve. Specific reserves are equal to the excess of a loan’s carrying value to the estimated fair value of the collateral. If recovery of our investment is expected from the sale of the collateral and such costs will reduce amounts recovered by us, specific reserves are equal to the excess of a loan’s carrying value to the estimated fair value of the collateral less estimated costs to sell.

Fair values used to determine specific reserves are calculated using a discounted cash flow model, a sales comparison approach, or a market capitalization approach. Estimates of fair values used to determine specific CECL reserves as of December 31, 2024 include assumptions of property specific cash flows over estimated holding periods, assumptions of property redevelopment costs, assumptions of leasing activities, discount rates ranging from 6.0% to 9.5%, and market and terminal capitalization rates ranging from 5.0% to 8.25%. These assumptions are based upon the nature of the properties, recent sales and lease comparables, recent and projected property cash flows, and anticipated real estate and capital market conditions.

Significant judgment is required in determining impairment and in estimating the resulting credit loss reserve, and actual losses, if any, could materially differ from those estimates.

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Real Estate Owned

We may assume legal title and/or physical possession of the underlying collateral property of a defaulted loan through foreclosure, a deed-in-lieu of foreclosure, or an assignment-in-lieu of foreclosure.

We account for acquisitions of real estate, including foreclosures, deed-in-lieu of foreclosures, or assignment-in-lieu of foreclosures, in accordance with ASC 805, Business Combinations, which first requires that we determine if the real estate investment is the acquisition of an asset or a business combination. Under this model, we identify and determine the estimated fair value of any assets acquired and liabilities assumed. This generally results in the allocation of the purchase price to the assets acquired and liabilities assumed based on the relative estimated fair values of each respective asset and liability. Debt related to real estate owned is initially recorded at its estimated fair value at the time of foreclosure, deed-in-lieu of foreclosure, or assignment-in-lieu of foreclosure.

Assets acquired and liabilities assumed generally include land, building, building improvements, tenant improvements, furniture, fixtures and equipment, mortgages payable, and identified intangible assets and liabilities, which generally consists of above or below market lease values, in-place lease values, and other lease-related values. In estimating fair values for allocating the purchase price of our real estate owned, we may utilize various methods, including a market approach, which considers recent sales of similar properties, adjusted for differences in location and state of the physical asset, or a replacement cost approach, which considers the composition of physical assets acquired, adjusted based on industry standard information and the remaining useful life of the acquired property. In estimating fair values of intangible assets acquired or liabilities assumed, we consider the estimated cost of leasing our real estate owned assuming the property was vacant, the value of the current lease agreements relative to market-rate leases, and the estimation of total lease-up time including lost rents.

Real estate assets held-for-investment are evaluated for indicators of impairment on a quarterly basis. Factors that we may consider in our impairment analysis include, among others: (1) significant underperformance relative to historical or anticipated operating results; (2) significant negative industry or economic trends; (3) costs necessary to extend the life or improve the real estate asset; (4) significant increase in competition; and (5) ability to hold and dispose of the real estate asset in the ordinary course of business. A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate asset over the estimated remaining holding period is less than the carrying amount of such real estate asset. Cash flows include operating cash flows and anticipated capital proceeds generated by the sale of the real estate asset. If the sum of such estimated undiscounted cash flows is less than the carrying amount of the real estate asset, an impairment charge is recorded equal to the excess of the carrying value of the real estate asset over its estimated fair value.

When determining the estimated fair value of a real estate asset, we make certain assumptions including consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon our estimate of a capitalization rate and discount rate.

There were no impairments of our real estate owned held-for-investment assets through December 31, 2024.

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