We consolidate all entities that we control through either majority ownership or voting rights. In addition, we consolidate all VIEs of which we are considered the primary beneficiary. VIEs are defined as entities in which equity investors (i) do not have an interest with the characteristics of a controlling financial interest and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is known as its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE.
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Notes to Consolidated Financial Statements (continued) (Unaudited)
In 2017, we entered into a joint venture, or our Multifamily Joint Venture, with Walker & Dunlop Inc. to originate, hold, and finance multifamily bridge loans. Pursuant to the terms of the agreements governing the joint venture, Walker & Dunlop contributed 15% of the venture’s equity capital and we contributed 85%. We consolidate the Multifamily Joint Venture as we have a controlling financial interest. The non-controlling interests included on our consolidated balance sheets represent the equity interests in our Multifamily Joint Venture that are owned by Walker & Dunlop. A portion of our Multifamily Joint Venture’s consolidated equity and results of operations are allocated to these non-controlling interests based on Walker & Dunlop’s pro rata ownership of our Multifamily Joint Venture.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ materially from those estimates.
Revenue Recognition
Interest income from our loans receivable portfolio is recognized over the life of each loan using the effective interest method and is recorded on the accrual basis. Recognition of fees, premiums, and discounts associated with these investments is deferred and recorded over the term of the loan as an adjustment to yield. Income accrual is generally suspended for loans at the earlier of the date at which payments become 90 days past due or when, in our opinion, recovery of income and principal becomes doubtful. Interest received is then recorded as income or as a reduction in the amortized cost basis, based on the specific facts and circumstances, until accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed. In addition, for loans we originate, the related origination expenses are deferred and recognized as a reduction to interest income, however expenses related to loans we acquire are included in general and administrative expenses as incurred.
Cash and Cash Equivalents
Cash and cash equivalents represent cash held in banks and liquid investments with original maturities of three months or less. We may have bank balances in excess of federally insured amounts; however, we deposit our cash and cash equivalents with high credit-quality institutions to minimize credit risk exposure. We have not experienced, and do not expect, any losses on our cash or cash equivalents. As of both September 30, 2024 and December 31, 2023, we had no restricted cash on our consolidated balance sheets.
Through our subsidiaries, we have oversight of certain servicing accounts held with third-party servicers, or Servicing Accounts, which relate to borrower escrows and other cash balances aggregating $611.9 million and $640.6 million as of September 30, 2024 and December 31, 2023, respectively. This cash is maintained in segregated bank accounts, and these amounts are not included in the assets and liabilities presented in our consolidated balance sheets. Cash in these Servicing Accounts will be transferred by the respective third-party servicer to the borrower or us under the terms of the applicable loan agreement upon occurrence of certain future events. We do not generate any revenue or incur any expenses as a result of these Servicing Accounts.
Loans Receivable
We originate and purchase commercial real estate debt and related instruments generally to be held as long-term investments at amortized cost.
Current Expected Credit Losses Reserve
The current expected credit loss, or CECL, reserve required under the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 326 “Financial Instruments – Credit Losses,” or ASC 326, reflects our current estimate of potential credit losses related to our loans and notes receivable included in our consolidated balance sheets. Changes to the CECL reserves are recognized through net income on our consolidated statements of operations. While ASC 326 does not require any particular method for determining the CECL reserves, it does specify the reserves should be based on relevant information about past events, including historical loss experience, current portfolio and market conditions, and reasonable and supportable forecasts for the duration of each respective loan. In addition, other than a few narrow exceptions, ASC 326 requires that all financial instruments subject to the CECL model have some amount of
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Notes to Consolidated Financial Statements (continued) (Unaudited)
loss reserve to reflect the principle underlying the CECL model that all loans and similar assets have some inherent risk of loss, regardless of credit quality, subordinate capital, or other mitigating factors.
We estimate our CECL reserves primarily using the Weighted-Average Remaining Maturity, or WARM method, which has been identified as an acceptable loss-rate method for estimating CECL reserves in FASB Staff Q&A Topic 326, No. 1. The WARM method requires us to reference historic loan loss data across a comparable data set and apply such loss rate to each of our loans over their expected remaining term, taking into consideration expected economic conditions over the relevant timeframe. We apply the WARM method for the majority of our loan portfolio, which consists of loans that share similar risk characteristics. In certain instances, for loans with unique risk characteristics, we may instead use a probability-weighted model that considers the likelihood of default and expected loss given default for each such individual loan.
Application of the WARM method to estimate CECL reserves requires judgment, including (i) the appropriate historical loan loss reference data, (ii) the expected timing and amount of future loan fundings and repayments, and (iii) the current credit quality of our portfolio and our expectations of performance and market conditions over the relevant time period. To estimate the historic loan losses relevant to our portfolio, we have augmented our historical loan performance, with market loan loss data licensed from Trepp LLC. This database includes commercial mortgage-backed securities, or CMBS, issued since January 1, 1999 through August 31, 2024. Within this database, we focused our historical loss reference calculations on the most relevant subset of available CMBS data, which we determined based on loan metrics that are most comparable to our loan portfolio including asset type, geography, and origination loan-to-value, or LTV. We believe this CMBS data, which includes month-over-month loan and property performance, is the most relevant, available, and comparable dataset to our portfolio.
Our loans typically include commitments to fund incremental proceeds to our borrowers over the life of the loan. These future funding commitments are also subject to the CECL model. The CECL reserve related to future loan fundings is recorded as a component of other liabilities on our consolidated balance sheets. This CECL reserve is estimated using the same process outlined above for our outstanding loan balances, and changes in this component of the CECL reserve will similarly impact our consolidated net income. 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.
The CECL reserves are measured on a collective basis wherever similar risk characteristics exist within a pool of similar assets. We have identified the following pools and measure the reserve for credit losses using the following methods:
•U.S. Loans: WARM method that incorporates a subset of historical loss data, expected weighted-average remaining maturity of our loan pool, and an economic view.
•Non-U.S. Loans: WARM method that incorporates a subset of historical loss data, expected weighted-average remaining maturity of our loan pool, and an economic view.
•Unique Loans: a probability of default and loss given default model, assessed on an individual basis.
•Impaired Loans: impairment is indicated when it is deemed probable that we will not be able to collect all amounts due to us pursuant to the contractual terms of the loan. Determining that a loan is impaired requires significant judgment from management and is based on several factors including (i) the underlying collateral performance, (ii) discussions with the borrower, (iii) borrower events of default, and (iv) other facts that impact the borrower’s ability to pay the contractual amounts due under the terms of the loan. If a loan is determined to be impaired, we record the impairment as a component of our CECL reserves by applying the practical expedient for collateral dependent loans. The CECL reserves are assessed on an individual basis for these loans by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, discount rates, leasing, creditworthiness of major tenants, occupancy rates, availability and cost of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed relevant by us. Actual losses, if any, could ultimately differ materially from these estimates. We only expect to charge-off the impairment losses in our consolidated financial statements prepared in accordance with GAAP if and when such amounts are deemed non-recoverable. This is generally at the time a loan is repaid or foreclosed. However, non-recoverability may also be concluded if, in our determination, it is nearly certain that all amounts due will not be collected.
Contractual Term and Unfunded Loan Commitments
Expected credit losses are estimated over the contractual term of each loan, adjusted for expected repayments. As part of our quarterly review of our loan portfolio, we assess the expected repayment date of each loan, which is used to determine the contractual term for purposes of computing our CECL reserves.
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Notes to Consolidated Financial Statements (continued) (Unaudited)
Additionally, the expected credit losses over the contractual period of our loans are subject to the obligation to extend credit through our unfunded loan commitments. The CECL reserve for unfunded loan commitments is adjusted quarterly, as we consider the expected timing of future funding obligations over the estimated life of the loan. The considerations in estimating our CECL reserve for unfunded loan commitments are similar to those used for the related outstanding loans receivable.
Credit Quality Indicator
Our risk rating is our primary credit quality indicator in assessing our current expected credit loss reserve. We perform a quarterly risk review of our portfolio of loans, and assign each loan a risk rating based on a variety of factors, including, without limitation, origination LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. Based on a 5-point scale, our loans are rated “l” through “5,” from less risk to greater risk, relative to our loan portfolio in the aggregate, which ratings are defined as follows:
1 -Very Low Risk
2 -Low Risk
3 -Medium Risk
4 -High Risk/Potential for Loss: A loan that has a risk of realizing a principal loss.
5 -Impaired/Loss Likely: A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss.
Estimation of Economic Conditions
In addition to the WARM method computations and probability-weighted models described above, our CECL reserves are also adjusted to reflect our estimation of the current and future economic conditions that impact the performance of the commercial real estate assets securing our loans. These estimations include unemployment rates, interest rates, expectations of inflation and/or recession, and other macroeconomic factors impacting the likelihood and magnitude of potential credit losses for our loans during their anticipated term. In addition to the CMBS data we have licensed from Trepp LLC, we have also licensed certain macroeconomic financial forecasts to inform our view of the potential future impact that broader economic conditions may have on our loan portfolio’s performance. We generally also incorporate information from other sources, including information and opinions available to our Manager, to further inform these estimations. This process requires significant judgments about future events that, while based on the information available to us as of the balance sheet date, are ultimately indeterminate and the actual economic condition impacting our portfolio could vary significantly from the estimates we made as of September 30, 2024.
Real Estate Owned
We may assume legal title or physical possession of the collateral underlying a loan through a foreclosure or the execution of a deed-in-lieu of foreclosure. These real estate acquisitions are classified as real estate owned, or REO, on our consolidated balance sheet and are initially recognized at fair value on the acquisition date in accordance with the ASC Topic 805, “Business Combinations.”
Upon acquisition of REO, we assess the fair value of acquired tangible and intangible assets, which may include land, buildings, tenant improvements, “above-market” and “below-market” leases, acquired in-place leases, other identified intangible assets and assumed liabilities, as applicable, and allocate the fair value to the acquired assets and assumed liabilities. We assess and consider fair value based on estimated cash flow projections that utilize discount and/or capitalization rates that we deem appropriate, as well as other available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known and anticipated trends, and market and economic conditions. We capitalize acquisition-related costs associated with asset acquisitions.
Real estate assets held for investment, except for land, are depreciated using the straight-line method over the assets’ estimated useful lives of up to 40 years for buildings and 10 years for tenant improvements. Renovations and/or replacements that improve or extend the life of the asset are capitalized and depreciated over their estimated useful lives. Lease intangibles are amortized over the remaining term of applicable leases on a straight-line basis. The cost of ordinary repairs and maintenance are expensed as incurred.
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Notes to Consolidated Financial Statements (continued) (Unaudited)
Real estate assets held for investment are assessed for impairment on a quarterly basis. If the depreciated cost basis of the asset exceeds the undiscounted cash flows over the remaining holding period, the asset is considered for impairment. The impairment loss is recognized when the carrying value of the real estate assets exceed their fair value. The evaluation of anticipated future cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates, capital requirements and anticipated holding periods that could differ materially from actual results.
Real estate assets are classified as held for sale in the period when they meet the criteria under ASC Topic 360 “Property, Plant, and Equipment.” Once a real estate asset is classified as held for sale, depreciation is suspended and the asset is reported at the lower of its carrying value or fair value less cost to sell. If circumstances arise and we decide not to sell a real estate asset previously classified as held for sale, the real estate asset is reclassified as held for investment. Upon reclassification, the real estate asset is measured at the lower of (i) its carrying amount prior to classification as held for sale, adjusted for depreciation expense that would have been recognized had the real estate been classified as held for investment, and (ii) its estimated fair value at the time of reclassification.
As of September 30, 2024, we had three REO assets which were all classified as held for investment.
Derivative Financial Instruments
We classify all derivative financial instruments as either other assets or other liabilities on our consolidated balance sheets at fair value.
On the date we enter into a derivative contract, we designate each contract as (i) a hedge of a net investment in a foreign operation, or net investment hedge, (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability, or cash flow hedge, (iii) a hedge of a recognized asset or liability, or fair value hedge, or (iv) a derivative instrument not to be designated as a hedging derivative, or non-designated hedge. For all derivatives other than those designated as non-designated hedges, we formally document our hedge relationships and designation at the contract’s inception. This documentation includes the identification of the hedging instruments and the hedged items, its risk management objectives, strategy for undertaking the hedge transaction and our evaluation of the effectiveness of its hedged transaction.
On a quarterly basis, we also formally assess whether the derivative we designated in each hedging relationship is expected to be, and has been, highly effective in offsetting changes in the value or cash flows of the hedged items. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued and the changes in fair value of the instrument are included in net income prospectively. Our net investment hedges are assessed using a method based on changes in spot exchange rates. Gains and losses, representing hedge components excluded from the assessment of effectiveness, are recognized in interest income on our consolidated statements of operations over the contractual term of our net investment hedges on a systematic and rational basis, as documented at hedge inception in accordance with our accounting policy election. All other changes in the fair value of our derivative instruments that qualify as hedges are reported as a component of accumulated other comprehensive income (loss) on our consolidated financial statements. Deferred gains and losses are reclassified out of accumulated other comprehensive income (loss) and into net income in the same period or periods during which the hedged transaction affects earnings, and are presented in the same line item as the earnings effect of the hedged item. For cash flow hedges, this is typically when the periodic swap settlements are made, while for net investment hedges, this occurs when the hedged item is sold or substantially liquidated. To the extent a derivative does not qualify for hedge accounting and is deemed a non-designated hedge, the changes in its fair value are included in net income concurrently.
Proceeds or payments from periodic settlements of derivative instruments are classified on our consolidated statement of cash flows in the same section as the underlying hedged item.
Secured Debt and Asset-Specific Debt
We record investments financed with secured debt or asset-specific debt as separate assets and the related borrowings under any secured debt or asset-specific debt are recorded as separate liabilities on our consolidated balance sheets. Interest income earned on the investments and interest expense incurred on the secured debt or asset-specific debt are reported separately on our consolidated statements of operations.
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Notes to Consolidated Financial Statements (continued) (Unaudited)
Loan Participations Sold
In certain instances, we have executed a syndication of a non-recourse loan interest to a third-party. Depending on the particular structure of the syndication, the loan interest may remain on our GAAP balance sheet or, in other cases, the sale will be recognized and the loan interest will no longer be included in our consolidated financial statements. When these sales are not recognized under GAAP we reflect the transaction by recording a loan participation sold liability on our consolidated balance sheet, however this gross presentation does not impact stockholders’ equity or net income. When the sales are recognized, our balance sheet only includes our remaining loan interest, and excludes the interest in the loan that we sold.
Term Loans
We record our term loans as liabilities on our consolidated balance sheets. Where applicable, any issue discount or transaction expenses are deferred and amortized through the maturity date of the term loans as additional non-cash interest expense.
Senior Secured Notes
We record our senior secured notes as liabilities on our consolidated balance sheets. Where applicable, any issue discount or transaction expenses are deferred and amortized through the maturity date of the senior secured notes as additional non-cash interest expense.
Convertible Notes
Convertible note proceeds, unless issued with a substantial premium or an embedded conversion feature, are classified as debt. Additionally, shares issuable under our convertible notes are included in diluted earnings per share in our consolidated financial statements, if the effect is dilutive, using the if-converted method, regardless of settlement intent. Where applicable, any issue discount or transaction expenses are deferred and amortized through the maturity date of the convertible notes as additional non-cash interest expense.
Deferred Financing Costs
The deferred financing costs that are included as a reduction in the net book value of the related liability on our consolidated balance sheets include issuance and other costs related to our debt obligations. These costs are amortized as interest expense using the effective interest method over the life of the related obligations.
Underwriting Commissions and Offering Costs
Underwriting commissions and offering costs incurred in connection with common stock offerings are reflected as a reduction of additional paid-in capital. Costs incurred that are not directly associated with the completion of a common stock offering are expensed when incurred.
Fair Value of Financial Instruments
The “Fair Value Measurements and Disclosures” Topic of the FASB, or ASC 820, defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date.
ASC 820 also establishes a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring financial instruments. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument, and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination, as follows:
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Notes to Consolidated Financial Statements (continued) (Unaudited)
•Level 1: Generally includes only unadjusted quoted prices that are available in active markets for identical financial instruments as of the reporting date.
•Level 2: Pricing inputs include quoted prices in active markets for similar instruments, quoted prices in less active or inactive markets for identical or similar instruments where multiple price quotes can be obtained, and other observable inputs, such as interest rates, yield curves, credit risks, and default rates.
•Level 3: Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. These inputs require significant judgment or estimation by management of third-parties when determining fair value and generally represent anything that does not meet the criteria of Levels 1 and 2.
Certain of our other assets are reported at fair value, as of quarter-end, either (i) on a recurring basis or (ii) on a nonrecurring basis, as a result of impairment or other events. Our assets that are recorded at fair value are discussed further in Note 18. We generally value our assets recorded at fair value by either (i) discounting expected cash flows based on assumptions regarding the collection of principal and interest and estimated market rates, or (ii) obtaining assessments from third-parties. For collateral-dependent loans that are identified as impaired, we measure impairment by comparing our estimation of the fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, discount rates, leasing, creditworthiness of major tenants, occupancy rates, availability and cost of financing, exit plan, loan sponsorship, actions of other lenders, and other factors.
As of September 30, 2024, we had an aggregate $883.6 million asset-specific CECL reserve related to 20 of our loans receivable with an aggregate amortized cost basis of $3.2 billion, net of cost-recovery proceeds. The CECL reserve was recorded based on our estimation of the fair value of the loans' aggregate underlying collateral as of September 30, 2024. These loans receivable are therefore measured at fair value on a nonrecurring basis using significant unobservable inputs, and are classified as a Level 3 asset in the fair value hierarchy. We estimated the fair value of the collateral underlying the loans receivable by considering a variety of inputs including property performance, market data, and comparable sales, as applicable. The significant unobservable inputs used include the exit capitalization rate assumption used to forecast the future sale price of the underlying real estate collateral, which ranged from 6.00% to 8.55%, and the unlevered discount rate, which ranged from 7.28% to 11.00%.
On March 19, 2024, we acquired legal title to an office property located in Mountain View, CA through a deed-in-lieu of foreclosure. At the time of acquisition, we determined the fair value of the real estate asset to be $60.2 million based on a variety of inputs including, but not limited to, estimated cash flow projections, leasing assumptions, required capital expenditures, market data, and comparable sales. This REO asset was measured at fair value on a nonrecurring basis using significant unobservable inputs and is classified as a Level 3 asset in the fair value hierarchy. The significant unobservable inputs used include the exit capitalization rate assumption used to forecast the future sale price of the asset of 7.00% and a discount rate of 9.50%.
On July 2, 2024, we acquired legal title to a multifamily property located in San Antonio, TX through a foreclosure transaction. At the time of acquisition, we determined the fair value of the real estate asset to be $33.6 million based on a variety of inputs including, but not limited to, estimated cash flow projections, leasing assumptions, required capital expenditures, market data, and comparable sales. This REO asset was measured at fair value on a nonrecurring basis using significant unobservable inputs and is classified as a Level 3 asset in the fair value hierarchy. The significant unobservable inputs used include the exit capitalization rate assumption used to forecast the future sale price of the asset of 6.00% and a discount rate of 7.50%.
On September 16, 2024, we consolidated an office property located in Burlington, MA as a result of a loan modification that provided us an equity interest in the property. Refer to Note 19 for additional information. At the time of modification, we determined the fair value of the real estate asset to be $64.6 million based on a variety of inputs including, but not limited to, estimated cash flow projections, leasing assumptions, required capital expenditures, market data, and comparable sales. This REO asset was measured at fair value on a nonrecurring basis using significant unobservable inputs and is classified as a Level 3 asset in the fair value hierarchy. The significant unobservable inputs used include the exit capitalization rate assumption used to forecast the future sale price of the asset of 8.00% and a discount rate of 10.00%.
We are also required by GAAP to disclose fair value information about financial instruments, which are not otherwise reported at fair value in our consolidated balance sheet, to the extent it is practicable to estimate a fair value for those instruments. These disclosure requirements exclude certain financial instruments and all non-financial instruments.
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Notes to Consolidated Financial Statements (continued) (Unaudited)
The following methods and assumptions are used to estimate the fair value of each class of financial instruments, for which it is practicable to estimate that value:
•Cash and cash equivalents: The carrying amount of cash and cash equivalents approximates fair value.
•Loans receivable, net: The fair values of these loans were estimated using a discounted cash flow methodology, taking into consideration various factors including capitalization rates, discount rates, leasing, credit worthiness of major tenants, occupancy rates, availability and cost of financing, exit plan, loan sponsorship, actions of other lenders, and other factors.
•Derivative financial instruments: The fair value of our foreign currency and interest rate contracts was estimated using advice from a third-party derivative specialist, based on contractual cash flows and observable inputs comprising foreign currency rates and credit spreads.
•Secured debt, net: The fair value of these instruments was estimated based on the rate at which a similar credit facility would currently be priced.
•Securitized debt obligations, net: The fair value of these instruments was estimated by utilizing third-party pricing service providers. In determining the value of a particular investment, pricing service providers may use broker-dealer quotations, reported trades, or valuation estimates from their internal pricing models to determine the reported price.
•Asset-specific debt, net: The fair value of these instruments was estimated based on the rate at which a similar agreement would currently be priced.
•Loan participations sold, net: The fair value of these instruments was estimated based on the value of the related loan receivable asset.
•Term loans, net: The fair value of these instruments was estimated by utilizing third-party pricing service providers. In determining the value of a particular investment, pricing service providers may use broker-dealer quotations, reported trades, or valuation estimates from their internal pricing models to determine the reported price.
•Senior secured notes, net: The fair value of these instruments was estimated by utilizing third-party pricing service providers. In determining the value of a particular investment, pricing service providers may use broker-dealer quotations, reported trades, or valuation estimates from their internal pricing models to determine the reported price.
•Convertible notes, net: Each series of the convertible notes is actively traded and their fair values were obtained using quoted market prices.
Income Taxes
Our financial results generally do not reflect provisions for current or deferred income taxes on our REIT taxable income. We believe that we operate in a manner that will continue to allow us to be taxed as a REIT and, as a result, we generally do not expect to pay substantial corporate level taxes other than those payable by our taxable REIT subsidiaries. If we were to fail to meet these requirements, we may be subject to federal, state, and local income tax on current and past income, and penalties. Refer to Note 16 for additional information.
Stock-Based Compensation
Our stock-based compensation consists of awards issued to our Manager, certain individuals employed by an affiliate of our Manager, and certain members of our board of directors that vest over the life of the awards, as well as deferred stock units issued to certain members of our board of directors. Stock-based compensation expense is recognized for these awards in net income on a variable basis over the applicable vesting period of the awards, based on the value of our class A common stock. Refer to Note 17 for additional information.
restricted shares have the same rights as our other shares of class A common stock, including participating in any gains or losses.
Diluted earnings per share, or Diluted EPS, is determined using the if-converted method, and is based on (i) the net earnings, adjusted for interest expense incurred on our convertible notes during the relevant period, net of incentive fees, allocable to our class A common stock, including restricted class A common stock and deferred stock units, divided by (ii) the weighted-average number of shares of our class A common stock, including restricted class A common stock, deferred stock units, and shares of class A common stock issuable under our convertible notes. Refer to Note 14 for additional discussion of earnings per share.
Foreign Currency
In the normal course of business, we enter into transactions not denominated in United States, or U.S., dollars. Foreign exchange gains and losses arising on such transactions are recorded as a gain or loss in our consolidated statements of operations. In addition, we consolidate entities that have a non-U.S. dollar functional currency. Non-U.S. dollar denominated assets and liabilities are translated to U.S. dollars at the exchange rate prevailing at the reporting date and income, expenses, gains, and losses are translated at the average exchange rate over the applicable period. Cumulative translation adjustments arising from the translation of non-U.S. dollar denominated subsidiaries are recorded in other comprehensive income (loss).
Recent Accounting Pronouncements
In December 2023, the FASB issued Accounting Standards Update, or ASU, 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” or ASU 2023-09. ASU 2023-09 requires additional disaggregated disclosures on an entity’s effective tax rate reconciliation and additional details on income taxes paid. ASU 2023-09 is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2024 and early adoption is permitted. We have not early adopted ASU 2023-09 and do not expect the adoption of ASU 2023-09 to have a material impact on our consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” or ASU 2023-07. ASU 2023-07 enhances the disclosures required for reportable segments on an annual and interim basis. ASU 2023-07 is effective on a retrospective basis for annual periods beginning after December 15, 2023, for interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted. We have not early adopted ASU 2023-07 and do not expect the adoption of ASU 2023-07 to have a material impact on our consolidated financial statements.
From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of September 30, 2024, we were not involved in any material legal proceedings.
(1)Total loan exposure reflects our aggregate exposure to each loan investment. As of September 30, 2024, total loan exposure, includes (i) loans with an outstanding principal balance of $21.8 billion that are included in our consolidated financial statements, (ii) $770.2 million of non-consolidated senior interests in loans we have sold, which are not included in our consolidated financial statements, and excludes (iii) $103.5 million of junior loan interests that we have sold, but that remain included in our consolidated financial statements. See Note 2 to our consolidated financial statements for further discussion of loan participations sold.
(2)We use foreign currency forward contracts to protect the value or fix the amount of certain investments or cash flows in terms of the U.S. dollar. We earn forward points on our forward contracts that reflect the interest rate differentials between the applicable base rate for our foreign currency investments and prevailing U.S. interest rates. These forward contracts effectively convert the foreign currency rate exposure for such investments to USD-equivalent interest rates.
(3)In addition to cash coupon, all-in yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees. Excludes loans accounted for under the cost-recovery and nonaccrual methods, if any.
(4)Includes an interest rate swap we entered into with a notional amount of $229.9 million that effectively converts certain of our fixed rate loan exposure to floating rate exposure.
(5)Includes floating rate loans indexed to STIBOR, BBSY, and SARON indices.
not realize the entire principal value of certain investments. As of September 30, 2024, we had an aggregate $883.6 million asset-specific CECL reserve related to 20 of our loans receivable, with an aggregate amortized cost basis of $3.2 billion, net of cost-recovery proceeds. This CECL reserve was recorded based on our estimation of the fair value of each of the loan's underlying collateral as of September 30, 2024.
As of September 30, 2024, all borrowers under performing loans were in compliance with the applicable contractual terms, including any required payment of interest. Refer to Note 2 to our consolidated financial statements for further discussion of our policies on revenue recognition and our CECL reserves.
Multifamily Joint Venture
As of September 30, 2024, our multifamily joint venture held $294.7 million of loans, which are included in the loan disclosures above, respectively. As of September 30, 2024, our Multifamily Joint Venture also held a $32.2 million REO asset. Refer to Note 2 to our consolidated financial statements for additional discussion of our multifamily joint venture.
Agency Multifamily Lending Partnership
In the second quarter of 2024, we entered an agreement with M&T Realty Capital Corporation, or MTRCC, a subsidiary of M&T Bank, that will allow our borrowers to access multifamily agency financing through MTRCC’s Fannie Mae DUS and Freddie Mac Optigo lending platforms. We will receive a portion of origination, servicing, and other fees paid under the programs for loans that we refer to MTRCC for origination. Similarly, we will share in losses with MTRCC and Fannie Mae on loans that we refer to MTRCC for origination under the Fannie Mae program. There were no loans originated under the MTRCC agreement during the three months ended September 30, 2024.
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Portfolio Financing
Our portfolio financing consists of secured debt, securitizations, and asset-specific debt. The following table details our portfolio financing ($ in thousands):
We have financed certain pools of our loans through collateralized loan obligations, or CLOs. The following table details our securitized debt obligations and the underlying collateral assets that are financed by our CLOs ($ in thousands):
September 30, 2024
Securitized Debt Obligations
Count
Principal
Balance
Book
Value(1)
Wtd. Avg.
Yield/Cost(2)(3)
Term(4)
2021 FL4 Collateralized Loan Obligation
Senior CLO Securities Outstanding
1
$
785,453
$
785,371
+ 1.40
%
May 2038
Underlying Collateral Assets
25
981,703
981,703
+ 3.26
%
January 2026
2020 FL3 Collateralized Loan Obligation
Senior CLO Securities Outstanding
1
659,495
659,494
+ 1.86
%
November 2037
Underlying Collateral Assets
14
850,745
850,745
+ 3.06
%
February 2026
2020 FL2 Collateralized Loan Obligation
Senior CLO Securities Outstanding
1
803,484
803,442
+ 1.38
%
February 2038
Underlying Collateral Assets
14
1,060,359
1,060,359
+ 2.82
%
April 2026
Total
Senior CLO Securities Outstanding(5)
3
$
2,248,432
$
2,248,307
+ 1.53
%
Underlying Collateral Assets
53
$
2,892,807
$
2,892,807
+ 3.03
%
(1)The book value of underlying collateral assets excludes any applicable CECL reserves.
(2)In addition to cash coupon, all-in yield includes the amortization of deferred origination and extension fees, loan origination costs, purchase discounts, and accrual of exit fees.
(3)The weighted-average all-in yield and cost are expressed as a spread over SOFR. All-in yield excludes loans accounted for under the cost-recovery and nonaccrual methods, if any.
(4)Underlying Collateral Assets term represents the weighted-average final maturity of such loans, assuming all extension options are exercised by the borrower. Repayments of securitized debt obligations are tied to timing of the related collateral loan asset repayments. The term of these obligations represents the rated final distribution date of the securitizations.
(5)During the three and nine months ended September 30, 2024, we recorded $40.6 million and $123.9 million, respectively, of interest expense related to our securitized debt obligations.
Refer to Note 7 and Note 19 to our consolidated financial statements for additional details of our securitized debt obligations.
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Asset-Specific Debt
The following table details our asset-specific debt ($ in thousands):
September 30, 2024
Asset-Specific Debt
Count
Principal
Balance
Book Value(1)
Wtd. Avg.
Yield/Cost(2)
Wtd. Avg.
Term(3)
Financing provided
2
$
1,201,237
$
1,197,056
+ 3.19
%
June 2026
Collateral assets
2
$
1,433,807
$
1,425,388
+ 4.06
%
June 2026
(1)The book value of underlying collateral assets excludes any applicable CECL reserves.
(2)The weighted-average all-in yield and cost are expressed as a spread over SOFR. These floating rate loans and related liabilities are currency and index-matched to the applicable benchmark rate relevant in each arrangement. In addition to cash coupon, yield/cost includes the amortization of deferred origination fees and financing costs.
(3)The weighted-average term is determined based on the maximum maturity of the corresponding loans, assuming all extension options are exercised by the borrower. Our non-recourse, asset-specific debt is term-matched in each case to the corresponding collateral loans.
Corporate Financing
The following table details our outstanding corporate financing ($ in thousands):
Corporate Financing Outstanding Principal Balance
September 30, 2024
December 31, 2023
Term loans
$
2,116,425
$
2,135,221
Senior secured notes
335,316
366,090
Convertible notes
266,157
300,000
Total corporate financing
$
2,717,898
$
2,801,311
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The following table details our outstanding senior term loan facilities, or Term Loans, Senior Secured Notes, and convertible senior notes, or Convertible Notes, as of September 30, 2024 ($ in thousands):
Corporate Financing
Face Value
Interest Rate(1)
All-in Cost(1)(2)
Maturity
Term Loans
B-1 Term Loan
$
901,418
+ 2.36
%
+ 2.65
%
April 23, 2026
B-3 Term Loan
407,773
+ 2.86
%
+ 3.54
%
April 23, 2026
B-4 Term Loan
807,234
+ 3.50
%
+ 4.11
%
May 9, 2029
Total term loans
$
2,116,425
Senior Secured Notes
Senior Secured Notes
$
335,316
3.75
%
4.02
%
January 15, 2027
Convertible Notes Issuance
Convertible Notes(3)
$
266,157
5.50
%
5.94
%
March 15, 2027
Total corporate financings
$
2,717,898
(1)The B-3 Term Loan and the B-4 Term Loan borrowings are subject to a floor of 0.50%. The Term Loans are indexed to one-month SOFR.
(2)Includes issue discounts, transaction expenses, and/or issuance costs, as applicable, that are amortized through interest expense over the life of each respective financing.
(3)The conversion price of the Convertible Notes is $36.27, which represents the price of class A common stock per share based on a conversion rate of 27.5702. The conversion rate represents the number of shares of class A common stock issuable per $1,000 principal amount of Convertible Notes. The cumulative dividend threshold has not been exceeded as of September 30, 2024.
During the nine months ended September 30, 2024, we repurchased an aggregate principal amount of $2.3 million of the B-1 Term Loan at a weighted-average price of 99%, an aggregate principal amount of $30.8 million of the Senior Secured Notes at a weighted-average price of 88%, and an aggregate principal amount of $33.8 million of the Convertible Notes at a weighted-average price of 93%. This resulted in a gain on extinguishment of debt of $25,000, $3.3 million, and $2.0 million, respectively, during the nine months ended September 30, 2024.
Refer to Note 2, Note 10, Note 11, and Note 12 to our consolidated financial statements for additional discussion of our Term Loans, Senior Secured Notes, and Convertible Notes.
Floating Rate Portfolio
Generally, our business model is such that rising interest rates will increase our net income, while declining interest rates will decrease net income. As of September 30, 2024, all of our loans by total loan exposure earned a floating rate of interest and were financed with liabilities that pay interest at floating rates, which resulted in an amount of net equity that is positively correlated to rising interest rates, subject to the impact of interest rate floors on certain of our floating rate loans.
Our liabilities are generally currency and index-matched to each collateral asset, resulting in a net exposure to movements in benchmark rates that varies by currency silo based on the relative proportion of floating rate assets and liabilities.
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The following table details our investment portfolio’s exposure to interest rates by currency as of September 30, 2024 (amounts in thousands):
USD
GBP
EUR
All Other(1)
Floating rate loans(2)(3)(4)(5)(6)
$
11,302,677
£
2,311,761
€
2,203,092
$
1,541,753
Floating rate portfolio financings(2)(5)(7)
(9,150,672)
(1,712,223)
(1,626,294)
(1,210,639)
Floating rate corporate financings(8)
(2,116,424)
—
—
—
Net floating rate exposure
$
35,581
£
599,538
€
576,798
$
331,114
Net floating rate exposure in USD(9)
$
35,581
$
801,883
$
642,265
$
331,114
(1)Includes Australian Dollar, Swedish Krona, and Swiss Franc currencies.
(2)Our floating rate loans and related liabilities are currency and index-matched to the applicable benchmark rate relevant in each arrangement.
(3)Includes an interest rate swap we entered into with a notional amount of $229.9 million that effectively converts certain of our fixed rate loan exposure to floating rate exposure.
(4)Excludes $3.3 billion of floating rate impaired loans.
(5)Excludes $770.2 million of non-consolidated senior interests and $103.5 million of loan participations sold, as of September 30, 2024. Our non-consolidated senior interests and loan participations sold are structurally non-recourse and term-matched to the corresponding loans, and have no impact on our net floating rate exposure.
(6)Our loan agreements generally require our borrowers to purchase interest rate caps, which mitigates our borrowers’ exposure to an increase in interest rates.
(7)Includes amounts outstanding under secured debt, securitizations, and asset-specific debt.
(8)Includes amounts outstanding under Term Loans.
(9)Represents the U.S. dollar equivalent as of September 30, 2024.
In addition to the risks related to fluctuations in cash flows and asset values associated with movements in interest rates, there is also the risk of non-performance on floating rate assets. In the case of a significant increase in interest rates, the cash flows of the collateral real estate assets may not be sufficient to pay debt service due under our loans, which may contribute to non-performance or, in severe cases, default. This risk is partially mitigated by our consideration of rising rate stress-testing during our underwriting process, which generally includes a requirement for our borrower to purchase an interest rate cap contract with an unaffiliated third party, provide an interest reserve deposit, and/or provide interest guarantees or other structural protections. As of September 30, 2024, 96% of our performing loans have interest rate caps, with a weighted-average strike price of 3.5%, or interest guarantees. During the nine months ended September 30, 2024, interest rate caps on $10.8 billion of performing loans, with a 3.4% weighted-average strike price, expired and 95% were replaced with new interest rate caps, with a weighted-average strike price of 3.4%, or interest guarantees.
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III. Our Results of Operations
Operating Results The following table sets forth information regarding our consolidated results of operations for the three months ended September 30, 2024 and June 30, 2024 ($ in thousands, except per share data):
Three Months Ended
Change
September 30, 2024
June 30, 2024
$
Income from loans and other investments
Interest and related income
$
430,092
$
466,152
$
(36,060)
Less: Interest and related expenses
321,744
339,380
(17,636)
Income from loans and other investments, net
108,348
126,772
(18,424)
Revenue from real estate owned
1,214
—
1,214
Gain on extinguishment of debt
2,389
—
2,389
Total net revenues
111,951
126,772
(14,821)
Other expenses
Management and incentive fees
18,605
18,726
(121)
General and administrative expenses
13,423
13,660
(237)
Expenses from real estate owned
2,684
963
1,721
Total other expenses
34,712
33,349
1,363
Increase in current expected credit loss reserve
(132,470)
(152,408)
19,938
Loss before income taxes
(55,231)
(58,985)
3,754
Income tax provision
613
1,217
(604)
Net loss
(55,844)
(60,202)
4,358
Net income attributable to non-controlling interests
(540)
(855)
315
Net loss attributable to Blackstone Mortgage Trust, Inc.
$
(56,384)
$
(61,057)
$
4,673
Net loss per share of common stock, basic and diluted
$
(0.32)
$
(0.35)
$
0.03
Weighted-average shares of common stock outstanding, basic and diluted
173,637,101
173,967,340
(330,239)
Dividends declared per share
$
0.47
$
0.62
$
(0.15)
Income from loans and other investments, net
Income from loans and other investments, net decreased $18.4 million during the three months ended September 30, 2024 compared to the three months ended June 30, 2024. The decrease was primarily due to a decrease in the weighted-average principal balance of our loan portfolio by $1.2 billion during the three months ended September 30, 2024, as well as a decline in interest income related to additional loans accounted for under the cost-recovery method during the three months ended September 30, 2024. This was offset by a decrease in the weighted-average principal balance of our outstanding financing arrangements by $1.1 billion for the three months ended September 30, 2024 compared to the three months ended June 30, 2024.
Revenue from real estate owned
Revenue from real estate owned increased by $1.2 million during the three months ended September 30, 2024 due to additional REO assets acquired during the quarter. There was no revenue from real estate owned during the three months ended June 30, 2024.
Gain on extinguishment of debt
Gain on extinguishment of debt increased by $2.4 million during the three months ended September 30, 2024. During the three months ended September 30, 2024, we recognized an aggregate gain on extinguishment of debt of $2.4 million
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related to the repurchase of an aggregate principal amount of $33.8 million, $4.6 million, and $2.3 million of our Convertible Notes, Senior Secured Notes, and B-1 Term Loan, respectively. There was no repurchase activity during the three months ended June 30, 2024.
Other expenses
Other expenses include management and incentive fees payable to our Manager, general and administrative expenses, and expenses from real estate owned. Other expenses increased by $1.4 million during the three months ended September 30, 2024 compared to the three months ended June 30, 2024 primarily due to an increase in expenses of real estate owned due to additional REO assets acquired during the quarter.
Changes in current expected credit loss reserve
During the three months ended September 30, 2024, we recorded a $132.5 million increase in our CECL reserves, as compared to a $152.4 million increase during the three months ended June 30, 2024. These incremental CECL reserves primarily reflect a $124.2 million increase in the specific reserves, primarily related to two loans impaired during the three months ended September 30, 2024, both of which were secured by office buildings. The office sector is generally facing reduced tenant and capital markets demand in recent years. These impairments are each determined individually as a result of changes in the specific credit quality factors for such loans. These factors included, among others, (i) the underlying collateral performance, (ii) discussions with the borrower, (iii) borrower events of default, and (iv) other facts that impact the borrower’s ability to pay the contractual amounts due under the terms of the loan. In addition, our general CECL reserves decreased primarily as a result of loan repayments reducing the size of our portfolio during the three months ended September 30, 2024.
We may be required to record further increases to our CECL reserves in the future, depending on the performance of our portfolio and broader market conditions, and there may be volatility in the level of our CECL reserves. In particular, our loans secured by office buildings have experienced higher levels of CECL reserves and may continue to do so if market conditions relevant to office buildings do not improve. Any such reserve increases are difficult to predict, but are expected to be primarily the result of incremental loan impairments resulting from changes in the specific credit quality factors of such loans and to be concentrated in our loans receivable with a risk rating of “4” as of September 30, 2024.
Income tax provision
The income tax provision decreased by $604,000 during the three months ended September 30, 2024 compared to the three months ended June 30, 2024 primarily due to a decrease in the income tax provisions related to our taxable REIT subsidiaries.
Dividends per share
During the three months ended September 30, 2024, we declared dividends of $0.47 per share, or $81.3 million in aggregate. During the three months ended June 30, 2024, we declared dividends of $0.62 per share, or $107.6 million in aggregate.
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The following table sets forth information regarding our consolidated results of operations for the nine months ended September 30, 2024 and 2023 ($ in thousands, except per share data):
Nine Months Ended September 30,
Change
2024
2023
$
Income from loans and other investments
Interest and related income
$
1,382,367
$
1,532,618
$
(150,251)
Less: Interest and related expenses
1,004,854
1,015,718
(10,864)
Income from loans and other investments, net
377,513
516,900
(139,387)
Revenue from real estate owned
1,214
—
1,214
Gain on extinguishment of debt
5,352
4,541
811
Total net revenues
384,079
521,441
(137,362)
Other expenses
Management and incentive fees
56,258
92,747
(36,489)
General and administrative expenses
40,811
37,888
2,923
Expenses from real estate owned
3,647
—
3,647
Total other expenses
100,716
130,635
(29,919)
Increase in current expected credit loss reserve
(519,747)
(134,530)
(385,217)
(Loss) income before income taxes
(236,384)
256,276
(492,660)
Income tax provision
2,832
4,663
(1,831)
Net (loss) income
(239,216)
251,613
(490,829)
Net income attributable to non-controlling interests
(2,063)
(2,681)
618
Net (loss) income attributable to Blackstone Mortgage Trust, Inc.
$
(241,279)
$
248,932
$
(490,211)
Net (loss) income per share of common stock
Basic
$
(1.39)
$
1.44
$
(2.83)
Diluted
$
(1.39)
$
1.44
$
(2.83)
Weighted-average shares of common stock outstanding
Basic
173,881,116
172,620,799
1,260,317
Diluted
173,881,116
180,891,859
(7,010,743)
Dividends declared per share
$
1.71
$
1.86
$
(0.15)
Income from loans and other investments, net
Income from loans and other investments, net decreased $139.4 million during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was primarily due to a decrease in the weighted-average principal balance of our loan portfolio by $1.8 billion during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, as well as a decline in interest income related to additional loans accounted for under the cost-recovery method during the nine months ended September 30, 2024. This was offset by a decrease in the weighted-average principal balance of our outstanding financing arrangements by $1.8 billion for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
Revenue from real estate owned
Revenue from real estate owned increased by $1.2 million during the nine months ended September 30, 2024 due to REO assets being acquired. There was no revenue from real estate owned during the nine months ended June 30, 2024.
Gain on extinguishment of debt
Gain on extinguishment of debt increased by $811,000 during the nine months ended September 30, 2024. During the nine months ended September 30, 2024, we recognized an aggregate gain on extinguishment of debt of $5.4 million related to
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the repurchase of an aggregate principal amount of $33.8 million, $30.8 million, and $2.3 million, of our Convertible Notes, Senior Secured Notes, and B-1 Term Loan, respectively. During the nine months ended September 30, 2023, we recognized a gain on extinguishment of debt of $4.5 million related to the repurchase of an aggregate principal amount of $33.4 million of our Senior Secured Notes.
Other expenses
Other expenses include management and incentive fees payable to our Manager, general and administrative expenses, and expenses from real estate owned. Other expenses decreased by $29.9 million during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to a decrease of $36.8 million of incentive fees payable to our Manager, driven primarily by charge-offs of CECL reserves. Expenses of real estate owned, which relates to real estate owned operations, increased by $3.6 million. We did not incur any expenses from REO during the nine months ended September 30, 2023. Additionally, general and administrative expenses increased by $2.9 million primarily due to (i) an increase in non-cash restricted stock amortization of $982,000 related to shares awarded under our long-term incentive plans, (ii) a $774,000 increase in legal expenses, and (iii) an increase of $279,000 of management fees payable to our Manager, primarily as a result of an increase in our Equity, as defined in our Management Agreement.
Changes in current expected credit loss reserve
During the nine months ended September 30, 2024, we recorded a $519.7 million increase in our CECL reserves, as compared to a $134.5 million increase during the nine months ended September 30, 2023. These incremental CECL reserves primarily reflect a $465.9 million increase in the specific reserves related to certain impaired loans in our portfolio, most of which were secured by office buildings. The office sector is generally facing reduced tenant and capital markets demand in recent years. These impairments are each determined individually as a result of changes in the specific credit quality factors for such loans. These factors included, among others, (i) the underlying collateral performance, (ii) discussions with the borrower, (iii) borrower events of default, and (iv) other facts that impact the borrower’s ability to pay the contractual amounts due under the terms of the loan. In addition, our general CECL reserves decreased primarily as a result of loan repayments reducing the size of our portfolio during the nine months ended September 30, 2024.
We may be required to record further increases to our CECL reserves in the future, depending on the performance of our portfolio and broader market conditions, and there may be volatility in the level of our CECL reserves. In particular, our loans secured by office buildings have experienced higher levels of CECL reserves and may continue to do so if market conditions relevant to office buildings do not improve. Any such reserve increases are difficult to predict, but are expected to be primarily the result of incremental loan impairments resulting from changes in the specific credit quality factors of such loans and to be concentrated in our loans receivable with a risk rating of “4” as of September 30, 2024.
Income tax provision
The income tax provision decreased by $1.8 million during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, due to a decrease in the income tax provisions related to our taxable REIT subsidiaries.
Dividends per share
During the nine months ended September 30, 2024, we declared dividends of $1.71 per share, or $296.6 million in aggregate. During nine months ended September 30, 2023, we declared dividends of $1.86 per share, or $320.5 million in aggregate.
IV. Liquidity and Capital Resources
Capitalization
We have capitalized our business to date primarily through the issuance and sale of shares of our class A common stock, corporate debt, and asset-level financings. As of September 30, 2024, our capitalization structure included $3.8 billion of common equity, $2.7 billion of corporate debt, and $14.5 billion of asset-level financings. Our $2.7 billion of corporate debt includes $2.1 billion of Term Loan borrowings, $335.3 million of Senior Secured Notes, and $266.2 million of Convertible Notes. Our $14.5 billion of asset-level financings includes $11.0 billion of secured debt, $2.2 billion of securitizations, and $1.2 billion of asset-specific debt, all of which are structured to produce term, currency, and index matched funding with no margin call provisions based upon capital markets events.
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As of September 30, 2024, we have $1.5 billion of liquidity that can be used to satisfy our short-term cash requirements and as working capital for our business.
See Notes 6, 7, 8, 9, 10, 11, and 12 to our consolidated financial statements for additional details regarding our secured debt, securitized debt obligations, asset-specific debt, loan participations sold, Term Loans, Senior Secured Notes, and Convertible Notes, respectively.
Debt-to-Equity Ratio and Total Leverage Ratio
The following table presents our debt-to-equity ratio and total leverage ratio:
September 30, 2024
December 31, 2023
Debt-to-equity ratios(1)
Debt-to-equity ratio(2)
3.8x
3.7x
Adjusted debt-to-equity ratio(3)
3.0x
3.2x
Total leverage ratios(1)
Total leverage ratio(4)
4.4x
4.3x
Adjusted total leverage ratio(5)
3.5x
3.7x
(1)The debt and leverage amounts included in the calculations above use gross outstanding principal balances, excluding any unamortized deferred financing costs and discounts.
(2)Represents, in each case at period end, (i) total outstanding secured debt, asset-specific debt, Term Loans, Senior Secured Notes, and convertible notes, less cash, to (ii) total equity.
(3)Represents, in each case at period end, (i) total outstanding secured debt, asset-specific debt, Term Loans, Senior Secured Notes, and convertible notes, less cash, to (ii) Adjusted Equity. Adjusted Equity is a non-GAAP financial measure. Refer to “Adjusted Debt-to-Equity Ratio and Adjusted Total Leverage Ratio” below for the definition of Adjusted Equity and a reconciliation to total equity.
(4)Represents, in each case at period end, (i) total outstanding secured debt, securitizations, asset-specific debt, Term Loans, Senior Secured Notes, and convertible notes, less cash, to (ii) total equity.
(5)Represents, in each case at period end, (i) total outstanding secured debt, securitizations, asset-specific debt, Term Loans, Senior Secured Notes, and convertible notes, less cash, to (ii) Adjusted Equity. Adjusted Equity is a non-GAAP financial measure. Refer to “Adjusted Debt-to-Equity Ratio and Adjusted Total Leverage Ratio” below for the definition of Adjusted Equity and a reconciliation to total equity.
Adjusted Debt-to-Equity Ratio and Adjusted Total Leverage Ratio
Our adjusted debt-to-equity and total leverage ratios are measures that are not prepared in accordance with GAAP, as they are calculated using Adjusted Equity, which we define as our total equity, excluding the aggregate CECL reserves on our loans receivable and unfunded loan commitments.
We believe that Adjusted Equity provides meaningful information to consider in addition to our total equity determined in accordance with GAAP in the context of assessing our debt-to-equity and total leverage ratios. The adjusted debt-to-equity and total leverage ratios are metrics we use, in addition to our unadjusted debt-to-equity and total leverage ratios, when evaluating our capitalization structure, as Adjusted Equity excludes the unrealized impact of our CECL reserves, which may vary from quarter-to-quarter as our loan portfolio changes and market and economic conditions evolve. We believe these ratios, and therefore our Adjusted Equity, are useful financial metrics for existing and potential future holders of our class A common stock to consider when evaluating how our business is capitalized and the relative amount of leverage in our business.
Adjusted Equity does not represent our total equity and should not be considered as an alternate to GAAP total equity. In addition, our methodology for calculating Adjusted Equity may differ from methodologies employed by other companies to calculate the same or similar supplemental measures, and accordingly, our reported Adjusted Equity may not be comparable to the Adjusted Equity reported by other companies.
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The following table provides a reconciliation of Adjusted Equity to our GAAP total equity ($ in thousands):
September 30, 2024
December 31, 2023
Total equity
$
3,860,397
$
4,387,504
Add back: aggregate CECL reserves
1,021,514
592,307
Adjusted Equity
$
4,881,911
$
4,979,811
Sources of Liquidity
Our primary sources of liquidity include cash and cash equivalents, available borrowings under our secured debt facilities, and net receivables from servicers related to loan repayments, which are set forth in the following table ($ in thousands):
September 30, 2024
December 31, 2023
Cash and cash equivalents
$
322,104
$
350,014
Available borrowings under secured debt
1,106,948
1,269,111
Loan principal payments held by servicer, net(1)
26,269
48,287
$
1,455,321
$
1,667,412
(1)Represents loan principal payments held by our third-party servicer as of the balance sheet date which were remitted to us during the subsequent remittance cycle, net of the related secured debt balance.
During the nine months ended September 30, 2024, we generated cash flow from operating activities of $281.9 million and received $3.1 billion from loan principal collections, sales proceeds, and cost-recovery proceeds. Furthermore, we are able to generate incremental liquidity through the replenishment provisions of certain of our CLOs, which allow us to replace a repaid loan in the CLO by increasing the principal amount of existing CLO collateral assets to maintain the aggregate amount of collateral assets in the CLO, and the related financing outstanding.
We have access to further liquidity through public and private offerings of equity and debt securities, syndicated term loans, and similar transactions. To facilitate public offerings, in July 2022, we filed a shelf registration statement with the SEC that is effective for a term of three years and expires in July 2025. The amount of securities to be issued pursuant to this shelf registration statement 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 registration statement include: (i) class A common stock; (ii) preferred stock; (iii) depositary shares representing preferred stock; (iv) debt securities; (v) warrants; (vi) subscription rights; (vii) purchase contracts; and (viii) units consisting of one or more of such securities or any combination of these securities. 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 materials, at the time of any offering.
We may also access liquidity through our dividend reinvestment plan and direct stock purchase plan, under which 9,970,314 shares of class A common stock were available for issuance as of September 30, 2024, and our at the market stock offering program, pursuant to which we may sell, from time to time, up to $480.9 million of additional shares of our class A common stock as of September 30, 2024. Refer to Note 14 to our consolidated financial statements for additional details.
Uses of Liquidity
In addition to our loan origination and funding activity and general operating expenses, our primary uses of liquidity include interest and principal payments under our $11.0 billion of outstanding borrowings under secured debt, our asset-specific debt, our Term Loans, our Senior Secured Notes, and our Convertible Notes. From time to time we may also repurchase our outstanding debt or shares of our class A common stock. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material. During the nine months ended September 30, 2024, we repurchased an aggregate principal amount of $2.3 million of the B-1 Term Loan at a weighted-average price of 99%, an aggregate principal amount of $30.8 million of our Senior Secured Notes at a weighted-average price of 88%, and an aggregate principal amount of $33.8 million of the Convertible Notes at a weighted-average price of 93%. This resulted in gains on extinguishment of debt of $25,000, $3.3 million, and $2.0 million, respectively, during the nine months ended September 30, 2024.
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In July 2024, our board of directors authorized the repurchase of up to $150.0 million of our class A common stock. Under the repurchase program, repurchases may be made from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the actual amounts repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. The repurchase program may be changed, suspended or discontinued at any time and does not have a specified expiration date.
During the three and nine months ended September 30, 2024, we repurchased 628,884 shares of class A common stock at a weighted-average price per share of $17.49, for a total cost of $11.0 million. As of September 30, 2024, the amount remaining available for repurchases under the program was $139.0 million.
As of September 30, 2024, we had unfunded commitments of $1.6 billion related to 76 loans receivable and $717.9 million of committed or identified financing for those commitments resulting in net unfunded commitments of $844.7 million. The unfunded loan commitments comprise funding for capital expenditures and construction, leasing costs, and interest and carry costs. Loan funding commitments are generally subject to certain conditions, including, without limitation, the progress of capital projects, leasing, and cash flows at the properties securing our loans. Therefore, the exact timing and amounts of such future loan fundings are uncertain and will depend on the current and future performance of the underlying collateral assets. We expect to fund our loan commitments over the remaining term of the related loans, which have a weighted-average future funding period of 2.3 years.
Contractual Obligations and Commitments
Our contractual obligations and commitments as of September 30, 2024 were as follows ($ in thousands):
Payment Timing
Total
Obligation
Less Than
1 Year(1)
1 to 3
Years
3 to 5 Years
More Than
5 Years
Unfunded loan commitments(2)
$
1,562,589
$
454,277
$
655,409
$
452,903
$
—
Principal repayments under secured debt(3)
11,012,558
1,440,255
8,080,944
1,391,046
100,313
Principal repayments under asset-specific debt(3)
1,201,237
921,253
—
279,984
—
Principal repayments of term loans(4)
2,116,425
21,997
1,311,969
782,459
—
Principal repayments of senior secured notes
335,316
—
335,316
—
—
Principal repayments of convertible notes(5)
266,157
—
266,157
—
—
Interest payments(3)(6)
2,330,183
985,399
1,065,055
278,733
996
Total(7)
$
18,824,465
$
3,823,181
$
11,714,850
$
3,185,125
$
101,309
(1)Represents known and estimated short-term cash requirements related to our contractual obligations and commitments. Refer to the sources of liquidity section above for our sources of funds to satisfy our short-term cash requirements.
(2)The allocation of our unfunded loan commitments is based on the earlier of the commitment expiration date or the final loan maturity date, however we may be obligated to fund these commitments earlier than such date.
(3)Our secured debt and asset-specific debt agreements are generally term-matched to their underlying collateral. Therefore, the allocation of both principal and interest payments under such agreements is generally allocated based on the maximum maturity date of the collateral loans, assuming all extension options are exercised by the borrower. In limited instances, the maturity date of the respective debt agreement is used.
(4)The Term Loans are partially amortizing, with an amount equal to 1.0% per annum of the initial principal balance due in quarterly installments. Refer to Note 10 to our consolidated financial statements for further details on our Term Loans.
(5)Reflects the outstanding principal balance of convertible notes, excluding any potential conversion premium. Refer to Note 12 to our consolidated financial statements for further details on our convertible notes.
(6)Represents interest payments on our secured debt, asset-specific debt, Term Loans, Senior Secured Notes, and convertible notes. Future interest payment obligations are estimated assuming the interest rates in effect as of September 30, 2024 will remain constant into the future. This is only an estimate as actual amounts borrowed and interest rates will vary over time.
(7)Total does not include $2.2 billion of consolidated securitized debt obligations, $770.2 million of non-consolidated senior interests, and $103.5 million of loan participations sold, as the satisfaction of these liabilities will not require cash outlays from us.
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We are also required to settle our foreign exchange and interest rate derivatives with our derivative counterparties upon maturity which, depending on foreign currency exchange and interest rate movements, may result in cash received from or due to such counterparties. The table above does not include these amounts as they are not fixed and determinable. Refer to Note 13 to our consolidated financial statements for details regarding our derivative contracts.
We are required to pay our Manager a base management fee, an incentive fee, and reimbursements for certain expenses pursuant to our Management Agreement. The table above does not include the amounts payable to our Manager under our Management Agreement as they are not fixed and determinable. Refer to Note 15 to our consolidated financial statements for additional terms and details of the fees payable under our Management Agreement.
As a REIT, we generally must distribute substantially all of our net taxable income to stockholders in the form of dividends to comply with the REIT provisions of the Internal Revenue Code. Our taxable income does not necessarily equal our net income as calculated in accordance with GAAP, or our Distributable Earnings as described above.
Cash Flows
The following table provides a breakdown of the net change in our cash and cash equivalents ($ in thousands):
Nine Months Ended September 30,
2024
2023
Cash flows provided by operating activities
$
281,908
$
347,681
Cash flows provided by investing activities
2,150,500
1,188,464
Cash flows used in financing activities
(2,458,947)
(1,407,463)
Net (decrease) increase in cash and cash equivalents
$
(26,539)
$
128,682
We experienced a net decrease in cash and cash equivalents of $26.5 million for the nine months ended September 30, 2024, compared to a net increase of $128.7 million for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, we received $3.6 billion from loan principal collections and sales proceeds, of which $3.1 billion is reflected in our consolidated statement of cash flows prepared in accordance with GAAP, excluding $512.1 million of additional repayments or reduction of loan exposure under related non-consolidated senior interests. Also, during the nine months ended September 30, 2024, we (i) repaid a net $1.7 billion of secured debt borrowings, (ii) funded $982.2 million of loans, (iii) paid $322.7 million of dividends on our class A common stock, and (iv) repaid $259.1 million of securitized debt obligations.
Refer to Note 3 to our consolidated financial statements for further discussion of our loan activity. Refer to Notes 6, 7, and 14 to our consolidated financial statements for additional discussion of our secured debt, securitized debt obligations, and equity, respectively.
V. Other Items
Income Taxes
We have elected to be taxed as a REIT under the Internal Revenue Code for U.S. federal income tax purposes. We generally must distribute annually at least 90% of our net taxable income, subject to certain adjustments and excluding any net capital gain, in order for U.S. federal income tax not to apply to our earnings. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our net taxable income, we will be subject to U.S. federal income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws.
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 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 September 30, 2024 and December 31, 2023, we were in compliance with all REIT requirements.
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Furthermore, our taxable REIT subsidiaries are subject to federal, state, and local income tax on their net taxable income. Refer to Note 16 to our consolidated financial statements for additional discussion of our income taxes.
Critical Accounting Policies
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. There have been no material changes to our Critical Accounting Policies described in our Annual Report on Form 10-K filed with the SEC on February 14, 2024, other than a supplement to the accounting policy for our real estate owned. Refer to Note 2 to our consolidated financial statements for additional discussion of the accounting policy for our real estate owned.
Current Expected Credit Losses
The current expected credit loss, or CECL, reserve required under the FASB Accounting Standards Codification, or ASC, Topic 326 “Financial Instruments – Credit Losses,” or ASC 326, reflects our current estimate of potential credit losses related to our portfolio. We estimate our CECL reserves primarily using the Weighted-Average Remaining Maturity, or WARM method, which has been identified as an acceptable loss-rate method for estimating CECL reserves in the Financial Accounting Standards Board Staff Q&A Topic 326, No. 1. Estimating the CECL reserve requires judgment, including the following assumptions:
•Historical loan loss reference data: To estimate the historic loan losses relevant to our portfolio, we have augmented our historical loan performance with market loan loss data licensed from Trepp LLC. This database includes commercial mortgage-backed securities, or CMBS, issued since January 1, 1999 through August 31, 2024. Within this database, we focused our historical loss reference calculations on the most relevant subset of available CMBS data, which we determined based on loan metrics that are most comparable to our loan portfolio including asset type, geography, and origination loan-to-value, or LTV. We believe this CMBS data, which includes month-over-month loan and property performance, is the most relevant, available, and comparable dataset to our portfolio.
•Expected timing and amount of future loan fundings and repayments: Expected credit losses are estimated over the contractual term of each loan, adjusted for expected repayments. As part of our quarterly review of our loan portfolio, we assess the expected repayment date of each loan, which is used to determine the contractual term for purposes of computing our CECL reserves. Additionally, the expected credit losses over the contractual period of our loans are subject to the obligation to extend credit through our unfunded loan commitments. The CECL reserve for unfunded loan commitments is adjusted quarterly, as we consider the expected timing of future funding obligations over the estimated life of the loan. The considerations in estimating our CECL reserve for unfunded loan commitments are similar to those used for the related outstanding loans receivable.
•Current credit quality of our portfolio: Our risk rating is our primary credit quality indicator in assessing our CECL reserves. We perform a quarterly risk review of our portfolio of loans and assign each loan a risk rating based on a variety of factors, including, without limitation, origination LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship.
•Expectations of performance and market conditions: Our CECL reserves are adjusted to reflect our estimation of the current and future economic conditions that impact the performance of the commercial real estate assets securing our loans. These estimations include unemployment rates, interest rates, expectations of inflation and/or recession, and other macroeconomic factors impacting the likelihood and magnitude of potential credit losses for our loans during their anticipated term. In addition to the CMBS data we have licensed from Trepp LLC, we have also licensed certain macroeconomic financial forecasts to inform our view of the potential future impact that broader economic conditions may have on our loan portfolio’s performance. We generally also incorporate information from other sources, including information and opinions available to our Manager, to further inform these estimations. This process requires significant judgments about future events that, while based on the information available to us as of the balance sheet date, are ultimately indeterminate and the actual economic condition impacting our portfolio could vary significantly from the estimates we made as of September 30, 2024.
•Impairment: impairment is indicated when it is deemed probable that we will not be able to collect all amounts due to us pursuant to the contractual terms of the loan. Determining that a loan is impaired requires significant judgment from management and is based on several factors including (i) the underlying collateral performance, (ii) discussions with the borrower, (iii) borrower events of default, and (iv) other facts that impact the borrower’s ability to pay the contractual amounts due under the terms of the loan. If a loan is determined to be impaired, we
75
record the impairment as a component of our CECL reserves by applying the practical expedient for collateral dependent loans. The CECL reserves are assessed on an individual basis for these loans by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, discount rates, leasing, creditworthiness of major tenants, occupancy rates, availability and cost of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed relevant by us. Actual losses, if any, could ultimately differ materially from these estimates. We only expect to charge-off the impairment losses in our consolidated financial statements prepared in accordance with GAAP if and when such amounts are deemed non-recoverable. This is generally at the time a loan is repaid or foreclosed. However, non-recoverability may also be concluded if, in our determination, it is nearly certain that all amounts due will not be collected.
These assumptions vary from quarter-to-quarter as our loan portfolio changes and market and economic conditions evolve. The sensitivity of each assumption and its impact on the CECL reserves may change over time and from period to period. During the nine months ended September 30, 2024, our CECL reserves increased by $434.1 million, bringing our total reserves to $1.0 billion as of September 30, 2024. See Notes 2 and 3 to our consolidated financial statements for further discussion of our CECL reserves.
Revenue Recognition
Interest income from our loans receivable portfolio is recognized over the life of each investment using the effective interest method and is recorded on the accrual basis. Recognition of fees, premiums, and discounts associated with these investments is deferred and recorded over the term of the loan as an adjustment to yield. Income accrual is generally suspended for loans at the earlier of the date at which payments become 90 days past due or when, in our opinion, recovery of income and principal becomes doubtful. Interest received is then recorded as income or as a reduction in the amortized cost basis, based on the specific facts and circumstances, until accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed. In addition, for loans we originate, the related origination expenses are deferred and recognized as a reduction to interest income, however expenses related to loans we acquire are included in general and administrative expenses as incurred.
Real Estate Owned
We may assume legal title or physical possession of the collateral underlying a loan through a foreclosure or the execution of a deed-in-lieu of foreclosure. These real estate acquisitions are classified as real estate owned, or REO, on our consolidated balance sheet and are initially recognized at fair value on the acquisition date in accordance with the ASC Topic 805, “Business Combinations.”
Upon acquisition of REO, we assess the fair value of acquired tangible and intangible assets, which may include land, buildings, tenant improvements, “above-market” and “below-market” leases, acquired in-place leases, other identified intangible assets and assumed liabilities, as applicable, and allocate the fair value to the acquired assets and assumed liabilities. We assess and consider fair value based on estimated cash flow projections that utilize discount and/or capitalization rates that we deem appropriate, as well as other available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known and anticipated trends, and market and economic conditions. We capitalize acquisition-related costs associated with asset acquisitions.
Real estate assets held for investment, except for land, are depreciated using the straight-line method over the assets’ estimated useful lives of up to 40 years for buildings and 10 years for tenant improvements. Renovations and/or replacements that improve or extend the life of the asset are capitalized and depreciated over their estimated useful lives. Lease intangibles are amortized over the remaining term of applicable leases on a straight-line basis. The cost of ordinary repairs and maintenance are expensed as incurred.
Real estate assets held for investment are assessed for impairment on a quarterly basis. If the depreciated cost basis of the asset exceeds the undiscounted cash flows over the remaining holding period, the asset is considered for impairment. The impairment loss is recognized when the carrying value of the real estate assets exceed their fair value. The evaluation of anticipated future cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates, capital requirements and anticipated holding periods that could differ materially from actual results.
Real estate assets are classified as held for sale in the period when they meet the criteria under ASC Topic 360 “Property, Plant, and Equipment.” Once a real estate asset is classified as held for sale, depreciation is suspended and the asset is reported at the lower of its carrying value or fair value less cost to sell. If circumstances arise and we decide not to sell a real estate asset previously classified as held for sale, the real estate asset is reclassified as held for investment. Upon
76
reclassification, the real estate asset is measured at the lower of (i) its carrying amount prior to classification as held for sale, adjusted for depreciation expense that would have been recognized had the real estate been classified as held for investment, and (ii) its estimated fair value at the time of reclassification.
As of September 30, 2024, we had three REO assets which were all classified as held for investment.
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VI. Loan Portfolio Details
The following table provides details of our loan portfolio, on a loan-by-loan basis, as of September 30, 2024 ($ in millions):
Loan Type(1)
Origination
Date(2)
Total
Loan(3)(4)
Principal
Balance(4)
Net Book Value
Cash
Coupon(5)
All-in
Yield(5)
Maximum
Maturity(6)
Location
Property Type
Loan Per SQFT / Unit / Key
Origination
LTV(2)
Risk Rating
1
Senior Loan
4/9/2018
$
1,487
$
1,301
$
1,298
+4.19
%
+4.51
%
6/9/2025
New York
Office
$458 / sqft
48
%
1
2
Senior Loan
6/24/2022
915
915
909
+4.75
%
+5.07
%
6/21/2029
Diversified - AU
Hospitality
$416 / sqft
59
%
3
3
Senior Loan
8/14/2019
1,001
912
907
+3.20
%
+3.95
%
1/29/2027
Dublin - IE
Mixed-Use
$266 / sqft
74
%
3
4
Senior Loan
3/22/2018
580
580
580
+3.25
%
+3.31
%
3/15/2026
Diversified - Spain
Mixed-Use
n / a
71
%
4
5
Senior Loan
7/23/2021
480
474
472
+3.60
%
+4.04
%
8/9/2027
New York
Multi
$636,471 / unit
58
%
2
6
Senior Loan
3/30/2021
469
469
467
+3.20
%
+3.41
%
5/15/2026
Diversified - SE
Industrial
$89 / sqft
76
%
2
7
Senior Loan(4)
11/22/2019
485
411
94
+4.44
%
+4.67
%
12/9/2027
Los Angeles
Office
$753 / sqft
69
%
4
8
Senior Loan
12/9/2021
385
377
376
+2.76
%
+3.00
%
12/9/2026
New York
Mixed-Use
$130 / sqft
50
%
2
9
Senior Loan
6/28/2022
675
350
344
+4.60
%
+5.06
%
7/9/2029
Austin
Mixed-Use
$291 / sqft
53
%
3
10
Senior Loan
4/11/2018
345
344
339
+2.25
%
+2.25
%
5/1/2025
New York
Office
$436 / sqft
n/m
5
11
Senior Loan
7/15/2021
326
326
325
+4.25
%
+4.76
%
7/16/2026
Diversified - EUR
Hospitality
$249,337 / key
53
%
3
12
Senior Loan
5/6/2022
310
310
309
+3.50
%
+3.79
%
5/6/2027
Diversified - UK
Industrial
$98 / sqft
53
%
2
13
Senior Loan
12/11/2018
356
301
302
+1.75
%
+1.76
%
12/9/2026
Chicago
Office
$254 / sqft
78
%
4
14
Senior Loan
9/29/2021
293
287
286
+2.81
%
+3.03
%
10/9/2026
Washington, DC
Office
$374 / sqft
66
%
2
15
Senior Loan
11/30/2018
286
286
256
+2.43
%
+2.43
%
8/9/2025
New York
Hospitality
$306,870 / key
n/m
5
16
Senior Loan
10/23/2018
290
286
286
+2.86
%
+3.01
%
11/9/2024
Atlanta
Mixed-Use
$266 / sqft
64
%
2
17
Senior Loan
1/11/2019
283
283
283
+5.10
%
+5.06
%
6/14/2028
Diversified - UK
Other
$280 / sqft
74
%
3
18
Senior Loan
9/30/2021
277
277
277
+2.61
%
+2.88
%
9/30/2026
Dallas
Multi
$146,437 / unit
74
%
3
19
Senior Loan
2/27/2020
273
267
267
+2.70
%
+2.83
%
1/9/2027
New York
Multi
$702,969 / unit
59
%
3
20
Senior Loan
6/8/2022
272
266
265
+7.65
%
+7.65
%
6/9/2027
New York
Office
$1,488 / sqft
n/m
5
21
Senior Loan
12/23/2021
345
266
260
+4.25
%
+4.97
%
6/24/2028
London - UK
Multi
$293,500 / unit
59
%
3
22
Senior Loan
11/30/2018
260
260
260
+4.80
%
+4.80
%
12/9/2024
San Francisco
Hospitality
$378,454 / key
n/m
5
23
Senior Loan
9/14/2021
255
255
255
+2.61
%
+2.86
%
9/14/2026
Dallas
Multi
$206,610 / unit
72
%
3
24
Senior Loan(4)
11/10/2021
362
255
51
+4.11
%
+4.91
%
12/9/2026
San Francisco
Life Sciences
$473 / sqft
66
%
4
25
Senior Loan
9/30/2021
256
235
235
+7.11
%
+7.11
%
10/9/2028
Chicago
Office
$260 / sqft
n/m
5
26
Senior Loan
2/23/2022
245
234
233
+2.60
%
+2.84
%
3/9/2027
Reno
Multi
$217,378 / unit
74
%
3
27
Senior Loan
7/16/2021
244
233
232
+3.25
%
+3.51
%
2/15/2027
London - UK
Multi
$240,929 / unit
69
%
2
28
Senior Loan(7)
9/16/2021
227
227
227
+1.63
%
+1.63
%
11/9/2025
San Francisco
Office
$276 / sqft
n/m
5
29
Senior Loan
12/22/2016
252
222
216
+10.50
%
+10.50
%
6/9/2028
New York
Mixed-Use
$313 / sqft
n/m
5
30
Senior Loan
1/26/2022
338
220
217
+4.10
%
+4.72
%
2/9/2027
Seattle
Office
$460 / sqft
56
%
3
continued…
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Loan Type(1)
Origination
Date(2)
Total
Loan(3)(4)
Principal
Balance(4)
Net Book Value
Cash
Coupon(5)
All-in
Yield(5)
Maximum
Maturity(6)
Location
Property Type
Loan Per SQFT / Unit / Key
Origination
LTV(2)
Risk Rating
31
Senior Loan
6/28/2019
$
219
$
219
$
218
+4.00
%
+4.74
%
6/26/2026
London - UK
Office
$528 / sqft
71
%
3
32
Senior Loan
6/27/2019
214
214
213
+2.80
%
+2.93
%
8/15/2026
Berlin - DEU
Office
$448 / sqft
62
%
4
33
Senior Loan
4/23/2021
219
209
203
+3.65
%
+3.65
%
9/9/2024
Washington, DC
Office
$234 / sqft
n/m
5
34
Senior Loan
7/29/2022
212
201
199
+4.60
%
+5.60
%
7/27/2027
London - UK
Industrial
$265 / sqft
52
%
3
35
Senior Loan(4)
3/17/2022
237
198
252
+2.76
%
+2.90
%
6/30/2025
London - UK
Office
$773 / sqft
50
%
3
36
Senior Loan(4)
3/29/2022
224
187
37
+4.50
%
+5.65
%
4/9/2027
Miami
Multi
$317,986 / unit
72
%
3
37
Senior Loan(8)
7/23/2021
244
184
183
-1.30
%
-0.92
%
8/9/2028
New York
Office
$596 / sqft
53
%
4
38
Senior Loan
2/15/2022
191
181
174
+2.90
%
+2.90
%
3/9/2027
Denver
Office
$361 / sqft
n/m
5
39
Senior Loan
3/9/2022
181
181
180
+2.95
%
+3.17
%
8/15/2027
Diversified - UK
Retail
$154 / sqft
55
%
2
40
Senior Loan
5/13/2021
199
179
179
+3.66
%
+3.92
%
6/9/2026
Boston
Life Sciences
$910 / sqft
64
%
3
41
Senior Loan
1/27/2022
178
177
177
+3.10
%
+3.40
%
2/9/2027
Dallas
Multi
$115,681 / unit
71
%
3
42
Senior Loan
12/21/2021
165
165
165
+2.83
%
+3.15
%
4/29/2027
London - UK
Industrial
$335 / sqft
67
%
3
43
Senior Loan
9/30/2021
191
165
164
+4.00
%
+4.67
%
9/30/2026
Diversified - Spain
Hospitality
$142,607 / key
60
%
3
44
Senior Loan
10/7/2021
165
162
156
+3.25
%
+3.25
%
10/9/2025
Los Angeles
Office
$329 / sqft
n/m
5
45
Senior Loan
5/27/2021
184
161
160
+2.31
%
+2.57
%
6/9/2026
Atlanta
Office
$135 / sqft
66
%
4
46
Senior Loan
2/20/2019
163
158
158
+4.62
%
+4.91
%
2/19/2025
London - UK
Office
$634 / sqft
61
%
3
47
Senior Loan
1/17/2020
203
157
156
+3.12
%
+3.39
%
2/9/2025
New York
Mixed-Use
$129 / sqft
43
%
3
48
Senior Loan
3/7/2022
156
156
156
+3.45
%
+3.63
%
6/9/2026
Los Angeles
Hospitality
$624,000 / key
64
%
3
49
Senior Loan
6/4/2018
153
153
153
+4.00
%
+4.24
%
6/9/2025
New York
Hospitality
$251,647 / key
52
%
3
50
Senior Loan
8/31/2017
152
152
152
+2.62
%
+2.62
%
9/9/2026
Orange County
Office
$176 / sqft
58
%
4
51
Senior Loan
1/7/2022
155
152
152
+3.70
%
+3.97
%
1/9/2027
Fort Lauderdale
Office
$392 / sqft
55
%
1
52
Senior Loan
11/18/2021
151
151
151
+3.25
%
+3.51
%
11/18/2026
London - UK
Other
$191 / sqft
65
%
2
53
Senior Loan
12/20/2019
150
150
150
+3.22
%
+3.44
%
12/18/2026
London - UK
Office
$762 / sqft
75
%
4
54
Senior Loan(4)
9/30/2021
145
145
195
+2.96
%
+3.38
%
10/9/2026
Boca Raton
Multi
$396,175 / unit
58
%
3
55
Senior Loan
3/10/2020
140
140
139
+3.10
%
+3.10
%
10/11/2024
New York
Mixed-Use
$854 / sqft
n/m
5
56
Senior Loan
12/15/2021
151
136
135
+2.75
%
+4.04
%
12/9/2026
Dublin - IE
Multi
$340,351 / unit
79
%
3
57
Senior Loan
11/23/2018
134
134
132
+3.50
%
+3.74
%
11/15/2029
Diversified - UK
Office
$986 / sqft
50
%
3
58
Senior Loan
8/24/2021
156
133
133
+2.71
%
+2.98
%
9/9/2026
San Jose
Office
$317 / sqft
65
%
4
59
Senior Loan
9/14/2021
132
129
129
+2.81
%
+3.07
%
10/9/2026
San Bernardino
Multi
$260,871 / unit
75
%
4
60
Senior Loan
5/20/2021
150
126
115
+8.76
%
+8.76
%
4/9/2025
San Jose
Office
$323 / sqft
n/m
5
continued…
79
Loan Type(1)
Origination
Date(2)
Total
Loan(3)(4)
Principal
Balance(4)
Net Book Value
Cash
Coupon(5)
All-in
Yield(5)
Maximum
Maturity(6)
Location
Property Type
Loan Per SQFT / Unit / Key
Origination
LTV(2)
Risk Rating
61
Senior Loan(4)
12/30/2021
$
228
$
125
$
25
+4.00
%
+4.99
%
1/9/2028
Los Angeles
Multi
$358,199 / unit
50
%
3
62
Senior Loan
3/28/2022
130
124
124
+2.55
%
+2.80
%
4/9/2027
Miami
Office
$336 / sqft
69
%
3
63
Senior Loan
4/6/2021
123
122
122
+7.31
%
+7.31
%
10/9/2024
Los Angeles
Office
$501 / sqft
n/m
5
64
Senior Loan
8/27/2021
122
121
120
+3.11
%
+3.35
%
9/9/2026
San Diego
Retail
$457 / sqft
58
%
3
65
Senior Loan
6/1/2021
120
120
120
+2.96
%
+3.11
%
6/9/2026
Miami
Multi
$298,507 / unit
61
%
2
66
Senior Loan
12/21/2021
120
118
118
+2.70
%
+3.00
%
1/9/2027
Washington, DC
Office
$406 / sqft
68
%
3
67
Senior Loan
4/29/2022
118
118
118
+3.50
%
+3.77
%
2/18/2027
Napa Valley
Hospitality
$1,240,799 / key
66
%
3
68
Senior Loan
3/29/2021
118
118
117
+4.02
%
+4.28
%
3/29/2026
Diversified - UK
Multi
$51,427 / unit
61
%
3
69
Senior Loan
7/15/2019
136
115
115
+3.01
%
+3.22
%
8/9/2028
Houston
Office
$208 / sqft
58
%
4
70
Senior Loan
10/21/2021
114
114
114
+3.01
%
+4.14
%
11/9/2025
Fort Lauderdale
Multi
$334,311 / unit
64
%
2
71
Senior Loan
12/10/2021
135
113
113
+3.11
%
+3.42
%
1/9/2027
Miami
Office
$379 / sqft
49
%
2
72
Senior Loan
6/28/2019
109
109
109
+3.75
%
+4.01
%
2/1/2026
Los Angeles
Studio
$551 / sqft
48
%
3
73
Senior Loan
9/23/2019
117
109
109
+3.50
%
+3.65
%
8/16/2027
Diversified - Spain
Hospitality
$127,206 / key
62
%
2
74
Senior Loan
12/29/2021
110
108
108
+2.85
%
+3.06
%
1/9/2027
Phoenix
Multi
$185,641 / unit
64
%
3
75
Senior Loan
3/13/2018
108
108
107
+3.11
%
+3.36
%
4/9/2027
Honolulu
Hospitality
$166,803 / key
50
%
3
76
Senior Loan
2/15/2022
106
105
105
+2.85
%
+3.19
%
3/9/2027
Tampa
Multi
$241,437 / unit
73
%
2
77
Senior Loan
11/27/2019
104
102
102
+2.86
%
+2.86
%
12/9/2024
Minneapolis
Office
$93 / sqft
n/m
5
78
Senior Loan
6/18/2021
99
99
98
+2.71
%
+2.95
%
7/9/2026
New York
Industrial
$51 / sqft
55
%
1
79
Senior Loan
1/30/2020
99
98
98
+3.50
%
+3.68
%
2/9/2027
Honolulu
Hospitality
$266,656 / key
63
%
3
80
Senior Loan
3/29/2022
97
97
97
+1.80
%
+2.69
%
4/9/2027
Miami
Multi
$271,118 / unit
75
%
4
81
Senior Loan
10/1/2021
96
96
96
+1.85
%
+2.53
%
10/1/2026
Phoenix
Multi
$222,840 / unit
77
%
4
82
Senior Loan
10/28/2021
96
96
96
+3.00
%
+3.35
%
11/9/2026
Philadelphia
Multi
$352,399 / unit
79
%
3
83
Senior Loan
12/21/2018
98
95
88
+2.71
%
+2.71
%
12/9/2024
Chicago
Office
$185 / sqft
n/m
5
84
Senior Loan
3/25/2020
94
94
94
+2.40
%
+2.66
%
3/31/2025
Diversified - NL
Multi
$113,747 / unit
65
%
2
85
Senior Loan
10/27/2021
93
93
93
+2.61
%
+2.81
%
11/9/2026
Orlando
Multi
$155,612 / unit
75
%
3
86
Senior Loan
9/13/2024
94
93
92
+3.25
%
+4.11
%
11/9/2027
Seattle
Multi
$84,456 / unit
67
%
3
87
Senior Loan
3/3/2022
92
92
92
+3.45
%
+3.76
%
3/9/2027
Boston
Hospitality
$418,182 / key
64
%
2
88
Senior Loan
12/15/2021
90
90
90
+3.25
%
+3.54
%
12/15/2026
Melbourne - AU
Multi
$65,790 / bed
38
%
1
89
Senior Loan
12/15/2021
91
90
90
+2.96
%
+3.22
%
1/9/2027
Charlotte
Multi
$256,393 / unit
76
%
4
90
Senior Loan
10/16/2018
88
88
88
+7.36
%
+7.36
%
11/9/2024
San Francisco
Hospitality
$191,807 / key
n/m
5
continued…
80
Loan Type(1)
Origination
Date(2)
Total
Loan(3)(4)
Principal
Balance(4)
Net Book Value
Cash
Coupon(5)
All-in
Yield(5)
Maximum
Maturity(6)
Location
Property Type
Loan Per SQFT / Unit / Key
Origination
LTV(2)
Risk Rating
91
Senior Loan
6/14/2022
$
106
$
88
$
87
+2.95
%
+3.24
%
7/9/2027
San Francisco
Mixed-Use
$181 / sqft
76
%
4
92
Senior Loan
6/25/2021
85
85
86
+2.86
%
+3.10
%
7/1/2026
St. Louis
Multi
$80,339 / unit
70
%
2
93
Senior Loan
7/29/2021
82
82
82
+2.76
%
+3.01
%
8/9/2026
Charlotte
Multi
$223,735 / unit
78
%
3
94
Senior Loan
8/27/2021
79
78
78
+4.35
%
+4.59
%
9/9/2026
Diversified - US
Hospitality
$116,168 / key
67
%
3
95
Senior Loan
12/21/2021
74
72
72
+2.70
%
+3.06
%
1/9/2027
Tampa
Multi
$212,924 / unit
77
%
3
96
Senior Loan
8/17/2022
79
71
70
+3.35
%
+3.83
%
8/17/2027
Dublin - IE
Industrial
$110 / sqft
72
%
3
97
Senior Loan
8/16/2022
71
70
70
+4.75
%
+5.19
%
8/16/2027
London - UK
Hospitality
$519,177 / key
64
%
3
98
Senior Loan
10/28/2021
69
69
69
+2.66
%
+2.86
%
11/9/2026
Tacoma
Multi
$209,864 / unit
70
%
3
99
Senior Loan
8/14/2019
67
67
67
+4.25
%
+4.44
%
12/9/2024
Los Angeles
Office
$655 / sqft
57
%
3
100
Senior Loan
3/31/2022
70
65
65
+2.80
%
+3.14
%
4/9/2027
Las Vegas
Multi
$142,750 / unit
71
%
3
101
Senior Loan
3/24/2022
65
65
65
+3.50
%
+3.59
%
4/1/2027
Fairfield
Multi
$406,250 / unit
70
%
3
102
Senior Loan
12/17/2021
65
65
65
+4.35
%
+4.59
%
1/9/2026
Diversified - US
Other
$4,886 / unit
37
%
1
103
Senior Loan
2/1/2022
84
63
63
+4.50
%
+6.68
%
2/1/2027
Diversified - UK
Life Sciences
$487 / sqft
45
%
3
104
Senior Loan
7/30/2021
62
62
62
+2.86
%
+3.06
%
8/9/2026
Salt Lake City
Multi
$224,185 / unit
73
%
3
105
Senior Loan
6/30/2021
65
61
61
+2.95
%
+3.20
%
7/9/2026
Nashville
Office
$252 / sqft
71
%
4
106
Senior Loan
4/15/2021
66
61
59
+8.06
%
+8.06
%
12/9/2024
Austin
Office
$297 / sqft
n/m
5
107
Senior Loan
12/10/2020
61
59
59
+3.30
%
+3.55
%
1/9/2026
Fort Lauderdale
Office
$205 / sqft
68
%
3
108
Senior Loan
4/26/2024
69
58
58
+4.95
%
+5.62
%
5/9/2029
Bermuda
Hospitality
$659,091 / key
39
%
3
109
Senior Loan
12/17/2021
58
58
58
+2.65
%
+2.85
%
1/9/2027
Phoenix
Multi
$209,601 / unit
69
%
3
110
Senior Loan
6/14/2021
58
58
58
+2.30
%
+2.30
%
3/9/2027
Miami
Office
$122 / sqft
65
%
3
111
Mezzanine Loan(9)
8/31/2017
64
56
39
+2.62
%
+2.62
%
9/9/2026
Orange County
Office
$241 / sqft
n/m
5
112
Senior Loan
1/21/2022
68
55
54
+8.70
%
+8.70
%
2/9/2027
Denver
Office
$327 / sqft
n/m
5
113
Senior Loan
12/22/2021
55
55
55
+2.82
%
+2.96
%
1/1/2027
Los Angeles
Multi
$272,500 / unit
68
%
3
114
Senior Loan
8/5/2021
56
54
54
+2.96
%
+3.21
%
8/9/2026
Denver
Office
$205 / sqft
70
%
3
115
Senior Loan
12/14/2018
54
54
54
+3.01
%
+3.28
%
1/9/2025
Diversified - US
Industrial
$40 / sqft
57
%
1
116
Senior Loan
8/22/2019
53
53
53
+2.66
%
+2.66
%
3/9/2025
Los Angeles
Office
$309 / sqft
63
%
4
117
Senior Loan
7/28/2021
53
53
53
+2.75
%
+2.99
%
8/9/2026
Los Angeles
Multi
$303,097 / unit
71
%
3
118
Senior Loan
4/7/2022
57
51
51
+3.25
%
+3.48
%
4/9/2027
Denver
Office
$151 / sqft
59
%
4
119
Senior Loan
2/17/2021
53
51
51
+3.66
%
+3.86
%
3/9/2026
Miami
Multi
$290,985 / unit
64
%
2
120
Senior Loan
10/21/2022
48
48
48
+4.14
%
+4.51
%
10/18/2027
Diversified - DEU
Industrial
$67 / sqft
74
%
2
continued…
81
Loan Type(1)
Origination
Date(2)
Total
Loan(3)(4)
Principal
Balance(4)
Net Book Value
Cash
Coupon(5)
All-in
Yield(5)
Maximum
Maturity(6)
Location
Property Type
Loan Per SQFT / Unit / Key
Origination
LTV(2)
Risk Rating
121
Senior Loan
7/20/2021
$
48
$
48
$
48
+2.86
%
+3.11
%
8/9/2026
Los Angeles
Multi
$366,412 / unit
60
%
3
122
Senior Loan
12/29/2021
47
47
47
+2.85
%
+2.96
%
1/1/2027
Dallas
Multi
$155,000 / unit
73
%
3
123
Senior Loan
11/30/2016
55
46
46
+3.33
%
+3.66
%
12/9/2025
Chicago
Retail
$804 / sqft
54
%
4
124
Senior Loan
12/8/2021
48
44
43
+2.75
%
+2.96
%
12/9/2026
Columbus
Multi
$142,806 / unit
69
%
2
125
Senior Loan
7/29/2021
42
42
42
+2.86
%
+3.06
%
8/9/2026
Las Vegas
Multi
$167,113 / unit
72
%
2
126
Senior Loan
11/3/2021
41
41
41
+2.71
%
+3.05
%
11/9/2026
Washington, DC
Multi
$137,788 / unit
68
%
1
127
Senior Loan
12/23/2021
42
41
41
+3.30
%
+3.45
%
1/1/2027
Dallas
Multi
$110,522 / unit
65
%
3
128
Senior Loan
10/1/2019
38
38
39
+3.80
%
+4.05
%
10/9/2025
Atlanta
Hospitality
$216,005 / key
74
%
3
129
Senior Loan
3/31/2022
42
38
38
+2.80
%
+3.15
%
4/9/2027
Las Vegas
Multi
$149,146 / unit
72
%
3
130
Senior Loan
2/26/2021
36
36
36
+3.50
%
+3.74
%
3/9/2026
Austin
Multi
$196,228 / unit
64
%
1
131
Senior Loan
12/23/2021
36
36
35
+1.71
%
+2.61
%
11/15/2025
New York
Multi
$173,924 / unit
68
%
2
132
Senior Loan
12/23/2021
35
35
35
+2.90
%
+3.19
%
1/1/2025
Jersey City
Multi
$111,063 / unit
46
%
2
133
Senior Loan
11/3/2021
35
35
35
+2.71
%
+3.05
%
11/9/2026
Dallas
Multi
$175,495 / unit
54
%
1
134
Senior Loan
6/29/2021
35
35
35
+3.70
%
+5.94
%
1/1/2025
Memphis
Multi
$95,072 / unit
54
%
2
135
Senior Loan
3/1/2022
35
35
35
+3.00
%
+3.34
%
3/9/2027
Los Angeles
Multi
$372,340 / unit
72
%
3
136
Senior Loan
12/23/2021
35
35
35
+2.76
%
+2.88
%
4/26/2025
Corvallis
Multi
$96,933 / unit
71
%
1
137
Senior Loan
12/23/2021
35
35
35
+3.11
%
+3.33
%
2/1/2026
New York
Office
$247 / sqft
30
%
3
138
Senior Loan
11/19/2020
38
32
32
+3.50
%
+3.76
%
12/9/2025
Chicago
Multi
$184,388 / unit
53
%
1
139
Senior Loan
11/3/2021
32
32
32
+2.71
%
+3.05
%
11/9/2026
Atlanta
Multi
$182,093 / unit
53
%
3
140
Senior Loan
8/12/2021
32
32
32
+6.87
%
+6.87
%
9/9/2026
Phoenix
Multi
$135,705 / unit
n/m
5
141
Senior Loan
11/3/2021
31
31
31
+2.71
%
+3.05
%
11/9/2026
Dallas
Multi
$159,752 / unit
52
%
1
142
Senior Loan
11/5/2019
30
30
30
+3.85
%
+3.85
%
11/15/2024
Diversified - IT
Office
$142 / sqft
66
%
2
143
Senior Loan
8/26/2022
29
29
28
+5.45
%
+5.03
%
6/23/2029
Melbourne - AU
Multi
$302,712 / unit
68
%
3
144
Senior Loan
11/19/2020
28
28
28
+3.50
%
+3.74
%
12/9/2025
Charlotte
Multi
$178,019 / unit
61
%
1
145
Senior Loan
10/31/2019
28
28
28
+3.36
%
+3.62
%
11/1/2024
Raleigh
Multi
$137,192 / unit
52
%
1
146
Senior Loan
11/3/2021
27
27
27
+2.71
%
+3.05
%
11/9/2026
Dallas
Multi
$160,023 / unit
57
%
2
147
Senior Loan
10/31/2019
25
25
25
+3.36
%
+3.63
%
11/1/2024
Austin
Multi
$133,333 / unit
52
%
1
148
Senior Loan
8/4/2021
22
22
22
+2.86
%
+3.13
%
8/9/2026
Las Vegas
Multi
$180,000 / unit
73
%
3
149
Senior Loan
6/25/2021
12
12
12
+2.86
%
+3.10
%
7/1/2026
St. Louis
Multi
$21,273 / unit
63
%
1
continued…
82
Loan Type(1)
Origination
Date(2)
Total
Loan(3)(4)
Principal
Balance(4)
Net Book Value
Cash
Coupon(5)
All-in
Yield(5)
Maximum
Maturity(6)
Location
Property Type
Loan Per SQFT / Unit / Key
Origination
LTV(2)
Risk Rating
CECL reserve
(1,011)
Loans receivable, net
$
24,238
$
22,429
$
20,592
+3.36
%
+3.75
%
2.2 yrs
63
%
3.1
(1)Senior loans include senior mortgages and similar credit quality loans, including related contiguous subordinate loans and pari passu participations in senior mortgage loans.
(2)Date loan was originated or acquired by us, and the LTV as of such date, excluding any loans that are impaired and any junior participations sold. Origination dates are subsequently updated to reflect material loan modifications.
(3)Total loan amount reflects outstanding principal balance as well as any related unfunded loan commitment.
(4)Total loan exposure reflects our aggregate exposure to each loan investment. As of September 30, 2024, total loan exposure, includes (i) loans with an outstanding principal balance of $21.8 billion that are included in our consolidated financial statements, (ii) $770.2 million of non-consolidated senior interests in loans we have sold, which are not included in our consolidated financial statements, and excludes (iii) $103.5 million of junior loan interests that we have sold, but that remain included in our consolidated financial statements.
(5)The weighted-average cash coupon and all-in yield are expressed as a spread over the relevant floating benchmark rates, which include SOFR, SONIA, EURIBOR, and other indices as applicable to each loan. As of September 30, 2024, all of our loans by total loan exposure earned a floating rate of interest, primarily indexed to SOFR. In addition to cash coupon, all-in yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees. Excludes loans accounted for under the cost-recovery and nonaccrual methods, if any.
(6)Maximum maturity assumes all extension options are exercised, however our loans may be repaid prior to such date. Excludes loans accounted for under the cost-recovery and nonaccrual methods, if any.
(7)This loan earns interest at a fixed rate. Cash coupon and all-in yield are expressed as a floating rate to include an interest rate swap we entered into that effectively converts the loan to a floating rate exposure.
(8)This loan has an interest rate of SOFR minus 1.30% with a SOFR floor of 3.50%, for an all-in rate of 3.55% as of September 30, 2024.
(9)Loan consists of one or more floating and fixed rate tranches. The fixed rate tranche is reflected as a spread over the relevant floating benchmark rate for both coupon and all-in yield.
83
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
For information on financial reference rate reforms, refer to “Part I. Item 1A. Risk Factors—Risks Related to Our Lending and Investment Activities—The transition away from reference rates and the use of alternative replacement reference rates may adversely affect net interest income related to our loans and investments or otherwise adversely affect our results of operations, cash flows and the market value of our investments.” of our Annual Report on Form 10-K filed with the SEC on February 14, 2024.
Investment Portfolio Net Interest Income
Generally, our business model is such that rising interest rates will increase our net income, while declining interest rates will decrease net income. As of September 30, 2024, all of our loans by total loan exposure earned a floating rate of interest and were financed with liabilities that pay interest at floating rates, which resulted in an amount of net equity that is positively correlated to rising interest rates, subject to the impact of interest rate floors on certain of our floating rate loans.
The following table projects the earnings impact on our interest income and expense, presented net of implied changes in incentive fees, for the twelve-month period following September 30, 2024, of an increase in the various floating-rate indices referenced by our portfolio, assuming no change in credit spreads, portfolio composition, or asset performance, relative to the average indices during the three months ended September 30, 2024 ($ in thousands):
Assets (Liabilities) Sensitive to Changes in Interest Rates(1)
Interest Rate Sensitivity as of September 30, 2024(2)(3)
Increase in Rates
Decrease in Rates
50 Basis Points
100 Basis Points
50 Basis Points
100 Basis Points
Floating rate assets(4)(5)(6)(7)
$
18,389,554
$
73,558
$
147,116
$
(73,558)
$
(146,922)
Floating rate liabilities(6)(8)
(16,578,711)
(66,515)
(133,030)
66,515
133,030
Net exposure
$
1,810,843
$
7,043
$
14,086
$
(7,043)
$
(13,892)
(1)Reflects the USD equivalent value of floating rate assets and liabilities denominated in foreign currencies.
(2)Increases (decreases) in interest income and expense are presented net of incentive fees. Refer to Note 15 to our consolidated financial statements for additional details of our incentive fee calculation.
(3)Excludes income from loans accounted for under the cost-recovery method.
(4)Includes an interest rate swap we entered into with a notional amount of $229.9 million that effectively converts certain of our fixed rate loan exposure to floating rate exposure.
(5)Excludes $3.3 billion of floating rate impaired loans.
(6)Excludes $770.2 million of non-consolidated senior interests and $103.5 million of loan participations sold, as of September 30, 2024. Our non-consolidated senior interests and loan participations sold are structurally non-recourse and term-matched to the corresponding loans, and have no impact on our net floating rate exposure.
(7)Our loan agreements generally require our borrowers to purchase interest rate caps, which mitigates our borrowers’ exposure to an increase in interest rates.
(8)Includes amounts outstanding under secured debt, securitizations, asset-specific debt, and Term Loans.
Investment Portfolio Value
As of September 30, 2024, all of our portfolio earned a floating rate of interest, so the value of such investments is generally not impacted by changes in market interest rates. Additionally, we generally hold all of our loans to maturity and so do not expect to realize gains or losses resulting from any mark to market valuation adjustments on our loan portfolio.
Risk of Non-Performance
In addition to the risks related to fluctuations in cash flows and asset values associated with movements in interest rates, there is also the risk of non-performance on floating rate assets. In the case of a significant increase in interest rates, the cash flows of the collateral real estate assets may not be sufficient to pay debt service due under our loans, which may contribute to non-performance or, in severe cases, default. This risk is partially mitigated by our consideration of rising rate stress-testing during our underwriting process, which generally includes a requirement for our borrower to purchase an interest rate cap contract with an unaffiliated third party, provide an interest reserve deposit, and/or provide interest guarantees or other structural protections. As of September 30, 2024, 96% of our performing loans have interest rate caps,
84
with a weighted-average strike price of 3.5%, or interest guarantees. During the nine months ended September 30, 2024, interest rate caps on $10.8 billion of performing loans, with a 3.4% weighted-average strike price, expired and 95% were replaced with new interest rate caps, with a weighted-average strike price of 3.4%, or interest guarantees.
Credit Risks
Our loans are subject to credit risk, including the risk of default. The performance and value of our loans depend upon the borrowers’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, our asset management team reviews our loan portfolios and, in certain instances, is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary.
In addition, we are exposed to the risks generally associated with the commercial real estate market, including changes in occupancy rates, capitalization rates, absorption rates, and other macroeconomic factors beyond our control. We seek to manage these risks through our underwriting and asset management processes.
We maintain a robust asset management relationship with our borrowers and utilize these relationships to maximize the performance of our portfolio, including during periods of volatility. We believe that we benefit from these relationships and from our long-standing core business model of originating senior loans collateralized by large assets in major markets with experienced, well-capitalized institutional sponsors. Our loan portfolio’s low weighted-average origination LTV was 62.8%, excluding any loans that are impaired and any junior participations sold, as of September 30, 2024. While we believe the principal amounts of our loans are generally adequately protected by underlying collateral value, there is a risk that we will not realize the entire principal value of certain loans. As of September 30, 2024, we had an aggregate $883.6 million asset-specific CECL reserve related to 20 of our loans receivable, with an aggregate amortized cost basis of $3.2 billion, net of cost-recovery proceeds. This CECL reserve was recorded based on our estimation of the fair value of each of the loan’s underlying collateral as of September 30, 2024.
Our portfolio monitoring and asset management operations benefit from the deep knowledge, experience, and information advantages derived from our position as part of Blackstone’s real estate platform. Blackstone has built the world's preeminent global real estate business, with a proven track record of successfully navigating market cycles and emerging stronger through periods of volatility. The market-leading real estate expertise derived from the strength of the Blackstone platform deeply informs our credit and underwriting process, and we believe gives us the tools to expertly asset manage our portfolio and work with our borrowers throughout periods of economic stress and uncertainty.
Capital Market Risks
We are exposed to risks related to the equity capital markets, and our related ability to raise capital through the issuance of our class A common stock or other equity instruments. We are also exposed to risks related to the debt capital markets, and our related ability to finance our business through borrowings under credit facilities or other debt instruments. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business. We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing, and terms of capital we raise.
Margin call provisions under our credit facilities do not permit valuation adjustments based on capital markets events, and are limited to collateral-specific credit marks generally determined on a commercially reasonable basis.
Counterparty Risk
The nature of our business requires us to hold our cash and cash equivalents and obtain financing from various financial institutions. This exposes us to the risk that these financial institutions may not fulfill their obligations to us under these various contractual arrangements. We mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with high credit-quality institutions.
The nature of our loans also exposes us to the risk that our counterparties do not make required interest and principal payments on scheduled due dates. We seek to manage this risk through a comprehensive credit analysis prior to making a loan and active monitoring of the asset portfolios that serve as our collateral, as further discussed above.
85
Currency Risk
Our loans that are denominated in a foreign currency are also subject to risks related to fluctuations in currency rates. We generally mitigate this exposure by matching the currency of our assets to the currency of the financing for our assets. As a result, we substantially reduce our exposure to changes in portfolio value related to changes in foreign currency rates. In addition, substantially all of our net asset exposure to foreign currencies has been hedged with foreign currency forward contracts as of September 30, 2024.
The following table outlines our assets and liabilities that are denominated in a foreign currency (amounts in thousands):
September 30, 2024
GBP
EUR
All Other(1)
Foreign currency assets
£
2,440,787
€
2,238,703
$
1,701,761
Foreign currency liabilities
(1,770,104)
(1,635,574)
(1,324,886)
Foreign currency contracts – notional
(663,345)
(594,609)
(370,636)
Net exposure to exchange rate fluctuations
£
7,338
€
8,520
$
6,239
Net exposure to exchange rate fluctuations in USD(2)
$
9,815
$
9,488
$
6,239
(1)Includes Swedish Krona, Australian Dollar, Canadian Dollar, Swiss Franc, and Danish Krone currencies.
(2)Represents the U.S. Dollar equivalent as of September 30, 2024.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in the company’s reports under the Exchange Act is recorded, processed, and summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by SEC rules and forms and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our “internal control over financial reporting” (as defined in Rule 13a–15(f) of the Exchange Act) that occurred during our most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
86
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of September 30, 2024, we were not involved in any material legal proceedings.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed under ''Part I, Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth information regarding repurchases of shares of our class A common stock during the three months ended September 30, 2024:
Period
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
($ in thousands)(1)
July 1 - July 31, 2024
55,858
$
17.90
55,858
$
149,001
August 1 - August 31, 2024
573,026
17.45
573,026
139,014
September 1 - September 30, 2024
—
—
—
139,014
Total
628,884
$
17.49
628,884
$
139,014
(1)In July 2024, our board of directors authorized the repurchase of up to $150.0 million of our class A common stock. Under the repurchase program, repurchases may be made from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the actual amounts repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. The repurchase program may be changed, suspended or discontinued at any time and does not have a specified expiration date. See Note 14 to our consolidated financial statements and “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Uses of Liquidity” for further information regarding this repurchase program.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Section 13(r) Disclosure
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) of the Exchange Act, we hereby incorporate by reference herein Exhibit 99.1 of this report, which includes disclosures regarding activities at Mundys S.p.A., which may be, or may have been at the time considered to be, an affiliate of Blackstone and, therefore, our affiliate.
Rule 10b5-1 Trading Arrangements
On August 8, 2024, Katharine A. Keenan, our Chief Executive Officer, terminated three separate “Rule 10b5-1 trading arrangements,” as defined in Item 408(c) of Regulation S-K, each of which was intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act and provided for the automatic sale of shares of class A common stock in order to satisfy tax withholding obligations arising from vesting of three separate grants to Ms. Keenan of 52,000 shares of restricted stock each. The terminated arrangements were adopted on February 17, 2022, February 22, 2023 and March 15,
87
2024, and such arrangements were to automatically terminate on the earlier of December 31, 2024, December 31, 2025 and December 31, 2026, respectively, or, with respect to each such arrangement, the completion of all of the contemplated transactions set forth therein.
Subsequently on August 8, 2024, Ms. Keenan adopted a new Rule 10b5-1 trading arrangement, which is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act, that provides for the automatic sale of shares of class A common stock in order to satisfy tax withholding obligations arising from vesting of an aggregate of 51,999 shares of restricted stock previously granted to Ms. Keenan on various dates. The number of shares to be sold under the new arrangement is unknown, as the number of shares will vary based on the extent to which vesting conditions are satisfied and the market price of our class A common stock at the time of vesting. The new arrangement will expire on December 31, 2026, subject to the arrangement’s earlier expiration or completion in accordance with its terms.
The new arrangement relates to sales to cover tax withholding obligations arising from vesting events scheduled to occur after February 5, 2025, six months following the date Ms. Keenan purchased shares of our class A common stock on the open market. All of these sales would have been covered by the terminated arrangements if they had not been terminated.
XBRL Instance Document – the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document
101.SCH
Inline XBRL Taxonomy Extension Schema Document With Embedded Linkbase Documents
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
___________
+This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act or the Exchange Act.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
89
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
