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 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.

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 September 30, 2025, we had net loss per share of $0.07, Diluted Distributable Loss per share of $0.15, Diluted Distributable Earnings per share prior to realized gains and losses of $0.04, and our Board did not declare any dividends. As of September 30, 2025, our book value per share was $12.24, our adjusted book value per share was $13.28, our Net Debt-to-Equity Ratio was 1.9x, and our Total Leverage Ratio was 2.4x. 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,

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, 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.

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 losses for the three months ended June 30, 2025 and March 31, 2025:

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 gains and losses for the three months ended September 30, 2025 and June 30, 2025:

Previous 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):

Current 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):

Previous 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.

Current wording

For the three months ended June 30, 2025, amount includes a $2.9 million charge-off of accrued interest receivable.

Previous 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).

Current wording

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

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 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%.

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 September 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%.

Previous wording

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

Current wording

The following table summarizes our loans receivable sold during the nine months ended September 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 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

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 nine months ended September 30, 2025 and through the sale of this loan in May 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.

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 70.4% 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 70.5% 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. 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.

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. We determined the anticipated sale did not reflect a strategic shift and therefore did not qualify for presentation as a discontinued operation. Concurrent with this classification, we recognized an $80.5 million loss based upon the anticipated sales price, less estimated costs to sell. During the nine months ended September 30, 2025, we continued to pursue the sale of this asset. During such period, we incurred $362,000 of capital expenditures at our hotel portfolio, which is included within valuation adjustment for real estate owned held-for-sale on our consolidated statement of operations. As of September 30, 2025, we determined that a sale was no longer advisable given current market conditions. Accordingly, we ceased the sale process, determined the hotel portfolio no longer met the held-for-sale criteria, and reclassified the hotel portfolio to real estate owned, held-for-investment on our consolidated balance sheet. As we determined the fair value of the hotel portfolio to be $320.0 million as of September 30, 2025, we did not recognize depreciation expense during the nine months ended September 30, 2025. Concurrent with the reclassification to held-for-investment, we recognized a $13.0 million reversal of a previously recognized valuation adjustment for real estate owned held-for-sale, representing previously estimated costs to sell.

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 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.

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 September 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. During the three months ended September 30, 2025, we sold two floors of office space to unaffiliated purchasers for an aggregate gross sales price $13.8 million, resulting in (i) an aggregate gain on partial sales of $2.0 million and (ii) proceeds, net of transaction costs and prorations, of $12.1 million. During the nine months ended September 30, 2025, we sold seven floors of primarily office space to unaffiliated purchasers for an aggregate gross sales price of $42.6 million, resulting in (i) an aggregate gain on partial sales, net of $0.4 million and (ii) proceeds, net of transaction costs and prorations, of $38.7 million. In October 2025, we (i) sold the signage component to an unaffiliated purchaser for a gross sales price of $12.2 million and (ii) entered into a binding agreement to sell one additional floor of office space to an unaffiliated purchaser for a gross sales price of $5.9 million.

Previous wording

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, we recognized 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.

Current wording

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, we recognized 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. In connection with the mortgage foreclosure, we incurred $0.1 million of transaction costs. As of September 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.

Previous wording

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.

Current wording

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. In connection with the mortgage foreclosure, we incurred $0.4 million of transaction costs. As of September 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.

Previous wording

Our Manager proactively manages the loans in our portfolio from closing to final repayment or resolution and our Sponsor has dedicated asset management employees who perform asset management services. Following the closing of an investment, the asset management team rigorously monitors the loan, with an emphasis on ongoing analyses of both quantitative and qualitative matters, including financial, legal, and market conditions. Through the final repayment or resolution of a loan, the asset management team maintains regular contact with borrowers, servicers and local market experts monitoring performance of the collateral, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.

Current wording

Our Manager proactively manages the loans in our portfolio from closing to final repayment or resolution of our investment and our Sponsor has dedicated asset management employees who perform asset management services. Following the closing of an investment, the asset management team rigorously monitors the loan, with an emphasis on ongoing analyses of both quantitative and qualitative matters, including financial, legal, and market conditions. Through the final repayment of a loan or resolution of our investment, the asset management team maintains regular contact with borrowers, servicers, property managers, and local market experts monitoring performance of the collateral, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.

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 3.8 as of June 30, 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 loans receivable held-for-investment portfolio was 3.6 as of September 30, 2025, weighted by carrying value net of specific CECL reserves

Previous 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.

Current wording

During the nine months ended September 30, 2025, we recorded a provision for current expected credit losses of $254.8 million, which consisted of a $12.1 million increase of our general CECL reserve, a $201.3 million increase in our specific CECL reserve prior to principal and exit fee charge-offs, and a $41.4 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 in part 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 in part by principal charge-offs recognized. 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 nine months ended September 30, 2025, offset in part by a reduction in reserves upon the receipt of past due interest. As of September 30, 2025, our total current expected credit loss reserve was $360.4 million.

Previous 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.

Current wording

During the nine months ended September 30, 2024, we recorded a provision for current expected credit losses of $182.6 million, which consisted of a $45.5 million increase in our general CECL reserve, a $113.9 million increase in our specific CECL reserve prior to principal charge-offs, and a $23.2 million increase in CECL reserves on accrued interest receivable prior to charge-offs. The 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 in part 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, and the reclassification of a loan receivable to held-for-sale. The increase in our CECL reserves on accrued interest receivable was attributable to reserving against interest income previously recognized on a loan placed on non-accrual status during the nine months ended September 30, 2024. As of September 30, 2024, our total current expected credit loss reserve was $237.1 million.

Previous 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.

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 September 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 4.66% 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 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.

Current wording

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

Previous wording

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

Current wording

Weighted average spread over the applicable benchmark rate is based on unpaid principal balance. SOFR as of September 30, 2025 was 4.13%.

Previous 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.

Current wording

We finance certain of our loans and multifamily real estate owned properties using repurchase agreements and a term participation facility. As of September 30, 2025, aggregate borrowings outstanding under our repurchase agreements and term participation facility totaled $2.5 billion, with a weighted average spread of SOFR plus 2.88% per annum based on unpaid principal balance. As of September 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 September 30, 2025, $198.3 million of borrowings outstanding relate to our multifamily real estate owned assets.

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 June 30, 2025 has an unpaid principal balance of $714.0 million and a carrying value of $708.4 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 September 30, 2025 has an unpaid principal balance of $712.1 million and a carrying value of $707.7 million.

Previous 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.

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 September 30, 2025, our debt related to real estate owned hotel portfolio has an unpaid principal balance of $235.0 million, a carrying value of $230.3 million and a stated rate of SOFR plus 3.18%. See Derivatives below for further detail of our interest rate cap.

Previous 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.

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 September 30, 2025 and December 31, 2024, the fair values of our interest rate caps were de minimis. During the three months ended September 30, 2025 and 2024, we recognized $0.0 million and $0.2 million, respectively, of proceeds from interest rate cap. During the nine months ended September 30, 2025 and 2024, we recognized $0.0 million and $1.3 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 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).

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) 5% 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 September 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.

Previous wording

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.

Current wording

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 and the effects thereof on our and our borrowers’ operating performance, 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 the results of our operating activities, our financial condition, and the overall market conditions in which we and our borrowers operate 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.

Previous 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):

Current wording

The following table summarizes our non-consolidated senior interest and related retained subordinate interest as of September 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 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.

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 September 30, 2025, 97.2% of our loans receivable held-for-investment based on unpaid principal balance were floating rate and indexed to SOFR. All of our financing is floating rate and indexed to SOFR, which resulted in approximately $735.8 million of net floating rate exposure.

Previous 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.

Current wording

Total net revenue decreased $5.6 million during the three months ended September 30, 2025, compared to the three months ended June 30, 2025. The decrease is primarily due to a decrease in net interest income of $9.1 million, which was driven by a decrease in interest income of $19.2 million as a result of decreased average loans receivable balances and additional loans on non-accrual status, partially offset by a decrease in interest expense of $10.2 million as a result of lower average borrowing levels during the three months ended September 30, 2025 compared to the three months ended June 30, 2025 as a result of loan repayments and foreclosures during the quarter in addition to incremental deleveraging. The decrease in total net revenue was partially offset by an increase in revenue from real estate owned of $3.5 million attributable to revenue from the multifamily properties we foreclosed on in July 2025 and the second quarter of 2025, partially offset by a decrease in revenue at the hotel portfolio compared to the three months ended June 30, 2025 due to lower overall average daily rate (“ADR”) and revenue per available room (“RevPAR”) levels while occupancy levels remained static.

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 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:

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 real estate owned, and depreciation and amortization on real estate owned and related in-place and other lease intangible values. Operating expenses from real estate owned primarily include real estate taxes, utilities, repairs and maintenance, personnel costs of third-party property managers, property management fees incurred to third-parties, insurance, marketing, and general and administrative expenses specific to our real estate owned properties. Expenses increased by $3.6 million during the three months ended September 30, 2025, as compared to the three months ended June 30, 2025, primarily due to:

Previous wording

an increase in depreciation and amortization from real estate owned of $0.4 million due to depreciation expense and amortization of in-place lease intangible values recognized at the multifamily properties we foreclosed on during the three months ended June 30, 2025;

Current wording

an increase in depreciation and amortization from real estate owned of $2.9 million due to depreciation expense and amortization of in-place lease intangible values recognized at the multifamily properties we foreclosed on in July 2025 and the second quarter of 2025;

Previous 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;

Current wording

an increase in operating expenses from real estate owned of $2.8 million during the comparative period, due to operating expenses such as real estate taxes, utilities, and repairs and maintenance expenses incurred from the multifamily properties we foreclosed on in July 2025 and the second quarter of 2025;

Previous wording

an increase in interest expense on real estate owned of $1.6 million due to additional interest being incurred on the debt related to the hotel portfolio pursuant to forbearance agreements prior to its refinancing on June 9, 2025, an increase in deferred financing costs recognized on the debt related to the hotel portfolio during the three months ended June 30, 2025 due to refinancing costs incurred, and interest expense recognized on debt related to the multifamily properties we foreclosed on during the three months ended June 30, 2025;

Current wording

an increase in interest expense on real estate owned of $1.3 million due to interest expense recognized on debt related to the multifamily properties we foreclosed on in July 2025 and the second quarter of 2025, partially offset by a decrease in interest expense on the debt related to the hotel portfolio due to the average outstanding balance on such debt being significantly lower and no additional interest being incurred pursuant to the forbearance agreement subsequent to its refinancing on June 9, 2025;

Previous wording

a decrease in management fees of $1.6 million as a result of lower stockholders’ equity over the comparative period;

Current wording

further offset by a decrease in management fees of $0.5 million as a result of lower stockholder’s equity compared to the comparative period.

Previous wording

During the three months ended June 30, 2025 we sold five floors of primarily office space in our mixed-use property to an unaffiliated purchaser for a gross sales price of $28.8 million, which resulted in a loss on sale of $1.6 million. There was no such loss recognized during the three months ended March 31, 2025.

Current wording

During the three months ended September 30, 2025, we sold two floors of office space in our mixed-use real estate owned asset to an unaffiliated purchaser for a gross sales price of $13.8 million, which resulted in a gain on partial sales of $2.0 million. During the three months ended June 30, 2025 we sold five floors of primarily office space in our mixed-use real estate owned asset to an unaffiliated purchaser for a gross sales price of $28.8 million, which resulted in a loss on partial sale of $1.6 million.

Previous wording

During the three months ended June 30, 2025, we recorded a provision for current expected credit losses of $189.5 million, which consisted of a $15.4 million increase in our general CECL reserve, a $143.1 million increase in our specific CECL reserve prior to principal charge-offs, and a $31.0 million increase in CECL reserves on accrued interest receivable prior to charge-offs. The increase in our general CECL reserve 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 of 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 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 three months ended June 30, 2025. 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 reserve was primarily attributable to changes in the historical loss rate of the analogous data set, 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.

Current wording

During the three months ended September 30, 2025, we recorded a provision for current expected credit losses of $24.2 million, which consisted of a $0.6 million increase in our general CECL reserve, a $16.7 million increase in our specific CECL reserve prior to principal charge-offs, and a $6.9 million increase in CECL reserves on accrued interest receivable. The increase in our general CECL reserve was primarily attributable to changes in the historical loss rate of the analogous data set, non-accrual status, and expected remaining duration within our loan portfolio, offset in part 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 of our specific CECL reserves was primarily attributable to changes to collateral values, protective advances made, and specific reserves determined on loans reclassified as held-for-sale, offset in part by principal charge-offs recognized. 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 three months ended September 30, 2025, offset in part by a reduction in reserves upon the receipt of past due interest. During the three months ended June 30, 2025, we recorded a provision for current expected credit losses of $189.5 million, which consisted of a $15.4 million increase in our general CECL reserve, a $143.1 million increase in our specific CECL reserve prior to principal charge-offs, and a $31.0 million increase in CECL reserves on accrued interest receivable prior to charge-offs. The increase in our general CECL reserve 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 in part 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 of 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 in part by principal charge-offs recognized. 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 three months ended June 30, 2025.

Previous 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.

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. There was no such adjustment recognized during the three months ended September 30, 2025.

Previous wording

The following table sets forth information regarding our consolidated results of operations for the six months ended June 30, 2025 and 2024 ($ in thousands, except per share data):

Current wording

The following table sets forth information regarding our consolidated results of operations for the nine months ended September 30, 2025 and 2024 ($ in thousands, except per share data):

Previous wording

Total net revenue decreased $28.3 million during the six months ended June 30, 2025, compared to the six months ended June 30, 2024. The decrease is primarily due to a decrease in net interest income of $31.9 million, which was driven by a decrease in interest income of $89.8 million as a result of a reduction in the size of our loan portfolio and an increase in the portion of loans on non-accrual status during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, partially offset by a decrease in interest expense of $57.9 million primarily as a result of lower average borrowing levels. The decrease in total net revenue was partially offset by an increase in revenue from real estate owned of $3.6 million due to higher overall average occupancy, RevPAR, and ADR levels at our hotel portfolio compared to the six months ended June 30, 2024 and income recognized from the multifamily properties we foreclosed on during the six months ended June 30, 2025.

Current wording

Total net revenue decreased $47.1 million during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The decrease is primarily due to a decrease in net interest income of $56.6 million, which was driven by a decrease in interest income of $153.8 million as a result of a reduction in the size of our loan portfolio and an increase in the portion of loans on non-accrual status during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, partially offset by a decrease in interest expense of $97.2 million primarily as a result of lower average borrowing levels. The decrease in total net revenue was partially offset by an increase in revenue from real estate owned of $9.5 million attributable to revenue recognized from the multifamily properties we foreclosed on during the nine months ended September 30, 2025 and higher overall average occupancy, ADR, and RevPAR levels at our hotel portfolio compared to the nine months ended September 30, 2024.