Claros Mortgage Trust, Inc.

(unaudited)

Note 1. Organization

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

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

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

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

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

These unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the U.S. Securities and Exchange Commission (the “SEC”). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of our financial position, results of operations and cash flows have been included. Our results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results to be expected for the full year or any other future period.

We consolidate all entities that are controlled either through majority ownership or voting rights. We also identify entities for which control is achieved through means other than through voting rights (a variable interest entity or “VIE”) using the analysis as set forth in Accounting Standards Codification (“ASC”) 810, Consolidation of Variable Interest Entities, and determine when and which variable interest holder, if any, should consolidate the VIE. We do not have any consolidated variable interest entities as of June 30, 2025 and December 31, 2024. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Estimates that are particularly susceptible to our judgment include, but are not limited to, the adequacy of our current expected credit loss reserve, the determination of the fair value of real estate assets acquired and liabilities assumed, and the impairment of certain assets.

Risks and Uncertainties

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

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

General CECL Reserve

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

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

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

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

To estimate an annual historical loss rate, we obtained historical loss rate data for loans most comparable to our loan portfolio from a commercial mortgage-backed securities database licensed by a third party, Trepp, LLC, which contains historical loss data from January 1, 1999 through June 30, 2025. We believe this CMBS data is the most relevant, available, and comparable dataset to our portfolio.

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

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

Very Low Risk

Low Risk

Medium Risk

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

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

Specific CECL Reserve

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

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

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

Recent Accounting Guidance

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

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

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

Note 3. Loan Portfolio

Loans Receivable

Our loan receivable held-for-investment portfolio as of June 30, 2025 was comprised of the following loans ($ in thousands, except for number of loans):

(1)

(2)

Net of specific CECL reserves of$193.5 million.

(3)

The weighted average spread is expressed as a spread over the relevant floating benchmark rates. One-month term Secured Overnight Financing Rate (“SOFR”) as of June 30, 2025 was 4.32%. Weighted average is based on unpaid principal balance as of June 30, 2025. For loans placed on non-accrual, the spread used in calculating the weighted average spread is 0%.

(4)

Reflects the weighted average interest rate based on the applicable floating benchmark rate (if applicable), including SOFR floors (if applicable). Weighted average is based on unpaid principal balance as of June 30, 2025 and includes loans on non-accrual status. For loans placed on non-accrual, the spread used in calculating the weighted average interest rate is 0%.

(5)

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

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

(1)

(2)

Net of specific CECL reserves of $120.9 million.

(3)

The weighted average spread is expressed as a spread over the relevant floating benchmark rates. SOFR as of December 31, 2024 was 4.33%. Weighted average is based on unpaid principal balance as of December 31, 2024. For loans placed on non-accrual, the spread used in calculating the weighted average spread is 0%.

(4)

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

(5)

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

Activity relating to our loans receivable held-for-investment portfolio for thesix months ended June 30, 2025 ($ in thousands):

(1)

Balance at December 31, 2024 does not include general CECL reserve.

In March 2025, we agreed to a loan repayment of a land loan with a then unpaid principal balance of $183.0 million and deferred interest of $6.4 million, which resulted in (i) a discounted loan payoff of $164.7 million, (ii) a discounted repayment of deferred interest of $2.9 million, and (iii) a waiver of a $0.5 million exit fee. As a result of this repayment, we recognized a$22.3 million charge-off through our provision for current expected credit loss reserve.

In April 2025, we agreed to a loan repayment of a subordinate loan secured by an equity interest in a retail property in Brooklyn, NY with a then unpaid principal balance of $886,000 and a carrying value prior to a specific CECL reserve of $884,000, which resulted in a discounted loan payoff of $775,000. Prior to this repayment, the loan was risk rated 5, on non-accrual status, and fully reserved for as part of our specific CECL reserves. As a result of this repayment, we reversed the specific CECL reserve and recognizeda $109,000 charge-off through our provision for current expected credit loss reserve.

Sales of Loans Receivable

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

(1)

For each loan receivable sold, the financial asset was legally isolated, control of the financial asset was transferred to the transferee, the transfer imposed no condition that would constrain the transferee from pledging the financial asset received, and we have no continuing involvement with the transferred financial asset. As such, we have determined each transaction constituted a sale.

(2)

Reflects risk rating of the loan receivable prior to the loan sale or reclassification to held-for-sale

(3)

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

(4)

Loan classified as held-for-sale as of December 31, 2024 and sold in January 2025. Principal charge-off recognized upon reclassification to held-for-sale as of December 31, 2024

(5)

In June 2025, this loan was sold. Principal charge-off attributable to the diminution in value of the collateral asset, and prorations and transaction costs related to the sale.

Modifications of Loans Receivable Held-for-Investment

Retroactive to its initial maturity date of November 2024, we agreed to a modification of a multifamily loan receivable with an unpaid principal balance of $390.0 million which primarily provides for (i) a discounted loan payoff of $350.0 million, contingent on the borrower meeting prescribed conditions within a certain timeframe, (ii) an extension of the maturity date from November 1, 2024 to August 1, 2025, (iii) a curtailment of existing maturity extension options, and (iv) partial deferral of monthly debt service payments until maturity. As of June 30, 2025 and in anticipation of the borrower meeting the prescribed conditions within the specified timeframe shortly thereafter, we reflect this loan as risk rated 5 and have reflected a specific CECL reserve equal to the agreed upon discount. In July 2025, this loan was repaid in accordance with the terms of the modified loan agreement. This loan remained on accrual status through repayment as the borrower continued to perform in accordance with the terms of the modified loan agreement.

During the year ended December 31, 2023, we modified a hospitality loan with a borrower that was experiencing financial difficulties, resulting in a maturity extension to June 10, 2024. In June 2025, we sold this loan for a gross sales price of $59.25 million. After prorations and transaction costs, we recognized a$23.8 million principal charge-off through our provision for current expected credit loss reserve as a result of this loan sale. Prior to this loan sale, the loan had total commitments and an amortized cost basis of$80.4 million, was in maturity default, and was risk rated 4. Concurrent with this loan sale, we entered into an agreement with the guarantor of the loan receivable which provides for a partial repayment of such individual’s loan guarantee. As of June 30, 2025, we have not recognized any value to this agreement on our consolidated financial statements.

During the year ended December 31, 2022, we modified an office loan with a borrower that was experiencing financial difficulties, resulting in a decrease in the index rate floor from 1.57% to 1.00% and modified extension requirements. Subsequently, we further modified this loan to provide for an initial maturity extension to September 18, 2023. In March 2025, we agreed to a discounted loan payoff of our loan with a then unpaid principal balance of$87.8 million prior to a principal charge-off following the borrower’s sale of the collateral asset which occurred in April 2025. After prorations and transaction costs, we recognized a$23.7 million charge-off through our provision for current expected credit loss reserve as a result of this discounted repayment. Prior to this loan repayment, the loan was in maturity default and risk rated 4. Effective March 31, 2025, this loan was placed on non-accrual status.

Concentration of Risk

The following table presents our loans receivable held-for-investment by loan type, as well as property type and geographic location of the properties collateralizing these loans as of June 30, 2025 and December 31, 2024 ($ in thousands):

(1)

Net of specific CECL reserves of$193.5 million at June 30, 2025.

(2)

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

(3)

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

(4)

At June 30, 2025, mixed-use comprises of 3% multifamily,2% office,1% retail, and 1% hospitality. At December 31, 2024, mixed-use comprises of 3% office,3% multifamily,2% retail,1% hospitality, and immaterial amounts of for sale condo.

Interest Income and Accretion

The following table summarizes our interest and accretion income from our loan portfolio and interest on cash balances for thethree and six months ended June 30, 2025 and 2024, respectively ($ in thousands):

(1)

For thethree months ended June 30, 2025 and 2024, we recognized$0.1 million and$0.0 million, respectively, of default interest, late fees, pre-payment penalties, and/or accelerated fees following repayments prior to maturity. For the six months ended June 30, 2025 and 2024, we recognized$0.1 million and$1.3 million, respectively, of default interest, late fees, pre-payment penalties, and/or accelerated fees following repayments prior to maturity.

Loan Risk Ratings

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

The following tables allocate the principal balance and carrying value of our loans receivable held-for-investment based on our internal risk ratings as of June 30, 2025 and December 31, 2024 ($ in thousands):

(1)

Net of specific CECL reservesof$193.5 million.

(1)

Net of specific CECL reserves of$120.9 million.

As of June 30, 2025 and December 31, 2024, the average risk rating of our portfolio was 3.8 and 3.6, respectively, weighted by unpaid principal balance.

The following table presents the carrying value and significant characteristics of our loans receivable held-for-investment on non-accrual status as of June 30, 2025 ($ in thousands):

(1)

In July 2025, we acquired legal title to the underlying collateral asset through a mortgage foreclosure.

(2)

(3)

Amount excludes one risk rated 5 loan with an unpaid principal balance of $390.0 million and carrying value net of specific CECL reserves of $350.0 million that remained on accrual status through repayment in July 2025 as the borrower continued to perform in accordance with the terms of the modified loan agreement.

As of June 30, 2025, loans receivable classified as non-accrual represented 24.1% of our total loans receivable held-for-investment, based on carrying value net of specific CECL reserves. During the six months ended June 30, 2025, we recognized$3.0 million of interest income and received$0.6 million of cost recovery proceeds for such loans while on non-accrual status. Further, the above table excludes (i)four loans with an aggregate carrying value of$428.5 million that are in maturity default but remain on accrual status as the borrower is either current on interest payments or interest is deemed collectible based on the underlying collateral value and (ii) two loans with an aggregate carrying value of$375.2 million that are delinquent in accordance with our revenue recognition policy but remain on accrual status as the interest is deemed collectible based on the underlying collateral value.

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

(1)

In June 2025, we acquired legal title to the underlying collateral asset through a mortgage foreclosure. See Note 5 – Real Estate Owned for further detail.

(2)

Amounts deemed uncollectible have been charged-off as of December 31, 2024.

(3)

In April 2025, we agreed to a loan repayment which resulted in a discounted loan payoff of $775,000.

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

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

The following table illustrates the changes in the current expected credit loss reserve for our loans receivable held-for-investment for thesix months ended June 30, 2025 and 2024, respectively ($ in thousands):

(1)

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

(2)

CECL reserve for unfunded commitments is included in other liabilities on the consolidated balance sheets.

The following table illustrates our specific and general CECL reserves as a percentage of total unpaid principal balance of loans receivable held-for-investment as of June 30, 2025, December 31, 2024, June 30, 2024, and December 31, 2023:

(1)

Represents specific CECL reserve on loans receivable held-for-investment as a percentage of unpaid principal balance of risk rated 5 loans.

(2)

Represents general CECL reserve on loans receivable held-for-investment and related unfunded loan commitments as a percentage of unpaid principal balance of loans subject to the general CECL reserve.

(3)

Represents total CECL reserve on loans receivable held-for-investment and related unfunded loan commitments as a percent of total unpaid principal balance of loans receivable held-for-investment.

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.

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.

Specific CECL Reserves

In certain circumstances, we may determine that a borrower is experiencing financial difficulty, and, if the repayment of the loan’s principal is collateral dependent, the loan is no longer suited for the WARM model. In these instances, there have been diminutions in the fair value and performance of the underlying collateral asset primarily as a result of reduced tenant and/or capital markets demand for such property types in the markets in which these assets and borrowers operate in. Furthermore, we may recognize a specific CECL reserve if we anticipate assuming legal title and/or physical possession of the underlying collateral property and the fair value of the collateral asset is determined to be below 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):

(1)

(2)

In July 2025, we acquired legal title to the underlying collateral asset through a mortgage foreclosure. As of June 30, 2025, we recognized a principal charge-off for unpaid principal balance deemed uncollectible in anticipation of such mortgage foreclosure.

(3)

(4)

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

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.

Our primary credit quality indicator is our internal risk rating, which is further discussed above. The following table presents the carrying value of our loans receivable held-for-investment as of June 30, 2025 by year of origination and risk rating, and principal charge-offs recognized during the six months ended June 30, 2025 ($ in thousands):

(1)

Net of specific CECL reserves of$193.5 million.

(2)

Reflects a loan receivable acquired in connection with a full loan repayment in July 2024.

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

(1)

Represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon, and fees received, based on the applicable floating benchmark rate/floors (if applicable), in place as of June 30, 2025 and December 31, 2024. 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%.

(2)

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

Note 4. Equity Method Investment

As of June 30, 2025 and December 31, 2024, we hold a 51% interest in CMTG/TT Mortgage REIT LLC (“CMTG/TT”). We are not deemed to be the primary beneficiary of CMTG/TT in accordance with ASC 810, therefore we do not consolidate this joint venture. During its active investment period, CMTG/TT originated loans collateralized by institutional quality commercial real estate. As of June 30, 2025, the sole remaining loan held by CMTG/TT had an unpaid principal balance of$78.5 million and was placed on non-accrual status effective April 1, 2023. As of June 30, 2025, the carrying value of our 51% equity interest in CMTG/TT approximated$42.3 million.

The following tables present CMTG/TT’s consolidated balance sheets as of June 30, 2025 and December 31, 2024 ($ in thousands):

The following tables present CMTG/TT’s consolidated statements of operations for the three months ended June 30, 2025 and 2024 and for the six months ended June 30, 2025 and 2024 ($ in thousands):

At each reporting period, we assess whether there are any indicators of other-than-temporary impairment of our equity investment. There were no other than temporary impairments of our equity method investment through June 30, 2025.

Note 5. Real Estate Owned

The following table presents additional detail related to our real estate owned held-for-investment, net, as of June 30, 2025 and December 31, 2024 ($ in thousands):

Depreciation expense related to our real estate owned held-for-investment assets for the three months ended June 30, 2025 and 2024 was$0.4 million and$2.4 million, respectively. Depreciation expense related to our real estate owned held-for-investment assets for the six months ended June 30, 2025 and 2024 was$0.6 million and$4.8 million, respectively. At each reporting period, we assess whether there are any indicators of impairment of our real estate owned held-for-investment assets. There wereno impairments of our real estate owned held-for-investment assets through June 30, 2025.

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

(1)

Such assets are pledged to certain of our repurchase agreements. Thus, amount excludes any allocation of amortization of deferred financing costs related to such repurchase agreement.

Hotel Portfolio

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 thesix 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 asset. We have determined this anticipated sale does not reflect a strategic shift and therefore does not qualify for presentation as a discontinued operation.

Mixed-Use Property

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 aloss on sale of$1.6 million and proceeds, net of transaction costs and prorations, of $26.8 million.

Multifamily Properties

On May 28, 2025, we acquired legal title to a multifamily property located in Phoenix, AZ through a mortgage foreclosure. Prior to such date, the multifamily property represented the underlying collateral for a senior loan with an unpaid principal balance of $50.2 million. During the year ended December 31, 2024, the borrower defaulted on the loan and, in anticipation of the mortgage foreclosure, we recognized a specific CECL reserve of $7.2 million, resulting in a carrying value of $42.8 million. Upon the mortgage foreclosure, werecognized a reversal of the specific CECL reserve of $0.3 million prior to recognizing a principal charge-off of $6.9 million based upon the multifamily property’s $42.8 million estimated fair value as determined by a third-party appraisal and assumption of $0.3 million of net working capital. The fair value was determined using a market capitalization rate of 5.25%. In connection with the mortgage foreclosure, we incurred $0.1 million of transaction costs. As of June 30, 2025, the multifamily property appears as part of real estate owned, net and related lease intangibles appear within other assets on our consolidated balance sheet.

On June 12, 2025, we acquired legal title to a multifamily property located in Henderson, NV through a mortgage foreclosure. Prior to such date, the multifamily property represented the underlying collateral for a senior loan with an unpaid principal balance of $96.5 million. During the year ended December 31, 2024, the borrower defaulted on the loan and, in anticipation of the mortgage foreclosure, we recognized a specific CECL reserve of $16.7 million, resulting in a carrying value of $79.4 million. Upon the mortgage foreclosure, we recognized a reversal of the specific CECL reserve of $0.1 million prior to recognizing a principal charge-off of $16.5 million based upon the multifamily property’s $79.4 million estimated fair value as determined by a third-party appraisal and assumption of $0.1 million of net working capital. The fair value was determined using a market capitalization rate of 5.5%. In connection with the mortgage foreclosure, we incurred $0.4 million of transaction costs. As of June 30, 2025, the multifamily property appears as part of real estate owned, net and related lease intangibles appear within other assets on our consolidated balance sheet.

In accordance with ASC 805, we allocated the fair value of assets acquired and liabilities assumed in connection with the above mortgage foreclosures on the above mentioned multifamily properties as follows ($ in thousands):

(1)

Included within other assets on our consolidated balance sheets.

The following table presents additional detail of the assets acquired and liabilities assumed in connection with the mortgage foreclosures on the above mentioned multifamily properties ($ in thousands):

(1)

Included within other assets on our consolidated balance sheets.

Leases

We have non-cancelable operating leases for space in our mixed-use and multifamily properties. These leases provide for fixed rent payments, which we recognize on a straight-line basis, and variable rent payments, including reimbursement of certain operating expenses and miscellaneous fees, which we recognize when earned. As of June 30, 2025, the future minimum fixed rents under our non-cancellable leases for each of the next five years and thereafter are as follows ($ in thousands):

(1)

Contractual lease payments due for the remaining six months of 2025.

Lease Intangibles

Upon acquisition of our mixed-use and multifamily real estate owned properties, the allocation of the fair value of intangible assets acquired and liabilities assumed are as follows ($ in thousands):

As of June 30, 2025 and December 31, 2024, our lease intangibles are comprised of the following ($ in thousands):

Amortization of our lease intangibles for thethree and six months ended June 30, 2025 and 2024 is as follows ($ in thousands):

(1)

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

(2)

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

As of June 30, 2025, the estimated amortization of our lease intangibles is approximately as follows ($ in thousands):

(1)

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

(2)

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

(3)

Represents amortization for the remaining six months of 2025.

The weighted average amortization period for in-place lease values acquired during the six months ended June 30, 2025 was 1.0 year.

Note 6. Debt Obligations

As of June 30, 2025 and December 31, 2024, we financed certain of our loans receivable using repurchase agreements, a term participation facility, and/or notes payable. Further, we have a secured term loan and debt related to real estate owned hotel portfolio. Our financings bear interest at a rate equal to SOFR plus a credit spread.

The following table summarizes our financings as of June 30, 2025 and December 31, 2024 ($ in thousands):

(1)

Weighted average spread over the applicable benchmark rate is based on unpaid principal balance. SOFR as of June 30, 2025 and December 31, 2024 was 4.32% and 4.33%, respectively.

(2)

The repurchase agreements and term participation facility are partially recourse to us. As of June 30, 2025, the weighted average recourse on ourrepurchase agreements and term participation facility was 28%. As of December 31, 2024, the weighted average recourse on our repurchase agreements and term participation facility was 29%.

Repurchase Agreements and Term Participation Facility

Repurchase Agreements

The following table summarizes our repurchase agreements by lender as of June 30, 2025 ($ in thousands):

(1)

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

(2)

Net of specific CECL reserves, if any.

(3)

Repurchase agreement 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, (i)$95.4 million ofborrowings outstanding relate to our multifamily real estate owned assets, and (ii) carrying value of collateral includes ourmultifamily real estate owned assets included in real estate owned, held-for-investment and related lease intangibles included in other assets on our consolidated balance sheet.

The Goldman Sachs Bank USA repurchase agreement was terminated in June 2025 in accordance with the terms of the agreement upon the repayment of the last remaining loan receivable pledged to the facility and its associated financing.

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

(1)

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

(2)

Net of specific CECL reserves, if any.

Term Participation Facility

On November 4, 2022, we entered into a master participation and administration agreement to finance certain of our loans receivable.

Our term participation facility as of June 30, 2025 is summarized as follows ($ in thousands):

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

(1)

Amount includes the carrying value of our mixed-use real estate owned asset, including related net lease intangible assets.

Notes Payable

Our notes payable as of June 30, 2025 are summarized as follows ($ in thousands):

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

Secured Term Loan, Net

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

The secured term loan as of June 30, 2025 is summarized as follows ($ in thousands):

(1)

SOFR at June 30, 2025 was 4.32%.

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

(1)

SOFR at December 31, 2024 was 4.33%.

Debt Related to Real Estate Owned Hotel Portfolio, Net

Upon maturity of our debt related to real estate owned hotel portfolio 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 anon-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.

Our debt related to real estate owned hotel portfolio as of June 30, 2025 is summarized as follows ($ in thousands):

(1)

SOFR at June 30, 2025 was 4.32%, which was below the 6.79%strike rate provided by our interest rate cap. See Note 7 – Derivatives for further detail.

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

(1)

SOFR at December 31, 2024 was 4.33%, which was below the 5.00% strike rate provided by our interest rate cap. See Note 7 – Derivatives for further detail.

Interest Expense and Amortization

The following table summarizes our interest and amortization expense on our secured financings, debt related to real estate owned hotel portfolio and secured term loan for thethree and six months ended June 30, 2025 and 2024, respectively ($ in thousands):

(1)

For thethree months ended June 30, 2025 and 2024, interest expense on debt related to real estate owned hotel portfolio includes$0.5 million and$1.1 million, respectively, of amortization of deferred financing costs. For the six months ended June 30, 2025 and 2024, interest expense on debt related to real estate owned hotel portfolio includes$0.9 million and$1.5 million, respectively, of amortization of deferred financing costs.

(2)

Our multifamily real estate owned assetsare pledged to certain of our repurchase agreements. Thus, amount excludes any allocation of amortization of deferred financing costs related to such repurchase agreement.

Financial Covenants

Our financing agreements generally contain certain financial covenants. For example, our ratio of earnings before interest, taxes, depreciation, and amortization to interest charges (“Interest Coverage Ratio”), as 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).

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

Note 7. Derivatives

On June 2, 2021 and in connection with our debt related to real estate owned 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%.

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.

Note 8. Fair Value Measurements

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

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

Financial Instruments Reported at Fair Value

The fair value of our interest rate caps are determined by using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the interest rate caps. The variable interest rates used in the calculation of projected receipts on the interest rate caps are based on a third-party expert’s expectation of future interest rates derived from observable market interest rate curves and volatilities. Our interest rate caps are classified as Level 2 in the fair value hierarchy. As of June 30, 2025 and December 31, 2024, the fair values of our interest rate caps were de minimis.

Financial Instruments Not Reported at Fair Value

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

Note 9. Equity

Common Stock

Our charter provides for the issuance of up to 500,000,000 shares of common stock with a par value of $0.01 per share. As of June 30, 2025 and December 31, 2024, we had 139,822,001 and 139,362,657 shares of common stock issued and outstanding, respectively.

The following table provides a summary of the number of shares of common stock outstanding during thesix months ended June 30, 2025 and 2024, respectively:

At the Market Stock Offering Program

On May 10, 2024, we entered into an equity distribution agreement with certain sales agents, pursuant to which we may sell, from time to time, up to an aggregate sales price of $150.0 million of our common stock pursuant to a continuous offering program (the “ATM Agreement”) under our in place effective shelf registration. Sales of our common stock made pursuant to the ATM Agreement may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended. The timing and amount of actual sales will depend on a variety of factors, including market conditions, the trading price of our common stock, our capital needs, and our determination of the appropriate sources of funding to meet such needs. During thesix months ended June 30, 2025, we didnot issue any shares of our common stock pursuant to the ATM Agreement. As of June 30, 2025, the ATM Agreement has not been utilized, and $150.0 million remained available for issuance of our common stock pursuant to the ATM Agreement.

Dividends

The Board didnot declare any dividends during thesix months ended June 30, 2025. The following table details our dividend activity for common stock for thesix months ended June 30, 2024 ($ in thousands, except per share data):

Note 10. Earnings Per Share

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

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

For the three and six months ended June 30, 2025 and 2024, we hadno dilutive securities. As a result, basic and diluted EPS are the same. The calculation of basic and diluted EPS is as follows ($ in thousands, except for share and per share data):

(1)

For thethree months ended June 30, 2025 and 2024, dividends on participating securities excludes$0 and$22,000 of dividends on fully vested RSUs, respectively. For the six months ended June 30, 2025 and 2024, dividends on participating securities excludes$0 and$33,000 of dividends on fully vested RSUs, respectively.

(2)

Amounts as of June 30, 2025 and 2024 include 187,142 and 89,282 fully vested RSUs, respectively.

For the three months ended June 30, 2025 and 2024,2,817,086 and 3,197,914 of weighted average unvested RSUs, respectively, were excluded from the calculation of diluted EPS because the effect was anti-dilutive. For the six months ended June 30, 2025 and 2024,2,767,324 and 2,905,313 of weighted average unvested RSUs, respectively, were excluded from the calculation of diluted EPS because the effect wasanti-dilutive.

Note 11. Related Party Transactions

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

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

Management Fees

Effective October 1, 2015, our Manager earns a base management fee in an amount equal to 1.50% per annum of Stockholders’ Equity, as defined in the Management Agreement. Management fees are reduced by our pro rata share of any management fees and incentive fees (if incentive fees are not incurred by us) incurred to our Manager by CMTG/TT. Management fees are generally paid quarterly, inarrears, and$8.2 million and$27.0 million were accrued and were included in management fee payable – affiliate, on our consolidated balance sheets at June 30, 2025 and December 31, 2024, respectively.

Incentive Fees

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

During the six months ended June 30, 2025, we didnot incur any incentive fees. As of June 30, 2025 and December 31, 2024, there wereno accrued incentive fees on our consolidated balance sheets.

Termination Fees

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

Reimbursable Expenses

Our Manager or its affiliates are entitled to reimbursement for certain documented costs and expenses incurred by them on our behalf, as set forth in the Management Agreement, excluding any expenses specifically required to be borne by our Manager under the Management Agreement. For the three months ended June 30, 2025 and 2024, we incurred$1.3 million and$1.4 million, respectively, of reimbursable expenses incurred on our behalf by our Manager which are included in general and administrative expenses on our consolidated statements of operations. For the six months ended June 30, 2025 and 2024, we incurred$2.1 million and$2.2 million, respectively, of reimbursable expenses incurred on our behalf by our Manager. As of June 30, 2025 and December 31, 2024,$1.0 million and$3.1 million, respectively, of reimbursable expenses incurred on our behalf and due to our Manager are included in other liabilities on our consolidated balance sheets.

Note 12. Stock-Based Compensation

Incentive Award Plan

We are externally managed and do not currently have any employees. On March 30, 2016, we adopted the 2016 Incentive Award Plan (the “Plan”) to promote the success and enhance the value of the Company by linking the individual interests of employees of our Manager and its affiliates to those of our stockholders. As of June 30, 2025, the maximum remaining number of shares that may be issued under the Plan is 2,402,554 shares. Awards granted under the Plan may be granted with the right to receive dividend equivalents and generally vest in equal installments on the specified anniversaries of the grant.

Deferred Compensation Plan

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

Under our Deferred Compensation Plan, certain of our Board members elected to receive the annual fees and/or time-based RSUs to which they are entitled under our Non-Employee Director Compensation Program in the form of deferred RSUs. Accordingly, during the three months ended June 30, 2025 and 2024, we issued 14,515 and 5,027, respectively, of deferred RSUs in lieu of cash fees to such directors, and recognized an expense of approximately$53,000 and$47,000, respectively. During the six months ended June 30, 2025 and 2024, we issued 25,603 and 8,478, respectively, of deferred RSUs in lieu of cash fees to such directors, and recognized an expense of approximately$106,000 and$94,000, respectively. Such expense is included in general and administrative expenses on our consolidated statements of operations.

Non-Employee Director Compensation Program

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

Eligible non-executive members of our Board were granted the time-based RSUs under the Plan. Each RSU was granted with the right to receive dividend equivalents. Additionally, certain directors elected to defer their RSUs pursuant to the terms of the Deferred Compensation Plan. Such deferred awards will become payable on the earliest to occur of the participant’s separation from service or a change in control. On June 1, 2025, we granted 276,750 RSUs to non-executive board members with a grant date fair value per share of $2.71.

Stock-Based Compensation Expense

For the three months ended June 30, 2025 and 2024, we recognized$4.8 million and$4.0 million, respectively, of stock-based compensation expense related to the RSUs. For the six months ended June 30, 2025 and 2024, we recognized$9.8 million and$8.4 million, respectively, of stock-based compensation expense related to the RSUs. As of June 30, 2025, total unrecognized compensation expense was$12.8 million based on the grant date fair value of RSUs granted. This expense is expected to be recognized over a remaining period of 1.7 years from June 30, 2025.

Certain participants of the Plan are required to settle their tax liabilities through a reduction of their vested RSU delivery. Such amount will result in a corresponding adjustment to additional paid-in capital and a cash payment to our Manager or its affiliates in order to remit the required statutory tax withholding to each respective taxing authority. The following table details the deliveries of shares of our common stock for vested RSUs and corresponding increases to additional paid-in capital on our consolidated statement of changes in equity during thethree and six months ended June 30, 2025 and 2024 ($ in thousands).

The following tables detail the time-based RSU activity during thesix months ended June 30, 2025 and 2024:

Note 13. Income Taxes

We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with our taxable year ended December 31, 2015 and expect to continue to operate so as to qualify as a REIT. As a result, we will generally not be subject to federal and state income tax on that portion of our income that we distribute to stockholders if we (i) distribute at least 90% of our taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains, and (ii) comply with certain other requirements to qualify as a REIT. Since Commencement of Operations, we have been in compliance with all REIT requirements and we plan to continue to operate so that we meet the requirements for taxation as a REIT. Therefore, other than amounts relating to our taxable REIT subsidiary (“TRS”), as described below, we have not provided for current income tax expense related to our REIT taxable income for thethree and six months ended June 30, 2025 and 2024, respectively. Additionally, no provision has been made for federal or state income taxes in the accompanying financial statements, as we believe we have met the prescribed requisite requirements.

In December 2024, our Board paused our quarterly dividend on our common stock commencing with the fourth quarter 2024 dividend that would have otherwise been paid in January 2025. The timing and amount of any future dividends declared by our Board depend on a variety of factors, including cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code, and such other factors as our Board deems relevant.

Our real estate owned hotel portfolio is held in a TRS. A TRS is a corporation that is owned directly or indirectly by a REIT and has jointly elected with the REIT to be treated as a TRS for tax purposes. Given the TRS’s history of generating taxable losses, we are not able to conclude that it is more likely than not that we will realize the future benefit of the TRS’s deferred tax assets and therefore recorded a full valuation allowance. Given the full valuation allowance, we did not record a provision or benefit for income taxes for the three and six months ended June 30, 2025 and 2024, and we didnot have any deferred tax assets or deferred tax liabilities as of June 30, 2025 and December 31, 2024. Our deferred tax asset and valuation allowance at June 30, 2025 and 2024 were $60.3 million, and $26.7 million, respectively. As of December 31, 2024, our deferred tax asset and valuation allowance were $56.6 million, respectively.

We recognize tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. Interest and penalties on uncertain tax positions, if applicable, are included as a component of the provision for income taxes in our consolidated statements of operations. As of June 30, 2025 and December 31, 2024, we havenot recorded any amounts for uncertain tax positions.

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

On July 4, 2025, a budget reconciliation bill (the “Bill”) was signed into law in the United States. The Bill includes several significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act of 2017 and other changes to the Internal Revenue Code, that affect REITs and their investors. For instance, for taxable years beginning after December 31, 2025, the Bill modifies the REIT asset test requirement with respect to TRSs, providing that not more than 25% (previously 20%) of the gross value of a REIT’s assets may be represented by securities of one or more TRSs. Additionally, the Bill permanently extends the Internal Revenue Code Section 199A pass-through qualified business income deduction. This allows certain individuals, trusts, and estates to continue deducting 20% of their qualified business income, including qualified REIT dividends. This deduction was set to expire for taxable years beginning after December 31, 2025. We are currently evaluating the potential impact that the provisions in the Bill may have on our consolidated financial statements and related disclosures.

Note 14. Commitments and Contingencies

We hold a 51% interest in CMTG/TT as a result of committing to invest $124.9 million in CMTG/TT. As of June 30, 2025 and December 31, 2024, we have contributed$163.1 million to CMTG/TT and have received return of capital distributions of$123.3 million, of which$111.1 million were recallable. As of June 30, 2025 and December 31, 2024, our remaining capital commitment to CMTG/TT was$72.9 million.

As of June 30, 2025 and December 31, 2024, we had aggregate unfunded loan commitments of$394.8 million and$498.3 million, respectively, which amounts will generally be funded to finance construction or leasing related expenditures by our borrowers, subject to them achieving certain conditions precedent to such funding. These future commitments will expire over the remaining term of the loans, none of which exceed five years.

To the extent a financing is expected to reach final maturity, we may seek replacement financings, extension of existing financings, or other capital solutions as deemed appropriate by management. Our contractual payments due under all financings wereas follows as of June 30, 2025 ($ in thousands):

(1)

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

(2)

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

(3)

Includes financings outstanding of$505.4 million related tonine loans in maturity default with aggregate unpaid principal balance of$942.5 million. Of such financings outstanding, $25.5 million relates to a senior loan collateralized by a multifamily property which we obtained title to through a mortgage foreclosure subsequent to June 30, 2025, and maintained the in-place financing.

(4)

In July 2025, we repaid $241.4 million of our secured financings due during the remainder of 2025 using a portion of the proceeds received from the repayment of a loan receivable.

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

Note 15. Segment Reporting

We have determined that we havetwo operating segments andtwo reporting segments, with activities related to investing in income-producing loans collateralized by institutional quality commercial real estate and activities related to the operations of our real estate owned assets. Our Chief Operating Decision Maker is J. Michael McGillis, our Chief Financial Officer, President, and Director, who primarily utilizes Distributable Earnings (Loss) as described below.

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

The following table provides a calculation of Distributable (Loss) Earnings for our loan and REO portfolios, as well as a reconciliation to net loss, for thethree months ended June 30, 2025 and 2024 ($ in thousands):

(1)

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.

(2)

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).

The following table provides a calculation of Distributable (Loss) Earnings for our loan and REO portfolios, as well as a reconciliation to net loss, for the six months ended June 30, 2025 and 2024 ($ in thousands):

(1)

For the six months ended June 30, 2025, amount includes (i) a$6.5 million charge-off of accrued interest receivable related to the discounted payoff of a land loan in March 2025 and the anticipated mortgage foreclosures on multifamily properties in July 2025 and (ii) a$0.5 million charge-off of an exit fee related to the discounted payoff of a land loan in March 2025.

(2)

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).

Note 16. Subsequent Events

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

In July 2025, we received repayment of a risk rated 5 multifamily loan receivable with an unpaid principal balance of $390.0 million and carrying value net of a specific CECL reserve of $350.0 million. See Note 3 for further detail.

In July 2025, we completed mortgage foreclosures on three multifamily properties located in Dallas, TX. Prior to such mortgage foreclosures, the multifamily properties represented the collateral fortwo senior loans with a combined unpaid principal balance of $135.5 million, net of principal charge-offs recognized as of June 30, 2025, which were risk rated 5 and on non-accrual status. Prior to such principal charge-offs, the two senior loans had a combined unpaid principal balance of $158.4 million. See Note 3 for further detail.