InPoint Commercial Real Estate Income, Inc.
For the period ended Dec 31, 2024. Filed Mar 14, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 14, 2025
ICR-PA$19.59+0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-15.
0000950170-24-032205
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-14.
0000950170-25-039459
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 152 previous paragraphs and 162 current paragraphs.
96 unchanged; 36 reworded; 27 added; 18 removed; 2 previous and 3 current paragraphs rearranged.
Tables are not compared: 21 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
The CRE and CRE debt markets were under pressure during 2023 and 2024 primarily due to the Federal Reserve’s monetary tightening policy. As the inflationary pressures eased, the Federal Reserve began lowering the interest rate in the second half of 2024 but signaled a pause to allow them to evaluate the impact of the implemented rate reductions. With the rate reductions, we observed the CRE debt market activity increasing in the fourth quarter with spreads tightening and more collateralized loan obligations entering the market. We believe the Federal Reserve will hold rates at current levels through at least the first half of 2025 and that the CRE debt markets will continue to be competitive which may improve the refinance market.
Current report
We did not originate any new loans during 2024 as we focused on maintaining our liquidity with several of our loans approaching maturity. During 2024, we had 8 loans with an outstanding balance of $110.9 million pay-off in full, refinanced one loan with an outstanding balance of $23.1 million, sold one loan at par with an outstanding balance of $12.7 million and funded $10.2 million on existing loans. We also foreclosed on two loans with an outstanding principal balance of $53.9 million resulting in the acquisition of three properties. During 2025, we will continue to focus on extending or restructuring our maturing loans with an emphasis on obtaining principal reductions.
Current report
Company Update – Strategic Plan
Current report
We are currently focusing on positioning the portfolio to pursue a potential future strategic alternative when capital market conditions have improved, in order to maximize stockholder value and potentially provide our investors with access to some level of liquidity. There is no assurance that the Company will be able to successfully implement any strategic plan. We are continually impacted by evolving market conditions and other complex factors such as (i) the state of the commercial real estate market and financial markets, (ii) our ability to access additional capital or leverage and (iii) changes in general economic conditions such as high interest rates, among other factors. We will provide updates as the Company considers appropriate or as required under applicable law.
Current report
On July 2, 2024, we acquired legal title to two office properties, one located in Addison, TX, and the other located in Irving, TX, through non-judicial foreclosure transactions. The properties previously collateralized a senior loan with an amortized cost basis of $24.4 million with a CECL reserve of $0.3 million at the time of the acquisition. The properties were recorded at $24.0 million based on the estimated fair value at acquisition.
Current report
On October 23, 2024, we acquired legal title to a multifamily property located in Portland, OR through a non-judicial foreclosure transaction. The property previously collateralized a senior loan with an amortized cost basis of $29.5 million with a CECL reserve of $9.9 million at the time of the acquisition. The property was recorded at $19.6 million based on the estimated fair value at acquisition.
Current report
Our strategy is to originate, acquire and manage an investment portfolio of CRE debt that is primarily floating rate and diversified based on the type and location of collateral securing the underlying CRE debt.
Current report
The loan matures on November 9, 2026 and the borrower has been marketing the property for sale. The borrower sold one property securing the loan and paid down the principal balance of $5.1 million in order to receive an extension on the loan. The Company has reviewed the loan and based on the estimated LTV recorded a $0.9 million asset-specific CECL reserve as of December 31, 2024.
Current report
The loan matures on October 9, 2025. The Company has reviewed the loan and based on the estimated LTV recorded a $1.1 million asset-specific CECL reserve as of December 31, 2024.
Current report
The loan matures on October 9, 2025. In February 2025, the Company was notified that the borrower was delinquent on paying the property manager and, as a result, the Company notified the borrower that they were in default of the loan agreement. The Company began foreclosure procedures in March 2025 pending resolution by the borrower. The Company has an allocated CECL reserve of $1.8 million on the loan as of December 31, 2024.
Current report
The loan matures on December 9, 2025. The Company has reviewed the loan and based on the estimated LTV recorded a $0.2 million asset-specific CECL reserve as of December 31, 2024.
Current report
The loan matured on January 9, 2025. The Company had an agreement with the borrower to extend the loan pending the borrower making an equity infusion to pay down the loan. The borrower was unable to make the required payment to the Company. The Company will proceed with the foreclosure process. The Company has an allocated CECL reserve of $0.3 million on the loan as of December 31, 2024.
Current report
The loan has no unfunded commitment and matured on October 6, 2024. The borrower is current on all debt service payments. The property is occupied by a single tenant that is possibly exiting the property at the end of its lease. The Company has negotiated with the borrower a possible repayment at an amount less than the outstanding balance. The Company has recorded a $4.0 million asset-specific CECL reserve on this loan as of December 31, 2024. The loan was placed on nonaccrual status effective July 1, 2024.
Current report
The following tables allocate the loan principal balance and the net loan exposure based on our internal risk ratings as of:
Current report
(1) Net loan exposure excludes the amount of loan participation sold. See “Note 5 – Loan Participations Sold, Net.” Further, net loan exposure is calculated net of the CECL reserve recorded on the loans. See “Note 3 – Commercial Mortgage Loans Held for Investment – Allowance for Credit Losses.”
Current report
On July 2, 2024, we acquired legal title to two office properties, one located in Addison, TX, and the other located in Irving, TX, through non-judicial foreclosure transactions. The properties previously collateralized a senior loan with an amortized cost basis of $24,411 that was risk rated 5 with a CECL reserve of $281 at the time of the acquisitions. The acquisitions were accounted for as asset acquisitions under applicable GAAP guidance, and we intend to hold these properties as real estate held for use with the intent to eventually sell when the market improves. The properties were recorded on our consolidated balance sheet at $24,035 based on the estimated fair value at acquisition. The fair market value estimate was determined based on appraisals performed by an independent third-party appraiser. The acquisitions resulted in a CECL reserve charge-off of $855 during the year ended December 31, 2024.
Current report
On October 23, 2024, we acquired legal title to a multifamily property located in Portland, OR through a non-judicial foreclosure transaction. The property previously collateralized a senior loan with an amortized cost basis of $29,476 that was risk rated 5 with a CECL reserve of $9,884 at the time of the acquisition. The acquisition was accounted for as an asset acquisition under applicable GAAP guidance, and we intend to hold this property as real estate held for use with the intent to eventually sell when the market improves. The property was recorded on our consolidated balance sheet at $19,592 based on the estimated fair value at acquisition. The fair market value estimate was determined based on an appraisal performed by an independent third-party appraiser. The acquisition resulted in a CECL reserve charge-off of $9,577 during the year ended December 31, 2024.
Current report
The following table shows selected data for our REO in our portfolio as of December 31, 2024:
Current report
Commercial Mortgage Loans Held for Investment and Allowance for Credit Losses
Current report
The change in performance from December 31, 2023 to the year ended December 31, 2024 was primarily due to a decrease in reserve for credit losses during the year, partially offset by a decrease in our net interest income related to a smaller loan portfolio, and the loss related to the sale of the Renaissance O’Hare recognized in 2023 with no comparable activity in 2024.
Current report
The change in our average interest-earning assets and interest-bearing liabilities from 2023 to 2024 was due to the reduction in our loan portfolio from loan payoffs and foreclosures. The change in the weighted average levered yield was primarily due to the composition of our loan portfolio and loans that were placed on nonaccrual status.
Current report
For the years ended December 31, 2024 and 2023, our net income (loss) was $12,669 and $(4,438), respectively. The increase in net income was primarily due to higher provision for credit losses in 2023.
Current report
Our primary liquidity needs include originating new loans, advances on our current loan portfolio, commitments to repay the principal and interest on our borrowings, funding our operations, and distributions to our stockholders. We believe we have sufficient liquidity to meet our current needs. In the future we may seek additional sources of liquidity to fund our growth which may include the sale of common or preferred stock or additional financing through repurchase agreements, collateralized loan obligations, sale of loan participations or other borrowings.
Current report
We experienced a net increase in cash and cash equivalents of $10,406 for the year ended December 31, 2024 compared to a net increase of $24,735 for the year ended December 31, 2023. During the year ended December 31, 2024, we funded $10,217 on existing mortgage loans, received $123,606 in principal payments from our loans, paid down $106,259, which is net of draws of $11,830, on our borrowing facilities, and paid distributions of $18,583.
Current report
On July 2, 2024, we acquired legal title to two office properties through non-judicial foreclosure transactions. The underlying loan was subject to the loan participation agreement. Upon foreclosure, we are still subject to the participation payments to the third party. Such payments are based on the underlying properties’ net income before depreciation adjusted for any non-cash revenue. If the monthly payment exceeds the interest due under the participation agreement, the excess is paid to the third party and recorded as a reduction of accrued and unpaid interest first and then as a reduction of the principal. If the monthly payment is less than the interest due under the participation agreement, the shortfall is accrued as interest payable.
Current report
Includes participation interest related to the foreclosed properties described above.
Removed paragraphs (18)
Previous report
In response to inflationary pressures, in 2022 the Federal Reserve began raising its federal funds rate target range and indicated that, due to the persistent high rate of inflation, it would continue to increase rates until a 2% inflation rate is achieved. The Federal Reserve has also been conducting monetary tightening by increasing the sale of bonds it had purchased on the open market. During the third quarter of 2023, the Federal Reserve paused its increase in interest rates to evaluate the impact that the rate increases have had on inflation and has indicated they may lower rates three times during 2024.
Previous report
We did not originate any new loans during 2023 as we chose to focus on liquidity with several loans nearing their maturity dates. We anticipate this to continue at least for the first half of 2024. The commercial real estate lending market tightened as the Federal Reserve raised rates and lenders concerns over property performance increased. Concerns over office properties continue as tenants evaluate the amount of space they need with more employees working from home. In general, property valuations have decreased as capitalization rates for commercial real estate assets have increased with overall interest rates.
Previous report
Company Update - Review of Strategic Alternatives
Previous report
As previously disclosed in our most recent Quarterly Reports on Form 10-Q and Current Reports on 8-K, in connection with the suspension of the primary offering, share repurchase program and distribution reinvestment plan, the Board has determined to evaluate strategic alternatives available for the Company. In furtherance of this evaluation, the Company has announced that it has engaged Robert A. Stanger & Co., Inc., an investment banking firm, to assist in evaluating strategic alternatives available to the Company. There is no assurance that the Company will be able to successfully implement any strategic alternative. In addition, our strategic efforts may continue to evolve or change over time. We make no undertaking to update you on future developments in this regard; however, to the extent our strategic efforts change in a material way, we may provide updates to the extent legally possible, through our public filings with the SEC.
Previous report
The loan matured on September 9, 2023 and is accruing default interest. The Company is negotiating an extension with the borrower which it expects to complete in the first quarter of 2024. The Company has reviewed the loan and based on the estimated LTV recorded a $2.6 million asset-specific CECL reserve as of December 31, 2023.
Previous report
The loan matured on February 9, 2024 and the Company agreed to extend the loan maturity date until June 9, 2024. The borrower paid an extension fee, and contributed funds into reserves for interest, taxes and insurance. The borrower is currently marketing the asset for sale and has executed a purchase and sale agreement for an amount that exceeds the loan balance. Once the sale is complete, the proceeds will be used to pay-off the loan. The Company has reviewed the loan and based on the current estimated LTV does not believe the loan is impaired.
Previous report
The loan has no unfunded commitment and matures on October 6, 2024. The borrower is current on all debt service payments. The property is 100% occupied by a single tenant that must provide notice of its intention to exercise its option to extend its lease by June 30, 2024. The Company has not recorded an asset-specific CECL reserve on this loan as of December 31, 2023 as the estimated LTV with the tenant in place was in excess of the total senior and credit loan amounts. If the tenant does not extend its lease and there is no replacement tenant, the property value likely will not be sufficient to cover the total loan amounts and the Company would record an asset-specific CECL reserve up to the outstanding loan balance.
Previous report
The Renaissance O’Hare was negatively impacted by the COVID-19 pandemic. We recognized net operating income before depreciation and amortization from the hotel of $1.0 million during the year ended December 31, 2023. We recognized a net operating loss before depreciation and amortization from the hotel of $0.6 million during the year ended December 31, 2022. While there was significant improvement in operations in 2023, performance did not return to pre-pandemic levels.
Previous report
The table below includes certain historical information with respect to the average occupancy, the revenue per available room and the average daily rate of the Renaissance O’Hare.
Previous report
The following table shows the Renaissance O’Hare’s performance trend over the past seven quarters up to the date of the sale.
Previous report
The hotel’s performance improved during 2023 relative to 2022 primarily due to an increase in travel in the Chicago O’Hare area.
Previous report
Commercial Mortgage Loans and Allowance for Credit Losses
Previous report
The change in performance from December 31, 2021 to the year ended December 31, 2022 was primarily due to improvement in net interest income and operating results for the Renaissance O’Hare. During 2022, we increased our average investment portfolio by $259.8 million to $783.8 million through the investment of our Preferred Stock Offering. In addition, during 2022 the Federal Reserve began a series of interest rate increases which improved the performance of our loan portfolio as approximately 98% is floating rate. As a result of these changes, our net interest income increased by $3.1 million, from $20.2 million in 2021 to $23.3 million in 2022. The easement of pandemic related travel restrictions resulted in improvement in the Renaissance O’Hare’s operating loss as it decreased by $1.6 million during the year, from a loss of $2.2 million in 2021 to a loss of $0.6 million in 2022. During the year ended December 31, 2022, we also recorded a provision for credit losses of $3.6 million.
Previous report
The change in our average interest-earning assets and interest-bearing liabilities from 2021 to 2022 was due to change in the composition of our investment portfolio as we invested proceeds from the IPO, Second Public Offering, the Preferred Stock Offering and the sale of loan participations to execute our business strategy. During 2022, we increased our average borrowings by $202.6 million due to the financing of the new loans originated from our Preferred Stock Offering. In addition, the Federal Reserve began a series of interest rate increases and our debt is floating rate. The combination of these resulted in the increase in our interest expense.
Previous report
During the years ended December 31, 2022 and 2021, the Renaissance O’Hare generated $14,774 and $8,109 in revenue, respectively. We believe the increase in revenue was most likely primarily due to increased travel because of the easing of pandemic related travel restrictions and increased willingness and desire to travel.
Previous report
For the years ended December 31, 2022 and 2021, our net income was $10,179 and $9,873, respectively. The increase was primarily due to improvement in net interest income and operating results for the Renaissance O’Hare. Increase in the LIBOR and SOFR rates throughout 2022 and an increase in the size of the loan portfolio, resulted in net interest income increasing by $3,083, from $20,187 in 2021 to $23,270 in 2022. The easement of pandemic related travel restrictions resulted in improvement in the Renaissance O’Hare’s operating loss as it decreased by $1,640 during the year, from a loss of $(2,235) in 2021 to a loss of $(595) in 2022. The improvements in net interest income and the operating results of the Renaissance O’Hare were partially offset by the loan loss reserve of $3,588 recorded in 2022.
Previous report
We experienced a net increase in cash and cash equivalents of $24,735 for the year ended December 31, 2023 compared to a net decrease of $27,860 for the year ended December 31, 2022. The increase in cash for the year ended December 31, 2023 is primarily driven by net proceeds from investing activities. The company did not originate any new loans in 2023 but had six loans payoff during the year.
Previous report
During 2022 the Federal Reserve began raising its federal funds rate target range due to the persistent high rate of inflation. Additionally, driven by the shift in Federal Reserve interest rate policy, the general level of interest rates in the market has increased, increasing the weighted average interest rates on our Facilities.
Reworded paragraphs (36)
Previous wording
There is no current public trading market for our common stock, and we do not expect that such a market will ever develop. Therefore, repurchase of shares by us will likely be the only way for stockholders to dispose of their shares, and our SRP is currently suspended;
Current wording
There is no current public trading market for our common stock, and we do not expect that such a market will develop. Therefore, repurchase of shares by us will likely be the only way for stockholders to dispose of their shares, and our SRP is currently suspended;
Previous wording
We are a Maryland corporation formed on September 13, 2016 to originate, acquire and manage an investment portfolio of CRE investments primarily comprised of (i) CRE debt, including (a) primarily floating-rate first mortgage loans, and (b) subordinate mortgage and mezzanine loans, and participations in such loans and (ii) floating-rate CRE securities such as CMBS and senior unsecured debt of publicly traded REITs. We may also invest in select equity investments in single-tenant, net leased properties. Substantially all of our business is conducted through our Operating Partnership, of which we are the sole general partner. We are externally managed by our Advisor, an indirect subsidiary of IREIC. Our Advisor has engaged the Sub-Advisor, a subsidiary of Sound Point CRE Management, LP, to perform certain services on behalf of the Advisor for us.
Current wording
We are a Maryland corporation formed on September 13, 2016 to originate, acquire and manage an investment portfolio of CRE investments primarily comprised of CRE debt, including primarily floating-rate first mortgage loans and fixed rate mezzanine loans. We may also invest in participations in CRE debt, floating-rate CRE securities such as CMBS, senior unsecured debt of publicly traded REITs and select equity investments in single-tenant, net leased properties. Substantially all of our business is conducted through our Operating Partnership, of which we are the sole general partner. We are externally managed by our Advisor, an indirect subsidiary of IREIC. Our Advisor has engaged the Sub-Advisor, a subsidiary of Sound Point CRE Management, LP, to perform certain services on behalf of the Advisor for us.
Previous wording
We continue to evaluate all loans on a quarterly basis and assign our internal risk rating with the majority of our loans continuing to perform as expected. While there has been some increase in competition for new loans in the fourth quarter 2023, refinancing risk continues to be a focus. As such, for our CECL reserve, we have placed additional focus on loans with maturity dates nine months from year end to determine if the collateral value would be sufficient to cover the outstanding loan principal balance and have recorded an asset-specific CECL reserve when necessary.
Current wording
We continue to evaluate all loans on a quarterly basis and assign our internal risk rating with the majority of our loans continuing to perform as expected. Our primary focus continues to be on refinance risk and our CECL reserve will place emphasis on loans with maturity dates nine months forward from the reporting date.
Previous wording
Net loss attributable to common stockholders was $10.4 million, or $1.03 per share during the year ended December 31, 2023, which included $16.9 million in provision for credit losses.
Current wording
Net income attributable to common stockholders was $6.7 million, or $0.66 per share during the year ended December 31, 2024, which included $2.3 million in provision for credit losses.
Previous wording
We declared gross distributions of $1.25 per common share during the year ended December 31, 2023. During the fourth quarter of 2023, we paid an annual gross distribution rate of $1.25 per common share, which represents an annualized rate of 7.4% on our aggregate NAV of $16.8995 as of December 31, 2023. Holders of Class D and Class T shares of common stock received less than the gross distribution amount after the deduction of stockholder servicing fees applicable to those classes.
Current wording
We declared gross distributions of $1.25 per common share during the year ended December 31, 2024, which represents an annualized rate of 7.6% on our aggregate NAV of $16.3513 as of December 31, 2024. Holders of Class D and Class T shares of common stock received less than the gross distribution amount after the deduction of stockholder servicing fees applicable to those classes.
Previous wording
We had $23.1 million in advances on previously originated loans and loan repayments of $107.5 million resulting in a 14.3% decrease in our loan portfolio to $722.0 million during the year ended December 31, 2023. The decrease also includes $17.4 million related to the sale of a loan that was previously subject to a loan participation agreement and $18.3 million of provision for credit losses, which includes $4.8 million from the adoption of ASU 2016-13 and is net of charge-offs of $3.5 million.
Current wording
We had $10.2 million in advances on previously originated loans and loan repayments of $123.8 million resulting in a 24% decrease in our loan portfolio to $549.2 million during the year ended December 31, 2024. The decrease also includes $12.7 million related to the sale of a loan, $2.5 million of provision for credit losses and two loans transferred on foreclosure to real estate owned of $53.9 million.
Previous wording
34 out of our 36 loans were current on their contractual interest payments with no interest deferrals during the year ended December 31, 2023. The remaining two loans were placed on nonaccrual status during 2023. After being placed on nonaccrual status, any cash collected, including any interest payments, on such loans is applied against their principal balance.
Current wording
As of December 31, 2024, 1 out of our 25 loans was on nonaccrual status. After being placed on nonaccrual status, any cash collected, including any interest payments, on such loans is applied against their principal balance.
Previous wording
We had net repayments of $30.7 million on our repurchase agreements and principal repayments of loan participations of $28.7 million during the year ended December 31, 2023.
Current wording
We had net repayments of $96.8 million and $9.5 million on our repurchase agreements and line of credit, respectively, and principal repayments of loan participations of $8.9 million during the year ended December 31, 2024.
Previous wording
During 2023, we paid a total of $18.5 million in distributions to common and preferred stockholders.
Current wording
During 2024, we paid a total of $18.6 million in distributions to common and preferred stockholders.
Previous wording
The charts below summarize our debt investments portfolio as a percentage of par value by type of rate, our total investment portfolio by investment type, including real estate sold, and our loan portfolio by collateral type and geographical region as of December 31, 2023 and 2022.
Current wording
The charts below summarize our debt investments portfolio as a percentage of par value by type of rate, our total investment portfolio by investment type, including real estate owned (“REO”), and our loan portfolio by collateral type and geographical region as of December 31, 2024 and 2023.
Previous wording
All-in yield is the present value of all future principal and interest payments on the loan and does not include any origination fees or deferred commitment fees. All-in yield is calculated using the spread plus the values of the indices as of December 31, 2023.
Current wording
All-in yield is the present value of all future principal and interest payments on the loan and does not include any origination fees or deferred commitment fees. All-in yield also excludes the all-in yield for loans placed on nonaccrual status. All-in yield is calculated using the spread plus the values of the indices as of December 31, 2024.
Previous wording
The decrease in the size of our portfolio is primarily due to loan payoffs with no new loans originated during the year ended December 31, 2023. The change in the all-in yield was primarily driven by increases in the SOFR rate.
Current wording
The decrease in the size of our portfolio is primarily due to loan payoffs, foreclosure of two loans, and a sale of a loan with no new loans originated during the year ended December 31, 2024. The change in the all-in yield was primarily driven by a decrease in the SOFR rate.
Previous wording
As of December 31, 2022, an 80% undivided senior interest in each of loan numbers 1, 2, 3, 5, 7, 10 and 11, which includes the right to receive priority interest payments at a rate of L+2.00%, was sold by our Operating Partnership pursuant to a Loan Participation Agreement dated November 15, 2021. Our Operating Partnership has retained a 20% undivided subordinate interest in each of these loans.
Current wording
As of December 31, 2024, an 80% undivided senior interest in each of loan numbers 1 and 5, which includes the right to receive priority interest payments at a rate of SOFR+2.00% was sold by our Operating Partnership pursuant to a Loan Participation Agreement dated November 15, 2021. Our Operating Partnership has retained a 20% undivided subordinate interest in each of these loans.
Previous wording
Cash coupon is the stated rate on the loan. All-in yield is the present value of all future principal and interest payments on the loan and does not include any origination fees or deferred commitment fees. Loans numbers 2 and 16 are nonaccrual basis as of December 31, 2023 and are excluded from the total. The total is the weighted average all-in yield calculated using the spread plus the values of the indices as of December 31, 2023 and 2022. Our first mortgage loans are all floating rate and each contains a minimum SOFR floor as of December 31, 2023 and minimum LIBOR or SOFR floor as of December 31, 2022. The weighted average SOFR floor was 0.65% and 0.53%, respectively as of December 31, 2023 and 2022. The weighted average LIBOR floor was 0.83% as of December 31, 2022.
Current wording
Cash coupon is the stated rate on the loan. All-in yield is the present value of all future principal and interest payments on the loan and does not include any origination fees or deferred commitment fees. Loan number 25 is nonaccrual basis as of December 31, 2024 and is excluded from the total. Loans numbers 2 and 16 were nonaccrual basis as of December 31, 2023, and were excluded from the total. As of December 31, 2024, loan number 5 is paying interest at a 4.0% fixed current rate and accruing the remaining amount as payment-in-kind. The total is the weighted average of the stated yield, excluding any default interest, as of December 31, 2024 and 2023. Our first mortgage loans are all floating rate and each contains a minimum SOFR floor as of December 31, 2024 and 2023. The weighted average SOFR floor was 0.68% and 0.65%, respectively as of December 31, 2024 and 2023.
Previous wording
The loan matured on April 9, 2023 and is currently paying default interest. The Company is negotiating an extension to allow the borrower to obtain long-term financing. The Company expects to complete the loan extension in the second quarter of 2024. The property securing the loan is class A office and is 97% occupied as of December 31, 2023. The Company has reviewed the loan and based on the current estimated LTV does not believe the loan is impaired.
Current wording
The loan matured on April 9, 2023 and is currently accruing default interest. The Company is negotiating an extension to allow the borrower to obtain long-term financing or bridge financing to pay-off the existing loan. The property securing the loan is class A office and was 92% occupied as of December 31, 2024. The Company has reviewed the loan and based on the estimated LTV recorded a $0.8 million asset-specific CECL reserve as of December 31, 2024.
Previous wording
The loan matured on October 9, 2023 and is currently in maturity default. The Company has been negotiating an extension with the borrower which is expected to be completed in the first quarter 2024. The Company has reviewed the loan and based on the estimated LTV recorded a $3.6 million asset-specific CECL reserve as of December 31, 2023.
Current wording
The loan matures on April 9, 2025 and the Company has been negotiating an extension with the borrower. The Company has reviewed the loan and based on the estimated LTV recorded a $0.2 million asset-specific CECL reserve as of December 31, 2024.
Previous wording
We entered into master repurchase agreements to fund our loan portfolio. As of December 31, 2023 and 2022, we had total borrowings of $457,438 (which is net of $0 of unamortized debt issuance costs) and $488,086 (which is net of $3 of unamortized debt issuance costs), respectively. During the years ended December 31, 2023 and 2022, we had weighted average borrowings of $562,396 and $551,192 and weighted average borrowing costs of 7.4% and 3.8%, respectively. The increase in weighted average borrowing costs was due to the increase in the SOFR index.
Current wording
As of December 31, 2024 and 2023, we had total borrowings of $360,677 and $457,438, respectively. For more information, see Part IV, Item 15, Note 4 – “Repurchase Agreements and Credit Facilities.” During the years ended December 31, 2024 and 2023, we had weighted average borrowings of $459,902 and $562,396 and weighted average borrowing costs of 7.7% and 7.4%, respectively. The increase in weighted average borrowing costs was due to a higher average SOFR index in 2024 compared to 2023.
Previous wording
Based on principal amount for repurchase agreements. Amounts are calculated based on the average daily balance.
Current wording
Based on principal amount for repurchase agreements. Amounts are calculated based on the average daily balance. Loan participations sold excludes the participation interest related to the REO.
Previous wording
Interest income excludes $1,005, $101 and $0 for the years ended December 31, 2023, 2022 and 2021, respectively, related to bank deposits and Treasury bills not included in the investment portfolio.
Current wording
Interest income excludes $2,306, $1,005 and $101 for the years ended December 31, 2024, 2023 and 2022, respectively, related to bank deposits not included in the investment portfolio. Interest expense excludes $695 of participation payments related to the REO.
Previous wording
During the years ended December 31, 2023 and 2022, the Renaissance O’Hare generated $12,719 and $14,774 in revenue, respectively. The decrease in revenue was primarily due to the sale of the property on September 28, 2023.
Current wording
Our revenue from real estate during the year ended December 31, 2024 and 2023 was $2,791 and $12,719, respectively. The decrease in revenue was primarily due to the sale of the Renaissance O’Hare in September 2023, partially offset by an increase in revenue due to the acquisition of three properties during the second half of 2024.
Previous wording
Total operating expenses increased $5,854 in the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to the increase in real estate operating expenses and the related depreciation and amortization expense. The increase was mostly in the variable costs of the hotel operations and was correlated to the increase in occupancy during the year.
Current wording
Total operating expenses decreased $16,127 in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to the decrease in real estate operating expenses related to the Renaissance O’Hare, which was sold in September 2023.
Previous wording
The advisory fees decreased during the year 2023 as the net asset value was lower compared to 2022. This was due to the net loss incurred by the Company during 2023. The advisory fees increased during the year 2022 as the average net asset value was higher in 2022 compared to 2021 primarily due to the Preferred Stock Offering.
Current wording
The advisory fees decreased during the year 2024 compared to 2023 primarily due to the reduction in our investment portfolio. The advisory fees decreased during the year 2023 as the net asset value was lower compared to 2022. This was due to the net loss incurred by the Company during 2023.
Previous wording
For the year ended December 31, 2023 our total operating expenses were 3.4% of our average invested assets.
Current wording
For the year ended December 31, 2024, our total operating expenses were 1.5% of our average invested assets.
Previous wording
For the years ended December 31, 2023, 2022 and 2021, other (loss) income was $(16,705), $(3,588) and $0, respectively. The primary reason for the activity in other (loss) income during the year ended December 31, 2023 was due to the increase in provision for credit losses. For more information, see Part IV, Item 15, “Note 3 – Commercial Mortgage Loans Held for Investment – Allowance for Credit Losses.” The primary reason for the activity in other (loss) income during the year ended December 31, 2022 was due to a decrease in value of the collateral of one of our first mortgage loans. Consequently, we recorded a loan loss reserve for the full value of the loan net of the participation interest in 2022.
Current wording
For the years ended December 31, 2024, 2023 and 2022, other loss was $1,359, $16,705 and $3,588, respectively. The primary reason for the activity in other loss was due to the change in the provision for credit losses. For more information, see Part IV, Item 15, “Note 3 - Commercial Mortgage Loans Held for Investment - Allowance for Credit Losses.”
Previous wording
We use Funds from Operations (“FFO”), a widely accepted metric, to evaluate our performance. FFO provides a supplemental measure to compare our performance and operations to other REITs. Due to certain unique operating characteristics of real estate companies, The National Association of Real Estate Investment Trusts (“NAREIT”) has promulgated a standard known as FFO, which it believes more accurately reflects the operating performance of a REIT. As defined by NAREIT, FFO means net income computed in accordance with GAAP, excluding gains (or losses) from sales of operating property, plus depreciation and amortization and after adjustments for unconsolidated entities. In addition, NAREIT has further clarified the FFO definition to add-back impairment write-downs of depreciable real estate or of investments in unconsolidated entities that are driven by measurable decreases in the fair value of depreciable real estate and to exclude the earnings impacts of cumulative effects of accounting changes. We have adopted the NAREIT definition for computing FFO.
Current wording
We use Funds from Operations (“FFO”), a widely accepted metric, to evaluate our performance. FFO provides a supplemental measure to compare our performance and operations to other REITs. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts (“NAREIT”) has promulgated a standard known as FFO, which it believes more accurately reflects the operating performance of a REIT. As defined by NAREIT, FFO means net income (loss) attributable to common stockholders computed in accordance with GAAP, excluding gains (or losses) from sales of operating property, plus depreciation and amortization and after adjustments for unconsolidated entities. In addition, NAREIT has further clarified the FFO definition to add-back impairment write-downs of depreciable real estate or of investments in unconsolidated entities that are driven by measurable decreases in the fair value of depreciable real estate and to exclude the earnings impacts of cumulative effects of accounting changes. We have adopted the NAREIT definition for computing FFO.
Previous wording
We define MFFO in accordance with the concepts established by the IPA and adjust FFO for certain items, such as amortization of premium and discounts on real estate securities. We purchase real estate securities at a premium or discount to par value, and in accordance with GAAP, record the amortization of premium/accretion of the discount to interest income. We believe that excluding the amortization of premiums and discounts provides better insight to the expected contractual cash flows. In addition, we adjust FFO for unrealized gains or losses on real estate securities. Any mark-to-market or fair value adjustments are based on general market or overall industry conditions and may be temporary in nature.
Current wording
We define MFFO in accordance with the concepts established by the IPA and adjust FFO for certain items, such as amortization of premium and discounts on real estate securities. We purchase real estate securities at a premium or discount to par value, and in accordance with GAAP, record the amortization of premium/accretion of the discount to interest income. We believe that excluding the amortization of premiums and discounts provides better insight to the expected contractual cash flows. We also adjust FFO for gains or losses on preferred stock repurchases, when/if they occur, because we do not consider these gains or losses to be a measure of our operating performance. In addition, we adjust FFO for unrealized gains or losses on real estate securities. Any mark-to-market or fair value adjustments are based on general market or overall industry conditions and may be temporary in nature.
Previous wording
Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay distributions to our stockholders, fund investments, originate loans, repay borrowings, and other general business needs including the payment of our operating and administrative expenses. Our primary sources of funds for liquidity consist of the net proceeds from our IPO, Second Public Offering, Preferred Stock Offering and any follow-on public offerings of common stock, net cash provided by operating activities, proceeds from repurchase agreements and other financing arrangements and future issuances of equity and/or debt securities.
Current wording
Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay distributions to our stockholders, fund investments, originate loans, repay borrowings, and other general business needs including the payment of our operating and administrative expenses.
Previous wording
On February 15, 2018, we, through our wholly owned subsidiary, entered into a master repurchase agreement (the “Atlas Repo Facility”) with Column Financial, Inc. as administrative agent for certain of its affiliates. As our business has grown, we have increased the borrowing limit and extended the maturity. The most recent extension was in November 2023 for a twelve-month term and the maximum advance amount was reduced to $100,000. On February 8, 2023, Column Financial, Inc. and affiliated parties sold and assigned their interest in the Atlas Repo Facility to Atlas Securitized Products Investments 2, L.P. with no changes to the terms of the Atlas Repo Facility. Advances under the Atlas Repo Facility for current loans accrue interest at a per annum rate equal to SOFR plus 2.50% to 3.00% with a 0.15% to 0.25% floor. We paid off the outstanding balance on the Atlas Repo Facility in May 2023 and had no outstanding balance as of December 31, 2023. As there was no outstanding balance on the Atlas Repo Facility, we were not subject to any financial covenants.
Current wording
On February 15, 2018, we, through our wholly owned subsidiary, entered into a master repurchase agreement (the “Atlas Repo Facility”) with Column Financial, Inc. as administrative agent for certain of its affiliates. As our business grew, we extended the maturity date of the Atlas Repo Facility. The most recent extension was in November 2023 for a twelve-month term and the maximum advance amount was reduced to $100,000. On February 8, 2023, Column Financial, Inc. and affiliated parties sold and assigned their interest in the Atlas Repo Facility to Atlas Securitized Products Investments 2, L.P. with no changes to the terms of the Atlas Repo Facility. Advances under the Atlas Repo Facility accrued interest at a per annum rate equal to SOFR plus 2.50% to 3.00% with a 0.15% to 0.25% floor. We paid off the outstanding balance on the Atlas Repo Facility in May 2023. The Atlas Repo Facility matured on November 8, 2024 and we chose not to extend the line as we did not believe it was needed.
Previous wording
On May 6, 2019, we, through our wholly owned subsidiary, entered into an uncommitted master repurchase agreement (the “JPM Repo Facility”) with JPMorgan Chase Bank, National Association. The JPM Repo Facility provides up to $150,000 in advances that we expect to use to finance the acquisition or origination of eligible loans and participation interests therein. Advances made prior to December 2021 under the JPM Repo Facility accrue interest at per annum rates equal to the sum of (i) the applicable LIBOR index rate plus (ii) a margin of between 1.75% to 2.50% with no floor, depending on the attributes of the purchased assets. Advances made subsequent to December 2021 under the JPM Repo Facility accrue interest at per annum rates equal to the sum of SOFR plus an agreed upon margin. As of December 31, 2023, all of the advances made under the JPM Repo Facility were indexed to SOFR and have margins between 1.85% to 2.85% with a floor between 0.00% and 2.00%. In May 2022, the maturity date of the JPM Repo Facility was extended to May 6, 2023. On May 5, 2023, we entered into an amendment that extended the maturity date to May 6, 2026, with the option to extend the maturity date further to May 6, 2028 subject to two optional one-year extensions. The amendment also increased the maximum facility amount to $526,076. We used the increased capacity to pay off the balance on the Atlas Repo Facility. The JPM Repo Facility is subject to certain financial covenants. One of the covenants requires that the ratio of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) to Fixed Charges, defined as preferred dividends plus interest expense per the JPM Repo Facility agreement, should not fall below 150% on a trailing four quarter basis. The amendment on May 5, 2023 removed preferred dividends from the definition of Fixed Charges for purposes of this calculation on a prospective basis. As of December 31, 2023 and 2022, the EBITDA to Fixed Charges ratio for the trailing four quarters was 152% and 135%, respectively. JPM agreed to waive this covenant as of December 31, 2022. As a result, we were in compliance with all financial covenant requirements as of December 31, 2023 and 2022.
Current wording
On May 6, 2019, we, through our wholly owned subsidiary, entered into an uncommitted master repurchase agreement (the “JPM Repo Facility”) with JPMorgan Chase Bank, National Association (“JPM”). The JPM Repo Facility provides up to $150,000 in advances that we expect to use to finance the acquisition or origination of eligible loans and participation interests therein. Advances made prior to December 2021 under the JPM Repo Facility accrue interest at per annum rates equal to the sum of (i) the applicable LIBOR index rate plus (ii) a margin of between 1.75% to 2.50% with no floor, depending on the attributes of the purchased assets. Advances made subsequent to December 2021 under the JPM Repo Facility accrue interest at per annum rates equal to the sum of SOFR plus an agreed upon margin. As of December 31, 2024, all of the advances made under the JPM Repo Facility were indexed to SOFR and have margins between 1.85% and 2.85% with a floor between 0.00% and 2.00%. In May 2022, the maturity date of the JPM Repo Facility was extended to May 6, 2023. On May 5, 2023, we entered into an amendment that extended the maturity date to May 6, 2026, with the option to extend the maturity date further to May 6, 2028 subject to two optional one-year extensions. The amendment also increased the maximum facility amount to $526,076. We used the increased capacity to pay off the balance on the Atlas Repo Facility. The JPM Repo Facility is subject to certain financial covenants. We were in compliance with all financial covenant requirements as of December 31, 2024 and 2023.
Previous wording
On March 10, 2021, we, through our wholly owned subsidiary, entered into a credit facility with Western Alliance Bank (the “WA Credit Facility,” together with the Atlas Repo Facility and the JPM Repo Facility, the “Facilities”). The WA Credit Facility provides for loan advances up to the lesser of $75,000 or the borrowing base. The borrowing base consists of eligible assets pledged to and accepted by Western Alliance in its discretion up to the lower of (i) 60% to 70% of loan-to-unpaid balance or (ii) 45% to 50% of the loan-to-appraised value (depending on the property type underlying the asset, for both (i) and (ii)). Assets that would otherwise be eligible become ineligible after being pledged as part of the borrowing base for 36 months. Advances under the WA Credit Facility accrue interest at an annual rate equal to one-month LIBOR plus 3.25% with a floor of 0.75%. The initial maturity date of the WA Credit Facility was March 10, 2023. On March 9, 2023, we extended the maturity date of the WA Credit Facility to March 10, 2025, modified that loan advances are up to the lesser of $40,000 or the borrowing base, and changed the index rate from LIBOR to SOFR. In addition, the spread increased to 3.50% and the floor to 2.50%. We have an option to convert the loan made pursuant to the WA Credit Facility upon its initial maturity to a term loan with the same interest rate and floor and a maturity of two years in exchange for, among other things, a conversion fee of 0.25% of the outstanding amount at the time of conversion. The WA Credit Facility requires maintenance of an average unrestricted aggregate deposit account balance with Western Alliance of not less than $3,750 until the calendar quarter ending on June 30, 2023 and not less than $5,000 commencing with the calendar quarter ending on September 30, 2023. Failure to meet the minimum deposit balance will result in, among other things, the interest rate of the WA Credit Facility increasing by 0.50% per annum for each quarter in which the compensating balances are not maintained. The WA Credit Facility is subject to certain financial covenants. One of the covenants requires we have a debt service coverage ratio of at least 1.50 measured on a quarterly basis. For the three-month period ended December 31, 2023, we had a debt service coverage ratio of 1.47. Western Alliance agreed to waive this covenant as of December 31, 2023. As a result, we were in compliance with all financial covenant requirements as of December 31, 2023 and 2022.
Current wording
On March 10, 2021, we, through our wholly owned subsidiary, entered into a credit facility with Western Alliance Bank (the “WA Credit Facility,” together with the Atlas Repo Facility (prior to its maturity) and the JPM Repo Facility, the “Facilities”). The WA Credit Facility provides for loan advances up to the lesser of $75,000 or the borrowing base. The borrowing base consists of eligible assets pledged to and accepted by Western Alliance in its discretion up to the lower of (i) 60% to 70% of loan-to-unpaid balance or (ii) 45% to 50% of the loan-to-appraised value (depending on the property type underlying the asset, for both (i) and (ii)). Assets that would otherwise be eligible become ineligible after being pledged as part of the borrowing base for 36 months. Advances under the WA Credit Facility accrue interest at an annual rate equal to one-month LIBOR plus 3.25% with a floor of 0.75%. The initial maturity date of the WA Credit Facility was March 10, 2023. On March 9, 2023, we extended the maturity date of the WA Credit Facility to March 10, 2025, modified that loan advances are up to the lesser of $40,000 or the borrowing base, and changed the index rate from LIBOR to SOFR. In addition, the spread increased to 3.50% and the floor to 2.50%. We have an option to convert the loan made pursuant to the WA Credit Facility upon its initial maturity to a term loan with the same interest rate and floor and a maturity of two years in exchange for, among other things, a conversion fee of 0.25% of the outstanding amount at the time of conversion. The WA Credit Facility requires maintenance of an average unrestricted aggregate deposit account balance with Western Alliance of not less than $3,750 until the calendar quarter ending on June 30, 2023 and not less than $5,000 commencing with the calendar quarter ending on September 30, 2023. Failure to meet the minimum deposit balance will result in, among other things, the interest rate of the WA Credit Facility increasing by 0.50% per annum for each quarter in which the compensating balances are not maintained. We paid off the outstanding balance on the WA Credit Facility in May 2024 and had no outstanding balance as of December 31, 2024. As there were no borrowings outstanding, we were not subject to any financial covenants. We decided the WA Credit Facility was no longer necessary and chose not to renew it when it matured on March 10, 2025.
Previous wording
Excluding $0 and $3 of unamortized debt issuance costs as of December 31, 2023 and 2022, respectively.
Current wording
Excluding $0 of unamortized debt issuance costs as of December 31, 2024 and 2023.
Previous wording
The third party, as the senior participation interest holder, will receive interest and principal payments from the borrower until they receive the amounts to which they are entitled. All expenses or losses on the underlying mortgages are allocated first to us and then to the third party. If the underlying mortgage is in default, we will have the option to purchase the third party’s participation interest and remove it from the loan participation agreement.
Current wording
The third party, as the senior participation interest holder, receives interest and principal payments from the borrower until they receive the amounts to which they are entitled. All expenses or losses on the underlying mortgages are allocated first to us and then to the third party. If the underlying mortgage is in default, we will have the option to purchase the third party’s participation interest and remove it from the loan participation agreement.
Previous wording
The following table details our loan participations sold as of December 31, 2023 and 2022:
Current wording
The following tables detail our loan participations sold as of December 31, 2024 and 2023:
Previous wording
During the years ended December 31, 2023 and 2022, we recorded $4,914 and $3,952 of interest expense related to loan participations sold, respectively.
Current wording
During the years ended December 31, 2024 and 2023, we recorded $3,762 and $4,914 of interest expense related to loan participations sold, respectively.
Previous wording
For the years ended December 31, 2023 and 2022, 100% of our distributions were paid from cash flows from operating activities generated during the period. For the year ended December 31, 2021, 6.0% of distributions on our common stock were paid from the combined net proceeds of our IPO and Preferred Stock Offering.
Current wording
For the years ended December 31, 2024 and 2023 and 2022, 100% of our distributions were paid from cash flows from operating activities generated during the period.
Previous wording
As of December 31, 2023 and 2022, we had no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources excluding future loan advance commitments as disclosed in Part IV, Item 15, “Note 8 - Commitments and Contingencies.”
Current wording
As of December 31, 2024 and 2023, we had no off-balance sheet arrangements that were reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources excluding future loan advance commitments as disclosed in Part IV, Item 15, “Note 8 - Commitments and Contingencies.”
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
24 out of our 25 loans were current on their contractual interest payments with no interest deferrals during the year ended December 31, 2024.
Current report — wording carried from elsewhere
Our primary sources of funds for liquidity consist of any follow-on public offerings of common stock, net cash provided by operating activities, repayments of our outstanding loans by borrowers, proceeds from repurchase agreements and other financing arrangements and future issuances of equity and/or debt securities. As of December 31, 2024, we had $64.5 million in cash, $205 million in available capacity on our borrowing facilities and $20 million in available borrowing capacity from our revolving credit letter agreements.
Current report — wording carried from elsewhere
The Facilities are used to finance eligible loans and each act in the manner of a revolving credit facility that can be repaid as the Company’s assets are paid off and re-drawn as advances against new assets.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
During the third quarter of 2023, we sold the Renaissance O’Hare for net proceeds of $12.0 million and recorded a gain of $0.2 million on the sale. We had recorded an impairment loss of $6.9 million on the property in the second quarter of 2023 when we entered into the sale agreement, resulting in a total net loss of $6.7 million on the property.
Previous report — wording carried elsewhere
In May 2023, we extended the JPM Repo facility maturity date to May 6, 2026 with the option to extend further to May 6, 2028. In addition, we increased the maximum facility amount to $526.1 million.