Claros Mortgage Trust Inc

Note 1. Organ ization

Claros Mortgage Trust, Inc. (referred to throughout this report as the “Company,” “we,” “us” and “our”) is a Maryland Corporation formed on April 29, 2015 for the purpose of creating a diversified portfolio of income-producing loans collateralized by institutional quality commercial real estate. We commenced operations on August 25, 2015 (“Commencement of Operations”) and generally conduct our business through wholly-owned subsidiaries. Unless the context requires otherwise, any references to the Company refers to the Company and its consolidated subsidiaries. The Company is traded on the New York Stock Exchange, or NYSE, under the symbol “CMTG”.

We elected and intend to maintain our qualification to be taxed as a real estate investment trust (“REIT”) under the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), for U.S. federal income tax purposes. As such, we generally are not subject to U.S. federal income tax on that portion of our income that we distribute to stockholders. See Note 13 – Income Taxes for further detail.

We are externally managed by Claros REIT Management LP (the “Manager”), our affiliate, through a management agreement (the “Management Agreement”) pursuant to which our Manager provides a management team and other professionals who are responsible for implementing our business strategy, subject to the supervision of our board of directors (the “Board”). In exchange for its services, our Manager is entitled to management fees and, upon the achievement of required performance hurdles, incentive fees. See Note 11 – Related Party Transactions for further detail.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

We consolidate all entities that are controlled either through majority ownership or voting rights. We also identify entities for which control is achieved through means other than through voting rights (a variable interest entity or “VIE”) using the analysis as set forth in Accounting Standards Codification (“ASC”) 810, Consolidation of Variable Interest Entities, and determine when and which variable interest holder, if any, should consolidate the VIE. We do not have any consolidated variable interest entities as of December 31, 2024 and 2023. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Estimates that are particularly susceptible to our judgment include, but are not limited to, the adequacy of our current expected credit loss reserve, the determination of the fair value of real estate assets acquired and liabilities assumed, and the impairment of certain assets.

Risks and Uncertainties

In the normal course of business, we primarily encounter two significant types of economic risk: credit and market. Credit risk is the risk of default on our loans receivable that results from a borrower’s or counterparty’s inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of the loans receivable due to changes in interest rates, spreads or other market factors, including risks that impact the value of the collateral underlying our loans. We believe that the carrying values of our loans receivable are reasonable taking into consideration these risks.

Tax Risks - We are subject to significant tax risks. If we fail to maintain our qualification as a REIT in a given taxable year, we may be subject to penalties as well as federal, state and local income tax on our taxable income, which could be material. We will also not be able to qualify as a REIT for the subsequent four taxable years, unless entitled to relief under certain statutory provisions.

A REIT must distribute at least 90% of its taxable income to its stockholders, determined without regard to the deduction for dividends paid and excluding net capital gains. In addition to the 90% distribution requirement, a REIT is subject to a nondeductible excise tax if it fails to make certain minimum distributions by calendar year-end. The excise tax imposed is equal to 4% of the excess of the required distribution (specified under U.S. federal tax law) over the distributed amount for such year. Distribution of the remaining balance may extend until timely filing of the REIT’s tax return in the subsequent taxable year. Qualifying distributions of taxable income are deductible by a REIT in computing taxable income.

Regulatory Risks - We are subject to significant regulatory risks. If we were unable to rely upon an exemption from registration available under the Investment Company Act of 1940, as amended, we could be required to restructure our assets or activities, including the disposition of assets during periods of adverse market conditions that could result in material losses to us.

Loans Receivable Held-for-Investment

Loans that we have originated or acquired and have the intent and ability to hold to maturity or payoff are reported at their unpaid principal balances net of any unamortized deferred fees and discounts and expected credit loss reserves, if applicable. Loan origination, extension, and exit fees are deferred and recognized in interest income over the estimated life of the loans using the effective interest method, adjusted for actual prepayments.

Loans Receivable Held-for-Sale

Loans that we have originated or acquired and for which we have an intent and ability to sell are classified as loans receivable held-for-sale and are reflected on our consolidated balance sheet at the lower of amortized cost or estimated fair value. If upon reclassification to held-for-sale the estimated value of expected sale proceeds is below the loan’s amortized cost generally as a result of a diminution in the value of the collateral asset, a specific CECL reserve is recorded and subsequently charged-off in the period in which we have determined the loan meets the held-for-sale criteria. Once a loan is classified as held-for-sale, subsequent adjustments to the fair value of such loan are reflected within valuation adjustment for loans receivable held-for-sale on our consolidated statements of operations.

Non-cash Advances in Lieu of Interest

We hold certain loans whereby a portion of the loan’s unfunded commitment may be used to satisfy monthly debt service, so long as certain conditions are met. As a result, such loan’s unpaid principal balance increases on the interest payment date and we do not receive cash. This feature is referred to as non-cash advance in lieu of interest, and the increase in unpaid principal balance is reflected in the operating section of our consolidated statements of cash flows, as opposed to the investing section as if the cash had been directly advanced to a borrower. We also have certain financings that allow for non-cash advances in lieu of interest, and the increase in unpaid principal balance is reflected in the operating section of our consolidated statements of cash flows, as opposed to the financing section as if cash had been directly received by us. In either case, repayments of non-cash advances in lieu of interest for both our loans receivable and our financings are reflected in the operating section of our consolidated statements of cash flows, except if the loan receivable is sold, in which case all proceeds from the loan sale are reflected in the investing section of our consolidated statements of cash flows.

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

General CECL Reserve

Our loans are typically collateralized by real estate, or in the case of mezzanine loans, by an equity interest in an entity that owns real estate. We consider key credit quality indicators in underwriting loans and estimating credit losses, including: the capitalization of borrowers and sponsors; the expertise of the borrowers and sponsors in a particular real estate sector and geographic market; collateral type; geographic region; use and occupancy of the property; property market value; loan-to-value (“LTV”) ratio; loan amount and lien position; our risk ratings; and prior experience with the borrower/sponsor. This information is used to assess the financial and operating capability, experience and profitability of the borrower/sponsor. Ultimate repayment of our loans is sensitive to interest rate changes, general economic conditions, liquidity, LTV ratio, existence of a liquid investment sales market for commercial properties, and availability of replacement financing.

We regularly evaluate on a loan-by-loan basis, the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property, the financial and operating capability of the borrower/sponsor, the financial strength of loan guarantors, if any, and the overall economic environment, real estate sector, the geographic sub-market in which the borrower operates. Such analyses are completed and reviewed by asset management personnel and evaluated by senior management on at least a quarterly basis, utilizing various data sources, including, to the extent available, (i) periodic financial data such as property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections, (iii) sales and financing comparables, (iv) current credit spreads for refinancing and (v) other relevant market data.

We primarily arrive at our general CECL reserve using the Weighted Average Remaining Maturity, or WARM method, which is considered an acceptable loss rate method for estimating CECL reserves by the Financial Accounting Standards Board (“FASB”). The application of the WARM method to estimate a general CECL reserve requires judgment, including the appropriate historical loan loss reference data, the expected timing and amount of future loan fundings and repayments, the current credit quality of our portfolio, and our expectations of performance and market conditions over the relevant time period.

The WARM method requires us to reference historical loan loss data from a comparable data set and apply such loss rate to each of our loans over their expected remaining duration, taking into consideration expected economic conditions over the forecasted timeframe. Our general CECL reserve reflects our forecast of the current and future macroeconomic conditions that may impact the performance of the commercial real estate assets securing our loans and the borrower’s ultimate ability to repay. These estimates include unemployment rates, price indices for commercial properties, and market liquidity, all of which may influence the likelihood and magnitude of potential credit losses for our loans during their expected remaining duration. Additionally, further adjustments may be made based upon loan positions senior to ours, the risk rating of a loan, whether a loan is a construction loan and whether the loan’s initial maturity is near-term, or the economic conditions specific to the property type of a loan’s underlying collateral.

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

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

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

Very Low Risk

Low Risk

Medium Risk

High Risk/Potential for Loss: A loan that has a risk of realizing a principal loss

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

Specific CECL Reserve

In certain circumstances, we may determine that a loan is no longer suited for the WARM method due to (i) its unique risk characteristics, (ii) we have deemed the borrower/sponsor to be experiencing financial difficulty and the repayment of the loan’s principal is collateral-dependent and/or (iii) we anticipate assuming legal title/and or physical possession of the underlying collateral property and the fair value of the collateral asset is determined to be below our carrying value. We may instead elect to employ different methods to estimate credit losses that also conform to ASC 326 and related guidance. For such loans, we would separately measure the specific reserve for each loan by using the estimated fair value of the loan’s collateral. If the estimated fair value of the collateral is less than the carrying value of the loan, an asset-specific reserve is created as a component of our overall current expected credit loss reserve. Specific reserves are equal to the excess of a loan’s carrying value to the estimated fair value of the collateral. If recovery of our investment is expected from the sale of the collateral and such costs will reduce amounts recovered by us, specific reserves are equal to the excess of a loan’s carrying value to the estimated fair value of the collateral less estimated costs to sell.

If we have determined that a loan or a portion of a loan is uncollectible, we will write off the amount deemed uncollectible through an adjustment to our CECL reserve. If we have determined that accrued interest receivable previously recognized under our revenue recognition policy is uncollectible, we will either reverse such amount against interest income or write off such amount through an adjustment to our CECL reserve. Significant judgment is required in determining impairment and in estimating the resulting credit loss reserve, and actual losses, if any, could materially differ from those estimates.

See Note 3 - Loan Portfolio - Current Expected Credit Losses for further detail.

Financial Instruments

Financial instruments held by us include cash and cash equivalents, restricted cash, loan principal payments held by servicer, loans receivable held-for-investment, loans receivable held-for-sale, other assets, other liabilities, dividends payable, management fee payable - affiliate, repurchase agreements, term participations, notes payable, loan participations sold, secured term loans and debt related to real estate owned. The estimated fair value of cash and cash equivalents, restricted cash, loan principal payments held by servicer, other assets (excluding the fair value of our interest rate cap), other liabilities, dividends payable, and management fee payable - affiliate approximates their current carrying amount.

GAAP requires the categorization of the fair value of financial instruments into three broad levels that form a hierarchy based on the transparency of inputs to the valuation. See Note 8 – Fair Value Measurements for further detail.

Cash and Cash Equivalents

We consider all investments with original maturities of three months or less, at the time of acquisition, to be cash equivalents. We maintain cash accounts which from time to time exceed the insured maximum of $250,000 per account.

Restricted Cash

Restricted cash includes reserve balances for real estate taxes and capital improvements for our real estate owned hotel portfolio, as well as lockbox accounts held pursuant to the terms of certain financings.

Real Estate Owned (and Related Debt)

We may assume legal title and/or physical possession of the underlying collateral property of a defaulted loan through foreclosure, a deed-in-lieu of foreclosure, or an assignment-in-lieu of foreclosure. If we intend to hold, operate or develop the property for a period of at least 12 months, the asset is classified as real estate owned, net on our consolidated balance sheets. Real estate owned is initially recorded at estimated fair value and is subsequently presented net of accumulated depreciation. Depreciation is computed using a straight-line method over estimated useful lives ranging from 5 to 40 years and is recognized in depreciation and amortization expense on our consolidated statements of operations. If the held-for-sale criteria prescribed by ASC 360, Property, Plant, and Equipment, are met, the asset is classified as real estate owned held-for-sale and reflected at the lower of amortized cost and fair value less estimated transaction costs on our consolidated balance sheets. Once classified as real estate owned held-for-sale, we cease recognition of the related depreciation and amortization.

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

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

Real estate assets held-for-investment are evaluated for indicators of impairment on a quarterly basis. Factors that we may consider in our impairment analysis include, among others: (1) significant underperformance relative to historical or anticipated operating results; (2) significant negative industry or economic trends; (3) costs necessary to extend the life or improve the real estate asset; (4) significant increase in competition; and (5) ability to hold and dispose of the real estate asset in the ordinary course of business. A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate asset over the estimated remaining holding period is less than the carrying amount of such real estate asset. Cash flows include operating cash flows and anticipated capital proceeds generated by the sale of the real estate asset. If the sum of such estimated undiscounted cash flows is less than the carrying amount of the real estate asset, an impairment charge is recorded equal to the excess of the carrying value of the real estate asset over its estimated fair value. When determining the estimated fair value of a real estate asset, we make certain assumptions including consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon our estimate of a capitalization rate and discount rate. There wereno impairments of our real estate owned held-for-investment assets through December 31, 2024.

Debt assumed in a foreclosure, deed-in-lieu of foreclosure, or assignment-in-lieu of foreclosure of real estate is recorded at its estimated fair value at the time of the acquisition and is subsequently presented net of unamortized deferred financing costs. As of December 31, 2024, debt related to real estate owned is partial recourse to us.

See Note 5 - Real Estate Owned for further detail of our real estate owned assets.

Equity Method Investment

We account for our investments in entities in which we have the ability to significantly influence, but do not have a controlling interest, by using the equity method of accounting. Under the equity method for which we have not elected a fair value option, the investment, originally recorded at cost, is adjusted to recognize our share of earnings or losses as they occur and for additional contributions made or distributions received. We look at the nature of the cash distributions received to determine the proper character of cash flow distributions on the accompanying consolidated statements of cash flows as either returns on investment, which would be included in operating activities, or returns of investment, which would be included in investing activities.

At each reporting period we assess whether there are any indicators of other-than-temporary impairment of our equity investments. There wereno other-than-temporary impairments of our equity method investment through December 31, 2024.

Derivative Financial Instruments

In the normal course of business, we are exposed to the effect of interest rate changes and may undertake one or more strategies to limit these risks through the use of derivatives. We may use derivatives to reduce the impact that changes in interest rates will have on our floating rate assets and floating rate liabilities. Such derivatives may consist of interest rate swaps, caps, collars, and floors.

As of December 31, 2024 and 2023, our only derivative is our interest rate cap, which is recognized on our consolidated balance sheets at fair value within other assets. To determine the fair value of our interest rate cap, we use a variety of methods and assumptions that are based on market conditions as of the balance sheet date, such as discounted cash flows and option-pricing models.

We have not designated any derivatives as hedges to qualify for hedge accounting for financial reporting purposes and fluctuations in the fair value of derivatives have been recognized as an unrealized gain or loss on interest rate cap in our consolidated statements of operations. Payments received from our counterparties in connection with our interest rate cap are recognized as proceeds from interest rate cap on our consolidated statements of operations.

Other Assets

Other assets generally include interest receivable, net of general CECL reserves related to interest receivable for loans subsequently placed on non-accrual status, miscellaneous receivables, prepaid expenses, deferred tax asset (net of any valuation allowance), deferred financing costs, net related to certain of our secured financings, interest rate cap at fair value, and certain lease intangible assets, net.

Deferred Financing Costs

Deferred financing costs included within other assets on our consolidated balance sheets include costs related to the establishment and ongoing operations of our repurchase agreements, term participation facility, and short-term funding facility. These costs are amortized as interest expense using the straight-line method over the contractual term of the repurchase agreements or the contractual term of the collateral asset for the term participation facility. Such amounts may include fees paid to the financing counterparty when financing a specific asset.

Costs related to obtaining notes payable, loan participations sold, secured term loans, and debt related to real estate owned are presented on our consolidated balance sheets as a direct deduction from the carrying amount of the respective obligations. These costs are amortized over the contractual term of the obligations as interest expense using the effective interest method.

Secured Financings

We evaluate whether a financing transaction constitutes a sale based on whether (i) the financial asset was legally isolated, (ii) control of the financial asset has been transferred to the transferee, (iii) the transfer imposed any condition that would constrain the transferee from pledging the financial asset received, and (iv) we have continuing involvement with the transferred financial asset.

Repurchase Agreements

We finance certain of our loans receivable using repurchase agreements, whereby an asset is sold to a counterparty to be repurchased at a later date at a predetermined price. Such arrangements are accounted for as secured financings under GAAP and are presented as a liability on our consolidated balance sheets. Prior to repurchase, interest is incurred to the counterparty based upon the sales price and a predetermined interest rate. Borrowings under the repurchase agreements are partially recourse to us.

Term Participation Facility

We finance certain of our loans receivable using our term participation facility, which allows us to sell senior interests in such loans to our counterparty. Such arrangements are accounted for as secured financings under GAAP and are presented as a liability on our consolidated balance sheets. Borrowings under the term participation facility are partially recourse to us.

Loan Participations Sold, Net

We may finance certain of our loans via the sale of a participation in such loan to a counterparty. However, we present the loan participation sold as a liability, net of any unamortized deferred financing costs on our consolidated balance sheets when the arrangement does not qualify as a sale under GAAP.

Notes Payable, Net

We finance certain of our loans receivable using direct financing, collateralized by the loans receivable, which are presented as liability net of any unamortized deferred financing costs on our consolidated balance sheets. Certain of our notes payable are partially recourse to us.

Secured Term Loan, Net

Our secured term loan is collateralized by a pledge of equity in certain subsidiaries and their related assets and is presented on our consolidated balance sheets net of any unamortized original issue discount. Generally, transaction expenses incurred in connection with obtaining or modifying our secured term loan are deferred and recognized as interest expense over the life of the loan using the effective interest method.

Other Liabilities

Other liabilities include interest payable, accrued expenses, general CECL reserve related to our unfunded loan commitments, reserves and deposits held for loans receivable, and below market lease values, net.

Revenue Recognition

Interest income from loans receivable is recorded on the accrual basis based on the unpaid principal balance and the contractual terms of the loans. Fees, premiums, discounts and direct costs associated with these loans are initially deferred and recognized as an adjustment to unpaid principal balance until the loan is advanced and are then amortized or accreted into interest income over the term of the loan as an adjustment to yield using the effective interest method based on expected cash flows through the expected recovery period. Income accrual may be suspended for loans when we determine that the payment of income and/or principal is no longer probable. Once income accrual is suspended, any previously recognized interest income deemed uncollectible is either reversed against interest income or reserved for under our CECL reserve. Factors considered when making this determination include, but are not limited to, our assessment of the underlying collateral value, delinquency in excess of 90 days, and overall market conditions. While on non-accrual status, based on our estimation as to collectability of principal, payments received from the borrower are either accounted for on a cash basis, where interest income is recognized only upon actual receipt of cash, or on a cost-recovery basis, where all cash receipts reduce a loan’s carrying value. If and when a loan is brought back into compliance with its contractual terms, and we have determined that the borrower has demonstrated an ability and willingness to continue to make contractually required payments related to the loan, we resume accrual of interest.

Revenue from real estate owned represents revenues associated with the operations of our hotel portfolio and mixed-use property classified as real estate owned.

Revenue from the operations of the hotel portfolio is recognized when guestrooms are occupied, services have been rendered or fees have been earned. Hotel revenues consist of room sales, food and beverage sales and other hotel revenues and are recorded net of any discounts, sales and other taxes collected from customers. In accordance with ASC 606, Revenue from Contracts with Customers, revenue from our hotel portfolio is recognized when we transfer promised services to customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those services. ASC 606 includes a five-step framework that requires an entity to: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when the entity satisfies a performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when the performance obligation is satisfied. Our contracts generally have a single performance obligation, such as renting a hotel room to a customer, or providing food and beverage to a customer, or providing a hotel property related good or service to a customer. Our performance obligations are generally satisfied at a point in time.

Revenue from operations of our mixed-use property is derived from lease agreements with tenants, which we account for under ASC 842, Leases. Such lease agreements generally provide for fixed rent payments, which we recognize on a straight-line basis over the lease term, and variable rent payments, including reimbursement of certain operating expenses and miscellaneous fees, which we recognize when earned. These reimbursements represent revenue attributable to non-lease components for which the timing and pattern of recognition is the same for lease components. We use the practical expedient, which allows us to account for lease and non-lease components as a single component for all classes of underlying assets. We periodically evaluate the collectability of tenant receivables required under the lease agreements. If we determine that collectability is not probable, we reverse any difference between revenue recognized to date and payments that have been collected from the tenant to date as a current period adjustment to revenue from real estate owned.

Stock-Based Compensation Expense

Stock-based compensation expense consists of time-based awards issued to persons employed by or otherwise associated with our Manager and/or its affiliates. Stock-based compensation expense is recognized in earnings on a straight-line basis over the applicable award’s vesting period. Forfeitures of stock-based compensation awards are recognized as they occur.

Common Stock

Common stock issued and outstanding excludes Restricted Stock Units (“RSUs”) which have not been delivered, regardless of vesting status. Fully vested RSUs are included in the calculation of basic and diluted weighted average shares outstanding and receive dividends declared on common stock.

Repurchased Shares

We account for the repurchases of our common stock based on the settlement date. Payments for common stock repurchases that are not yet settled as of the reporting date are included in other assets on our consolidated balance sheets. As of December 31, 2024, all repurchased shares of our common stock have been retired.

Reportable Segments

We have determined that our Chief Operating Decision Maker (“CODM”) is J. Michael McGillis, our Chief Financial Officer, President, and Director. For the year ended December 31, 2023, as a result of obtaining title to an additional real estate owned asset through an assignment-in-lieu of foreclosure and the performance of our real estate owned assets, our CODM determined that we havetwo operating segments andtwo reporting segments, with activities related to investing in income-producing loans collateralized by institutional quality commercial real estate and activities related to the operations of our real estate owned assets. See Note 3 - Loan Portfolio for further detail of our loan portfolio, Note 5 - Real Estate Owned for further detail of our real estate owned assets, and Note 15 - Segment Reporting for further detail of segment profit and loss.

Recent Accounting Guidance

The FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses” (“ASU 2024-03”). The standard provides improvements to disclosure of the nature of expenses included in the statement of operations via tabular disclosure in the footnotes that disaggregates relevant expenses into certain expense categories. Further, the FASB issued ASU 2025-01, “Clarifying the Effective Date,” which clarifies the effective date of ASU 2024-03. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The adoption of ASU 2024-03 is not expected to have a material impact on our consolidated financial statements.

The FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”). The standard provides improvements to income tax disclosure requiring disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The adoption of ASU 2023-09 is not expected to have a material impact on our consolidated financial statements.

The FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). The standard provides improvements to reportable segment disclosure requirements for annual and interim reporting, primarily through enhanced disclosures about significant segment expenses and measures of segment profit or loss. The standard is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024. As such, we have adopted ASU 2023-07 retrospectively for all periods presented. See Note 15 - Segment Reporting for further detail of segment profit and loss.

Note 3. Loan Portfolio

Loans Receivable

Our loan receivable held-for-investment portfolio as of December 31, 2024 was comprised of the following loans ($ in thousands, except for number of loans):

(1)

(2)

Net of specific CECL reserves of$120.9 million.

(3)

The weighted average spread is expressed as a spread over the relevant floating benchmark rates. One-month term Secured Overnight Financing Rate (“SOFR”) as of December 31, 2024 was 4.33%. Weighted average is based on unpaid principal balance as of December 31, 2024. For loans placed on non-accrual, the spread used in calculating the weighted average spread is 0%.

(4)

Reflects the weighted average interest rate based on the applicable floating benchmark rate (if applicable), including SOFR floors (if applicable). Weighted average is based on unpaid principal balance as of December 31, 2024 and includes loans on non-accrual status. For loans placed on non-accrual, the spread used in calculating the weighted average interest rate is 0%.

(5)

Senior loans include senior mortgages and similar credit quality loans, including related contiguous subordinate loans (if any), and pari passu participations in senior mortgage loans.

Our loans receivable held-for-investment portfolio as of December 31, 2023 was comprised of the following loans ($ in thousands, except for number of loans):

(1)

(2)

Net of specific CECL reserves of$72.6 million.

(3)

The weighted average spread is expressed as a spread over the relevant floating benchmark rates. SOFR as of December 31, 2023 was 5.35%. Weighted average is based on unpaid principal balance as of December 31, 2023. For loans placed on non-accrual, the spread used in calculating the weighted average spread is 0%.

(4)

Reflects the weighted average interest rate based on the applicable floating benchmark rate (if applicable), including SOFR floors (if applicable). Weighted average is based on unpaid principal balance as of December 31, 2023 and includes loans on non-accrual status. For loans placed on non-accrual, the interest rate used in calculating the weighted average interest rate is 0%.

(5)

Senior loans include senior mortgages and similar credit quality loans, including related contiguous subordinate loans (if any), and pari passu participations in senior mortgage loans.

Activity relating to our loans receivable held-for-investment portfolio for theyears ended December 31, 2024 and 2023 ($ in thousands):

(1)

Balance at December 31, 2023 does not include general CECL reserve.

(1)

Balance at December 31, 2022 does not include general CECL reserve.

(2)

Includes $341,000 of extension fees earned prior to December 31, 2023 which were received in January 2024.

During the year ended December 31, 2024, we received the full repayment of a risk rated 4 office loan with an unpaid principal balance of $122.5 million. In connection with this repayment, we received cash proceeds of $25.1 million and acquired a loan receivable with a total unpaid principal balance of $100.0 million secured by a retail and entertainment property located in New Jersey and other forms of credit support.

Sales of Loans Receivable

(1)

(2)

(3)

(4)

(5)

(6)

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

(7)

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

(8)

During the year ended December 31, 2023, we sold a senior loan collateralized by a portfolio of multifamily properties located in San Francisco, CA. We obtained a true-sale-at-law opinion and determined the transaction constituted a sale. Concurrent with the sale, we entered into an agreement with the transferee which provides for a share of cash flows from the senior loan upon the transferee meeting certain financial metrics. As of December 31, 2024, we have not recognized any value to this interest on our consolidated financial statements.

Modifications of Loans Receivable Held-for-Investment

As of December 31, 2024, we agreed to a modification of a multifamily loan receivable with an unpaid principal balance of $390.0 million which primarily provides for (i) a discounted loan payoff of $350.0 million, contingent on the borrower meeting prescribed conditions within a certain timeframe, (ii) an extension of the maturity date from November 1, 2024 to August 1, 2025, (iii) a curtailment of existing maturity extension options, and (iv) partial deferral of monthly debt service payments until maturity. As the fair value of the collateral asset exceeds our carrying value of the loan receivable, we reserved for this contingent discounted loan payoff within our general CECL reserve and reflect this loan as risk rated 4.

During the year ended December 31, 2024, we modified a mixed-use loan receivable with an unpaid principal balance of $75.5 million, resulting in a $7.2 million principal repayment and the remaining $68.3 million principal being bifurcated into a $30.0 million loan secured by a retail property and a $38.3 million unsecured personal loan, both of which are accompanied by additional credit support.

During the year ended December 31, 2023, we modified a loan with a borrower that was experiencing financial difficulties, resulting in a maturity extension to June 10, 2024. As of December 31, 2024, the loan had total commitments and an amortized cost basis of$78.6 million, represents approximately 1.3% of total loans receivable held-for-investment, based on carrying value net of specific CECL reserves, is current on interest payments, is in maturity default, and is risk rated 4. The loan is considered in determining our general CECL reserve.

During the year ended December 31, 2022, we modified a loan with a borrower that was experiencing financial difficulties, resulting in a decrease in the index rate floor from 1.57% to 1.00% and modified extension requirements. During the year ended December 31, 2023, we further modi fied this loan to provide for an initial maturity extension to September 18, 2023. As of December 31, 2024, the loan had total commitments and an amortized cost basis of$87.8 million, represents approximately 1.4% of total loans receivable held-for-investment, based on carrying value net of specific CECL reserves, is current on interest payments, is in maturity default, and is risk rated 4. The loan is considered in determining our general CECL reserve.

Concentration of Risk

The following table presents our loans receivable held-for-investment by loan type, as well as property type and geographic location of the properties collateralizing these loans as of December 31, 2024 and 2023 ($ in thousands):

(1)

Net of specific CECL reserves of$120.9 million at December 31, 2024.

(2)

Net of specific CECL reserves of$72.6 million at December 31, 2023.

(3)

Senior loans include senior mortgages and similar credit quality loans, including related contiguous subordinate loans and pari passu participations in senior mortgage loans.

(4)

At December 31, 2024, mixed-use comprises of 3% office,3% multifamily,2% retail,1% hospitality, and immaterial amounts of for sale condo. At December 31, 2023, mixed-use comprises of 3% office,2% retail,2% multifamily,1% hospitality, and immaterial amounts of for sale condo.

Interest Income and Accretion

The following table summarizes our interest and accretion income from our loan portfolio and interest on cash balances for theyears ended December 31, 2024, 2023, and 2022 ($ in thousands):

(1)

For theyears ended December 31, 2024, 2023, and 2022, we recognized$4.5 million,$1.6 million, and$5.1 million of default interest, late fees, pre-payment penalties, and/or accelerated fees following repayments prior to maturity.

Loan Risk Ratings

As further described in Note 2 – Summary of Significant Accounting Policies, we evaluate the credit quality of our loan portfolio on a quarterly basis. In conjunction with our quarterly loan portfolio review, we assess the risk factors of each loan and assign a risk rating based on several factors, including, but not limited to as-is or as-stabilized debt yield, term of loan, property type, property or collateral location, loan type, structure, collateral cash flow volatility and other more subjective variables that include, but are not limited to, as-is or as-stabilized collateral value, market conditions, industry conditions, borrower/sponsor financial stability, and borrower/sponsor exit plan. While evaluating the credit quality of each loan within our portfolio, we assess these quantitative and qualitative factors as a whole and with no pre-prescribed weight on their impact to our determination of a loan’s risk rating. However, based upon the facts and circumstances for each loan and the current market conditions, we may consider certain previously mentioned factors more or less relevant than others. Loans are rated “1” (less risk) through “5” (greater risk), which ratings are defined in Note 2 – Summary of Significant Accounting Policies.

The following tables allocate the principal balance and carrying value of our loans receivable held-for-investment based on our internal risk ratings as of December 31, 2024 and 2023 ($ in thousands):

(1)

Net of specific CECL reserves of$120.9 million.

(1)

Net of specific CECL reserves of$72.6 million.

As of December 31, 2024 and 2023, the average risk rating of our portfolio was 3.6 and 3.3, respectively, weighted by unpaid principal balance.

The following table presents the carrying value and significant characteristics of our loans receivable held-for-investment on non-accrual status as of December 31, 2024 ($ in thousands):

As of December 31, 2024, loans receivable classified as non-accrual represented 15.3% of our total loans receivable held-for-investment, based on carrying value net of specific CECL reserves. During the year ended December 31, 2024, we recognized$4.6 million of interest income and received$7.1 million of cost recovery proceeds for such loans while on non-accrual status. Further, the above table excludes (i)four loans with an aggregate carrying value of$394.8 million that are in maturity default but remain on accrual status as the borrower is either current on interest payments or interest is deemed collectible based on the underlying collateral value and (ii) three loans with an aggregate carrying value of$647.3 million that are delinquent in accordance with our revenue recognition policy but remain on accrual status as the interest is deemed collectible based on the underlying collateral value.

The following table presents the carrying value and significant characteristics of our loans receivable held-for-investment on non-accrual status as of December 31, 2023 ($ in thousands):

(1)

This loan was sold in April 2024.

As of December 31, 2023, loans receivable classified as non-accrual represented 9.2% of our total loans receivable held-for-investment, based on carrying value net of specific CECL reserves. During the year ended December 31, 2023, we recognized$0.3 million of interest income on a cash basis and received$2.0 million of cost recovery proceeds for such loans while on non-accrual status. Further, the above table excludes (i)four loans with an aggregate carrying value of$490.2 million that are in maturity default but remain on accrual status as the borrower is either current on interest payments or interest is deemed collectible based on the underlying collateral value and (ii) one loan with an aggregate carrying value of$78.4 million that is delinquent in accordance with our revenue recognition policy but remains on accrual status as the interest is deemed collectible based on the underlying collateral value.

The current expected credit loss reserve required under GAAP reflects our current estimate of potential credit losses related to our loan portfolio. See Note 2 for further detail of our current expected credit loss reserve methodology.

The following table illustrates the changes in the current expected credit loss reserve for our loans receivable held-for-investment for theyears ended December 31, 2024 and 2023, respectively ($ in thousands):

(1)

CECL reserves for accrued interest receivable, if any, are included in other assets on our consolidated balance sheets.

(2)

CECL reserves for unfunded commitments are included in other liabilities on our consolidated balance sheets.

(3)

Represents CECL reserve as a percent of total unpaid principal balance of loans receivable held-for-investment. As of December 31, 2024, specific CECL reserves approximated 18.2% of unpaid principal balance of loans with specific CECL reserves and general CECL reserves approximated 2.6% of unpaid principal balance of loans subject to the general CECL reserve.

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

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

Specific CECL Reserves

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

(2)

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

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

Our primary credit quality indicator is our internal risk rating, which is further discussed above. The following table presents the carrying value of our loans receivable held-for-investment as of December 31, 2024 by year of origination and risk rating, and principal charge-offs recognized during the year ended December 31, 2024 ($ in thousands):

(1)Net of specific CECL reserves of$120.9 million.

(2) Principal charge off of $0.3 million recognized in connection with the reclassification of a senior loan to held-for-sale as of December 31, 2024. Principal charge-off of $46.5 million comprised of a principal charge-off of $42.8 million recognized in connection with the sale of a senior loan in April 2024 and a principal charge-off of $3.7 million recognized in connection with the sale of a senior loan in October 2024. Principal charge-off of $0.8 million recognized in connection with the sales of a senior and subordinate loan during the three months ended December 31, 2024.

Principal charge-off of $28.1 million recognized in connection with the reclassification of a senior loan to held-for-sale as of September 30, 2024. Amounts exclude loss in connection with the reclassification of our real estate owned hotel portfolio to held-for-sale.

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

The following table details overall statistics for our loans receivable held-for-investment:

(1)

Represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon, and fees received, based on the applicable floating benchmark rate/floors (if applicable), in place as of December 31, 2024 and 2023. For loans placed on non-accrual, the annualized yield to initial maturity used in calculating the weighted average annualized yield to initial maturity is 0%.

(2)

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

Note 4. Equity Method Investment

As of December 31, 2024 and December 31, 2023, we hold a 51% interest in CMTG/TT Mortgage REIT LLC (“CMTG/TT”). We are not deemed to be the primary beneficiary of CMTG/TT in accordance with ASC 810, therefore we do not consolidate this joint venture. During its active investment period, CMTG/TT originated loans collateralized by institutional quality commercial real estate. As of December 31, 2024, the sole remaining loan held by CMTG/TT had an unpaid principal balance of $78.5 million and was placed on non-accrual status effective April 1, 2023. As of December 31, 2024, the carrying value of our 51% equity interest in CMTG/TT approximated$42.3 million.

At each reporting period, we assess whether there are any indicators of other-than-temporary impairment of our equity investment. There were no other-than-temporary impairments of our equity method investment through December 31, 2024.

Note 5. Real Estate Owned

The following table presents additional detail related to our real estate owned held-for-investment, net as of December 31, 2024 and 2023 ($ in thousands):

Depreciation expense related to our hotel portfolio and mixed-use real estate owned assets for the years ended December 31, 2024, 2023, and 2022 was$9.7 million,$8.9 million, and$8.0 million, respectively. At each reporting period, we assess whether there are any indicators of impairment of our real estate owned held-for-investment assets. There wereno impairments of our real estate owned held-for-investment assets through December 31, 2024. During the year ended December 31, 2023, we recorded an out-of-period adjustment of $4.2 million, representing an over accrual of accounts payable assumed upon the foreclosure of our hotel portfolio and, accordingly, we recorded an adjustment to correct the prior period understatement of the gain on foreclosure of our hotel portfolio. This is reflected as an adjustment to gain on foreclosure on our consolidated statement of operations during the year ended December 31, 2023, and such amount was not deemed to be material to any periods presented.

As of December 31, 2024, we determined that our hotel portfolio real estate owned asset has met the held-for-sale criteria, and we expect such sale to consummate within one-year of this determination. Therefore, we have reclassified this asset to real estate owned held-for-sale on our consolidated balance sheet and concurrently recognized a$80.5 million loss based upon anticipated sales price, less estimated costs to sell. As of December 31, 2024, approximately $29.1 million of our restricted cash, $6.4 million of our other assets, $10.2 million of our other liabilities, and $275.0 million of our debt related to real estate owned assets relate to our hotel portfolio real estate owned assets. We have determined this anticipated sale does not reflect a strategic shift and therefore does not qualify for presentation as a discontinued operation.

As of December 31, 2024, our mixed-use real estate owned asset with a carrying value of$143.9 million (including related net lease intangible assets) was pledged as collateral to our term participation facility. As of December 31, 2024 and 2023, the aggregate cost basis of our real estate owned for federal income tax purposes was$585.7 million and$584.6 million, respectively.

The following table presents additional detail related to the revenues and operating expenses of our real estate owned assets ($ in thousands):

Leases

We have non-cancelable operating leases for space in our mixed-use property. These leases provide for fixed rent payments, which we recognize on a straight-line basis, and variable rent payments, including reimbursement of certain operating expenses and miscellaneous fees, which we recognize when earned. As of December 31, 2024, the future minimum fixed rents under our non-cancellable leases for each of the next five years and thereafter are as follows ($ in thousands):

Lease Intangibles

Upon acquisition of our mixed-use property on June 30, 2023, $20.1 million of the purchase price was allocated to lease related intangible assets including $4.8 million to in-place lease values, $17.9 million to above market lease values, $4.2 million to below market lease values, and $1.6 million to other lease related values.

As of December 31, 2024 and 2023, our lease intangibles are comprised of the following ($ in thousands):

Amortization of in-place and other lease values for the years ended December 31, 2024, 2023, and 2022 was$0.8 million,$0.4 million, and$0, respectively. Amortization of above market lease values for the years ended December 31, 2024, 2023, and 2022 was

$1.8 million,$0.9 million, and$0, respectively. Amortization of below market lease values for the years ended December 31, 2024, 2023, and 2022 was$0.4 million,$0.2 million, and$0, respectively.

As of December 31, 2024, the estimated amortization of these intangibles is approximately as follows ($ in thousands):

(1)

Amortization of in-place and other lease values is recognized in depreciation and amortization expense on our consolidated statements of operations.

(2)

Amortization of above and below market lease values, net is recognized in revenue from real estate owned on our consolidated statements of operations.

At acquisition, the weighted average amortization period for in-place and other lease values, above market lease values, and below market lease values was approximately 8.9 years,10.5 years, and 11.3 years, respectively.

Note 6. Debt Obligations

As of December 31, 2024 and 2023, we financed certain of our loans receivable using repurchase agreements, a term participation facility, the sale of loan participations, and/or notes payable. Further, we have a secured term loan and debt related to real estate owned. Our financings bear interest at a rate equal to SOFR plus a credit spread.

The following table summarizes our financings as of December 31, 2024 and 2023 ($ in thousands):

(1)

Weighted average spread over the applicable benchmark rate is based on unpaid principal balance. SOFR as of December 31, 2024 and 2023 was 4.33% and 5.35%, respectively.

(2)

The repurchase agreements and term participation facility are partially recourse to us. As of December 31, 2024 and 2023, the weighted average recourse on both ourrepurchase agreements and term participation facility was 29% and 30%, respectively.

Repurchase Agreements and Term Participation Facility

Repurchase Agreements

The following table summarizes our repurchase agreements by lender as of December 31, 2024 ($ in thousands):

(1)

Facility maturity dates may be extended, subject to meeting prescribed conditions.

(2)

Net of specific CECL reserves, if any.

(3)

In January 2025, we exercised our option to extend the initial maturity of this facility to January 26, 2026.

(4)

In January 2025, we extended the initial maturity of this facility to March 31, 2025.

The Deutsche Bank AG, New York Branch repurchase agreement reached its maturity in June 2024, upon which the facility was terminated.

The following table summarizes our repurchase agreements by lender as of December 31, 2023 ($ in thousands):

(1)

Facility maturity dates may be extended, subject to meeting prescribed conditions.

(2)

Net of specific CECL reserves, if any.

Term Participation Facility

On November 4, 2022, we entered into a master participation and administration agreement to finance certain of our loans receivable. As of December 31, 2024, our mixed-use real estate owned asset with a carrying value of$143.9 million (including related net lease intangible assets) was pledged as collateral to our term participation facility.

Our term participation facility as of December 31, 2024 is summarized as follows ($ in thousands):

(1)

Approximately $2.4 million of loan repayment proceeds due to our term participation facility counterparty were held at the loan servicer and included in our restricted cash balance as of December 31, 2024. Subsequent to December 31, 2024, the amount was released by the loan servicer and reduced the borrowings outstanding.

(2)

As of December 31, 2024, amount includes the carrying value of our mixed-use real estate owned asset, including related net lease intangible assets.

Our term participation facility as of December 31, 2023 is summarized as follows ($ in thousands):

Loan Participations Sold

As of December 31, 2024, we haveno loan participations sold. Our loan participations sold as of December 31, 2023 are summarized as follows ($ in thousands):

(1)

Carrying value of collateral includes cash reserve balances held by our financing counterparty.

Notes Payable

Our notes payable as of December 31, 2024 are summarized as follows ($ in thousands):

Our notes payable as of December 31, 2023 are summarized as follows ($ in thousands):

Secured Term Loan, Net

On August 9, 2019, we entered into a $450.0 million secured term loan which, on December 1, 2020, was modified to increase the aggregate principal amount by $325.0 million, increase the interest rate, and to increase the quarterly amortization payment. On December 2, 2021, we further modified our secured term loan to reduce the interest rate to the greater of (i)SOFR plus a 0.10% credit spread adjustment, and (ii)0.50%, plus a credit spread of 4.50%. Our secured term loan is collateralized by a pledge of equity in certain subsidiaries and their related assets.

The secured term loan as of December 31, 2024 is summarized as follows ($ in thousands):

(1)

SOFR at December 31, 2024 was 4.33%.

The secured term loan as of December 31, 2023 is summarized as follows ($ in thousands):

(1)

SOFR at December 31, 2023 was 5.35%.

Debt Related to Real Estate Owned, Net

On February 8, 2021 we assumed a $300.0 million securitized senior mortgage in connection with a foreclosure of a hotel portfolio. On June 1, 2021, the terms of the securitized senior mortgage were modified to include an extension of the maturity date to February 9, 2024 and a principal repayment of $10.0 million. On February 7, 2024, we modified our debt related toreal estate owned to provide for, among other things, an extension of the contractual maturity date to November 9, 2024, a $10.0 million principal paydown, and the designation of a portion of the loan becoming partial recourse to us. Concurrent with this modification, we purchased an interest rate cap with a notional amount of $280.0 million and a strike rate of 5.00% through the then extended contractual maturity date. We subsequently further extended the contractual maturity date to February 9, 2025 and concurrently purchased an interest rate cap with a notional amount of$275.0 million and a strike rate through the further extended contractual maturity date.

Our debt related to real estate owned as of December 31, 2024 is summarized as follows ($ in thousands):

(1)

SOFR at December 31, 2024 was 4.33%, which is lower than the 5.00% ceiling provided by our interest rate cap. See Note 7 - Derivatives forfurther detail.

(2)

Upon maturity, we entered into a forbearance agreement with our lender which expires on May 9, 2025.

Our debt related to real estate owned as of December 31, 2023 is summarized as follows ($ in thousands):

(1)

SOFR at December 31, 2023 was 5.35%, which exceeded the 3.00% ceiling provided by our interest rate cap. See Note 7 – Derivatives for further detail.

Short-Term Funding Facility

On June 29, 2022, we entered into a full recourse revolving credit facility with $150.0 million in capacity, which generally provided interim financing for eligible loans for up to 180 days at an initial advance rate of up to 75%. As of December 31, 2023, we hadno outstanding balance on the facility. On September 25, 2024, we terminated this facility, at which point we hadno outstanding balance.

Interest Expense and Amortization

The following table summarizes our interest and amortization expense on our secured financings, debt related to real estate owned, and secured term loan for theyears ended December 31, 2024, 2023, and 2022 ($ in thousands):

(1)

For theyears ended December 31, 2024, 2023, and 2022, interest expense on debt related to real estate owned includes$3.7 million,$0.5 million, and$0.3 million, respectively, of amortization of deferred financing costs.

Financial Covenants

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

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

Note 7. Derivatives

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

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

Note 8. Fair Value Measurements

ASC 820, “Fair Value Measurements and Disclosures” establishes a framework for measuring fair value as well as disclosures about fair value measurements. It emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use when pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, the standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability other than quoted prices, such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement fall is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Financial Instruments Reported at Fair Value

The fair value of our interest rate cap is determined by using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the interest rate cap. The variable interest rates used in the calculation of projected receipts on the interest rate cap are based on a third-party expert’s expectation of future interest rates derived from observable market interest rate curves and volatilities. Our interest rate cap is classified as Level 2 in the fair value hierarchy. As of December 31, 2024, the fair value of our interest rate cap was de minimis, and as of December 31, 2023, the fair value of our interest rate cap was$0.9 million.

Financial Instruments Not Reported at Fair Value

The carrying value and estimated fair value of financial instruments not recorded at fair value on a recurring basis but required to be disclosed at fair value were as follows ($ in thousands):

Note 9. Equity

Common Stock

Our charter provides for the issuance of up to 500,000,000 shares of common stock with a par value of $0.01 per share. As of December 31, 2024 and 2023, we had 139,362,657 and 138,745,357 shares of common stock issued and 139,362,657 and 138,745,357 shares of common stock outstanding, respectively.

The following table provides a summary of the number of shares of common stock outstanding during theyears ended December 31, 2024, 2023, and 2022:

Preferred Stock

Our charter provides for the issuance of up to 10,000,000 shares of preferred stock with a par value of $0.01 per share. As of December 31, 2024 and 2023, there wereno preferred shares outstanding.

At the Market Stock Offering Program

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

Dividends

The following tables detail our dividend activity for common stock ($ in thousands, except per share data):

(1)

On December 16, 2024, our Board paused our quarterly dividend on our common stock commencing with the fourth quarter dividend that would have otherwise been paid in January 2025.

Note 10. Earnings Per Share

We calculate basic earnings per share (“EPS”) using the two-class method, which defines unvested share-based payment awards that contain nonforfeitable rights to dividends as participating securities. Under the two-class method, both distributed and undistributed earnings are allocated to common stock and participating securities based on their respective rights. Basic EPS is calculated by dividing our net income (loss) less participating securities’ share in earnings by the weighted average number of shares of common stock outstanding during each period.

Diluted EPS is calculated under the more dilutive of the treasury stock or the two-class method. Under the treasury stock method, diluted EPS is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding plus the incremental potential shares of common stock assumed issued during the period if they are dilutive.

As of December 31, 2024, 2023 and 2022 we hadno dilutive securities. As a result, basic and diluted EPS are the same. The calculation of basic and diluted EPS is as follows ($ in thousands, except for share and per share data):

(1)

For theyears ended December 31, 2024, 2023, and 2022, dividends on participating securities excludes$42,000,$35,000, and$4,000, respectively, of dividends on fully vested RSUs.

(2)

Amounts as of December 31, 2024, 2023, and 2022 include 102,063,41,780, and 6,850 fully vested RSUs.

For the years ended December 31, 2024, 2023, and 2022,2,689,202,2,637,717, and 1,190,126 of weighted average unvested RSUs, respectively, were excluded from the calculation of diluted EPS because the effect was anti-dilutive.

Note 11. Related Party Transactions

Our activities are managed by our Manager. Pursuant to the terms of the Management Agreement, our Manager is responsible for originating investment opportunities, providing asset management services and administering our day-to-day operations. Our Manager is entitled to receive a management fee, an incentive fee and a termination fee as defined below.

The following table summarizes our management and incentive fees ($ in thousands):

Management Fees

Effective October 1, 2015, our Manager earns a base management fee in an amount equal to 1.50% per annum of Stockholders’ Equity, as defined in the Management Agreement. Management fees are reduced by our pro rata share of any management fees and incentive fees (if incentive fees are not incurred by us) incurred to our Manager by CMTG/TT. Management fees aregenerally paid quarterly, in arrears, and$27.0 million, and$9.3 million were accrued and were included in management fee payable – affiliate, on our consolidated balance sheets at December 31, 2024 and 2023, respectively.

Incentive Fees

Our Manager is entitled to an incentive fee equal to 20% of the excess of our Core Earnings on a rolling four-quarter basis, as defined in the Management Agreement, over a 7.00% return on Stockholders’ Equity. Incentive fees are reduced by our pro rata share of any incentive fees incurred to our Manager by CMTG/TT.

There wereno accrued incentive fees on our consolidated balance sheets as of December 31, 2024 and 2023.

Termination Fees

If we elect to terminate the Management Agreement, we are required to pay our Manager a termination fee equal to three times the sum of the average total annual amount of management fees and the average annual incentive fee paid by us over the prior two years.

Reimbursable Expenses

Our Manager or its affiliates are entitled to reimbursement for certain documented costs and expenses incurred by them on our behalf, as set forth in the Management Agreement, excluding any expenses specifically required to be borne by our Manager under the

Management Agreement. For the years ended December 31, 2024, 2023, and 2022, we incurred$4.3 million,$4.1 million, and$1.3 million, respectively, of reimbursable expenses incurred on our behalf by our Manager, which are included in general and administrative expenses on our consolidated statements of operations. As of December 31, 2024 and 2023,$3.1 million and$1.0 million, respectively, of reimbursable expenses incurred on our behalf and due to our Manager are included in other liabilities on our consolidated balance sheets.

Note 12. Stock-Based Compensation

Incentive Award Plan

We are externally managed and do not currently have any employees. On March 30, 2016, we adopted the 2016 Incentive Award Plan (the “Plan”) to promote the success and enhance the value of the Company by linking the individual interests of employees of our Manager and its affiliates to those of our stockholders. As of December 31, 2024, the maximum remaining number of shares that may be issued under the Plan is 3,693,904 shares. Awards granted under the Plan may be granted with the right to receive dividend equivalents and generally vest in equal installments on the specified anniversaries of the grant.

Deferred Compensation Plan

On May 24, 2022, we adopted the Deferred Compensation Plan to provide our directors and certain executives with an opportunity to defer payment of their stock-based compensation or RSUs and director cash fees, if applicable, pursuant to the terms of the Deferred Compensation Plan.

Under our Deferred Compensation Plan, certain of our Board members elected to receive the annual fees and/or time-based RSUs to which they are entitled under our Non-Employee Director Compensation Program in the form of deferred RSUs. Accordingly, during the years ended December 31, 2024, 2023, and 2022, we issued 21,259,15,410, and 6,850, respectively, of deferred RSUs in lieu of cash fees to such directors, and recognized a related expense of approximately$192,000,$186,000, and$98,000, respectively. Such related expense is included in general and administrative expenses on our consolidated statements of operations.

Non-Employee Director Compensation Program

Our Board awards time-based RSUs to eligible non-employee Board members on an annual basis as part of such Board members’ annual compensation in accordance with the Non-Employee Director Compensation Program. The time-based awards are generally issued in the second quarter on the date of the annual meeting of our stockholders, in conjunction with the director’s election to our Board, and the awards vest on the earlier of (x) the one-year anniversary of the grant date and (y) the date of the next annual meeting of our stockholders following the grant date, subject to the applicable participants’ continued service through such vesting date. Effective January 1, 2024, our Non-Employee Director Compensation Program was amended to increase the value of the annual director grants and increase the annual retainer fees payable to the chair and members of the Nominating and Corporate Governing Committee, members of the Compensation Committee and the Lead Independent Director, as set forth in the Non-Employee Director Compensation Program. Effective January 1, 2025, our Non-Employee Director Compensation Program was further amended to increase the value of the annual director grants and increase the annual retainer fees payable to the chair and members of the Nominating and Corporate Governing Committee, members of the Compensation Committee and the Lead Independent Director, as set forth in the Non-Employee Director Compensation Program.

Eligible non-executive members of our Board were granted the time-based RSUs under the Plan. Each RSU was granted with the right to receive dividend equivalents. Additionally, certain directors elected to defer their RSUs pursuant to the terms of the Deferred Compensation Plan. Such deferred awards will become payable on the earliest to occur of the participant’s separation from service or a change in control. The following table details the time-based RSUs granted to non-executive members of our Board.

Stock-Based Compensation Expense

For the years ended December 31, 2024, 2023, and 2022, we recognized$18.1 million,$16.6 million, and$7.5 million, respectively, of stock-based compensation expense related to the RSUs. As of December 31, 2024, total unrecognized compensation expense was$20.7 million based on the grant date fair value of RSUs granted. This expense is expected to be recognized over a remaining period of 1.4 years from December 31, 2024.

We may allow participants of the Plan to settle their tax liabilities through a reduction of their vested RSU delivery. Such amount will result in a corresponding adjustment to additional paid-in capital and a cash payment to our Manager or its affiliates in order to remit the required statutory tax withholding to each respective taxing authority. During the year ended December 31, 2024, we delivered a total of 596,454 shares of our common stock for 1,012,741 vested RSUs, and concurrently recorded a$3.5 million adjustment to additional paid-in capital on our consolidated statement of changes in equity. During the year ended December 31, 2023, we delivered a total of 342,786 shares of our common stock for 703,318 vested RSUs and concurrently recorded a$3.9 million adjustment to additional paid-in capital on our consolidated statement of changes in equity.

The following tables detail the time-based RSU activity during theyears ended December 31, 2024 and 2023:

Note 13. Income Taxes

We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with our taxable year ended December 31, 2015 and expect to continue to operate so as to qualify as a REIT. As a result, we will generally not be subject to federal and state income tax on that portion of our income that we distribute to stockholders if we (i) distribute at least 90% of our taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains, and (ii) comply with certain other requirements to qualify as a REIT. Since Commencement of Operations, we have been in compliance with all REIT requirements and we plan to continue to operate so that we meet the requirements for taxation as a REIT. Therefore, other than amounts relating to our taxable REIT subsidiary (“TRS”), as described below, we have not provided for current income tax expense related to our REIT taxable income for theyears ended December 31, 2024, 2023, and 2022. Additionally, no provision has been made for federal or state income taxes in the accompanying financial statements, as we believe we have met the prescribed requisite requirements.

On December 16, 2024, our Board paused our quarterly dividend on our common stock commencing with the fourth quarter dividend that would have otherwise been paid in January 2025. During the year ended December 31, 2024, our Board declared three quarterly dividends totaling$0.60 per share of common stock, which exceeds our 2024 taxable income. The timing and amount of any future dividends declared by our Board depend on a variety of factors, including cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code, and such other factors as our Board deems relevant.

Our real estate owned hotel portfolio is held in a TRS. A TRS is a corporation that is owned directly or indirectly by a REIT and has jointly elected with the REIT to be treated as a TRS for tax purposes. Given the TRS’s history of generating taxable losses, we are not able to conclude that it is more likely than not that we will realize the future benefit of the TRS’s deferred tax assets and therefore recorded a full valuation allowance. Given the full valuation allowance, we did not record a provision for income taxes for the years ended December 31, 2024, 2023, and 2022, and we didnot have any deferred tax assets or deferred tax liabilities as of December 31, 2024 and December 31, 2023. As of December 31, 2024, our deferred tax asset and valuation allowance were $56.6 million, respectively. As of December 31, 2023, our deferred tax asset and valuation allowance were $21.7 million, respectively.

The components of the deferred tax asset at December 31, 2024 consisted of an investment basis difference in our real estate owned hotel portfolio of approximately $4.4 million, a net operating loss carryforward of approximately $23.5 million, and net unrealized loss (a deferred tax asset) of approximately $28.7 million. The components of the deferredtax asset at December 31, 2023 consisted of an investment basis difference in our real estate owned hotel portfolio of approximately $4.2 million, a net operating loss carryforward of approximately $17.8 million, and net unrealized gain (a deferred tax liability) of approximately $0.3 million.

We recognize tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. Interest and penalties on uncertain tax positions, if applicable, are included as a component of the provision for income taxes in our consolidated statements of operations. As of December 31, 2024 and 2023, we havenot recorded any amounts for uncertain tax positions.

The federal statutory rate for the years ended December 31, 2024, 2023, and 2022 was 21%. Our effective tax rate differs from its combined U.S. federal, state and local corporate statutory tax rate primarily due to income earned at the REIT, which is not subject to tax, due to the deduction for qualifying distributions made by us, and any change in the valuation allo wance.

Our tax returns are subject to audit by taxing authorities. As of the date of this filing, tax years 2021 and onward remain open to examination by major taxing jurisdictions in which we are subject to taxes.

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

Note 14. Commitments and Contingencies

We hold a 51% interest in CMTG/TT as a result of committing to invest $124.9 million in CMTG/TT. Distributions representing repayment proceeds from CMTG/TT’s loans may be recalled by CMTG/TT, if the repayment occurred at leastsix months prior to the loan’s initial maturity date. As of December 31, 2024 and 2023, we have contributed $163.1 million to CMTG/TT and have received return of capital distributions of $123.3 million, of which $111.1 million were recallable. As of December 31, 2024 and 2023, our remaining capital commitment to CMTG/TT was $72.9 million.

As of December 31, 2024 and 2023, we had aggregate unfunded loan commitments of$498.3 million and$1.1 billion, respectively, which amounts will generally be funded to finance construction or leasing related expenditures by our borrowers, subject to them achieving certain conditions precedent to such funding. These future commitments will expire over the remaining term of the loans, none of which exceed five years.

Our contractual payments due under all financings were as follows as of December 31, 2024 ($ in thousands):

(1)

Initial maturity is based on the earlier of the initial maturity date of each individual corresponding loan receivable or the maximum maturity date under the respective financing agreement, assuming conditions to extend are met.

(2)

Fully extended maturity is based on the earlier of the fully extended maturity date of each individual corresponding loan receivable or the maximum maturity date under the respective financing agreement, assuming conditions to extend are met.

(3)

Includes financings outstanding of$354.1 million related toseven loans in maturity default with aggregate unpaid principal balance of$735.4 million.

(4)

Includes $85.9 million of unpaid principal balance related to a loan classified as held-for-sale as of December 31, 2024. Such loan was sold in January 2025 and the associated financing was repaid in full.

In the normal course of business, we may enter into contracts that contain a variety of representations and provide for general indemnifications. Our maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against us that have not yet occurred. However, based on experience, we expect the risk of loss to be remote.

Note 15. Segment Reporting

We have determined that we havetwo operating segments andtwo reporting segments, with activities related to investing in income-producing loans collateralized by institutional quality commercial real estate and activities related to the operations of our real estate owned assets. Our CODM primarily utilizes Distributable Earnings (Loss) as described below.

Distributable Earnings (Loss) is a non-GAAP measure used to evaluate our performance excluding the effects of certain transactions, non-cash items and GAAP adjustments. Distributable Earnings (Loss) is a non-GAAP measure, which we define as net income (loss) in accordance with GAAP, excluding (i) non-cash stock-based compensation expense, (ii) real estate owned held-for-investment depreciation and amortization, (iii) any unrealized gains or losses from mark-to-market valuation changes (other than permanent impairments) that are included in net income (loss) for the applicable period, (iv) one-time events pursuant to changes in GAAP and (v) certain non-cash items, which in the judgment of our Manager, should not be included in Distributable Earnings (Loss).

The following table provides a calculation of Distributable Earnings (Loss) for our loan and REO portfolios, as well as a reconciliation to net (loss) income, for theyears ended December 31, 2024, 2023, and 2022 ($ in thousands):

(1)

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

(2)

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

(3)

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

Note 16. Subsequent Events

We have evaluated subsequent events through the filing of this Annual Report on Form 10-K and determined that the following or events have occurred:

In January 2025 we sold asenior loan. See Note 3 for further detail.

Upon maturity of our debt related to real estate owned, we entered into a forbearance agreement with our lender which expires on May 9, 2025. See Note 6 for further detail.