Claros Mortgage Trust, Inc.

Previous wording

As a CRE finance company, we believe the key financial measures and indicators for our business are net income (loss) per share, Distributable Earnings (Loss) per share, Distributable Earnings per share prior to realized gains and losses, which includes charge-offs of principal, accrued interest receivable, and/or exit fees, dividends declared per share, book value per share, adjusted book value per share, Net Debt-to-Equity Ratio and Total Leverage Ratio. During the three months ended March 31, 2025, we had net loss per share of $0.56, Distributable Loss per share of $0.25, Distributable Earnings per share prior to realized gains and losses of $0.08, and our Board did not declare any dividends. As of March 31, 2025, our book value per share was $13.60, our adjusted book value per share was $14.64, our Net Debt-to-Equity Ratio was 2.4x, and our Total Leverage Ratio was 2.8x. We use Net Debt-to-Equity Ratio and Total Leverage Ratio, financial measures which are not prepared in accordance with GAAP, to evaluate our financial leverage, which in the case of our Total Leverage Ratio, makes certain adjustments that we believe provide a more conservative measure of our financial condition.

Current wording

As a CRE finance company, we believe the key financial measures and indicators for our business are net income (loss) per share, Distributable Earnings (Loss) per share, Distributable Earnings per share prior to realized gains and losses, which includes charge-offs of principal, accrued interest receivable, and/or exit fees, dividends declared per share, book value per share, adjusted book value per share, Net Debt-to-Equity Ratio and Total Leverage Ratio. During the three months ended June 30, 2025, we had net loss per share of $1.30, Distributable Loss per share of $0.77, Distributable Earnings per share prior to realized gains and losses of $0.10, and our Board did not declare any dividends. As of June 30, 2025, our book value per share was $12.27, our adjusted book value per share was $13.27, our Net Debt-to-Equity Ratio was 2.2x, and our Total Leverage Ratio was 2.6x. We use Net Debt-to-Equity Ratio and Total Leverage Ratio, financial measures which are not prepared in accordance with GAAP, to evaluate our financial leverage, which in the case of our Total Leverage Ratio, makes certain adjustments that we believe provide a more conservative measure of our financial condition.

Previous wording

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

Current wording

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

Previous wording

The table below summarizes the reconciliation from weighted average diluted shares under GAAP to the weighted average diluted shares used for Distributable Loss and Distributable Earnings prior to realized gains and losses for the three months ended March 31, 2025 and December 31, 2024:

Current wording

The table below summarizes the reconciliation from weighted average diluted shares under GAAP to the weighted average diluted shares used for Distributable Loss and Distributable Earnings prior to realized losses for the three months ended June 30, 2025 and March 31, 2025:

Previous wording

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

Current wording

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

Previous wording

For the three months ended March 31, 2025, amount includes a $3.5 million charge-off of accrued interest receivable and a $0.5 million charge-off of an exit fee related to the discounted payoff of a land loan.

Current wording

For the three months ended June 30, 2025, amount includes a $2.9 million charge-off of accrued interest receivable related to the anticipated mortgage foreclosures on multifamily properties in July 2025. For the three months ended March 31, 2025, amount includes a $3.5 million charge-off of accrued interest receivable and a $0.5 million charge-off of an exit fee related to the discounted payoff of a land loan.

Previous wording

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

Current wording

Reflects previously recognized depreciation and amortization on the portion of our mixed-use real estate owned asset that was sold during the three months ended June 30, 2025. Amount not previously recognized in Distributable Earnings (Loss).

Previous wording

We believe that presenting book value per share adjusted for our general current expected credit loss reserve and accumulated depreciation and amortization on our real estate owned held-for-investment and related lease intangibles is useful for investors as it enhances the comparability to our peers who may not hold real estate investments. Further, we believe that our investors and lenders consider book value excluding these items as an important metric related to our overall capitalization.

Current wording

We believe that presenting book value per share adjusted for our general current expected credit loss reserve and accumulated depreciation and amortization on our real estate owned held-for-investment is useful for investors as it enhances the comparability to our peers who may not hold real estate investments. Further, we believe that our investors and lenders consider book value excluding these items as an important metric related to our overall capitalization.

Previous wording

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 March 31, 2025. 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%.

Current wording

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 June 30, 2025. 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%. Excluding two loans for which we acquired legal title to the underlying collateral asset through mortgage foreclosures in July 2025, the weighted average yield to maturity at June 30, 2025 is 7.2%.

Previous wording

The following table summarizes our loan receivable held-for-sale as of March 31, 2025 and loan receivable sold during the three months ended March 31, 2025 ($ in thousands):

Current wording

The following table summarizes our loans receivable sold during the six months ended June 30, 2025 ($ in thousands):

Previous wording

Principal charge-offs and valuation allowance attributable to the delinquency of the loan and its $23.8 million of remaining unfunded commitments. During the three months ended March 31, 2025, we recognized a further adjustment to the held-for-sale carrying value of $42.6 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 loan receivable held-for-sale on our consolidated statement of operations. Effective October 1, 2024, this loan was placed on non-accrual status.

Current wording

Principal charge-offs and valuation allowance attributable to the delinquency of the loan and its $23.8 million of remaining unfunded commitments. During the six months ended June 30, 2025, we recognized a further adjustment to reduce the held-for-sale carrying value of this loan by $41.8 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 loan receivable held-for-sale on our consolidated statement of operations. Effective October 1, 2024, this loan was placed on non-accrual status. This loan was sold in May 2025

Previous wording

Origination LTV represents “loan-to-value” or “loan-to-cost,” which is calculated as our total loan commitment upon origination, as if fully funded, plus any financings that are pari passu with or senior to our loan, divided by our estimate of either (1) the value of the underlying real estate, determined in accordance with our underwriting process (typically consistent with, if not less than, the value set forth in a third-party appraisal) or (2) the borrower’s projected, fully funded cost basis in the asset, in each case as we deem appropriate for the relevant loan and other loans with similar characteristics. Underwritten values and projected costs should not be assumed to reflect our judgment of current market values or project costs, which may have changed materially since the date of origination. Weighted average origination LTV of 70.6% is based on loan commitment, including non-consolidated senior interests and pari passu interests, and excludes risk rated 5 loans.

Current wording

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

Previous wording

On February 8, 2021, we acquired legal title to a portfolio of seven limited service hotels located in New York, NY through a foreclosure and assumed the securitized senior mortgage. As of December 31, 2024, we determined that our hotel portfolio had met the held-for-sale criteria and, accordingly, we reflected this asset as real estate owned held-for-sale on our consolidated balance sheet. During the three months ended March 31, 2025 we continued to pursue the sale of this asset and, as of March 31, 2025, it remains classified as held-for-sale. As of March 31, 2025, approximately $20.4 million of our restricted cash, $4.4 million of our other assets, $11.0 million of our other liabilities, and $275.2 million of our debt related to real estate owned assets relate to our hotel portfolio real estate owned assets.

Current wording

On February 8, 2021, we acquired legal title to a portfolio of seven limited service hotels located in New York, NY through a foreclosure and assumed the securitized senior mortgage. As of December 31, 2024, we determined that our hotel portfolio had met the held-for-sale criteria and, accordingly, we reflected this asset as real estate owned held-for-sale on our consolidated balance sheet. Concurrent with this classification, we recognized an $80.5 million loss based upon the anticipated sales price, less estimated costs to sell. During the six months ended June 30, 2025, we continued to pursue the sale of this asset and, as of June 30, 2025, it remains classified as held-for-sale. During the six months ended June 30, 2025, we incurred $362,000 of capital expenditures at our hotel portfolio, which is reflected as an additional loss on real estate owned held-for-sale on our consolidated statement of operations. As of June 30, 2025, approximately $9.4 million of our restricted cash, $7.5 million of our other assets, $10.0 million of our other liabilities, and $235.0 million of our debt related to real estate owned hotel portfolio relate to this 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.

Previous wording

On June 30, 2023, we acquired legal title to a mixed-use property located in New York, NY and the equity interests in the borrower through an assignment-in-lieu of foreclosure and is comprised of office, retail, and signage components. As of March 31, 2025, the mixed-use property appears as part of real estate owned, net and related lease intangibles, net appear within other assets and other liabilities on our consolidated balance sheet. As of March 31, 2025, our mixed-use real estate owned asset with a carrying value of $143.1 million (including related net lease intangible assets) was pledged as collateral to our term participation facility. In April 2025, we entered into a binding agreement to sell approximately 77,000 square feet of office and retail space within our mixed-use real estate owned asset to an unaffiliated purchaser for a sales price of $28.8 million.

Current wording

On June 30, 2023, we acquired legal title to a mixed-use property located in New York, NY and the equity interests in the borrower through an assignment-in-lieu of foreclosure and is comprised of office, retail, and signage components. As of June 30, 2025, the mixed-use property appears as part of real estate owned, net and related lease intangibles appear within other assets and other liabilities on our consolidated balance sheet. In April 2025, we entered into a binding agreement to sell five floors of primarily office space to an unaffiliated purchaser for a gross sales price of $28.8 million. This sale occurred in June 2025 and resulted in a loss on sale of $1.6 million and proceeds, net of transaction costs and prorations, of $26.8 million.

Previous wording

Our Manager evaluates the credit quality of each of our loans receivable on an individual basis and assigns a risk rating at least quarterly. We have developed a loan grading system for all of our outstanding loans receivable that are collateralized directly or indirectly by real estate. Grading criteria include, but are not limited to, as-is or as-stabilized debt yield, term of loan, property type, property or collateral location, loan type, structure, collateral cash flow volatility and other more subjective variables that include, but are not limited to, as-is or as-stabilized collateral value, market conditions, industry conditions, borrower/sponsor financial stability, and borrower/sponsor exit plan. While evaluating the credit quality of each loan within our portfolio, we assess these quantitative and qualitative factors as a whole and with no pre-prescribed weight on their impact to our determination of a loan’s risk rating. However, based upon the facts and circumstances for each loan and the overall market conditions, we may consider certain previously mentioned factors more or less relevant than others. We utilize the grading system to determine each loan’s risk of loss and to provide a determination as to whether an individual loan is impaired and whether a specific CECL reserve is necessary. Based on a 5-point scale, the loans are graded “1” through “5,” from less risk to greater risk, respectively. The weighted average risk rating of our total loan portfolio was 3.5 as of March 31, 2025.

Current wording

Our Manager evaluates the credit quality of each of our loans receivable on an individual basis and assigns a risk rating at least quarterly. We have developed a loan grading system for all of our outstanding loans receivable that are collateralized directly or indirectly by real estate. Grading criteria include, but are not limited to, as-is or as-stabilized debt yield, term of loan, property type, property or collateral location, loan type, structure, collateral cash flow volatility and other more subjective variables that include, but are not limited to, as-is or as-stabilized collateral value, market conditions, industry conditions, borrower/sponsor financial stability, and borrower/sponsor exit plan. While evaluating the credit quality of each loan within our portfolio, we assess these quantitative and qualitative factors as a whole and with no pre-prescribed weight on their impact to our determination of a loan’s risk rating. However, based upon the facts and circumstances for each loan and the overall market conditions, we may consider certain previously mentioned factors more or less relevant than others. We utilize the grading system to determine each loan’s risk of loss and to provide a determination as to whether an individual loan is impaired and whether a specific CECL reserve is necessary. Based on a 5-point scale, the loans are graded “1” through “5,” from less risk to greater risk, respectively. The weighted average risk rating of our total loan portfolio was 3.8 as of June 30, 2025.

Previous wording

During the three months ended March 31, 2025, we recorded a provision for current expected credit losses of $41.1 million, which consisted of a $3.9 million reversal of our general CECL reserve and a $45.0 million increase in our specific CECL reserve prior to principal, accrued interest receivable, and exit fee charge-offs. The reversal of our general CECL reserves was primarily attributable to changes in the historical loss rate of the analogous dataset, seasoning of our loan portfolio, and a reduction in the size of our loan portfolio subject to determination of the general CECL reserve. The reversal of our specific CECL reserves was primarily attributable to changes to collateral values, offset by protective advances made. As of March 31, 2025, our total current expected credit loss reserve was $260.8 million.

Current wording

During the six months ended June 30, 2025, we recorded a provision for current expected credit losses of $230.6 million, which consisted of an $11.5 million increase of our general CECL reserve, a $184.6 million increase in our specific CECL reserve prior to principal and exit fee charge-offs, and a $34.5 million increase in CECL reserves on accrued interest receivable prior to charge-offs. The increase in our general CECL reserves was primarily attributable to changes in the historical loss rate of the analogous data set and changes in risk ratings, non-accrual status, and expected remaining duration within our loan portfolio, offset by the seasoning of our loan portfolio and a reduction in the size of our loan portfolio subject to determination of the general CECL reserve. The increase in our specific CECL reserves was primarily attributable to specific reserves determined on loans now classified as risk rated 5, changes to collateral values, and protective advances made, offset by principal charge offs recognized as a result of (i) mortgage foreclosures on two loans previously classified as risk rated 5 and (ii) anticipated mortgage foreclosures on two loans currently classified as risk rated 5. The increase in our CECL reserves on accrued interest receivable is attributable to reserving against interest income previously recognized on loans placed on non-accrual status during the six months ended June 30, 2025. As of June 30, 2025, our total current expected credit loss reserve was $378.5 million.

Previous wording

During the three months ended March 31, 2024, we recorded a provision for current expected credit losses of $70.0 million, which consisted of a $22.7 million increase in our general CECL reserve and a $47.3 million increase in our specific CECL reserve prior to principal charge-offs. This increase in our general CECL reserves was primarily attributable to changes in the historical loss rate of the analogous dataset and changes in risk ratings and non-accrual status within our loan portfolio, offset by the seasoning of our loan portfolio and a reduction in the size of our loan portfolio subject to determination of the general CECL reserve. The increase in our specific CECL reserves was primarily attributable to changes to collateral values and additional protective advances made. As of March 31, 2024, our total current expected credit loss reserve was $180.4 million.

Current wording

During the six months ended June 30, 2024, we recorded a provision for current expected credit losses of $103.9 million, which consisted of a $55.4 million increase in our general CECL reserve and a $48.5 million increase in our specific CECL reserve prior to principal charge-offs. This increase in our general CECL reserve was primarily attributable to changes in the historical loss rate of the analogous dataset and changes in risk ratings, non-accrual status, and expected remaining duration within our loan portfolio, offset by the reduction in the size of our loan portfolio subject to determination of the general CECL reserve. The increase in our specific CECL reserves was primarily attributable to changes to collateral values and additional protective advances made. As of June 30, 2024, our total current expected credit loss reserve was $213.7 million.

Previous wording

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 March 31, 2025 ($ in thousands):

Current wording

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 the carrying value of our loan. Additionally, in certain circumstances, we may recognize a specific CECL reserve based upon anticipated proceeds from the disposition of our loan. The following table presents a summary of our risk rated 5 loans receivable held-for-investment as of June 30, 2025 ($ in thousands):

Previous wording

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

Current wording

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

Previous wording

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 March 31, 2025 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.

Current wording

Fair values of collateral assets 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 June 30, 2025 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 4.75% 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.

Previous wording

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

Current wording

Excludes loss recognized in connection with the reclassification of our real estate owned hotel portfolio to held-for-sale and partial sale of our mixed-use real estate owned asset.

Previous wording

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

Current wording

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

Previous wording

We finance certain of our loans using repurchase agreements and a term participation facility. As of March 31, 2025, aggregate borrowings outstanding under our repurchase agreements and term participation facility totaled $3.5 billion, with a weighted average spread of SOFR plus 2.88% per annum based on unpaid principal balance. As of March 31, 2025, the loans receivable securing the outstanding borrowings under these facilities had a weighted average term to initial maturity and fully extended maturity of 0.5 years and 1.4 years, respectively, assuming all conditions to extend are met.

Current wording

We finance certain of our loans and multifamily real estate owned properties using repurchase agreements and a term participation facility. As of June 30, 2025, aggregate borrowings outstanding under our repurchase agreements and term participation facility totaled $2.9 billion, with a weighted average spread of SOFR plus 2.84% per annum based on unpaid principal balance. As of June 30, 2025, the loans receivable securing the outstanding borrowings under these facilities had a weighted average term to initial maturity and fully extended maturity of 0.6 years and 1.5 years, respectively, assuming all conditions to extend are met. Further, we have a repurchase agreement that specifically provides for the ability to finance (i) loans receivable, including those which may be delinquent or in default, and (ii) real estate owned assets subsequent to assuming legal title and/or physical possession of the underlying collateral property. As of June 30, 2025, $95.4 million of borrowings outstanding relate to our multifamily real estate owned assets.

Previous wording

We may finance certain of our loans via the sale of a participation in such loans, and we present the loan participations sold as a liability on our consolidated balance sheet when such arrangements do not qualify as sales under GAAP. We generally seek to (i) have financings not cross-collateralized to the extent that we have multiple loan participations with the same lender, and (ii) term match our loan participations sold to the underlying loans. As of March 31, 2025, we had no loan participations sold.

Current wording

We may finance certain of our loans via the sale of a participation in such loans, and we present the loan participations sold as a liability on our consolidated balance sheet when such arrangements do not qualify as sales under GAAP. As of June 30, 2025, we had no loan participations sold.

Previous wording

We have a secured term loan which we originally entered into on August 9, 2019. Our secured term loan is presented net of any original issue discount and transaction expenses which are deferred and recognized as interest expense over the life of the loan using the effective interest method. The secured term loan matures on August 9, 2026 and as of March 31, 2025 has an unpaid principal balance of $715.9 million and a carrying value of $709.1 million.

Current wording

We have a secured term loan which we originally entered into on August 9, 2019. Our secured term loan is presented net of any original issue discount and transaction expenses which are deferred and recognized as interest expense over the life of the loan using the effective interest method. The secured term loan matures on August 9, 2026 and as of June 30, 2025 has an unpaid principal balance of $714.0 million and a carrying value of $708.4 million.

Previous wording

On February 8, 2021 we assumed a $300.0 million securitized senior mortgage in connection with a foreclosure of a hotel portfolio. On June 1, 2021, the terms of the securitized senior mortgage were modified to include an extension of the maturity date to February 9, 2024 and a principal repayment of $10.0 million. On February 7, 2024, we modified our debt related to real estate owned to provide for, among other things, an extension of the contractual maturity date to November 9, 2024, a $10.0 million principal paydown, and the designation of a portion of the loan becoming partial recourse to us. Concurrent with this modification, we purchased an interest rate cap with a notional amount of $280.0 million and a strike rate of 5.00% through the then extended contractual maturity date. We subsequently further extended the contractual maturity date to February 9, 2025 and concurrently purchased an interest rate cap with a notional amount of $275.0 million and a strike rate through the further extended contractual maturity date. Upon maturity in February 2025, we entered into a forbearance agreement with our lender which expires on May 9, 2025 and provides for interest to accrue at an additional rate of 4.0% per annum. In May 2025, we extended the forbearance period for our debt related to real estate owned through September 9, 2025 and concurrently repaid $5.0 million of the principal balance. As of March 31, 2025, our debt related to real estate owned has an unpaid principal balance of $275.2 million, a carrying value of $275.2 million and a stated rate of SOFR plus 2.94%. See Derivatives below for further detail of our interest rate cap.

Current wording

On February 8, 2021 we assumed a $300.0 million securitized senior mortgage in connection with a foreclosure on a hotel portfolio. Subsequently, we entered into modifications of our debt related to real estate owned hotel portfolio to provide for, among other things, total principal payments of $25.0 million, an extension of the contractual maturity date to February 9, 2025, and the designation of a portion of the loan becoming partial recourse to us. Concurrent with each modification, we acquired interest rate caps with notional amounts equal to the borrowing outstanding, strike rates ranging from 3.0% to 5.0%, and maturity dates matching the associated financing. Upon maturity in February 2025 and subsequent thereto, we entered into forbearance agreements with our lender through September 9, 2025 and concurrently repaid $5.0 million of the principal balance. During the forbearance period, interest accrued at additional rates ranging from 3.0% to 5.0% per annum. On June 9, 2025, we refinanced our debt related to real estate owned hotel portfolio with a non-recourse senior mortgage in the amount of $235.0 million. Such financing matures on June 9, 2027, and we may extend the maturity to June 9, 2030 pursuant to three one-year extension options, subject to meeting prescribed conditions. As of June 30, 2025, our debt related to real estate owned hotel portfolio has an unpaid principal balance of $235.0 million, a carrying value of $229.6 million and a stated rate of SOFR plus 3.18%. See Derivatives below for further detail of our interest rate cap.

Previous wording

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. Through the contractual maturity of our debt related to real estate owned, the interest rate cap effectively limited the maximum interest rate of our debt related to real estate owned to 7.94% through its maturity.

Current wording

On June 2, 2021 and in connection with our debt related to real estate owned hotel portfolio, 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 hotel portfolio to 5.83% through its then maturity. Subsequent thereto and in connection with modifications of our debt related to real estate owned hotel portfolio, we acquired interest rate caps with maturity dates and notional amounts equal to that of the then maturity dates and outstanding principal balance of our debt related to real estate owned hotel portfolio, respectively, and strike rates of 5.00%. Through the contractual maturity of our debt related to real estate owned hotel portfolio, the interest rate caps effectively limited the maximum interest rate of our debt related to real estate owned hotel portfolio to 7.94%. Concurrent with refinancing our debt related to real estate owned hotel portfolio in June 2025, we acquired an interest rate cap for a price of $71,000 with a notional amount of $235.0 million, a strike rate of 6.79%, and a maturity date of June 2027, which effectively limits the maximum interest rate of our debt related to real estate owned hotel portfolio to 9.97%.

Previous wording

Changes in the fair value of our interest rate cap were recorded as an unrealized gain or loss on interest rate cap on our consolidated statements of operations and the fair value was recorded in other assets on our consolidated balance sheets. Proceeds received from our counterparty related to the interest rate cap were recorded as proceeds from interest rate cap on our consolidated statements of operations. As of March 31, 2025, we did not have an interest rate cap for our debt related to real estate owned. As of December 31, 2024, the fair value of our interest rate cap was de minimis. During the three months ended March 31, 2025 and 2024, we recognized $0.0 million and $0.9 million, respectively, of proceeds from interest rate cap.

Current wording

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 June 30, 2025 and December 31, 2024, the fair values of our interest rate caps were de minimis. During the three months ended June 30, 2025 and 2024, we recognized $0.0 million and $0.2 million, respectively, of proceeds from interest rate cap. During the six months ended June 30, 2025 and 2024, we recognized $0.0 million and $1.1 million, respectively, of proceeds from interest rate cap.

Previous wording

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 agreement 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) $20 million or (y) 3% of our recourse indebtedness (which includes our secured term loan); and (iii) our indebtedness shall not exceed 77.8% of our total assets. The requirements set forth in (i) through (iii) above are based upon the most restrictive financial covenants in place as of the reporting date. As of March 31, 2025, we are in compliance with all financial covenants under our financing agreements. Commencing with the quarter ending December 31, 2025, our Interest Coverage Ratio shall not be less than 1.3 to 1.0. Further, commencing July 1, 2025, our cash liquidity shall not be less than the greater of (x) $20 million or (y) 5% of our recourse indebtedness (which includes our secured term loan).

Current wording

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 calculated in accordance with 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 calculated in accordance with our secured term loan agreement shall not be less than 1.5 to 1.0. Further, our tangible net worth, as calculated in accordance with our repurchase agreements, shall not be less than $1.7 billion, whereas our tangible net worth, as calculated in accordance with our secured term loan agreement, which permits us to make certain adjustments for our current expected credit loss reserve, shall not be less than $1.86 billion as of each measurement date. Additionally, (i) 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); and (ii) our indebtedness shall not exceed 77.8% of our total assets, which is the most restrictive indebtedness covenant as of the reporting date. As of June 30, 2025, we are in compliance with all financial covenants under our financing agreements. Commencing with the quarter ending December 31, 2025, our Interest Coverage Ratio shall not be less than 1.3 to 1.0. Further, commencing July 1, 2025, our cash liquidity shall not be less than the greater of (x) $20 million or (y) 5% of our recourse indebtedness (which includes our secured term loan).

Previous wording

The following table summarizes our non-consolidated senior interests and related retained subordinate interests, excluding for loans classified as held-for-sale, as of March 31, 2025 ($ in thousands):

Current wording

The following table summarizes our non-consolidated senior interest and related retained subordinate interest, excluding for loans classified as held-for-sale, as of June 30, 2025 ($ in thousands):

Previous wording

Our business model seeks to minimize our exposure to changing interest rates by originating floating rate loans and financing them with floating rate liabilities. Further, we seek to match the benchmark index in the floating rate loans we originate with the benchmark index used in the related floating rate financings. Generally, we use SOFR as the benchmark index in both our floating rate loans and floating rate financings. As of March 31, 2025, 97.9% of our loans receivable held-for-investment based on unpaid principal balance were floating rate and indexed to SOFR. All of our encumbered floating rate loans were financed with floating rate liabilities indexed to SOFR, which resulted in approximately $1.2 billion of net floating rate exposure.

Current wording

Our business model seeks to minimize our exposure to changing interest rates by originating floating rate loans and financing them with floating rate liabilities. Further, we seek to match the benchmark index in the floating rate loans we originate with the benchmark index used in the related floating rate financings. Generally, we use SOFR as the benchmark index in both our floating rate loans and floating rate financings. As of June 30, 2025, 97.6% of our loans receivable held-for-investment based on unpaid principal balance were floating rate and indexed to SOFR. All of our encumbered floating rate loans, our real estate owned hotel portfolio, and our real estate owned multifamily properties were financed with floating rate liabilities indexed to SOFR, which resulted in approximately $1.1 billion of net floating rate exposure.

Previous wording

SOFR as of March 31, 2025 was 4.32%. Net floating rate exposure includes $521.8 million related to loans on non-accrual status and excludes one unencumbered loan receivable classified as held-for-sale as of March 31, 2025.

Current wording

SOFR as of June 30, 2025 was 4.32%. Net floating rate exposure includes $645.5 million related to loans on non-accrual status, of which $32.6 million relates to loans which we acquired legal title to the collateral asset through a mortgage foreclosure in July 2025.

Previous wording

As of March 31, 2025, we do not employ interest rate derivatives (interest rate swaps, caps, collars or floors) to hedge our asset or liability portfolio, but we may do so in the future.

Current wording

As of June 30, 2025 and aside from our interest rate cap on our debt related to real estate owned hotel portfolio, we do not employ interest rate derivatives (interest rate swaps, caps, collars or floors) to hedge our asset or liability portfolio, but we may do so in the future.

Previous wording

Total net revenue decreased $16.9 million during the three months ended March 31, 2025, compared to the three months ended December 31, 2024. The decrease is primarily due to a decrease in revenue from real estate owned of $13.2 million due to lower overall average occupancy, average daily rate (“ADR”), and revenue per available room (“RevPAR”) levels at the hotel portfolio compared to the three months ended December 31, 2024 due to seasonality, a decrease in net interest income of $3.7 million, which was driven by a decrease in interest income of $14.5 million as a result of decreased average loans receivable balances, partially offset by a decrease in interest expense of $10.9 million as a result of lower average borrowing levels during the three months ended March 31, 2025 compared to the three months ended December 31, 2024 as a result of continued deleveraging.

Current wording

Total net revenue increased $8.3 million during the three months ended June 30, 2025, compared to the three months ended March 31, 2025. The increase is primarily due to an increase in revenue from real estate owned of $10.9 million due to higher overall average occupancy, average daily rate (“ADR”), and revenue per available room (“RevPAR”) levels at the hotel portfolio compared to the three months ended March 31, 2025 due to the impact of expected seasonality, and income recognized from the multifamily properties we foreclosed on during the three months ended June 30, 2025. Such amount is partially offset by a decrease in net interest income of $2.7 million, which was driven by a decrease in interest income of $9.9 million as a result of decreased average loans receivable balances, partially offset by a decrease in interest expense of $7.2 million as a result of lower average borrowing levels during the three months ended June 30, 2025 compared to the three months ended March 31, 2025 as a result of loan repayments and loan sales during the quarter in addition to incremental deleveraging.

Previous wording

Expenses are primarily comprised of base management fees payable to our Manager, general and administrative expenses, stock-based compensation expense, operating expenses from real estate owned, interest expense from debt related to real estate owned, and depreciation and amortization on real estate owned and related in-place and other lease values. Expenses decreased by $4.9 million during the three months ended March 31, 2025, as compared to the three months ended December 31, 2024, primarily due to:

Current wording

Expenses are primarily comprised of base management fees payable to our Manager, general and administrative expenses, stock-based compensation expense, operating expenses from real estate owned, interest expense from the debt related to real estate owned hotel portfolio, and depreciation and amortization on real estate owned and related in-place and other lease intangible values. Expenses increased by $5.1 million during the three months ended June 30, 2025, as compared to the three months ended March 31, 2025, primarily due to:

Previous wording

a decrease in operating expenses from real estate owned of $3.5 million during the comparative period, due to lower variable operating expenses in connection with lower occupancy levels at the hotel portfolio due to seasonality;

Current wording

an increase in operating expenses from real estate owned of $2.8 million during the comparative period, due to higher variable operating expenses in connection with higher occupancy levels at the hotel portfolio due to the impact of expected seasonality, and operating expenses incurred from the multifamily properties we foreclosed on during the three months ended June 30, 2025;

Previous wording

partially offset by an increase in general and administrative expenses of $0.9 million primarily as a result of an increase in certain non-recurring charges incurred over the comparative period.

Current wording

an increase in general and administrative expenses of $0.8 million primarily as a result of an increase in certain non-recurring charges incurred over the comparative period;

Previous wording

During the three months ended March 31, 2025 and the three months ended December 31, 2024, we recognized losses from our equity method investment of $0.1 million as a result of the net losses recognized by our investee during each respective period.

Current wording

During the three months ended June 30, 2025 and the three months ended March 31, 2025, we recognized de minimis losses from our equity method investment as a result of the net losses recognized by our investee during each respective period.

Previous wording

During the three months ended March 31, 2025 and the three months ended December 31, 2024, we recognized losses on extinguishment of debt of $0.6 million due to the recognition of unamortized deferred financing costs resulting from the repayment of financing balances prior to maturity.

Current wording

During the three months ended March 31, 2025, we recognized losses on extinguishment of debt of $0.6 million due to the recognition of unamortized deferred financing costs resulting from the repayment of financing balances prior to maturity. No such losses were recognized during the three months ended June 30, 2025.

Previous wording

During the three months ended December 31, 2024, we determined that our hotel portfolio real estate owned asset met the held-for-sale criteria and concurrently recognized a $80.5 million loss based upon anticipated sales price, less estimated costs to sell. During the three months ended March 31, 2025 we recognized an additional $49.0 thousand of loss on real estate owned held-for-sale as a result of capital expenditures incurred.

Current wording

During the three months ended June 30, 2025 and the three months ended March 31, 2025 we recognized $0.3 million and $49,000 of loss on real estate owned held-for-sale, respectively, as a result of capital expenditures incurred.

Previous wording

During the three months ended March 31, 2025 we recognized a valuation adjustment of $42.6 million for our loan receivable held-for-sale and during the three months ended December 31, 2024 we recognized a valuation adjustment of $7.2 million for our loan receivable held-for sale. In both instances the valuation adjustments were as a result of additional protective advances made and a reduction in anticipated proceeds from the sale of such loan.

Current wording

During the three months ended June 30, 2025, we recognized a valuation adjustment of $0.8 million for our loan receivable held-for-sale as a result of an increase in anticipated net proceeds from the sale of such loan, primarily due to lower transaction costs than previously estimated. This loan receivable held-for-sale was sold in May 2025. During the three months ended March 31, 2025 we recognized a valuation adjustment of $42.6 million for our loan receivable held-for sale as a result of additional protective advances made and a decrease in anticipated proceeds from the sale of such loan.