Apollo Commercial Real Estate Finance Inc
For the period ended Dec 31, 2024. Filed Feb 10, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 10, 2025
ARI$2.32-3.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-06.
0001467760-24-000010
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-10.
0000950170-25-017122
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 162 previous paragraphs and 159 current paragraphs.
59 unchanged; 67 reworded; 29 added; 28 removed; 8 previous and 4 current paragraphs rearranged.
Tables are not compared: 15 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (29)
Current report
In March 2024, the SEC adopted amendments to its rules under the Securities Act and the Exchange Act that require disclosure of certain climate-related information in registration statements and annual reports, when material. In April 2024, the SEC chose to stay its newly adopted climate disclosure rules, pending the completion of judicial review. We are currently evaluating the impact of the new rule, if the stay is lifted, on our disclosures.
Current report
Net Income (Loss) Available to Common Stockholders
Current report
Net interest income decreased by $53.2 million during the year ended December 31, 2024 compared to the year ended December 31, 2023. This net decrease was primarily attributable to a decrease in interest income from (i) higher average balance of loans on non-accrual in 2024, (ii) realization of a loss on investment during 2024, and (iii) modifying two commercial mortgage loans from floating to fixed rate terms in 2024. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Current report
Management Fees
Current report
Management fees expense decreased by $1.9 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease was primarily due to a decrease in stockholders' equity (as defined in the Management Agreement) as a result of increased Specific CECL Allowance and realized losses on investments recorded during the year ended December 31, 2024.
Current report
Net realized loss on investments
Current report
During the year ended December 31, 2024, we recorded a $128.2 million net realized loss on investments, consisting of (i) a $127.5 million realized loss related to the extinguishment of the Massachusetts Healthcare Loan (as defined in "Note 4 -
Current report
Commercial Mortgage Loans and Other Lending Assets, Net"), and (ii) a $0.7 million realized loss related to the sale of a commercial mortgage loan collateralized by a hotel property located in Honolulu, HI. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Current report
During the year ended December 31, 2024, we recorded a net increase in our Specific CECL Allowance of $149.5 million, related to two of our subordinate loans. During the first quarter of 2024, we recorded a $142.0 million Specific CECL Allowance related to a mezzanine loan secured by an ultra-luxury residential property in Manhattan, NY, primarily attributable to a reduction in list pricing of remaining units and slower sales pace at the property. During the second quarter of 2024, we recorded a Specific CECL Allowance of $7.5 million on a subordinate loan secured by our interest in a Class A office building in Troy, MI, attributable to low occupancy and limited leasing activity in the property's submarket. Additionally, we recorded an increase and subsequent write-off of $127.5 million of our Specific CECL Allowance related to the Massachusetts Healthcare Loan. The $127.5 million write-off was recorded as a realized loss within net realized loss on investments in our consolidated statement of operations as discussed above.
Current report
Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Current report
For the year ended December 31, 2024, we recorded a net increase in our General CECL Allowance of $6.3 million. The increase was primarily driven by loan originations and the increase in our view of remaining expected term of certain of our loans. The increase was partially offset by the effects of portfolio seasoning and earlier than expected loan repayments.
Current report
Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Current report
During the year ended December 31, 2024, we recorded a net gain of $0.6 million on our interest rate caps. The net gain was primarily driven by a $1.9 million realized gain recorded in relation to our construction financing interest rate cap. The realized gain was attributable to SOFR exceeding the interest rate cap's strike rate throughout the year. Additionally, we recorded a partially offsetting unrealized loss of $1.3 million, driven by a decrease in the interest rate cap's fair value, as it approached its maturity.
Current report
During the year ended December 31, 2023, we recorded a net loss of $0.4 million primarily related to our 2026 Term Loan interest rate cap. Though we recorded a realized gain of $9.7 million driven by an increase in the applicable index rate above the interest rate cap's strike rate, this gain was offset by unrealized losses of $10.1 million, resulting from a decrease in the interest rate cap's fair value as it reached its June 2023 maturity.
Current report
Refer to "Note 11 – Derivatives" for full discussion of interest rate caps.
Current report
Unvested RSUs are net of incremental shares assumed repurchased under the treasury stock method, if dilutive. There were no incremental shares included in the year ended December 31, 2024. For 2023, the weighted-average diluted shares for GAAP were determined using the "if-converted" method.
Current report
Loan matured in September 2024. Negotiations with sponsor currently in process.
Current report
Average month-end balances reflect principal and borrowings outstanding for assets and related debt, respectively.
Current report
Includes average month end asset and debt balance of a commercial mortgage loan, held for sale.
Current report
Net of Specific CECL Allowance.
Current report
As of December 31, 2024, we had $317.4 million of cash on hand, $50.8 million of loan proceeds held by servicer and held approximately $507.2 million of unencumbered assets. We also had $2.1 billion of undrawn capacity under our secured debt arrangements and $134.5 million of additional capacity on our construction financing secured by our Brooklyn Multifamily Development property (as defined in "Note 3 - Fair Value Disclosure"), which is available to fund future construction costs.
Current report
As of December 31, 2024, we had nine secured credit counterparties through wholly-owned subsidiaries. During the year ended December 31, 2024, we entered into one new credit facility and upsized two of our existing credit facilities which provided additional capacity of £366.6 million ($458.8 million converted into USD) and $413.5 million, respectively. Furthermore, we have repaid the full amount of borrowings outstanding on both the Goldman Sachs USD and Santander EUR facilities.
Current report
In March 2023, we entered into a Revolving Credit Facility. The Revolving Credit Facility matures in March 2026 and is secured by certain of our qualifying commercial mortgage loans and real property owned assets. As of December 31, 2024, the Revolving Credit Facility had a capacity of $160.0 million and requires that we maintain an interest coverage ratio of 1.3:1.
Current report
Senior Secured Term Loans
Current report
In August 2022, we obtained construction financing on the Brooklyn Multifamily Development property. The construction financing includes a maximum commitment of $388.4 million, $164.8 million of which was funded when we acquired legal title of the property. As of December 31, 2024, the construction financing had a carrying value of $252.0 million, net of $2.0 million in deferred financing costs.
Current report
In June 2024, we obtained a $73.7 million mortgage secured by our D.C. Hotel property (as defined in "Note 3 - Fair Value Disclosure"). As of December 31, 2024, the mortgage had a carrying value of $72.6 million, net of $1.1 million in deferred financing costs.
Current report
Refer to "Note 5 – Real Estate Owned" of our consolidated financial statements for additional disclosure regarding our debt related to real estate owned.
Current report
Repurchases of Equity Securities
Current report
In March 2020, our board of directors approved a stock repurchase program for up to $150.0 million of our common stock and in February 2021, approved the repurchase of an additional $150.0 million of our common stock. During the year ended December 31, 2024, we repurchased 4,013,405 shares of our common stock under this program at a weighted-average price of $10.15 per share.
Removed paragraphs (28)
Previous report
Net interest income increased by $10.6 million during the year ended December 31, 2023 compared to the same period in 2022. This increase was primarily driven by higher average index rates and was partially offset by placing a first mortgage loan and subordinate loan collateralized by the same ultra-luxury residential-for-sale property in Manhattan on non-accrual status as of May 1, 2023.
Previous report
Net income related to real estate owned increased by $2.4 million during the year ended December 31, 2023 compared to the year ended December 31, 2022. This increase was primarily driven by an increase in net income from hotel operations, prior to depreciation, of $5.2 million and $4.7 million attributable to the D.C. Hotel and the Atlanta Hotel, respectively.
Previous report
This increase was partially offset by a $7.5 million increase in depreciation expense for the year ended December 31, 2023 compared to the year ended December 31, 2022, which was primarily related to the reclassification of the D.C. Hotel from held for sale to held for investment. Upon reclassification on March 1, 2023, we resumed depreciation and recorded depreciation expense representing the amount that would have been recorded had the asset been consistently classified as held for investment since its initial reclassification to held for sale during the first quarter of 2022.
Previous report
Refer to "Note 5 - Real Estate Owned" for full discussion of the reclassification and operations related to real estate owned.
Previous report
Operating Expenses
Previous report
Other income, net
Previous report
Other income, net increased by $2.1 million during the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to an increase in bank interest earned on our cash balances and money market funds as a result of a higher interest rate environment.
Previous report
The net realized gain of $18.7 million during the year ended December 31, 2022 was primarily driven by a $43.6 million realized gain recorded in connection with the title acquisition for one of our first mortgage loans secured by a multifamily development in Brooklyn, NY. Refer to "Note 5 - Real Estate Owned" for more information. This realized gain was partially offset by a (i) $17.9 million realized loss, representing a write-off of a previously recorded Specific CECL Allowance on a first mortgage loan secured by an urban predevelopment property due to the sale of the underlying property, and (ii) a $7.0 million realized loss, representing a write-off of a previously recorded Specific CECL Allowance related to a first mortgage secured by the Atlanta Hotel, which went into maturity default during 2022. Refer to "Note 4 - Commercial Mortgage Loans Subordinate Loans and Other Lending Assets, Net" for more information.
Previous report
During the year ended December 31, 2023, we recorded a net increase to our Specific CECL Allowance of $59.5 million compared to a net decrease of $11.5 million recorded during the year ended December 31, 2022.
Previous report
The $11.5 million decrease of our Specific CECL Allowance during the year ended December 31, 2022 was comprised of (i) a $53.0 million reversal and $15.0 million write-off of a previously recorded Specific CECL Allowance on an urban predevelopment first mortgage loan in Miami, FL and (ii) a $10.0 million reversal of a previously recorded Specific CECL Allowance on a loan related to a multifamily development in Brooklyn, NY. These write-offs and reversals recorded during the year ended December 31, 2022 were offset by the Specific CECL Allowance of $66.5 million recorded in relation to mezzanine loan secured by our interest in an ultra-luxury residential property in Manhattan, NY.
Previous report
Refer to "Note 2 - Summary of Significant Accounting Policies" and "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional information related to our Specific CECL Allowance.
Previous report
Refer to "Note 2 - Summary of Significant Accounting Policies" and "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional information related to our General CECL Allowance.
Previous report
During the year ended December 31, 2023, we recorded a net loss of $0.4 million on our interest rate caps, which included realized gains of $9.7 million. This realized gain was primarily due to LIBOR exceeding the strike rate on our 2026 Term Loan interest rate cap prior to maturing in the second quarter of 2023. The realized gain was offset by unrealized losses which increased as the interest rate cap neared maturity. During the year ended December 31, 2022, our interest rate cap generated a gain of $13.4 million due to rising LIBOR rates, including a realized gain of $5.7 million due to LIBOR exceeding the strike rate on our 2026 Term Loan interest rate cap.
Previous report
Income tax provision
Previous report
During the year ended December 31, 2023, we recorded an income tax provision of $0.4 million. The income tax provision reflects the aggregate income tax of one of our TRS entities for the taxable year ended December 31, 2023. We recorded no income tax provision during the year ended December 31, 2022.
Previous report
During the year ended December 31, 2022, we recorded a $18.7 million net realized gain on investments consisting of (i) a $43.6 million realized gain on investments reflecting the difference between the fair value of a multifamily development property located in Brooklyn, NY acquired through a deed-in-lieu of foreclosure and the amortized cost of the loan at the time of foreclosure, (ii) a $17.9 million realized loss representing a write-off of a previously recorded Specific CECL Allowance on an urban predevelopment first mortgage loan and (iii) a $7.0 million realized loss on a first mortgage secured by a hotel property, representing a write-off of a previously recorded Specific CECL Allowance related to a first mortgage loan in maturity default. Refer to "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" and Note 5 – Real Estate Owned" for additional information.
Previous report
As of December 31, 2023, we had $225.4 million of cash on hand and held approximately $521.5 million of unencumbered assets, consisting of $245.6 million of senior mortgages, $200.5 million of mezzanine loans, and $75.4 million of real estate owned.
Previous report
As of December 31, 2023, we have one interest in an unconsolidated joint venture deemed to be a variable interest entity ("VIE"), of which we are not the primary beneficiary. Therefore, the VIE is not consolidated in our consolidated financial statements as of December 31, 2023. The joint venture owns an underlying property that secures one of our first mortgage loans, and is accounted for as an off-balance-sheet arrangement. Our maximum exposure to loss from this commercial mortgage loan is limited to its carrying value, which as of December 31, 2023 was $99.9 million.
Previous report
Refer to "Note 2 - Summary of Significant Accounting Policies" to our consolidated financial statements for more information.
Previous report
As of December 31, 2023, we had nine counterparties across our secured credit facilities through wholly-owned subsidiaries. During the year ended December 31, 2023, we entered into secured credit facilities with Banco Santander, S.A., New York Branch and Churchill MRA Funding I LLC, which provided a combined $430.0 million of additional capacity. Additionally, during the year ended December 31, 2023 we increased our borrowing capacity on the Atlas Facility, as defined below, by $100.1 million.
Previous report
On February 8, 2023, in connection with the acquisition by certain subsidiaries of Atlas Securitized Products Holdings
Previous report
(“Atlas”), which is a wholly-owned investment of a fund managed by an affiliate of the Manager, of certain warehouse assets
Previous report
and liabilities of the Credit Suisse AG Securitized Products Group ("Credit Suisse AG")("Credit Suisse Facility")(the “Transaction”), the Credit Suisse Facility was acquired by Atlas ("Atlas Facility"). In order to effect the assignment of the Credit Suisse Facility and related agreements, we and one of our subsidiaries, similar to the other sellers and guarantors party to the subject agreements in the Transaction, entered into an Omnibus Assignment, Assumption and Amendment Agreement as well as certain related agreements with Credit Suisse AG and Atlas. Refer to "Note 7 - Secured Debt Arrangements, Net" and "Note 15 - Related Party Transactions" of our Condensed Consolidated Financial Statements for further discussion regarding the transaction.
Previous report
Term Loans
Previous report
Convertible Senior Notes
Previous report
In two separate offerings during 2017, we issued an aggregate principal amount of $345.0 million of 4.75% Convertible Senior Notes due 2022 (the "2022 Notes"), for which we received $337.5 million, after deducting the underwriting discount and offering expenses. During the third quarter of 2022, we repaid the $345.0 million aggregate principal amount of the 2022 Notes.
Previous report
Notes" and, together with the 2022 Notes, the "Convertible Notes"), for which we received $223.7 million after deducting the underwriting discount and offering expenses.
Previous report
Refer to “Note 10 – Convertible Senior Notes, Net” of our Consolidated Financial Statements for additional disclosure regarding our Convertible Notes
Reworded paragraphs (67)
Previous wording
The following discussion should be read in conjunction with our financial statements and accompanying notes included in
Current wording
The following discussion should be read in conjunction with our financial statements and accompanying notes included in Item 8. "Financial Statements and Supplementary Data" of this annual report on Form 10-K.
Previous wording
We are externally managed and advised by the Manager, an indirect subsidiary of Apollo, a global, high-growth alternative asset manager with assets under management of approximately $631.2 billion as of September 30, 2023.
Current wording
We are externally managed and advised by the Manager, an indirect subsidiary of Apollo, a global, high-growth alternative asset manager with assets under management of approximately $751.0 billion as of December 31, 2024.
Previous wording
Certain external events such as public health issues, including the novel coronavirus ("COVID-19"), natural disasters, political and economic instability abroad, concerns regarding the stability of the sovereign debt of certain European countries, and other geopolitical issues, including the ongoing conflicts between Israel and Hamas, as well as further escalation of tensions between Israel and various countries in the Middle East and North Africa, and among Russia, Belarus and Ukraine, and the severe economic sanctions and export controls imposed by the U.S. and other governments against Russia, Belarus and Russian or Belarusian interests, have adversely impacted the global economy and have contributed to significant volatility in financial markets. Due to various uncertainties caused by such external events and recent macroeconomic trends, including inflation and higher interest rates, further business risks could arise. Some of the factors that impacted us to date and may continue to affect us are outlined in Item 1A. "Risk Factors."
Current wording
Certain external events such as public health issues, natural disasters, political and economic instability abroad, concerns regarding the stability of the sovereign debt of certain European countries, and other geopolitical issues, have adversely impacted the global economy and have contributed to significant volatility in financial markets. Due to various uncertainties caused by such external events and recent macroeconomic trends, including inflation and higher interest rates, further business risks could arise. Some of the factors that impacted us to date and may continue to affect us are outlined in Item 1A. "Risk Factors."
Previous wording
For a comparison and discussion of our results of operations and other operating and financial data for the fiscal years ended December 31, 2022 and 2021, see Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our annual report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 8, 2023.
Current wording
Our results of operations discuss fiscal years ended December 31, 2024 and 2023 items and year-to-year comparisons between fiscal years ended December 31, 2024 and 2023. Discussions of prior period items and year-to-year comparisons between fiscal years ended December 31, 2023 and 2022 can be found in our "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our annual report on Form 10-K for the fiscal year ended December 31, 2023.
Previous wording
For the years ended December 31, 2023 and 2022, our net income available to common stockholders was $45.9 million, or $0.29 per diluted share of common stock, and $253.0 million, or $1.68 per diluted share of common stock, respectively.
Current wording
For the years ended December 31, 2024 and 2023, our net income (loss) available to common stockholders was ($131.9) million, or ($0.97) per diluted share of common stock, and $45.9 million, or $0.29 per diluted share of common stock, respectively.
Previous wording
Management fees to related party and General and administrative expenses remained generally the same for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Current wording
Net income related to real estate owned remained generally the same for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Previous wording
During the year ended December 31, 2023, we recorded a $86.6 million net realized loss on investments, compared to the year ended December 31, 2022, in which we recorded a $18.7 million net realized gain. The $86.6 million net realized loss recorded during 2023 was primarily comprised of (i) a $4.8 million realized loss related to the acquisition of the Atlanta Hotel through a deed-in-lieu of foreclosure and (ii) a $82.0 million realized loss representing a write-off of previously recorded Specific CECL Allowance on one of our subordinate loans secured by an ultra-luxury residential property in Manhattan, NY. These losses were partially offset by a $0.2 million gain on investments recorded in connection with the sale of our entire interest in three commercial loans secured by properties in Europe and a partial interest in one commercial loan secured by property located in London, United Kingdom.
Current wording
Comparatively, during the year ended December 31, 2023, we recorded a net realized loss on investments of $86.6 million, consisting of (i) a $4.8 million realized loss related to the acquisition of the Atlanta Hotel through a deed-in-lieu of foreclosure and (ii) a $82.0 million realized loss on investments representing a write-off of previously recorded Specific CECL Allowance on one of our subordinate loans secured by an ultra-luxury residential property in Manhattan, NY. These losses were partially offset by a $0.2 million gain on investments recorded in connection with the sale of our entire interest in three commercial loans secured by properties in Europe and a partial interest in one commercial loan secured by property located in London, UK.
Previous wording
During the year ended December 31, 2023, we repurchased $53.9 million aggregate principal amount of the 2023 Notes at a weighted average price of 99.1%. As a result of these transactions, during the year ended December 31, 2023, we recorded a gain of $0.5 million in our condensed consolidated statement of operations. During the fourth quarter of 2023, we repaid the $176.1 million remaining principal of the 2023 Notes in cash at par.
Current wording
During the year ended December 31, 2023, we repurchased $53.9 million aggregate principal amount of the 5.375% Convertible Senior Notes due 2023 (the "2023 Notes" or "Convertible Notes") at a weighted average price of 99.1%. As a result of this transaction, we recognized a $0.5 million gain on extinguishment of debt. We fully repaid the remaining principal of the 2023 Notes in cash at par during the fourth quarter of 2023.
Previous wording
Decrease (increase) in Specific CECL Allowance, net
Current wording
Increase in Specific CECL Allowance, net
Previous wording
During the year ended December 31, 2023, we recorded a $141.5 million increase to our Specific CECL Allowance, related to two mezzanine loans secured by the same ultra-luxury residential property in Manhattan, NY. As of June 30, 2023, $82.0 million related to the most junior mezzanine loan was deemed unrecoverable. Accordingly, $82.0 million of previously recorded Specific CECL was written-off and recorded as a realized loss within net realized loss on investments during 2023.
Current wording
During the year ended December 31, 2023, we recorded a net increase to our Specific CECL Allowance of $59.5 million. The net increase consisted of a $141.5 million Specific CECL Allowance related to two mezzanine loans secured by the same ultra-luxury residential property in Manhattan, NY with a subsequent write-off of $82.0 million during the same period related to the most junior mezzanine loan which was deemed unrecoverable. The $82.0 million write-off of Specific CECL Allowance was recorded as a realized loss within net realized loss on investments in our 2023 consolidated statement of operations as discussed above.
Previous wording
Decrease in General CECL Allowance, net
Current wording
Decrease (increase) in General CECL Allowance, net
Previous wording
Our General CECL Allowance decreased by $0.1 million during the year ended December 31, 2023 compared to a decrease of $6.1 million for the same period in 2022. The decrease recorded during 2023 was primarily related to portfolio seasoning and loan repayments outpacing originations. The decrease was partially offset by the increase in our view of remaining expected term of certain of our loans. The decrease in General CECL Allowance recorded during the year ended December 31, 2022, was primarily due to portfolio seasoning and changes in expected loan repayment dates, which were partially offset by a more adverse macroeconomic outlook.
Current wording
During the year ended December 31, 2023, we recorded a net decrease in our General CECL Allowance of $0.1 million primarily driven by the effects of portfolio seasoning and loan repayments outpacing originations, which was partially offset by the increase in our view of remaining expected term of certain of our loans.
Previous wording
Foreign currency translation loss and gain on derivative instruments
Current wording
Foreign currency translation gain and loss on derivative instruments
Previous wording
Foreign currency gains and losses on derivative instruments are evaluated on a combined basis and the net impact for the years ended December 31, 2023 and 2022 was a net gain of $3.8 million and $30.6 million, respectively. We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than USD.
Current wording
Foreign currency gains and losses on derivative instruments are evaluated on a combined basis and the net impact for the year ended December 31, 2024 and year ended December 31, 2023 was a net gain of $15.1 million and $3.8 million, respectively.
Previous wording
During the year ended December 31, 2023, both the GBP and the EUR rates rose in relation to USD while both rates fell considerably during the year ended December 31, 2022. The rise in rates resulted in a loss on our foreign currency forward contracts and a gain related to foreign currency translation. The change in net gain for the year ended December 31, 2023 compared to the year ended December 31, 2022 is predominantly due to lower forward point estimates and a decrease in value on forward currency contracts related to our net interest hedges for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Current wording
The net gain for the year ended December 31, 2024 was higher than the net gain for the year ended December 31, 2023 due to lower forward point estimates.
Previous wording
Gain (loss) on interest rate hedging instruments
Current wording
Gain (loss) on interest rate hedges
Previous wording
Distributable Earnings, a non-GAAP financial measure, is defined as net income available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity-based compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share settlement to satisfy income tax withholding), (ii) any unrealized gains or losses or other non-cash items (including depreciation and amortization related to real estate owned) included in net income available to common stockholders, (iii) unrealized income from unconsolidated joint ventures, (iv) foreign currency gains (losses), other than (a) realized gains/(losses) related to interest income, and (b) forward point gains/(losses) realized on our foreign currency hedges, and (v) provision for loan losses. Distributable Earnings may also be adjusted to exclude certain other non-cash items, as determined by the Manager and approved by a majority of our independent directors.
Current wording
Distributable Earnings, a non-GAAP financial measure, is defined as net income available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity-based compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share settlement to satisfy income tax withholding), (ii) any unrealized gains or losses or other non-cash items (including depreciation and amortization related to real estate owned) included in net income available to common stockholders, (iii) unrealized income from unconsolidated joint ventures, (iv) foreign currency gains (losses), other than (a) realized gains/(losses) related to interest income, and (b) forward point gains/(losses) realized on our foreign currency hedges, and (v) provision for current expected credit losses. Distributable Earnings may also be adjusted to exclude certain other non-cash items, as determined by the Manager and approved by a majority of our independent directors.
Previous wording
For theyear ended December 31, 2023, our Distributable Earnings were $157.5 million, or $1.09 per share, as compared to $239.3 million, or $1.67 per share, for the prior year.
Current wording
For the year ended December 31, 2024, our Distributable Earnings were $61.3 million, or $0.43 per share, as compared to $157.5 million, or $1.09 per share for the prior year.
Previous wording
Distributable Earnings per weighted average diluted share is useful to investors for various reasons, including the following: (i) conversion of Convertible Notes to shares requires both the holder of a note to elect to convert the Convertible Note and for us to elect to settle the conversion in the form of shares (ii) future conversion decisions by note holders will be based on our stock price in the future, which is presently not determinable; (iii) the exclusion of shares issued in connection with a potential conversion of the Convertible Notes from the computation of Distributable Earnings per weighted-average diluted share is consistent with how we treat other unrealized items in our computation of Distributable Earnings per weighted-average diluted share; and (iv) we believe that when evaluating our operating performance, investors and potential investors consider our Distributable Earnings relative to our actual distributions, which are based on shares outstanding and not shares that might be issued in the future.
Current wording
The weighted-average diluted shares outstanding used for Distributable Earnings per weighted-average diluted share has been adjusted from weighted-average diluted shares under GAAP to exclude shares issued from a potential conversion of the Convertible Notes. The Convertible Notes were fully repaid during the fourth quarter 2023, and as such, no adjustment was applied in 2024. Consistent with the treatment of other unrealized adjustments to Distributable Earnings, these potentially issuable shares are excluded until a conversion occurs. We believe that excluding shares issued in connection with a potential conversion of the Convertible Notes from our computation of Distributable Earnings per weighted-average diluted share is useful to investors for various reasons, including the following: (i) conversion of Convertible Notes to shares requires both the holder of a note to elect to convert the Convertible Note and for us to elect to settle the conversion in the form of shares; (ii) future conversion decisions by note holders will be based on our stock price in the future, which is presently not determinable; (iii) the exclusion of shares issued in connection with a potential conversion of the Convertible Notes from the computation of Distributable
Previous wording
We believe it is useful to our investors to present Distributable Earnings prior to net realized gains (losses) on investments and gain on extinguishment of debt to reflect our operating results because (i) our operating results are primarily comprised of earning interest income on our investments net of borrowing and administrative costs, which comprise our ongoing operations and (ii)it has been a useful factor related to our dividend per share because it is one of the considerations when a dividend is determined. We believe that our investors use Distributable Earnings and Distributable Earnings prior to net realized gains (losses) on investments and gain on extinguishment of debt, or a comparable supplemental performance measure, to evaluate and compare the performance of our company and our peers.
Current wording
We believe it is useful to our investors to present Distributable Earnings prior to net realized loss on investments and gain on extinguishment of debt to reflect our operating results because (i) our operating results are primarily comprised of earning interest income on our investments net of borrowing and administrative costs, which comprise our ongoing operations and (ii) it has been a useful factor related to our dividend per share because it is one of the considerations when a dividend is determined. We believe that our investors use Distributable Earnings and Distributable Earnings prior to net realized loss on investments and gain on extinguishment of debt, or a comparable supplemental performance measure, to evaluate and compare the performance of our company and our peers.
Previous wording
A significant limitation associated with Distributable Earnings as a measure of our financial performance over any period is that it excludes unrealized gains (losses) from investments. In addition, our presentation of Distributable Earnings may not be comparable to similarly-titled measures of other companies, that use different calculations. As a result, Distributable Earnings should not be considered as a substitute for our GAAP net income as a measure of our financial performance or any measure of our liquidity under GAAP. Distributable Earnings are reduced for realized losses on loans which include losses that management believes are near certain to be realized.
Current wording
A significant limitation associated with Distributable Earnings as a measure of our financial performance over any period is that it excludes unrealized gains (losses) from investments. In addition, our presentation of Distributable Earnings may not be comparable to similarly-titled measures of other companies, that use different calculations. As a result, Distributable Earnings should not be considered as a substitute for our GAAP net income as a measure of our financial performance or any measure of our liquidity under GAAP. Distributable Earnings are reduced for realized losses and increased for realized gains.
Previous wording
The table below summarizes the reconciliation from net income available to common stockholders to Distributable Earnings and Distributable Earnings prior to net realized gains (losses) on investments and gain on extinguishment of debt ($ in thousands):
Current wording
The table below summarizes the reconciliation from net income available to common stockholders to Distributable Earnings and Distributable Earnings prior to net realized loss on investments and gain on extinguishment of debt ($ in thousands):
Previous wording
During the year ended December 31, 2023, we recorded $86.6 million net realized loss on investments consisting of (i) a $82.0 million realized loss representing a write-off of previously recorded Specific CECL Allowance on one of our subordinate loans secured by an ultra-luxury residential property in Manhattan, NY, (ii) a $4.8 million realized loss related to the acquisition of a hotel property through a deed-in-lieu of foreclosure and (iii) a $0.2 million gain on loan sales. Refer to Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" and "Note 5 – Real Estate Owned" for additional information.
Current wording
Net realized loss on investment for the year ended December 31, 2024 includes a realized loss of $127.5 million related to the Massachusetts Healthcare Loan and a $0.7 million loss on the sale of a commercial mortgage loan. Net realized loss on investment for the year ended December 31, 2023 includes (i) $4.8 million realized loss related to the acquisition of the hotel property in Atlanta, GA through a deed-in-lieu of foreclosure, (ii) $82.0 million realized loss representing a write-off of previously recorded Specific CECL Allowance on one of our subordinate loans secured by an ultra-luxury residential property in Manhattan, NY, (iii) $0.2 million net realized gain on loan sales. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for full discussion.
Previous wording
During the year ended December 31, 2023, we recorded $0.5 million gain on extinguishment of debt related to a partial repurchase of our 2023 Notes. See "Note 10 - Convertible Senior Notes, Net" for full discussion of this transaction.
Current wording
$0.5 million realized gains on extinguishment of debt was recorded during the year ended December 31, 2023 in connection with partial repurchases of our 2023 Notes. See "Note 10 – Convertible Senior Notes, Net" for full discussion.
Previous wording
The table below calculates our book value per share ($ in thousands, except per share data):
Current wording
The following table calculates our book value per share ($ in thousands, except per share data):
Previous wording
The table below shows the changes in our book value per share:
Current wording
The following table shows the changes in our book value per share:
Previous wording
(1)Includes net unrealized gain on forward currency contracts and interest hedges, and realized gain on forward currency contracts related to principal outside impact of forward points
Current wording
Includes net unrealized loss on forward currency contracts and interest hedges, and realized loss on forward currency contracts related to principal outside impact of forward points.
Previous wording
We believe that presenting book value per share with sub-totals prior to the CECL Allowances and depreciation and amortization is useful for investors for various reasons, including, among other things, analyzing our compliance with financial covenants related to tangible net worth and debt-to-equity under our secured debt arrangements and Term Loans, which permit us to add the General CECL Allowance to our GAAP stockholders' equity. Given that our lenders consider book value per share prior to the General CECL Allowance as an important metric related to our debt covenants, we believe disclosing book value per share prior to the General CECL Allowance is important to investors such that they have the same visibility. We further believe that presenting book value before depreciation and amortization is useful to investors since it is a non-cash expense included in net income and is not representative of our core business and ongoing operations.
Current wording
We believe that presenting book value per share with sub-totals prior to the CECL Allowances and depreciation is useful for investors for various reasons, including, among other things, analyzing our compliance with financial covenants related to tangible net worth and debt-to-equity under our secured debt arrangements and senior secured term loan, which permit us to add the General CECL Allowance to our GAAP stockholders' equity. Given that our lenders consider book value per share prior to the General CECL Allowance as an important metric related to our debt covenants, we believe disclosing book value per share prior to the General CECL Allowance is important to investors such that they have the same visibility. We further believe that presenting book value before depreciation and amortization is useful to investors since it is a non-cash expense included in net income and is not representative of our core business and ongoing operations.
Previous wording
During the year ended December 31, 2023, we committed $734.1 million of capital to loans ($456.2 million was funded at closing). In addition, during the year ended December 31, 2023, we received $1.2 billion in repayments and sales and funded $472.9 million for commitments closed prior to 2023.
Current wording
During the year ended December 31, 2024, we committed $1.9 billion of capital to new loans ($1.3 billion was funded at closing), and provided $627.4 million of add-on fundings, including £168 million ($213 million in USD) to a first mortgage loan secured by a portfolio of pubs across the United Kingdom, that was originated in December 2023. During the year ended December 31, 2024, we received $2.5 billion in loan repayments and sales.
Previous wording
(1) Based on the applicable benchmark rates as of December 31, 2023 on the floating rate loans and includes zero percent coupon and yield for loans on non-accrual.
Current wording
Weighted-Average Coupon and Weighted-Average All-in Yield are based on the applicable benchmark rates as of December 31, 2024 on the floating rate loans.
Previous wording
(2) Includes the amortization of deferred origination fees, loan origination costs and accrual of both extension and exit fees. Excludes the benefit of forward points on currency hedges relating to loans denominated in currencies other than USD.
Current wording
Weighted-Average All-in Yield includes the amortization of deferred origination fees, loan origination costs and accrual of both extension and exit fees. Weighted-Average All-in Yield excludes the benefit of forward points on currency hedges relating to loans denominated in currencies other than USD.
Previous wording
(3) Gross of deferred financing costs of $13.3 million.
Current wording
Gross of deferred financing costs of $8.8 million.
Previous wording
(4) Includes weighted average spread and applicable benchmark rates as of December 31, 2023 on secured debt arrangements.
Current wording
Cost of funds includes weighted-average spread and applicable benchmark rates as of December 31, 2024 on secured debt arrangements.
Previous wording
(5) Represents loan portfolio at amortized cost less secured debt outstanding.
Current wording
Represents loan portfolio at carrying value less secured debt outstanding.
Previous wording
The following table provides loan-by-loan details of our commercial mortgage loan portfolio and subordinate loan and other lending assets portfolio as of December 31, 2023 ($ in millions):
Current wording
The following table provides additional details of our commercial mortgage loans, subordinate loans, and other lending assets portfolio as of December 31, 2024 ($ in millions):
Previous wording
(1)Amortized cost for these loans is net of the recorded Specific CECL Allowance.
Current wording
Amortized cost for these loans is net of the recorded Specific CECL Allowance.
Previous wording
(2)Loans are secured by the same property.
Current wording
Loans are secured by the same property.
Previous wording
(3)Includes portfolio of office, industrial, and retail property types.
Current wording
Includes portfolio of office, industrial, and retail property types.
Previous wording
(4)Total may not foot due to rounding.
Current wording
Total may not foot due to rounding.
Previous wording
Our average asset and related debt balances for the year ended December 31, 2023 were ($ in thousands):
Current wording
Our average asset and debt balances for the year ended December 31, 2024 were ($ in thousands):
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Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" and "Note 5 – Real Estate Owned" for additional detail.
Current report — wording carried from elsewhere
Earnings per weighted-average diluted share is consistent with how we treat other unrealized items in our computation of Distributable Earnings per weighted-average diluted share; and (iv) we believe that when evaluating our operating performance, investors and potential investors consider our Distributable Earnings relative to our actual distributions, which are based on shares outstanding and not shares that might be issued in the future.
Current report — wording carried from elsewhere
As of December 31, 2024, we had £716.8 million, €493.9 million, and kr2.0 billion ($1.6 billion assuming conversion into USD as of December 31, 2024) of borrowings outstanding under the Barclays Private Securitization secured by certain of our commercial mortgage loans.
Current report — wording carried from elsewhere
Debt Related to Real Estate Owned
Rearranged previous paragraphs (8)
Previous report — wording carried elsewhere
Net Income Available to Common Stockholders
Previous report — wording carried elsewhere
Net realized gain (loss) on investments
Previous report — wording carried elsewhere
During the year ended December 31, 2023, we repurchased $53.9 million aggregate principal of the 5.375% Convertible Senior Notes due 2023 (the "2023 Notes") and realized a $0.5 million gain on extinguishment of debt. There was no repurchase activity for the year ended December 31, 2022.
Previous report — wording carried elsewhere
Refer to "Note 10 - Convertible Senior Notes, Net" for further discussion.
Previous report — wording carried elsewhere
The weighted-average diluted shares outstanding used for Distributable Earnings per weighted-average diluted share has been adjusted from weighted-average diluted shares under GAAP to exclude shares issued from a potential conversion of the Convertible Notes. Consistent with the treatment of other unrealized adjustments to Distributable Earnings, these potentially issuable shares are excluded until a conversion occurs, which we believe is a useful presentation for investors. We believe that excluding shares issued in connection with a potential conversion of the Convertible Notes from our computation of
Previous report — wording carried elsewhere
would be committed to protect during periods of volatility and market disruption.
Previous report — wording carried elsewhere
assessment or is prescriptive as to which specific risk rating is assigned to a specific loan. We apply these various factors on a case-by-case basis depending on the facts and circumstances for each loan, and the different factors may be given different weightings in different situations. As of both December 31, 2023 and 2022, the weighted-average risk rating of the loan portfolio was 3.0, respectively.
Previous report — wording carried elsewhere
During the fourth quarter of 2018, we issued $230.0 million of the 5.375% Convertible Senior Notes due 2023 (the "2023