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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the
quarterly period ended
September 30,
2025
OR
☐
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number:
001-34452
Apollo Commercial Real Estate Finance, Inc.
(Exact name of registrant as specified in its charter)
Maryland
27-0467113
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
Apollo Commercial Real Estate Finance, Inc.
c/o Apollo Global Management, Inc.
9 West 57th Street
,
42nd Floor
,
New York
,
New York
10019
(Address of principal executive offices) (Zip Code)
(
212
)
515–3200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value
ARI
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
☒
As of October 29, 2025, there were 138,943,831 shares, $0.01 par value per share, of the registrant's common stock issued and outstanding.
Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands—except share data)
September 30, 2025
December 31, 2024
Assets:
Cash and cash equivalents
$
245,856
$
317,396
Commercial mortgage loans, net
(1)(2)
8,149,855
6,715,347
Subordinate loans, net
(2)
153,790
388,809
Real estate owned, held for investment, net (net of $
31,035
and $
23,266
accumulated depreciation in 2025 and 2024, respectively)
827,672
752,643
Other assets
141,872
138,027
Note receivable, held for sale
—
41,200
Derivative assets, net
37
58,169
Total Assets
$
9,519,082
$
8,411,591
Liabilities and Stockholders' Equity
Liabilities:
Secured debt arrangements, net
$
5,896,015
$
4,814,973
Senior secured term loans, net
728,358
754,210
Senior secured notes, net
497,026
496,433
Debt related to real estate owned, held for investment, net
402,945
324,587
Accounts payable, accrued expenses and other liabilities
(3)
92,952
138,179
Derivative liabilities, net
30,970
—
Payable to related party
8,641
8,728
Total Liabilities
$
7,656,907
$
6,537,110
Commitments and Contingencies (see Note 16)
Stockholders' Equity:
Preferred stock, $
0.01
par value,
50,000,000
shares authorized, Series B-1,
6,770,393
shares issued and outstanding ($
169,260
liquidation preference) in 2025 and 2024 (see Note 15)
68
68
Common stock, $
0.01
par value,
450,000,000
shares authorized,
138,943,831
and
138,174,636
shares issued and outstanding in 2025 and 2024, respectively
1,389
1,382
Additional paid-in-capital
2,700,932
2,695,701
Accumulated deficit
(
840,214
)
(
822,670
)
Total Stockholders' Equity
1,862,175
1,874,481
Total Liabilities and Stockholders' Equity
$
9,519,082
$
8,411,591
(1)
Inclu
des carrying value of
$
8,025,026
and
$
6,715,347
pledged as collateral under secured debt arrangements in 2025 and 2024
, respectively.
(2)
Net
of
$
374,257
and
$
373,336
CECL Allowances comprised
$
39,257
and
$
30,836
General CECL Allowance in 2025 and 2024, respectively, and
$
335,000
and $342,500 Specific CECL Allowance in 2025 and 2024
, respectively.
(3)
Inc
ludes
$
5,782
an
d
$
5,948
of General CECL Allowance related to unfunded commitments on commercial mortgage loans and subordinate loans, net in
2025 and 2024
, respectively.
See notes to unaudited condensed consolidated financial statements.
3
Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations (Unaudited)
(in thousands—except share and per share data)
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
Net interest income:
Interest income from commercial mortgage loans
$
155,317
$
179,921
$
465,993
$
543,025
Interest income from subordinate loans and other lending assets
86
1,210
1,200
2,901
Interest expense
(
115,368
)
(
134,088
)
(
344,603
)
(
390,447
)
Net interest income
$
40,035
$
47,043
$
122,590
$
155,479
Revenue from real estate owned operations
21,584
24,530
75,747
77,737
Total net revenue
$
61,619
$
71,573
$
198,337
$
233,216
Operating expenses:
General and administrative expenses (includes equity-based compensation of $
3,416
and $
10,246
in 2025 and $
4,165
and $
12,510
in 2024, respectively)
$
(
6,651
)
$
(
7,547
)
$
(
19,864
)
$
(
22,408
)
Management fees to related party
(
8,637
)
(
8,801
)
(
25,557
)
(
27,395
)
Operating expenses related to real estate owned
(
19,451
)
(
19,879
)
(
61,331
)
(
61,539
)
Depreciation and amortization on real estate owned
(
2,783
)
(
2,342
)
(
7,770
)
(
9,285
)
Total operating expenses
$
(
37,522
)
$
(
38,569
)
$
(
114,522
)
$
(
120,627
)
Other income, net
$
2,388
$
1,573
$
6,214
$
2,784
Income from equity method investment
$
17,067
$
—
$
15,667
$
—
Decrease (increase) in current expected credit loss allowance, net
6,366
899
(
755
)
(
157,043
)
Foreign currency translation gain (loss)
(
16,940
)
60,102
97,323
39,177
Gain (loss) on foreign currency forward contracts (includes unrealized gains (losses) of $
26,788
and ($
88,723
) in 2025 and ($
57,621
) and ($
38,657
) in 2024, respectively)
24,247
(
59,535
)
(
96,864
)
(
29,760
)
Gain (loss) on interest rate hedging instruments (includes unrealized (losses) of ($
133
) and ($
379
) in 2025 and ($
562
) and ($
1,213
) in 2024, respectively)
—
(
14
)
23
436
Decrease in valuation allowance, loans and other lending assets held for sale
1,236
—
—
—
Net realized loss on investments
(
7,436
)
(
127,512
)
(
7,436
)
(
128,191
)
Net income (loss) before taxes
$
51,025
$
(
91,483
)
$
97,987
$
(
160,008
)
Income tax provision
(
234
)
(
66
)
(
466
)
(
280
)
Net income (loss)
$
50,791
$
(
91,549
)
$
97,521
$
(
160,288
)
Preferred dividends
(
3,068
)
(
3,068
)
(
9,204
)
(
9,204
)
Net income (loss) available to common stockholders
$
47,723
$
(
94,617
)
$
88,317
$
(
169,492
)
Net income (loss) per share of common stock:
Basic
$
0.34
$
(
0.69
)
$
0.62
$
(
1.23
)
Diluted
$
0.34
$
(
0.69
)
$
0.62
$
(
1.23
)
Basic weighted-average shares of common stock outstanding
138,943,831
138,246,827
138,843,250
140,177,962
Diluted weighted-average shares of common stock outstanding
139,667,116
138,246,827
139,300,645
140,177,962
Dividend declared per share of common stock
$
0.25
$
0.25
$
0.75
$
0.95
See notes to unaudited condensed consolidated financial statements.
4
Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited)
(in thousands—except share and per share data)
Preferred Stock
Common Stock
Additional
Paid-In-
Accumulated
Shares
Par
Shares
Par
Capital
Deficit
Total
Balance at January 1, 2025
6,770,393
$
68
138,174,636
$
1,382
$
2,695,701
$
(
822,670
)
$
1,874,481
Capital increase (decrease) related to Equity Incentive Plan
—
—
696,552
7
(
1,524
)
—
(
1,517
)
Net Income
—
—
—
—
—
25,991
25,991
Dividends declared on preferred stock - $
0.45
per share
—
—
—
—
—
(
3,068
)
(
3,068
)
Dividends declared on common stock and RSUs - $
0.25
per share
—
—
—
—
—
(
35,279
)
(
35,279
)
Balance at March 31, 2025
6,770,393
$
68
138,871,188
$
1,389
$
2,694,177
$
(
835,026
)
$
1,860,608
Capital increase related to Equity Incentive Plan
—
—
72,643
—
3,399
—
3,399
Net Income
—
—
—
—
—
20,739
20,739
Dividends declared on preferred stock - $
0.45
per share
—
—
—
—
—
(
3,068
)
(
3,068
)
Dividends declared on common stock and RSUs - $
0.25
per share
—
—
—
—
—
(
35,292
)
(
35,292
)
Balance at June 30, 2025
6,770,393
$
68
138,943,831
$
1,389
$
2,697,576
$
(
852,647
)
$
1,846,386
Capital increase related to Equity Incentive Plan
—
—
—
3,356
—
3,356
Net Income
—
—
—
—
—
50,791
50,791
Dividends declared on preferred stock - $
0.45
per share
—
—
—
—
—
(
3,068
)
(
3,068
)
Dividends declared on common stock and RSUs - $
0.25
per share
—
—
—
—
—
(
35,290
)
(
35,290
)
Balance at September 30, 2025
6,770,393
$
68
138,943,831
$
1,389
$
2,700,932
$
(
840,214
)
$
1,862,175
See notes to unaudited condensed consolidated financial statements.
5
Preferred Stock
Common Stock
Additional
Paid-In-
Accumulated
Shares
Par
Shares
Par
Capital
Deficit
Total
Balance at January 1, 2024
6,770,393
$
68
141,358,605
$
1,414
2,727,488
$
(
520,237
)
$
2,208,733
Capital increase (decrease) related to Equity Incentive Plan
—
—
738,110
7
(
3,093
)
—
(
3,086
)
Net Loss
—
—
—
—
—
(
104,524
)
(
104,524
)
Dividends declared on preferred stock - $
0.45
per share
—
—
—
—
—
(
3,068
)
(
3,068
)
Dividends declared on common stock and RSUs - $
0.35
per share
—
—
—
—
—
(
50,620
)
(
50,620
)
Balance at March 31, 2024
6,770,393
$
68
142,096,715
$
1,421
$
2,724,395
$
(
678,449
)
$
2,047,435
Capital increase related to Equity Incentive Plan
—
—
65,490
1
4,147
—
4,148
Repurchase of common stock
(
3,723,772
)
(
37
)
(
37,882
)
—
(
37,919
)
Net Income
—
—
—
—
—
35,785
35,785
Dividends declared on preferred stock - $
0.45
per share
—
—
—
—
—
(
3,068
)
(
3,068
)
Dividends declared on common stock and RSUs - $
0.35
per share
—
—
—
—
—
(
49,333
)
(
49,333
)
Balance at June 30, 2024
6,770,393
$
68
138,438,433
$
1,385
$
2,690,660
$
(
695,065
)
$
1,997,048
Capital increase related to Equity Incentive Plan
—
—
20,364
0
4,002
—
4,002
Repurchase of common stock
(
289,633
)
(
3
)
(
2,886
)
—
(
2,889
)
Net Loss
—
—
—
—
—
(
91,549
)
(
91,549
)
Dividends declared on preferred stock - $
0.45
per share
—
—
—
—
—
(
3,068
)
(
3,068
)
Dividends declared on common stock and RSUs - $
0.25
per share
—
—
—
—
—
(
35,156
)
(
35,156
)
Balance at September 30, 2024
6,770,393
$
68
138,169,164
$
1,382
$
2,691,776
$
(
824,838
)
$
1,868,388
See notes to unaudited condensed consolidated financial statements.
6
Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)
(in thousands)
Nine Months Ended September 30,
2025
2024
Cash flows from operating activities:
Net income (loss)
$
97,521
$
(
160,288
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of discount/premium, deferred fees and payment-in-kind interest
(
23,237
)
(
22,023
)
Amortization of deferred financing costs
13,036
13,400
Straight-line rent amortization
(
281
)
—
Equity-based compensation
10,246
12,510
Increase in current expected credit loss allowance, net
755
157,043
Foreign currency gain
(
95,728
)
(
34,803
)
Unrealized loss on foreign currency contracts
88,723
38,657
Unrealized loss on interest rate hedging instruments
379
1,213
Depreciation and amortization on real estate owned
7,770
9,285
Income from equity method investment
(
15,667
)
—
Net realized loss on investment
7,436
128,191
Changes in operating assets and liabilities:
Proceeds received from payment-in-kind interest
39,136
—
Other assets
(
4,819
)
(
14,676
)
Payment for interest rate cap
(
8
)
(
429
)
Accounts payable, accrued expenses and other liabilities
9,104
22,995
Payable to related party
(
87
)
(
750
)
Net cash provided by operating activities
$
134,280
$
150,325
Cash flows from investing activities:
New funding of commercial mortgage loans
(
2,183,157
)
(
955,328
)
Add-on funding of commercial mortgage loans
(
670,733
)
(
490,864
)
Add-on funding of subordinate loans
(
30,805
)
(
39,883
)
Proceeds received from the repayment and sale of commercial mortgage loans
1,939,560
1,580,003
Proceeds received from the repayment of subordinate loans and other lending assets
80,507
23,122
Proceeds and payments received of notes receivable, held for sale
39,964
—
Contributions to equity method investment
(
5,416
)
—
Distributions from equity method investment
18,128
—
Origination fees, other fees, and cost recovery proceeds received on commercial mortgage loans, and subordinate loans, net
36,912
34,468
Decrease in collateral related to derivative contracts, net
(
84,370
)
(
37,370
)
Capital expenditures on real estate owned assets
(
81,849
)
(
123,275
)
Net cash used in investing activities
$
(
941,259
)
$
(
9,127
)
Cash flows from financing activities:
Proceeds from secured debt arrangements
3,050,302
1,683,234
Proceeds related to financing on real estate owned
76,873
117,572
Repayments of secured debt arrangements
(
2,236,318
)
(
1,752,492
)
Repayments of senior secured term loan principal
(
13,125
)
(
6,000
)
Payment of deferred financing costs
(
20,544
)
(
9,895
)
Payment of issuance discount
(
5,625
)
—
Payment of withholding tax on RSU delivery
(
5,008
)
(
7,446
)
Repurchase of common stock
—
(
40,809
)
Dividends on common stock
(
105,430
)
(
150,793
)
Dividends on preferred stock
(
9,204
)
(
9,204
)
Net cash provided by (used in) financing activities
$
731,921
$
(
175,833
)
See notes to unaudited condensed consolidated financial statements.
7
Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited) (Continued)
(in thousands)
Nine Months Ended September 30,
2025
2024
Net decrease in cash and cash equivalents, including cash classified within assets related to real estate owned, held for sale
$
(
75,058
)
$
(
34,635
)
Decrease in cash classified within assets related to real estate owned, held for sale
-
577
Net decrease in cash and cash equivalents
$
(
75,058
)
$
(
34,058
)
Cash and cash equivalents beginning of period
317,396
225,438
Effects of foreign currency translation on cash and cash equivalents
3,518
2,907
Cash and cash equivalents end of period
$
245,856
$
194,287
Supplemental disclosure of cash flow information:
Interest paid
$
335,590
$
374,071
Income tax paid
132
34
Change in secured debt repayments pending servicer remittance
—
73,278
Change in loan proceeds held by servicer
(
38,066
)
99,498
Supplemental disclosure of non-cash investing and financing activities:
Dividend declared, not yet paid
$
38,358
$
38,224
Restructuring of subordinate loan to commercial mortgage loan
148,034
—
Transfer of assets related to real estate owned, held for sale to assets related to real estate owned, held for investment, net
—
70,688
Transfer of assets related to real estate owned, held for sale to other assets
—
2,280
Transfer of liabilities related to real estate owned, held for sale to accounts payable, accrued expenses and other liabilities
—
3,937
Transfer of commercial mortgage loan to other assets
—
159,667
Restructuring of commercial mortgage loan to subordinate loan
—
74,304
See notes to unaudited condensed consolidated financial statements.
8
Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 – Organization
Apollo Commercial Real Estate Finance, Inc. (together with its consolidated subsidiaries, is referred to throughout this report as the "Company," "ARI," "we," "us" and "our") is a corporation that has elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes and primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, and other commercial real estate related debt investments. These asset classes are referred to as our target assets.
We were formed in Maryland on June 29, 2009, commenced operations on September 29, 2009 and are externally managed and advised by ACREFI Management, LLC (the "Manager"), an indirect subsidiary of Apollo Global Management, Inc. (together with its subsidiaries, "Apollo").
We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2009. To maintain our tax qualification as a REIT, we are required to distribute at least 90% of our taxable income, excluding net capital gains, to stockholders and meet certain other asset, income, and ownership tests.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements include our accounts and those of our consolidated subsidiaries. All intercompany amounts have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our most significant estimates include current expected credit loss ("CECL") allowances. Actual results may differ from estimates. Certain reclassifications have been made to previously reported amounts to conform to the current period's presentation.
These unaudited condensed 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 Securities and Exchange Commission (the "SEC"). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows have been included. Our results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for the full year or any other future period.
We currently operate in
one
reporting segment. Refer to "Note 19 - Segment Reporting" for additional information.
Real Estate Owned, Held for Investment
Real estate assets that are acquired for investment are assumed at their estimated fair value at acquisition and presented net of accumulated depreciation and impairments, if applicable. Upon acquisition, we allocate the value of acquired real estate assets based on the fair value of the acquired land, building, furniture, fixtures and equipment, and intangible assets, if applicable. Real estate assets are depreciated using the straight-line method over the assets' estimated useful lives of up to
40
years for buildings and up to
8
years
for furniture, fixtures and equipment. Renovations and/or replacements that improve or extend the life of the real estate asset are capitalized and depreciated over their estimated useful lives. The cost of ordinary repairs and maintenance are expensed as incurred. For real estate projects under development, we capitalize costs incurred to prepare the property for its intended use in accordance with ASC Topic 970, "Real Estate — General." Such costs can include costs related to acquisition, construction, financing, development, and real estate taxes. The capitalization of such expenses ceases when the real estate project is ready for its intended use and occupied by tenants, or held for available occupancy, but no later than one-year from substantial completion of major construction activities. If portions of a real estate project are substantially completed and occupied by tenants, or held available for occupancy, and other portions have not yet reached that stage, the substantially completed portions are
9
accounted
for as a separate project. We cease capitalization on the portions substantially completed and occupied or held available for occupancy, and capitalize only those costs associated with the portions under construction.
Revenue Recognition
Interest income on our lending assets is accrued based on the actual coupon rate adjusted for accretion of any purchase discounts, the amortization of any purchase premiums and the accretion of any deferred fees, in accordance with GAAP. Loans that are significantly past due may be placed on nonaccrual if we determine it is probable that we will not collect all payments which are contractually due. When a loan is placed on nonaccrual, interest is only recorded as interest income when it's received. Under certain circumstances, we may apply cost recovery under which interest collected on a loan reduces its amortized cost. The cost recovery method will no longer apply if collection of all principal and interest is reasonably assured. A loan may be placed back on accrual status if we determine it is probable that we will collect all payments which are contractually due.
Revenue from real estate owned operations in our condensed consolidated statement of operations represent revenue associated with the operations of hotel properties ("hotel revenue") and rental income from a multifamily property ("rental revenue"). Hotel revenue is recognized when guestrooms are occupied or services have been rendered and are recorded net of any discounts and sales and other taxes collected from customers. Hotel revenues consist of room sales, food and beverage sales and other hotel revenues. Rental revenue consists of base rent net of concessions, if applicable, recognized on a straight-line basis over the term of the lease. We commence rental revenue recognition when the tenant takes possession of the leased space or controls the physical use of the leased space and when the leased space is substantially ready for its intended use. The difference between rental revenue earned on a straight-line basis and cash rent received is recorded as a receivable and presented within "other assets" on our condensed consolidated balance sheets.
Gains or losses on the sale of real estate assets, including residential property, are recognized in accordance with ASC 610- 20, "Gains and Losses from the Derecognition of Nonfinancial Assets." We use the specific identification method to allocate costs.
Recent Accounting Pronouncements
In July 2025, the Financial Accounting Standards Board ("FASB") issued ASU 2025-05 "Measurement of Credit Losses for Accounts Receivable and Contract Assets" ("ASU 2025-05"). ASU 2025-05 allows entities to prospectively apply a practical expedient that assumes current conditions as of the balance sheet date do not change for the remaining life of current accounts receivable when estimating expected credit losses. ASU 2025-05 is applicable for reporting periods beginning after December 31, 2025. We do not expect ASU 2025-05 to materially affect our consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03 "Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" ("ASU 2024-03"). ASU 2024-03 requires disaggregation of certain expense captions in financial statement disclosures for each interim and annual reporting period. The guidance is effective for annual periods starting after December 15, 2026, and interim periods after December 15, 2027, with early adoption permitted. It is to be adopted on a prospective basis with the option to apply retrospectively. We have not early adopted ASU 2024-03 and are currently evaluating its impact. We do not expect it to materially affect our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09 "Improvements to Income Tax Disclosures" ("ASU 2023-09") which intends to improve the transparency of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and is to be adopted on a prospective basis with the option to apply retrospectively. We are currently assessing the impact of this guidance; however, we do not expect a material impact to our consolidated financial statements.
Note 3 – Fair Value Disclosure
GAAP establishes a hierarchy of valuation techniques based on the observability of the inputs utilized in measuring financial instruments at fair value. Market-based or observable inputs are the preferred source of values, followed by valuation models using management's assumptions in the absence of market-based or observable inputs. The three levels of the hierarchy as noted in Accounting Standards Codification ("ASC") Topic 820, "Fair Value Measurements and Disclosures
"
("ASC 820") are described below:
10
Level I — Quoted prices in active markets for identical assets or liabilities.
Level II — Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.
Level III — Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used.
While we anticipate that our valuation methods are appropriate and consistent with valuation methods used by other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. We use inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced.
Forward Currency Contracts
The fair values of foreign exchange ("Fx") forwards are determined by comparing the contracted forward exchange rate to the current market exchange rate. The current market exchange rates are determined by using market spot rates, forward rates, and interest rate curves for the underlying countries. Our Fx forwards are classified as Level II in the fair value hierarchy.
Interest Rate Hedging Instruments
The fair values of our interest rate caps are determined by using the market standard methodology of discounting the future expected cash receipts that occur when variable interest rates rise above the strike rates 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 volatility. Our interest rate caps are classified as Level II in the fair value hierarchy and manage our exposure to variable cash flows on certain of our borrowings. As of September 30, 2025 and December 31, 2024,
we held
two
interest rate caps:
one
related to financing on a full service luxury hotel in Washington D.C. (
"D.C. Hotel"
) and
one
related
to our construction financing on a multifamily development property in Brooklyn, NY ("Brooklyn Multifamily Development"). Refer to "Note 5 – Real Estate Owned" and "Note 10 – Derivatives" for further detail.
Loans and Other Lending Assets Held for Sale
Loans and other lending assets are classified as held for sale if there is an intent to sell them in the short-term following the reporting date. These loans are recorded at the lower of amortized cost or fair value, less selling costs, unless the fair value option was elected at the time of origination. If the loan's fair value, less selling costs, is determined to be less than its amortized cost, a fair value adjustment may be recorded through a valuation allowance. Changes in the valuation allowance are recorded within our consolidated statement of operations in the period in which the change occurs.
The fair value of loans held for sale may be estimated using sales of comparable loans as supported by independent market data, or a contractually negotiated sales price. We consider the inputs used to calculate the fair value of loans held for sale as unobservable inputs. Accordingly, we classify the fair value of loans held for sale within Level III of the fair value hierarchy.
As of December 31, 2024, we held a promissory note classified as held for sale. T
he note's fair value was equal to its amortized cost of $
41.2
million and
no
valuation allowance was recorded. During the second quarter of 2025, we recorded a fair value adjustment of $
1.2
million (representing the difference between the note’s amortized cost and the note’s fair value as of June 30, 2025), which was included within Valuation allowance, loans and other lending assets held for sale on our condensed consolidated statement of operations. The note was subsequently sold during the third quarter of 2025 at a price of
97.0
%, upon which we reversed the valuation allowance and recorded an equivalent realized loss within realized loss on investments on our condensed consolidated statement of operations for the three and nine months ended September 30, 2025.
During the second quarter of 2024, we sold a commercial mortgage loan collateralized by a hotel property located in Honolulu, HI. The loan was previously classified as held for sale and was sold at a price of
99.5
%.
We recorded a realized loss
11
of
$
0.7
million within realized loss on investments on our condensed consolidated statement of operations for the three and nine months ended September 30, 2024.
The following table summarizes the levels in the fair value hierarchy into which our assets and liabilities with recurring fair value measurements were categorized as of
September 30, 2025 and December 31, 2024 ($ in thousands):
Fair Value as of September 30, 2025
Fair Value as of December 31, 2024
Level I
Level II
Level III
Total
Level I
Level II
Level III
Total
Recurring fair value measurements:
Foreign currency forwards, net
$
—
$
(
30,970
)
$
—
$
(
30,970
)
$
—
$
57,753
$
—
$
57,753
Interest rate cap assets
—
37
—
37
—
416
—
416
Note receivable, held for sale
—
—
—
—
—
—
41,200
41,200
Total financial instruments
$
—
$
(
30,933
)
$
—
$
(
30,933
)
$
—
$
58,169
$
41,200
$
99,369
Non-recurring Fair Value Measurements
Real Estate Owned
Property acquired through foreclosure or deed-in-lieu of foreclosure is classified as real estate owned and recognized at fair value on our condensed consolidated balance sheet upon acquisition in accordance with ASC Topic 805, "Business Combinations" ("ASC 805"). We are required to record real estate owned, a nonfinancial asset, at fair value on a non-recurring basis in accordance with ASC 820. Under ASC 820, we may utilize the income, market, or cost approach (or combination thereof) to determine the fair value of real estate owned. We deem the inputs used in these approaches to be significant unobservable inputs. Therefore, we classify the fair value of real estate owned within Level III of the fair value hierarchy.
On March 31, 2023, we acquired legal title of a hotel property in Atlanta, GA ("Atlanta Hotel") through a deed-in-lieu of foreclosure. At the time of acquisition, we determined the fair value of the net real estate assets to be $
75.0
million, using a combination of market and income approaches. We utilized a discount rate and capitalization rate of
10.5
% and
9.5
%, respectively. During the second quarter of 2023, the Atlanta Hotel's assets and liabilities were reclassified to held for sale and the fair value of the net real estate assets, less costs to sell, was in excess of our cost basis. During the first quarter of 2024, we determined that the sale to a third party from whom we received an unsolicited offer was no longer probable, and we were not actively marketing the property for sale. Therefore, the Atlanta Hotel no longer met the criteria for held for sale and was reclassified to real estate owned, held for investment.
No
impairments had been recorded as of
September 30, 2025 or December 31, 2024.
On August 3, 2022, we acquired legal title of the Brooklyn Multifamily Development through a deed-in-lieu of foreclosure. We determined the fair value of the real estate assumed to be $
270.1
million, based on the market value of the land at the time of acquisition.
No
impairments had been recorded as of
September 30, 2025 or December 31, 2024.
On May 24, 2021, we acquired legal title to the D.C. Hotel through a deed-in-lieu of foreclosure. We assumed the D.C. Hotel's assets and liabilities, including a $
110.0
million mortgage loan which we repaid at par. At the time of acquisition, we determined the fair value of the real estate assets to be $
154.3
million.
No
impairments had been recorded as of
September 30, 2025 or December 31, 2024.
Refer to "Note 5 – Real Estate Owned" for additional discussion.
12
Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net
Our loan portfolio was comprised of the following at
September 30, 2025 and December 31, 2024 ($ in thousands):
Loan Type
September 30, 2025
December 31, 2024
Commercial mortgage loans, net
(1)
$
8,149,855
$
6,715,347
Subordinate loans, net
153,790
388,809
Total loans, net
$
8,303,645
$
7,104,156
Note receivable, held for sale
—
41,200
Carrying value, net
$
8,303,645
$
7,145,356
(1)
Includes
$
61.2
million
and
$
8.3
million
in 2025 and 2024
, respectively, of contiguous financing structured as subordinate loans.
Our loan portfolio consisted of
98
%
and
95
%
floating rate loans, based on amortized cost, net of Specific CECL Allowance, as of September 30, 2025 and December 31, 2024, respectively.
Activity relating to our loan portfolio for the
nine months ended September 30, 2025 was as follows ($ in thousands):
Principal
Balance
Deferred Fees/Other Items
Specific CECL Allowance
Carrying Value, Net
(1)
December 31, 2024
$
7,550,410
$
(
31,718
)
$
(
342,500
)
$
7,176,192
New loan fundings
$
2,183,157
$
—
$
—
$
2,183,157
Add-on loan fundings
(2)
$
701,538
$
—
$
—
$
701,538
Loan repayments and sale
$
(
2,057,725
)
$
—
$
—
$
(
2,057,725
)
Gain (loss) on foreign currency translation
$
353,903
$
(
1,329
)
$
—
$
352,574
Realized loss on investment
(3)
$
(
7,436
)
$
—
$
—
$
(
7,436
)
Decrease in Specific CECL Allowance
$
—
$
—
$
7,500
$
7,500
Deferred fees and other items
(4)
$
—
$
(
36,912
)
$
—
$
(
36,912
)
Amortization of fees
$
4,785
$
19,229
$
—
$
24,014
September 30, 2025
$
8,728,632
$
(
50,730
)
$
(
335,000
)
$
8,342,902
General CECL Allowance
(5)
$
(
39,257
)
Carrying value, net
$
8,303,645
(1)
Includes Note receivable, held for sale as of December 31, 2024. The Note receivable, held for sale was sold during the third quarter of 2025.
(2)
Represents fundings subsequent to loan closing.
(3)
Realized loss on investment includes $
6.2
million related to discounted payoff of the Michigan Office Loan (as defined and discussed below
) and $
1.2
million related to the sale of a promissory note previously recorded as Note receivable, held for sale (refer to Loans and Other Lending Assets Held for Sale in
"Note 3 – Fair Value Disclosure").
(4)
Other items primarily consist of purchase discounts or premiums, cost recovery interest, exit fees, and deferred origination expenses.
(5)
$
5.8
million
of the General CECL Allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheet.
The following table details overall statistics for our loan portfolio at the dates indicated ($ in thousands):
September 30, 2025
December 31, 2024
(1)
Number of loans
54
46
Principal balance
$
8,728,632
$
7,550,410
Carrying value, net
$
8,303,645
$
7,145,356
Unfunded loan commitments
(2)
$
1,034,562
$
840,627
Weighted-average cash coupon
(3)
7.0
%
7.5
%
Weighted-average remaining fully-extended term
(4)
3.0
years
2.5
years
Weighted-average expected term
(5)
2.2
years
1.9
years
(1)
Includes Note receivable, held for sale.
(2)
Unfunded loan commitments are primarily funded to finance construction costs, tenant improvements, leasing commissions, or carrying costs. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.
(3)
For floating rate loans, based on applicable benchmark rates as of the specified dates. For loans placed on nonaccrual, the interest rate used in calculating weighted-average cash coupon is
0
%.
13
(4)
Assumes all extension options are exercised.
(5)
Expected term represents our estimated timing of repayments as of the specified dates. Excludes risk-rated five loans.
Property Type
The table below details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):
September 30, 2025
December 31, 2024
Property Type
Carrying
Value
% of
Portfolio
(1)
Carrying
Value
% of
Portfolio
(1)
Residential
(2)
$
2,545,682
30.5
%
$
1,556,819
21.8
%
Office
2,040,028
24.5
1,756,965
24.6
Hotel
1,459,879
17.5
1,575,270
22.1
Industrial
832,824
10.0
399,546
5.6
Data Centers
445,539
5.3
—
0.0
Retail
359,497
4.3
946,017
13.3
Mixed Use
304,376
3.6
363,211
5.1
Other
(3)
355,077
4.3
537,164
7.5
Total
$
8,342,902
100.0
%
$
7,134,992
100.0
%
General CECL Allowance
(4)
(
39,257
)
(
30,836
)
Total Carrying Value, net
$
8,303,645
$
7,104,156
(1)
Percentage of portfolio calculations are made prior to consideration of General CECL Allowance.
(2)
Includes
senior housing (
10.5
%), multifamily (
9.1
%), student housing (
5.3
%),
residential-for-sale
(
3.7
%), and vacation rentals (
1.9
%)
in 2025
and senior housing (
4.7
%), multifamily (
4.7
%), student housing (
4.6
%), residential-for-sale (
5.5
%), and vacation rentals (
2.3
%) in
2024.
(3)
Other property types include pu
bs (
2.7
%) and urban predevelopment (
1.6
%
) in 2025
, and pubs (
2.9
%
), caravan parks (
2.7
%
), and urban predevelopment (
1.9
%) in 2024.
(4)
$
5.8
million
and
$
5.9
million
of the General CECL Allowance for 2025 and 2024, respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheets.
Geography
The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):
September 30, 2025
December 31, 2024
Geographic Location
Carrying
Value
% of
Portfolio
(1)
Carrying
Value
% of
Portfolio
(1)
United Kingdom
$
2,548,921
30.5
%
$
2,423,856
33.9
%
New York City
1,412,227
16.9
1,539,995
21.6
Other Europe
(2)
1,175,077
14.1
1,265,344
17.7
Southeast
888,876
10.7
511,742
7.2
West
807,665
9.7
489,008
6.9
Midwest
751,192
9.0
560,436
7.9
Other
(3)
758,944
9.1
344,611
4.8
Total
$
8,342,902
100.0
%
$
7,134,992
100.0
%
General CECL Allowance
(4)
(
39,257
)
(
30,836
)
Total Carrying Value, net
$
8,303,645
$
7,104,156
(1)
Percentage of portfolio calculations are made prior to consideration of General CECL Allowance.
(2)
Other Europe includes Germa
ny (
8.3
%), Italy (
2.3
%%), Sweden (
3.2
%) and the Netherlands (
0.3
%) i
n 2025
and Germany (
8.4
%), Italy (
2.4
%), Spain (
3.5
%), Sweden (
3.1
%) and the Netherlands (
0.3
%) in
2024.
(3)
Other includes Northeast
(
3.4
%), Mid-Atlantic (
1.4
%), Southwest (
3.1
%) and Other (
1.2
%)
in 2025
and Northeast (
0.6
%), Mid-Atlantic (
1.4
%), Southwest (
1.5
%) and Other (
1.3
%) in
2024.
(4)
$
5.8
million
and
$
5.9
million
of the General CECL Allowance for 2025 and 2024
, respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheets.
14
Risk Rating
We assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan to value ("LTV") ratio, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. We apply these various factors on a case-by-case basis depending on the facts and circumstances for each loan, and the different factors may be given different weightings in different situations. This review is performed quarterly. Based on a 5-point scale, our loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:
1. Very low risk
2. Low risk
3. Moderate/average risk
4. High risk/potential for loss: a loan that has a risk of realizing a principal loss
5. Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss, or an impairment has been recorded
The following tables present the carrying value of our loan portfolio by year of origination and internal risk rating and gross write-offs by year of origination as of
September 30, 2025 and December 31, 2024, respectively ($ in thousands):
September 30, 2025
Amortized Cost
(1)
by Year Originated
Risk Rating
Number of Loans
Total
% of Portfolio
2025
2024
2023
2022
2021
Prior
1
—
$
—
—
%
$
—
$
—
$
—
$
—
$
—
$
—
2
2
684,207
8.2
%
$
—
$
—
$
—
$
684,207
$
—
$
—
3
49
7,461,533
89.4
%
$
2,257,997
$
1,507,990
$
716,376
$
948,802
$
1,051,766
$
978,602
4
1
73,112
0.9
%
$
—
$
—
$
—
$
—
$
—
$
73,112
5
2
124,050
1.5
%
$
—
$
—
$
—
$
—
$
—
$
124,050
Total
54
$
8,342,902
100.0
%
2,257,997
1,507,990
716,376
1,633,009
1,051,766
1,175,764
General CECL Allowance
(2)
(
39,257
)
Total loans, net
$
8,303,645
Weighted-Average Risk Rating
3.0
Gross write-offs
$
6,200
$
—
$
—
$
—
$
—
$
—
$
6,200
December 31, 2024
Amortized Cost
(1)
by Year Originated
Risk Rating
Number of Loans
Total
% of Portfolio
2024
2023
2022
2021
2020
Prior
1
—
$
—
—
%
$
—
$
—
$
—
$
—
$
—
$
—
2
3
560,180
7.9
%
—
—
547,851
12,329
—
—
3
37
6,169,860
86.4
%
1,218,189
649,599
1,549,750
1,173,982
397,972
1,180,368
4
2
279,732
3.9
%
—
—
—
—
—
279,732
5
3
125,220
1.8
%
—
—
—
—
27,881
97,339
Total
45
$
7,134,992
100.0%
$
1,218,189
$
649,599
$
2,097,601
$
1,186,311
$
425,853
$
1,557,439
General CECL Allowance
(2)
(
30,836
)
Total loans, net
$
7,104,156
Weighted-Average Risk Rating
3.0
Gross write-offs
$
127,512
$
—
$
—
$
127,512
$
—
$
—
$
—
(1)
Net of Specific CECL Allowance.
(2)
$
5.8
million
and
$
5.9
million
of the General CECL Allowance for 2025 and 2024
, respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheets.
15
CECL
In accordance with ASC Topic 326 "Financial Instruments – Credit Losses" ("ASC 326"), which we refer to as the "CECL Standard," we record allowances for loans and held-to-maturity debt securities that are deducted from the carrying amount of the assets to present the net carrying value of the amounts expected to be collected on the assets. We record loan specific allowances as a practical expedient under the CECL Standard ("Specific CECL Allowance"), which we apply to assets that are collateral dependent and where the borrower or sponsor is experiencing financial difficulty. For the remainder of the portfolio, we record a general allowance ("General CECL Allowance," and together with the Specific CECL Allowance, "CECL Allowances") on a collective basis by assets with similar risk characteristics. We have elected to use the weighted-average remaining maturity ("WARM") method in determining a General CECL Allowance for a majority of our portfolio. In the future, we may use other acceptable methods, such as a probability-of-default/loss-given-default method.
The following table summarizes changes in CECL Allowances for the
nine months ended September 30, 2025 ($ in thousands):
Specific CECL
General CECL Allowance
Total CECL
CECL Allowance as % of Amortized Cost
Allowance
(1)
Funded
Unfunded
Total
Allowance
General
(1)
Total
December 31, 2024
$
342,500
$
30,836
$
5,948
$
36,784
$
379,284
0.52
%
5.07
%
Changes:
Allowances (Reversals), net
(2)
—
3,876
132
4,008
4,008
March 31, 2025
$
342,500
$
34,712
$
6,080
$
40,792
$
383,292
0.54
%
4.75
%
Changes:
Allowances (Reversals), net
(3)
—
4,136
(
1,023
)
3,113
3,113
June 30, 2025
$
342,500
$
38,848
$
5,057
$
43,905
$
386,405
0.51
%
4.29
%
Changes:
Allowances (Reversals), net
(4)(5)
(
1,300
)
409
725
1,134
(
166
)
Write-offs
(5)
(
6,200
)
—
—
—
(
6,200
)
September 30, 2025
$
335,000
$
39,257
$
5,782
$
45,039
$
380,039
0.55
%
4.38
%
(1)
Loans evaluated for Specific CECL Allowance are excluded from General CECL Allowance pool.
(2)
During the three months ended March 31, 2025, our General CECL Allowance increased by $
4.0
million. The increase was primarily due to a more adverse macroeconomic outlook as well as the effect of loan originations. The increase was partially offset by the favorable impacts of portfolio
seasoning.
(3)
During the three months ended June 30, 2025, our General CECL Allowance increased by
$
3.1
millio
n. The increase was primarily due to the effect of loan originations as well as extending our expected loan repayment dates. The increase was partially offset by the favorable impacts of portfolio seasoning.
(4)
During the three months ended September 30, 2025, our General CECL Allowance increased by
$
1.1
million
. The increase was primarily due to the effect of loan originations as well as extending our expected loan repayment dates. The increase was partially offset by the favorable impacts of portfolio seasoning and a more optimistic macroeconomic outlook.
(5)
During the three months ended September 30, 2025, we recorded a reversal of $
1.3
million and a write-off of $
6.2
million of our Specific CECL Allowance related to our Michigan Office Loan (as defined and discussed below). The $
6.2
million write-off was recorded as a realized loss within net realized loss on investments in our September 30, 2025 condensed consolidated statement of operations.
16
The following table summarizes changes in CECL Allowances for the nine months ended September 30, 2024 ($ in thousands):
Specific CECL
General CECL Allowance
Total CECL
CECL Allowance as % of Amortized Cost
Allowance
(1)
Funded
Unfunded
Total
Allowance
General
(1)
Total
December 31, 2023
$
193,000
$
26,482
$
4,017
$
30,499
$
223,499
0.38
%
2.61
%
Changes:
Allowances (Reversals), net
(2)
142,000
6,076
(
392
)
5,684
147,684
March 31, 2024
$
335,000
$
32,558
$
3,625
$
36,183
$
371,183
0.44
%
4.29
%
Changes:
Allowances (Reversals), net
(3)
7,500
2,761
(
3
)
2,758
10,258
June 30, 2024
$
342,500
$
35,319
$
3,622
$
38,941
$
381,441
0.47
%
4.40
%
Changes:
Allowances (Reversals), net
(4)(5)
127,512
(
1,127
)
228
(
899
)
126,613
Write-offs
(5)
(
127,512
)
—
—
—
(
127,512
)
September 30, 2024
$
342,500
$
34,192
$
3,850
$
38,042
$
380,542
0.49
%
4.64
%
(1)
Loans evaluated for Specific CECL Allowance are excluded from General CECL Allowance pool.
(2)
During the three months ended March 31, 2024, our General CECL Allowance increased by $
5.7
million. The increase was primarily related to extending our expected loan repayment dates as well as an increase to the historical loss rate derived from Trepp's data. The increase was partially offset by the favorable impacts of portfolio seasoning.
During the three months ended March 31, 2024, we also recorded an additional $
142.0
million Specific CECL Allowance on our Junior Mezzanine A Loan (as defined below - see "Manhattan Residential"), resulting in the loan’s aggregate Specific CECL allowance of $
268.0
million. The additional allowance was recorded primarily due to a reduction in list pricing of remaining units and slower sales pace at the property. The slower sales velocity coincided with the continued overall softening in the midtown Manhattan ultra-luxury submarket.
(3)
During
the three months ended June 30, 2024, our General CECL Allowance increased by $
2.8
million primarily due to new loan originations as well as a more adverse outlook on our office portfolio. The increase was partially offset by the favorable impacts of portfolio seasoning. Additionally, during the three months ended June 30, 2024, we recorded an increase of $
7.5
million to our Specific CECL Allowance. The increase was related to a mezzanine loan secured by an office building in Troy, MI.
(4)
During the three months ended September 30, 2024, our General CECL Allowance decreased by $
0.9
million primarily due to the favorable impacts of portfolio seasoning and earlier than expected loan repayments. The decrease was partially offset by the effects of loan originations and a more adverse macroeconomic outlook associated with our office portfolio.
(5)
During the three months ended September 30, 2024, we recorded an increase and write-off of $
127.5
million of our Specific CECL Allowance related to our Massachusetts Healthcare Loan (as defined and discussed below). The $
127.5
million write-off was recorded as a realized loss within net realized loss on investments in our September 30, 2024 condensed consolidated statement of operations.
General CECL Allowance
In determining the General CECL Allowance using the WARM method, an annual historical loss rate, adjusted for macroeconomic estimates, is applied to the amortized cost of an asset, or pool of assets, over each subsequent period for the assets' remaining expected life. We considered various factors including (i) historical loss experience in the commercial real estate lending market, (ii) timing of expected repayments and satisfactions, (iii) expected future funding, (iv) capital subordinate to us when we are the senior lender, (v) capital senior to us when we are the subordinate lender, and (vi) our current and future view of the macroeconomic environment for a reasonable and supportable forecast period. The CECL Standard requires the use of significant judgment to arrive at an estimated credit loss. There is significant uncertainty related to future macroeconomic conditions, including inflation, labor shortages and interest rates.
We derive an annual historical loss rate based on a commercial mortgage-backed securities ("CMBS") database with historical losses from 1998 through the third quarter of 2025 provided by a third party, Trepp LLC ("Trepp"). We apply various filters to arrive at a CMBS dataset most analogous to our current portfolio from which to determine an appropriate historical loss rate. The annual historical loss rate is further adjusted to reflect our expectations of the macroeconomic environment for a reasonable and supportable forecast period of eight quarters. In assessing the macroeconomic environment, we consider macroeconomic factors, including unemployment rate, commercial real estate prices, and market liquidity. We compare the historical data for each metric to historical commercial real estate losses in order to determine the correlation of the data. We use
17
projections, obtained from third-party service providers, of each factor to approximate the impact the macroeconomic outlook may have on our loss rate.
The General CECL Allowance on subordinate loans is calculated by incorporating both the loan balance of the position(s) of the structurally senior third-party lender(s) and the balance of our subordinate loan(s). The subordinate loans, by virtue of being the first loss position, are required to absorb losses prior to the senior position(s) being impacted, resulting in a higher percentage allowance attributable to the subordinate loan. The General CECL Allowance on unfunded loan commitments is time-weighted based on our expected commitment to fund such obligations. The General CECL Allowance on unfunded commitments is recorded as a liability on our condensed consolidated balance sheets within accounts payable, accrued expenses and other liabilities. The considerations in estimating our General CECL allowance for unfunded loan commitments are similar to those used for the related outstanding loans receivable.
Additionally, we have made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of the related commercial mortgage loans and subordinate loans and other lending assets in determining the General CECL Allowance, as any uncollectible accrued interest receivable is written off in a timely manner. As of September 30, 2025 and December 31, 2024, accrued interest receivable was
$
65.5
million
and
$
58.5
million
, respectively, and included within other assets on our condensed consolidated balance sheets.
The following table sets forth our General CECL Allowance as of
September 30, 2025 and December 31, 2024 ($ in thousands):
September 30, 2025
December 31, 2024
Commercial mortgage loans, net
$
39,142
$
30,167
Subordinate loans, net
115
669
Unfunded commitments
(1)
5,782
5,948
Total General CECL Allowance
$
45,039
$
36,784
(1)
The General CECL Allowance on unfunded commitments is recorded as a liability on our condensed consolidated balance sheets within accounts payable, accrued expenses and other liabilities.
Specific CECL Allowance
For collateral-dependent loans where we have deemed the borrower/sponsor to be experiencing financial difficulty and a more than moderate/average risk of realizing a principal loss, we have elected to apply a practical expedient in accordance with the CECL Standard in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a Specific CECL Allowance. The Specific CECL Allowance is determined as the difference between the fair value of the underlying collateral and the carrying value of the loan (prior to the Specific CECL Allowance). When the repayment or satisfaction of a loan is dependent on a sale, rather than operations, of the collateral, the fair value is adjusted for the estimated cost to sell the collateral. Collateral-dependent loans evaluated for a Specific CECL Allowance are removed from the General CECL Allowance pool. The fair value of the underlying collateral is determined by using method(s) such as discounted cash flow, the market approach, or direct capitalization approach. The key unobservable inputs used to determine the fair value of the underlying collateral may vary depending on the information available to us and market conditions as of the valuation date.
We regularly evaluate the extent and impact of any credit migration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan-by-loan basis. The Specific CECL Allowance is evaluated on a quarterly basis. Specifically, a property's operating results and any cash reserves are analyzed and used to assess (i) whether cash from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the liquidation value of the underlying collateral. We also evaluate the financial wherewithal of any loan guarantors as well as the borrower's competency in managing and operating the properties. In addition, we consider the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. Such impairment analysis is completed and reviewed by asset management and finance personnel who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower's exit plan, and capitalization and discount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants.
18
The following table summarizes our risk rated 5 loans as of
September 30, 2025, which were analyzed for Specific CECL Allowances ($ in thousands):
Type
Property type
Location
Amortized cost prior to Specific CECL Allowance
Specific CECL Allowance
Amortized cost
Interest recognition status/ as of date
Risk Rating
Mortgage
Retail
(1)(2)
Cincinnati, OH
$
163,169
$
67,000
$
96,169
Nonaccrual/ 10/1/2019
5
Mezzanine
Residential
(3)
Manhattan, NY
295,881
268,000
27,881
Nonaccrual/ 7/1/2021
5
Total
$
459,050
$
335,000
$
124,050
(1)
The fair value of retail collateral was determined by applying a capitalization rate of
9.0
%.
(2)
In September 2018, we entered a joint venture with Turner Consulting II, LLC ("Turner Consulting"), through an entity which owns the underlying property that secures our loan. Turner Consulting contributed
10
% of the venture's equity and we contributed
90
%. The entity was deemed to be a variable interest entity ("VIE"), and we determined that we are not the primary beneficiary of that VIE as we do not have the power to direct the entity's activ
ities. During the second quarter of 2024, the loan's maturity was extended from September 2024 to September 2025.
(3)
The fair valu
e of the residential collateral was determined by making certain projections and assumptions with respect to future performance and a discount rate of
10
%.
Any future change to the Specific CECL Allowance will be based upon a number of factors, including but not limited to the continued assessment of both the potential nominal value of remaining inventory as well as the expected sales velocity.
Michigan Office
During the three months ended June 30, 2024, we recorded a Specific CECL Allowance of $
7.5
million on a subordinate loan secured by a pledge of the equity interest in the entity that owns a Class A office building in Troy, MI (the "Michigan Office Loan"), representing a full reserve against the loan’s amortized cost basis. During the three months ended September 30, 2025, we reached a discounted payoff agreement with the borrower and received proceeds of $
1.3
million. We recorded a $
6.2
million realized loss on investments on our condensed consolidated statement of operations for the
three and nine months ended September 30, 2025.
Loan Modifications Pursuant to ASC 326
During the twelve months ended September 30, 2025, we provided the following loan modifications that require disclosure pursuant to ASC 326.
During the three months ended September 30, 2025, we modified our commercial mortgage loan secured by an office property in London, UK. The loan’s final maturity date was extended from August 2025 to March 2028. In conjunction with the borrower injecting additional equity in the underlying property, we upsized the total commitment of the loan by $
77.4
million to finance future leasing costs, as necessary. Additionally, the loan’s terms were modified to include a PIK interest component on the upsize accruing at a fixed rate of
10.0
% for interest not received in cash. The loan is performing pursuant to its modified contractual terms, and the loan’s risk rating remains a 3 as of September 30, 2025
During the three months ended June 30, 2025, we modified our commercial mortgage loan secured by an office property in Berlin, Germany. The loan’s final maturity date was extended from August 2026 to June 2030 allowing for a component of interest to be paid in-kind. The loan is performing pursuant to its modified contractual terms, and the loan’s risk rating was upgraded from a 4 to a 3.
As of September 30, 2025 and December 31, 2024, the aggregate amortized cost basis of these modified receivables was
$
438.9
million
and
$
378.3
million
, respectively, or
5.3
%
of our aggregate commercial mortgage loans and subordinate loans by amortized cost. Unfunded commitments related to these loans as of September 30, 2025 and December 31, 2024 were
$
104.0
million
and
$
5.1
million
, respectively.
Nonaccrual and Past Due Loans
We cease accruing interest on loans if we deem the interest to be uncollectible with any previously accrued uncollected interest on the loan charged to interest income in the same period. The amortized cost basis, net of Specific CECL Allowance, for loans on nonaccrual was
$
375.0
million
and
$
486.8
million
as of September 30, 2025 and December 31, 2024, respectively.
19
Under certain circumstances, we may apply the cost recovery method under which interest collected on a loan reduces the loan's amortized cost. We received
$
0.2
million
and
$
1.2
million
in interest that reduced amortized cost under the cost recovery method during the three and nine months ended September 30, 2025, respectively, and
$
7.0
million
and
$
8.3
million
during the three and nine months ended September 30, 2024, respectively.
As of September 30, 2025 and December 31, 2024, the amortized cost basis, net of Specific CECL Allowance, for loans that are past due 90 days or more as to principal or interest, was
$
375.0
million
and
$
486.8
million
, respectively. As of September 30, 2025 and December 31, 2024, there were no loans with accrued interest between 30 and 89 days past due.
Manhattan Residential — 111 West 57
th
Street
During the three months ended June 30, 2025, the third-party mortgage, which was senior to our mezzanine positions secured by an ultra-luxury residential property in Manhattan, NY, was repaid in full. Accordingly, our Senior Mezzanine A Loan and a portion of our Senior Mezzanine Loan were restructured into a mortgage loan (the "Senior Loan") as we are now the sole lender in the capital structure. The Senior Loan remains on nonaccrual status subsequent to the restructuring.
Pre-payment penalties, accelerated fees, and Paid-In-Kind ("PIK") interest
We recognized
$
1.4
million
and
$
1.9
million
in pre-payment penalties and accelerated fees for the three and nine months ended September 30, 2025, respectively, and
$
4.2
million
and
$
5.1
million
for the three and nine months ended September 30, 2024, respectively.
We recognized PIK interest of
$
5.1
million
and
$
5.5
million
for the three and nine months ended September 30, 2025
. There was
no
recognized PIK interest during the
three and nine months ended September 30, 2024.
Loan Sales
From time to time, we may enter into sale transactions with other parties. All sale transactions are evaluated in accordance with ASC Topic 860, "Transfers and Servicing" ("ASC 860").
In February 2025, we originated a $
114.0
million commercial mortgage loan secured by a multifamily property located in Miami, FL, which included a $
24.0
million contiguous subordinate loan. In March 2025
, we sold our interest in the $
24.0
million subordinate loan. We evaluated the transaction under ASC 860 and determined the sale met the criteria for sale accounting. We recorded no gain or loss related to this transaction.
During the three months ended June 30, 2024, we sold a commercial mortgage loan collateralized by a hotel property located in Honolulu, HI. The loan was previously classified as held for sale and was sold at a price of
99.5
%. Upon selling the commercial mortgage loan, we reversed the previously recorded valuation allowance and recorded a realized loss of $
0.7
million included within realized loss on investments on our condensed consolidated statement of operations for the three and six months ended June 30, 2024.
20
Note 5 – Real Estate Owned
Real Estate Owned, Held for Investment
As of September 30, 2025
, assets and liabilities related to real estate owned, held for investment consisted of
three
properties: the D.C. Hotel, a full-service luxury hotel in Washington, D.C., the Brooklyn Multifamily Development, a multifamily development property located in downtown Brooklyn, NY, and the Atlanta Hotel, a hotel in Atlanta, GA.
Property acquired through foreclosure or deed-in-lieu of foreclosure is classified as real estate owned and recognized at fair value on our condensed consolidated balance sheet upon acquisition in accordance with ASC 805. As real estate owned is a nonfinancial asset, it is recorded at fair value on a non-recurring basis in accordance with ASC 820.
Refer to "Note 3 – Fair Value Disclosure" for full discussion of non-recurring fair value measurements.
D.C. Hotel
In 2021, we acquired legal title to the D.C. Hotel, which previously secured two subordinate loans, through a deed-in-lieu of foreclosure. In accordance with ASC 805, we consolidated the hotel's assets and liabilities at their respective fair values.
As of September 30, 2025 and December 31, 2024, the value of net real estate assets related to the D.C. Hotel was
$
158.4
million
and
$
157.1
million
, respectively. As of September 30, 2025, our net real estate assets included depreciable assets of
$
78.5
million
, net of
$
11.0
million
in accumulated depreciation, attributable to the building, and
$
5.9
million
, net of
$
7.2
million
in accumulated depreciation, attributable to furniture, fixtures, and equipment ("FF&E"). As of December 31, 2024, our net real estate assets included depreciable assets of
$
79.1
million
, net of
$
9.1
million
in accumulated depreciation, attributable to the building, and
$
6.0
million
, net of
$
5.6
million
in accumulated depreciation, attributable to FF&E.
In June 2024, we obtained a $
73.7
million mortgage secured by the D.C. Hotel. The mortgage includes an interest rate of term
one-month SOFR
+
3.00
% and current maturity of July 2026, with an option to extend for
one year
, contingent upon meeting certain conditions. The mortgage agreement contains covenants requiring our unencumbered liquidity be greater than $
10.0
million and our net worth be greater than $
200.0
million. Under these covenants, our General CECL Allowance is added back to our net worth calculation.
As of September 30, 2025 and December 31, 2024, the carrying value of the mortgage included within debt related to real estate owned, held for investment, net on our condensed consolidated balance sheet was
$
73.2
million
, net of
$
0.5
million
in deferred financing costs and
$
72.6
million
, net of
$
1.1
million
in deferred financing costs, respectively. To manage our exposure to variable cash flows on our borrowings under this mortgage, we entered into an interest rate cap in June 2024. As of both September 30, 2025 and December 31, 2024, the fair value of the interest rate cap was de minimis. Refer to "Note 10 – Derivatives" for full detail.
We recorded net profit from the hotel’s operations of
$
0.7
million
and
$
6.9
million
for three and nine months ended September 30, 2025, and net profit of
$
1.9
million
and
$
8.1
million
for three and nine months ended September 30, 2024, respectively.
Brooklyn Multifamily Development
In 2022, we acquired legal title of a multifamily development property in downtown Brooklyn, NY, through a deed-in-lieu of foreclosure. The transaction was accounted for as an asset acquisition in accordance with ASC 805, and we recorded the real estate assumed at a fair value based on the market value of the property as of the date of acquisition.
Upon taking title, we concurrently contributed the property to a joint venture with a third-party real estate developer. The entity was deemed to be a VIE, of which we were determined to be the primary beneficiary. Through our wholly owned subsidiaries, we hold a
100
% equity ownership interest in the joint venture and our partner is only entitled to profit upon achievement of certain returns under our joint venture agreement.
Additionally, upon taking title, we obtained $
164.8
million in construction financing on the property. As of
September 30, 2025 and December 31, 2024, the carrying value of the construction financing included within debt related to real estate owned,
21
held for investment, net on our condensed consolidated balance sheets was
$
329.8
million
, net of
$
1.1
million
in deferred financing costs and
$
252.0
million
, net of
$
2.0
million
in deferred financing costs, respectively.
The construction financing includes a maximum commitment of $
388.4
million, an
interest rate of SOFR
+
2.55
%, and current maturity of August 2026, with an option to extend for
one year
, contingent upon meeting certain conditions. The construction financing agreement contains covenants requiring our unencumbered liquidity be greater than $
100.0
million and our net worth be greater than $
600.0
million. Under these covenants, our General CECL Allowance is added back to our net worth calculation. As of both
September 30, 2025 and December 31, 2024, we were in compliance with these covenants.
To manage our exposure to variable cash flows on our borrowings under this construction financing, we entered into an interest rate cap in September 2023. The interest rate cap was extended by one year in September 2024. As of September 30, 2025 and December 31, 2024, the fair value of the interest rate cap was
$
0.1
million
and
$
0.4
million
, respectively, and recorded within derivative assets, net on our condensed consolidated balance sheet. Refer to "Note 10 – Derivatives" for full detail.
As of September 30, 2025 and December 31, 2024, our cost basis in the property was
$
616.6
million
and
$
540.9
million
, respectively and included capitalized construction and financing costs as of September 30, 2025 and December 31, 2024 of
$
393.3
million
and
$
319.7
million
, respectively. We capitalized construction and financing costs of
$
22.7
million
and
$
75.7
million
during the three and nine months ended September 30, 2025, respectively, and
$
44.0
million
and
$
121.4
million
during the three and nine months ended September 30, 2024, respectively.
During the third quarter of 2025, a component of the property reached substantial completion stage and residential units in this component were held available for occupancy. As such, we accounted for this component as a separate project, ceased capitalizing expenses associated with this project and started recording depreciation for such project. Direct and indirect costs attributable to the remainder of the property, which is still undergoing construction, continue to be capitalized.
As of September 30, 2025, our net real estate assets included depreciable assets of
$
393.2
million
, net of
$
0.1
million
in accumulated depreciation, attributable to the building, and
$
2.1
million
, net of de minimis accumulated depreciation, attributable to FF&E.
In accordance with ASC 842, leases at the Brooklyn Multifamily Development are classified as operating leases, accordingly rental revenue is recognized using the straight-line method over the lease terms. We recorded net loss from the property’s operations of
$
0.8
million
for the three and nine months ended September 30, 2025.
Atlanta Hotel
In March 2023, we acquired legal title of the Atlanta Hotel through a deed-in-lieu of foreclosure, and we consolidated the hotel's assets and liabilities at their respective fair values in accordance with ASC 805. The hotel was subsequently classified as held for sale during the second quarter of 2023.
As of March 31, 2024, the Atlanta Hotel no longer met the criteria to be classified as held for sale under ASC 360. In accordance with ASC 360, the REO Fixed Assets were reclassified to their carrying value before classifying as held for sale in June 2023. On the date of reclassification, March 31, 2024, we recorded $
3.6
million in depreciation, representing the amount that would have been recorded had the asset remained as held for investment. All other assets and liabilities were reclassified to the corresponding line items on our condensed consolidated balance sheet. No realized gain or loss was recorded in connection with this reclassification.
As of September 30, 2025 and December 31, 2024, the value of net real estate assets related to the Atlanta Hotel was
$
69.6
million
and
$
69.0
million
, respectively. As of September 30, 2025, our net real estate assets included depreciable assets of
$
42.3
million
, net of
$
7.8
million
in accumulated depreciation, attributable to the building, and
$
9.0
million
, net of
$
4.9
million
in accumulated depreciation, attributable to FF&E. As of December 31, 2024, our net real estate assets included depreciable assets of
$
44.7
million
, net of
$
5.5
million
in accumulated depreciation, attributable to the building, and
$
6.7
million
, net of
$
3.1
million
in accumulated depreciation, attributable to FF&E.
22
For the three and nine months ended September 30, 2025, we recorded net profit/(loss) from the hotel's operations of
($
0.6
) million
and
$
0.5
million
, respectively. For the three and nine months ended September 30, 2024, we recorded net profit/(loss) from the hotel's operations of
$
0.4
million
and
($
1.2
) million
,
respectively.
Note 6 – Other Assets
The following table details the components of our other assets at the dates indicated ($ in thousands):
September 30, 2025
December 31, 2024
Interest receivable
$
65,482
$
58,470
Collateral deposited under derivative agreements
29,950
—
Loan proceeds held by servicer
(1)
12,777
50,843
Equity method investment
(2)
23,390
20,073
Other
(3)
10,273
8,641
Total
$
141,872
$
138,027
(1)
Includes loan principal, interest, and other fees held by our third-party servicers as of the balance sheet date and remitted during subsequent remittance cycle.
(2)
Relates to our former Massachusetts Healthcare Loan as discussed below (see "Massachusetts Healthcare").
(3)
Includes
$
9.4
million
and
$
7.7
million
of other assets from Real Estate Owned, Held for Investment as of September 30, 2025 and December 31, 2024, respectively. Refer to "Note 5 – Real Estate Owned"
for additional information.
Massachusetts Healthcare
In 2022, we and other Apollo-managed entities ("Apollo Co-Lenders") co-originated a first mortgage loan ("Massachusetts Healthcare Loan") secured by eight hospitals in Massachusetts. During the third quarter of 2024, we and the Apollo Co-Lenders, through a joint venture ("Massachusetts Healthcare JV"), acquired title to one of the eight hospitals (St. Elizabeth’s Medical Center) that previously secured the Massachusetts Healthcare Loan. During the same period, the hospital was taken by eminent domain by the Commonwealth of Massachusetts (the "Commonwealth"). Refer to "Note 16 - Commitments and Contingencies" for additional information regarding the Commonwealth's taking of the hospital and the associated lawsuit against the Commonwealth.
Additionally in the third quarter of 2024, guarantors made a guaranty payment on the Massachusetts Healthcare Loan, and the Borrowers transferred the deeds of the remaining seven hospitals into escrow, thereby releasing the borrowers from their obligation under the loan agreement. As a result, during the third quarter of 2024, we recorded a $
127.5
million realized loss on investments in relation to the Massachusetts Healthcare Loan. During the fourth quarter of 2024, five of the seven hospitals were sold to third parties and the proceeds were allocated among us and other Apollo Co-Lenders based on our pro-rata interests in the Massachusetts Healthcare Loan. As of December 31, 2024,
$
20.1
million
remained in other assets on our consolidated balance sheet related to our allocation of fair value of the two unsold hospitals. During the first quarter of 2025, the Massachusetts Healthcare JV took title of the two unsold hospitals.
For the three and nine months ended September 30, 2025, we contributed
$
1.2
million
and
$
5.4
million
, respectively, to the Massachusetts Healthcare JV. Additionally, our allocation of income from the Massachusetts Healthcare JV for the three and nine months ended September 30, 2025 was
$
17.1
million
and
$
15.7
million
, respectively, recorded within income from equity method investment, net on our condensed consolidated statement of operations. Our allocation of income from the Massachusetts Healthcare JV for the quarter ended
September 30, 2025 includes a $
17.4
million gain on litigation settlement representing $
18.1
million of additional proceeds received from the Commonwealth net of associated legal expenses. Refer to "Note 16 - Commitments and Contingencies" for additional information.
As of September 30, 2025, our equity method investment in the Massachusetts Healthcare JV was
$
23.4
million
, and recorded in other assets on our consolidated balance sheet.
23
Note 7 – Secured Debt Arrangements, Net
We utilize secured debt arrangements to finance the origination activity in our loan portfolio. Our secured debt arrangements are comprised of secured credit facilities, a private securitization, and a revolving credit facility.
During the nine months ended September 30, 2025, we entered into two new secured credit facilities with Morgan Stanley and new secured credit facilities with Atlas ("Atlas Facility - EUR", together with Atlas Facility - USD, "Atlas Facilities") and Barclays, which collectively provide
$
1.4
billion
of additional borrowing capacity. In addition, we increased the capacity under our secured credit facility with JPMorgan by $
500.0
million, under our secured credit facility with Barclays by $
100.0
million, under the Barclays Private Securitization by
$
283.5
million
, and under our Revolving Credit Facility by
$
115.0
million. Furthermore, we have fully repaid all borrowings outstanding under the HSBC, MUFG Securities and Churchill facilities.
Our borrowings under secured debt arrangements as of
September 30, 2025 and December 31, 2024 are detailed in the following table ($ in thousands):
September 30, 2025
December 31, 2024
Maximum
Amount of
Borrowings
(1)
Borrowings
Outstanding
(1)
Maturity
(2)
Maximum
Amount of
Borrowings
(1)
Borrowings
Outstanding
(1)
Maturity
(2)
JPMorgan Facility - USD
(3)
$
2,000,000
$
1,713,891
March 2030
(4)
$
1,500,000
$
1,033,504
September 2026
Morgan Stanley Facility - GBP
586,700
299,453
April 2033
—
—
N/A
Morgan Stanley Facility - USD
450,000
365,256
April 2031
—
—
N/A
Atlas Facility - USD
(5)
800,000
498,105
March 2027
(6)
800,000
462,886
March 2027
(6)
Atlas Facility - EUR
281,611
281,612
August 2028
—
—
N/A
HSBC Facility - GBP
(7)
—
—
N/A
377,483
377,483
May 2025
HSBC Facility - EUR
(7)
—
—
N/A
250,162
250,162
January 2026
(8)
Barclays Facility - USD
600,000
475,291
March 2030
(9)(10)
500,000
321,546
March 2027
(9)
Barclays Facility - GBP
167,109
124,282
February 2029
—
—
N/A
Goldman Sachs Facility - GBP
464,062
440,245
June 2029
458,804
373,706
May 2029
Deutsche Bank Facility - USD
(3)(11)
200,000
27,300
March 2028
(11)
700,000
123,434
March 2026
Santander Facility - USD
(12)
—
—
N/A
300,000
—
February 2026
MUFG Securities Facility - GBP
(13)
—
—
N/A
171,972
171,972
November 2025
(9)
Churchill Facility - USD
(14)
—
—
N/A
130,000
121,289
April 2026
Total Secured Credit Facilities
5,549,482
4,225,435
5,188,421
3,235,982
Barclays Private Securitization - GBP, EUR, SEK
1,680,125
1,680,125
February 2028
(8)
1,587,780
1,587,780
May 2027
(8)
Revolving Credit Facility
(15)
275,000
—
August 2028
(16)
160,000
—
March 2026
Total Secured Debt Arrangements
7,504,607
5,905,560
6,936,201
4,823,762
Less: deferred financing costs
N/A
(
9,545
)
N/A
(
8,789
)
Total Secured Debt Arrangements, net
(17)(18)(19)
$
7,504,607
$
5,896,015
$
6,936,201
$
4,814,973
(1)
As of September 30, 2025, British Pound Sterling ("GBP"), Euro ("EUR"), and Swedish Krona ("SEK") borrowings were converted to USD at a rate of
1.3446
,
1.17
, and
0.11
, respectively. As of December 31, 2024, GBP, EUR and SEK borrowings were converted to USD at a rate of
1.25
,
1.04
and
0.09
, respectively.
(2)
Maturity date assumes extensions at our option are exercised with consent of financing providers, where applicable.
(3)
The JPMorgan Facility and Deutsche Bank Facility enable us to elect to receive advances in USD, GBP, or EUR.
(4)
The JPMorgan Facility final maturity was extended to March 31, 2030 during the first quarter of 2025.
(5)
The Atlas Facility - USD was formerly the Credit Suisse Facility. See "Atlas Facilities" below for additional discussion.
(6)
The Atlas Facility - USD was amended during March 2024 to convert the facility's maturity from a six month "evergreen" feature to a two-year initial term, with an additional one-year extension option.
(7)
The HSBC Facility was terminated during the third quarter of 2025.
(8)
Represents weighted-average maturity across various financings with the counterparty. See below for additional details.
(9)
Assumes financings are extended in line with the underlying loans.
(10)
The Barclays Facility final maturity was extended to March 26, 2030 during the third quarter of 2025.
(11)
Effective March 31, 2025, the capacity on the Deutsche Bank Facility was reduced to $
200.0
million from $
700.0
million and final maturity was extended to March 31, 2028 during the first quarter 2025.
(12)
The Santander Facility was terminated during the first quarter of 2025.
(13)
The MUFG Facility was terminated during the second quarter of 2025.
(14)
The Churchill Facility was terminated during the second quarter of 2025.
(15)
Borrowings under the Revolving Credit Facility bear interest at a per annum rate equal to the sum of (i) a floating rate index and (ii) a fixed margin. Borrowings under the Revolving Credit Facility are full recourse to certain guarantor wholly-owned subsidiaries of the Company. See "Revolving Credit Facility" below for additional discussion.
(16)
The Revolving Credit Facility was extended to August 7, 2028 during the third quarter of 2025. See "Revolving Credit Facility" below for additional
24
discussion.
(17)
Weighted-average borrowing costs as of September 30, 2025 and December 31, 2024 were applicable benchmark rates and credit spread adjustments, plus spreads of USD: +
2.02
%
/ GBP: +
1.99
%
/ EUR: +
2.26
%
/ SEK: +
1.50
%
and USD: +
2.47
%
/ GBP: +
2.43
%
/ EUR: +
2.11
%
/ SEK: +
1.50
%
, respectively.
(18)
Weighted-average advance rates based on cost as of September 30, 2025 and December 31, 2024 were
73.45
%
(
71.9
%
(USD) /
76.3
%
(GBP) /
71.1
%
(EUR) /
80.1
%
(SEK)) and
68.6
%
(
62.2
%
(USD) /
75.3
%
(GBP) /
70.8
%
(EUR) /
80.2
%
(SEK)), respectively.
(19)
As of September 30, 2025 and December 31, 2024, approximately
36
%
and
46
%
, respectively, of the outstanding balance under these secured borrowings were recourse to us.
Terms of our secured credit facilities are designed to keep each lender's credit exposure generally constant as a percentage of the underlying value of the assets pledged as security to the facility. If the credit of the underlying collateral value decreases, the amount of leverage to us may be reduced. As of both September 30, 2025 and December 31, 2024, the weighted-average haircut under our secured debt arrangements was approximately
26.5
%
. Our secured credit facilities do not contain capital markets-based mark-to-market provisions.
Revolving Credit Facility
We are party to a revolving credit facility (the "Revolving Credit Facility") administered by Bank of America, N.A. The Revolving Credit Facility permits borrowings secured by qualifying commercial mortgage loans and real property owned assets. During the third quarter of 2025, we amended and restated the facility to extend the maturity date from March 2026 to August 2028 and increased the borrowing capacity from $
160.0
million to $
275.0
million with a syndicate of five lenders. In connection with the amendment and restatement, the Company incurred $
2.7
million of deferred financing costs, including issuance and legal related costs. The Revolving Credit Facility is also subject to certain financial covenants, which are discussed below (see "Debt Covenants").
As of both September 30, 2025 and December 31, 2024
, we had
no
outstanding balance on the Revolving Credit Facility.
During the three and nine months ended September 30, 2025, we recorded
$
117.0
thousand
and
$
259.0
thousand
of unused fees, respectively. During the three and nine months ended September 30, 2024, we recorded
$
84.7
thousand
and
$
195.3
thousand
of unused fees, respectively.
During the three and nine months ended September 30, 2025, we recorded
$
15.0
thousand
and
$
622.0
million
of contractual interest expense, respectively. During the three and nine months ended September 30, 2024, we recorded
$
0.1
million
and
$
2.4
million
of contractual interest expense.
Barclays Private Securitization
We are party to a private securitization with Barclays Bank plc ("Barclays") (such securitization, the "Barclays Private Securitization"). Commercial mortgage loans currently financed under the Barclays Securitization are denominated in GBP, EUR, and SEK.
The Barclays Private Securitization does not include daily margining provisions and grants us significant discretion to modify certain terms of the underlying collateral including waiving certain loan-level covenant breaches and deferring or waiving of debt service payments for up to
18
months. The securitization includes loan-to-value based covenants with deleveraging requirements that are based on significant declines in the value of the collateral as determined by an annual third-party (engaged by us) appraisal process tied to the provisions of the underlying loan agreements. We believe this provides us with both cushion and predictability to avoid sudden unexpected outcomes and material repayment requirements.
The table below provides principal balances and the carrying value for commercial mortgage loans pledged to the Barclays Private Securitization as of
September 30, 2025 and December 31, 2024 ($ in thousands):
September 30, 2025
25
Local Currency
Count
Outstanding
Principal
Carrying Value
GBP
5
$
1,453,105
$
1,441,264
EUR
2
542,844
536,885
SEK
1
263,350
262,631
Total
8
$
2,259,299
$
2,240,780
December 31, 2024
Local Currency
Count
Outstanding
Principal
Carrying Value
GBP
5
$
1,251,205
$
1,236,691
EUR
3
720,126
711,859
SEK
1
223,992
222,727
Total
9
$
2,195,324
$
2,171,277
The table below provides the borrowings outstanding (on an as converted basis) and weighted-average fully-extended maturities by currency for the assets financed under the Barclays Private Securitization as of
September 30, 2025 ($ in thousands):
Borrowings
Outstanding
(1)
Fully-Extended
Maturity
(2)
Total/Weighted-Average GBP
$
1,076,127
June 2028
Total/Weighted-Average EUR
393,318
January 2028
(3)
Total/Weighted-Average SEK
210,680
May 2026
Total/Weighted-Average Securitization
$
1,680,125
February 2028
(1)
As of September 30, 2025, we had
£
800.3
million
,
€
335.2
million
, and kr
2.0
billion
of borrowings outstanding under the Barclays Private Securitization secured by certain of our commercial mortgage loans.
(2)
Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.
(3)
The EUR portion of the Barclays Private Securitization has an "evergreen" feature such that the facility continues for
one year
and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve months' notice.
The table below provides the borrowings outstanding (on an as converted basis) and weighted-average fully-extended maturities by currency for the assets financed under the Barclays Private Securitization as of December 31, 2024 ($ in thousands):
Borrowings
Outstanding
(1)
Fully-Extended
Maturity
(2)
Total/Weighted-Average GBP
$
897,199
April 2027
Total/Weighted-Average EUR
511,387
October 2027
(3)
Total/Weighted-Average SEK
179,194
May 2026
Total/Weighted-Average Securitization
$
1,587,780
May 2027
(1)
As of December 31, 2024, we had
£
716.8
million
,
€
493.9
million
, and kr
2.0
billion
of borrowings outstanding under the Barclays Private Securitization secured by certain of our commercial mortgage loans.
(2)
Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.
(3)
The EUR portion of the Barclays Private Securitization has an "evergreen" feature such that the facility continues for
one year
and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve months' notice.
26
The table below provides the assets and liabilities of the Barclays Private Securitization VIE included in our condensed consolidated balance sheet
s ($ in thousands):
September 30, 2025
December 31, 2024
Assets:
Cash
$
1,345
$
150
Commercial mortgage loans, net
(1)
2,240,780
2,171,277
Other Assets
(2)
36,321
29,179
Total Assets
$
2,278,446
$
2,200,606
Liabilities:
Secured debt arrangements, net (net of deferred financing costs of $
0.9
million and $
1.1
million in 2025 and 2024, respectively)
$
1,679,210
$
1,586,680
Accounts payable, accrued expenses and other liabilities
(3)
10,099
10,519
Total Liabilities
$
1,689,309
$
1,597,199
(1)
Net of the General CECL Allowance of
$
8.9
million
and
$
10.8
million
as of September 30, 2025 and December 31, 2024, respectively.
(2)
Includes loan principal, interest, and other fees held by our third-party servicers as of the balance sheet date and remitted during subsequent remittance cycle.
(3)
Includes General CECL Allowance related to unfunded commitments on commercial mortgage loans, net of
$
1.3
million
and
$
2.1
million
as of September 30, 2025 and December 31, 2024, respectively.
The table below provides the net income of the Barclays Private Securitization VIE included in our condensed consolidated statement of operations
($ in thousands):
Three months ended September 30,
Nine months ended September 30,
2025
2024
2025
2024
Net interest income:
Interest income from commercial mortgage loans
$
43,479
$
69,455
$
138,919
$
197,574
Interest expense
(
24,436
)
(
39,343
)
(
77,010
)
(
111,445
)
Net interest income
$
19,043
$
30,112
$
61,909
$
86,129
General and administrative expense
$
(
163
)
$
(
4
)
$
(
326
)
$
(
6
)
Decrease (increase) in current expected credit loss allowance, net
1,634
(
176
)
2,687
(
4,315
)
Foreign currency translation gain (loss)
(
9,342
)
38,209
59,728
24,799
Net income
$
11,172
$
68,141
$
123,998
$
106,607
At
September 30, 2025, our borrowings had the following remaining maturities ($ in thousands):
Less than
1 year
1 to 3
years
3 to 5
years
Total
JPMorgan Facility
$
319,039
$
198,892
$
1,195,960
$
1,713,891
Morgan Stanley Facility - GBP
—
—
299,453
299,453
Morgan Stanley Facility - USD
—
—
365,256
365,256
Atlas Facility
93,100
405,005
—
498,105
Atlas UK Facility
—
281,612
—
281,612
Barclays Facility - USD
—
29,599
445,692
475,291
Barclays Facility - GBP
—
—
124,282
124,282
Goldman Sachs Facility - GBP
—
—
440,245
440,245
Deutsche Bank Facility
27,300
—
—
27,300
Barclays Private Securitization
359,264
421,828
899,033
1,680,125
Revolving Credit Facility
—
—
—
—
Total
$
798,703
$
1,336,936
$
3,769,921
$
5,905,560
27
The table above reflects the fully extended maturity date of the facility and assumes facilities with an "evergreen" feature continue to extend through the fully-extended maturity of the underlying asset and assumes underlying loans are extended with consent of financing providers.
The table below summarizes the outstanding balances at
September 30, 2025, as well as the maximum and average month-end balances for the nine months ended September 30, 2025 for our borrowings under secured debt arrangements ($ in thousands).
As of September 30, 2025
For the nine months ended September 30, 2025
Balance
Collateral
(1)
Maximum
Month-End
Balance
Average
Month-End
Balance
JPMorgan Facility
$
1,713,891
$
2,375,092
$
1,713,890
$
1,515,568
Morgan Stanley Facility - GBP
299,453
368,600
300,726
207,836
Morgan Stanley Facility - USD
365,256
483,527
365,256
306,119
Atlas Facility
498,105
751,904
505,776
516,416
Atlas UK Facility
281,612
410,332
293,685
63,922
HSBC Facility
—
—
674,118
514,882
Barclays Facility - USD
475,291
652,029
475,291
334,338
Barclays Facility - GBP
124,282
157,263
124,817
124,283
Goldman Sachs Facility - GBP
440,245
570,147
440,244
416,849
Deutsche Bank Facility
27,300
45,500
27,300
68,967
Barclays Private Securitization
1,680,125
2,249,711
1,801,532
1,720,970
Revolving Credit Facility
—
—
—
19,625
Total
$
5,905,560
$
8,064,105
(1)
Represents the amortized cost balance of commercial loan collateral assets and the value of net real estate assets of real property owned collateral assets.
The table below summarizes the outstanding balances at December 31, 2024, as well as the maximum and average month-end balances for the year ended December 31, 2024 for our borrowings under secured debt arrangements ($ in thousands).
As of December 31, 2024
For the year ended December 31, 2024
Balance
Collateral
(1)
Maximum
Month-End
Balance
Average
Month-End
Balance
JPMorgan Facility
$
1,033,504
$
1,832,859
$
1,063,261
$
969,759
Deutsche Bank Facility
123,434
199,217
278,703
201,020
Goldman Sachs Facility - USD
—
—
11,620
2,903
Goldman Sachs Facility - GBP
373,706
485,054
390,163
251,571
Atlas Facility
462,886
702,927
758,201
640,453
HSBC Facility
627,646
839,123
672,422
653,182
Barclays Facility
321,546
420,774
353,153
242,792
MUFG Securities Facility
171,972
209,493
211,057
197,420
Churchill Facility
121,289
161,264
126,080
123,684
Santander Facility - USD
—
—
67,500
56,250
Santander Facility - EUR
—
—
54,677
22,684
Barclays Private Securitization
1,587,779
2,182,088
2,249,538
2,041,421
Revolving Credit Facility
—
—
150,000
38,796
Total
$
4,823,762
$
7,032,800
(1)
Represents the amortized cost balance of commercial loan collateral assets and the value of net real estate assets of real property owned collateral assets.
Debt Covenants
The guarantees related to our secured debt arrangements contain the following financial covenants: (i) tangible net worth must be greater than $
1.25
billion plus
75
% of the net cash proceeds of any equity issuance after March 31, 2017 (or $
1.42
billion plus
75
%
of the net cash proceeds of any equity issuance after June 30, 2025 with respect to the Revolving Credit Facility); (ii)
28
our
ratio of total indebtedness to total assets shall not exceed
83.33
% (
81.82
% for the Revolving Credit Facility) and (iii) our liquidity cannot be less than an amount equal to the greater of
5.0
% of total recourse indebtedness or $
30.0
million. Under these covenants, our General CECL Allowance is added back to our tangible net worth calculation and total assets and total indebtedness are subject to certain adjustments. The Revolving Credit Facility contains an additional financial covenant to maintain a minimum interest coverage ratio of not less than
1.3
:1.
Effective as of June 30, 2025, we amended our financial covenants from a maximum ratio of total indebtedness to tangible net worth of
4.0
:1.0 to a ratio of total indebtedness to total assets not to exceed
83.33
% (
81.82
% for our Revolving Credit Facility). We were in compliance with our covenants for the periods ended
September 30, 2025 and December 31, 2024.
The impact of macroeconomic conditions on the commercial real estate markets and global capital markets, including increased interest rates, foreign currency fluctuations, changes to fiscal and monetary policy, slower economic growth or recession, labor shortages, and recent distress in the banking sector, may make it more difficult to meet or satisfy our debt covenants in the future.
Note 8 – Senior Secured Term Loans, Net
In June 2025, we entered into a $
750.0
million senior secured term loan facility (the
"2030 Term Loan"
) to refinance and replace our previously outstanding 2026 Term Loan and 2028 Term Loans (each as defined and described below). The 2030 Term Loan matures in June 2030 and bears interest at a rate of SOFR plus
3.25
%. The 2030 Term Loan was issued at a price of
99.3
% and is amortizing with repayments of
0.25
% of the total committed principal per quarter.
Inclusive of the discount and deferred financing costs, the total cost of the 2030 Term Loan was SOFR+
3.92
% as of
September 30, 2025. During the three and nine months ended September 30, 2025, we repaid
$
1.9
million
of principal related to the 2030 Term Loan. The 2030 Term Loan contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities. The refinancing was accounted for as a continuation of the existing loans in accordance with ASC Topic 470 "Debt".
Prior to refinancing in June 2025, we held a $
471.3
million senior secured term loan (the "2026 Term Loan") that bore interest at SOFR plus
2.86
% and a $
288.0
million senior secured term loan (the "2028 Term Loan", collectively with the 2026 Term Loan, the "2026 and 2028 Term Loans") that bore interest at SOFR (with a floor of
0.50
%) plus
3.61
%. The 2026 and 2028 Term Loans contained restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities and were issued at a price of
99.5
% and
99.0
%, respectively.
The following table summarizes the terms of the 2030 Term Loan as of
September 30, 2025 ($ in thousands):
Principal Amount
Unamortized Issuance Discount
(1)
Deferred Financing Costs
(1)
Carrying Value
Rate
(2)
Maturity Date
2030 Term Loan
$
748,125
$
(
6,681
)
$
(
13,086
)
$
728,358
+
3.25
%
6/13/2030
Total
$
748,125
$
(
6,681
)
$
(
13,086
)
$
728,358
(1)
Unamortized issuance discount and deferred financing costs will be amortized to interest expense over remaining life of respective term loans.
(2)
Indexed to one-month SOFR.
The following table summarizes the terms of the 2026 and 2028 Term Loans as of December 31, 2024 ($ in thousands):
Principal Amount
Unamortized Issuance Discount
(1)
Deferred Financing Costs
(1)
Carrying Value
Rate
(2)
Maturity Date
2026 Term Loan
$
472,500
$
(
476
)
$
(
2,778
)
$
469,246
+
2.86
%
5/15/2026
2028 Term Loan
288,750
(
1,357
)
(
2,429
)
284,964
+
3.61
%
3/11/2028
Total
$
761,250
$
(
1,833
)
$
(
5,207
)
$
754,210
(1)
Unamortized issuance discount and deferred financing costs will be amortized to interest expense over remaining life of respective term loans.
(2)
Indexed to one-month SOFR
29
Covenants
The 2030 Term Loan contains a financial covenant that our recourse indebtedness shall not exceed
83.3
% of our total assets (subject to certain adjustments). As of
September 30, 2025, we were in compliance with this covenant.
The financial covenants of the 2026 and 2028 Term Loans included the requirement that we maintain: (i) a maximum ratio of total recourse debt to tangible net worth of
4
:1; and (ii) a ratio of total unencumbered assets to total pari-passu indebtedness of at least
2.50
:1. We were in compliance with the covenants under the 2026 and 2028 Term Loans at
December 31, 2024
.
Note 9 – Senior Secured Notes, Net
In June 2021, we issued $
500.0
million of
4.625
% Senior Secured Notes due 2029 (the "2029 Notes"), for which we received net proceeds of $
495.0
million, after deducting initial purchasers' discounts and commissions. The 2029 Notes will mature on June 15, 2029, unless earlier repurchased or redeemed. The 2029 Notes are secured by a first-priority lien, and rank pari-passu in right of payment with all of our existing and future first lien obligations, including indebtedness under the 2030 Term Loan. The 2029 Notes were issued at par and contain covenants relating to liens, indebtedness, and investments in non-wholly owned entities. The 2029 Notes had a carrying value o
f
$
497.0
million
and
$
496.4
million
, net of deferred financing costs of
$
3.0
million
and
$
3.6
million
, as of September 30, 2025 and December 31, 2024, respectively.
Covenants
The 2029 Notes include certain covenants including a requirement that we maintain a ratio of total unencumbered assets to total pari-passu indebtedness of at least
1.20
:1. As of
September 30, 2025 and December 31, 2024
, we were in compliance with all covenants.
Note 10 – Derivatives
We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than USD.
We have entered into a series of forward contracts to sell an amount of foreign currency (GBP, EUR and SEK) for an agreed upon amount of USD at various dates through August 2029. These forward contracts were executed to economically fix the USD amounts of foreign denominated cash flows expected to be received by us related to foreign denominated loan investments.
The agreements with our derivative counterparties require that we post collateral to secure net liability positions. As of September 30, 2025, we were in a net liability position with our derivative counterparties and posted collateral of
$
30.0
million
included within other assets on our condensed consolidated balance sheet. As of December 31, 2024, we were in a net asset position with all of our derivative counterparties and did not have any collateral posted under these derivative contracts.
The following table summarizes our non-designated Fx forwards and interest rate caps as of
September 30, 2025:
September 30, 2025
Type of Derivatives
Number of
Contracts
Aggregate
Notional Amount
(in thousands)
Notional
Currency
Maturity
Weighted-Average
Years to Maturity
Fx contracts - GBP
144
596,183
GBP
October 2025 - August 2029
1.40
Fx contracts - EUR
26
256,709
EUR
November 2025 - August 2028
0.80
Fx contracts - SEK
11
587,718
SEK
November 2025 - May 2026
0.64
Interest rate caps
2
238,535
USD
October 2025 - September 2026
0.29
30
The following table summarizes our non-designated Fx forwards and interest rate caps as of December 31, 2024:
December 31, 2024
Type of Derivatives
Number of
Contracts
Aggregate
Notional Amount
(in thousands)
Notional
Currency
Maturity
Weighted-Average
Years to Maturity
Fx contracts - GBP
80
632,702
GBP
January 2025 - August 2027
1.39
Fx contracts - EUR
48
355,218
EUR
January 2025 - August 2026
1.18
Fx contracts - SEK
14
633,231
SEK
February 2025 - May 2026
1.32
Interest rate caps
2
238,535
USD
July 2025 - October 2025
0.67
We have not designated any of our derivative instruments as hedges as defined in ASC Topic 815, "Derivatives and Hedging" and, therefore, changes in the fair value of our derivative instruments are recorded directly in earnings.
The following table summarizes the amounts recognized on our condensed consolidated statements of operations related to our forward currency contracts for the
three and nine months ended September 30, 2025 and 2024 ($ in thousands):
Amount of gain (loss)
recognized in income
Amount of gain (loss)
recognized in income
Three Months Ended September 30,
Nine Months Ended September 30,
Location of Gain (Loss) Recognized in Income
2025
2024
2025
2024
Forward currency contracts
Unrealized gain (loss) on derivative instruments
$
26,788
$
(
57,621
)
$
(
88,723
)
$
(
38,657
)
Forward currency contracts
Realized gain (loss) on derivative instruments
(
2,541
)
(
1,914
)
(
8,141
)
8,897
Total
$
24,247
$
(
59,535
)
$
(
96,864
)
$
(
29,760
)
The following table summarizes the amounts recognized on our condensed consolidated statements of operations related to our interest rate caps for the three and nine months ended September 30, 2025 and 2024 ($ in thousands):
Amount of gain (loss)
recognized in income
Amount of gain (loss)
recognized in income
Three Months Ended September 30,
Nine Months Ended September 30,
Location of Gain (Loss) recognized in Income
2025
2024
2025
2024
Interest rate caps
Unrealized gain (loss) on interest rate hedging instruments
$
(
133
)
$
(
562
)
$
(
379
)
$
(
1,213
)
Interest rate caps
Realized gain on interest rate hedging instruments
133
548
402
1,649
Total
$
—
$
(
14
)
$
23
$
436
In September 2023, we entered into an interest rate cap with an original maturity of October 1, 2024 and a notional amount of $
164.8
million.
During
September 2024, we extended our interest rate cap to October 2025. We use our interest rate cap to hedge our exposure to variable cash flows on our construction financing. The interest rate cap effectively limits SOFR from exceeding
4.00
% which results in the maximum all-in coupon on our construction financing of
6.55
%.
During both the three and nine months ended September 30, 2025 and 2024
, SOFR exceeded the cap rate of
4.00
%. We reali
zed a gain from the interest rate cap in the amount of
$
0.1
million
and
$
0.4
million
during the three and nine months ended September 30, 2025, respectively, and
$
0.5
million
and
$
1.6
million
during the three and nine months ended September 30, 2024, respectively, which is included in gain (loss) on interest rate hedging instruments in our condensed consolidated statement of operations.
In June 2024, we entered into an interest rate cap with an original maturity of July 1, 2025 and a notional amount of $
73.7
million.
During August 2025, we extended our interest rate cap to September 1, 2026.
We
use our interest rate cap to hedge our exposure to variable cash flows on our floating rate mortgage related to the D.C. Hotel. The interest rate cap effectively limits
31
SOFR
from exceeding
6.00
% which results in the maximum all-in coupon on mortgage of
9.00
%. During the
three and nine months ended September 30, 2025 and 2024
, SOFR did not exceed the cap rate of
6.00
%, and accordingly, no realized gain was recorded.
The following tables summarize the gross asset and liability amounts related to our derivatives at
September 30, 2025 and December 31, 2024 ($ in thousands):
September 30, 2025
December 31, 2024
Gross
Amount of
Recognized
Assets
Gross
Amounts
Offset in our Condensed
Consolidated
Balance Sheet
Net Amounts
of Assets
Presented in our Condensed
Consolidated
Balance Sheet
Gross
Amount of
Recognized
Assets
Gross
Amounts
Offset in our
Consolidated
Balance Sheet
Net Amounts
of Assets
Presented in our
Consolidated
Balance Sheet
Forward currency contracts
$
8,139
$
(
39,109
)
$
(
30,970
)
$
59,261
$
(
1,508
)
$
57,753
Interest rate caps
37
—
37
416
—
416
Total derivative assets (liabilities)
$
8,176
$
(
39,109
)
$
(
30,933
)
$
59,677
$
(
1,508
)
$
58,169
Note 11 – Accounts Payable, Accrued Expenses and Other Liabilities
The following table details the components of our accounts payable, accrued expense and other liabilities ($ in thousands):
September 30, 2025
December 31, 2024
Collateral held under derivative agreements
$
—
$
54,420
Accrued dividends payable
38,406
37,976
Accrued interest payable
38,139
28,261
Accounts payable and other liabilities
(1)
10,625
11,574
General CECL Allowance on unfunded commitments
(2)
5,782
5,948
Total
$
92,952
$
138,179
(1)
Includes
$
10.6
million
and
$
8.8
million
of accounts payable and other liabilities on the balance sheet of the Real Estate Owned, Held for Investment at September 30, 2025 and December 31, 2024, respectively.
(2)
Refer to "Note 4
–
Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional disclosure related to the General CECL Allowance on unfunded commitments as of September 30, 2025 and December 31, 2024
, respectively.
Note 12 – Income Taxes
We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2009. As a REIT, U.S. federal income tax law generally requires us to distribute annually at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that we pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our net taxable income. We are also subject to U.S. federal, state, and local income taxes on our domestic taxable REIT subsidiaries ("TRS") based on the tax jurisdictions in which they operate.
During the three and nine months ended September 30, 2025, we recorded an income tax provision of
$
0.2
million
and
$
0.5
million
, respectively, related to activities of our taxable REIT subsidiaries. We recorded an income tax provision of
$
66.0
thousand and $
0.3
million
, during the three and nine months ended September 30, 2024, respectively.
There
was a $
0.2
million income tax liability
related to the operating activities of our TRS entities as of September 30, 2025
and $
0.3
million in
come tax asset related to the operating activities of our TRS entities as of December 31, 2024, respectively. As of September 30, 2025 and December 31, 2024, there were no material deferred tax assets or liabilities.
As of September 30, 2025, we had net operating los
ses of $
8.5
million and capital losses of $
25.2
million that may be
carried forward for use in subsequent periods.
As of September 30, 2025, tax years 2021 through 2024 remain
subject to examination by taxing authorities.
32
Note 13 – Related Party Transactions
Management Agreement
In connection with our initial public offering in September 2009, we entered into a management agreement (the "Management Agreement") with the Manager, which describes the services to be provided by the Manager and its compensation for those services. The Manager is responsible for managing our day-to-day operations, subject to the direction and oversight of our board of directors.
Pursuant to the terms of the Management Agreement, the Manager is paid a base management fee equal to
1.5
% per annum of our Stockholders' Equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears.
The term of the Management Agreement was automatically renewed for a successive
one-year
term in September 2025 and will automatically renew on each anniversary thereafter. The Management Agreement may be terminated upon expiration of the
one-year
extension term only upon the affirmative vote of at least two-thirds of our independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to ARI or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager's right to prevent such a termination based on unfair fees by accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of our independent directors. The Manager must be provided with written notice of any such termination at least
180
days prior to the expiration of the then existing term and will be paid a termination fee equal to
three
times the sum of the average annual base management fee during the
24
-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. Following a meeting of our independent directors in February 2025, which included a discussion of the Manager's performance and the level of the management fees thereunder, we determined not to seek termination of the Management Agreement.
We incurred approximately
$
8.6
million
and
$
25.6
million
in base management fees under the Management Agreement for the three and nine months ended September 30, 2025, respectively, as compared to
$
8.8
million
and
$
27.4
million
for the three and nine months ended September 30, 2024, respectively.
In addition to the base management fee, we are also responsible for reimbursing the Manager for certain expenses paid by the Manager on our behalf or for certain services provided by the Manager to us. For the three and nine months ended September 30, 2025, we paid expenses totaling
$
3.5
million
and
$
11.5
million
respectively, related to reimbursements for certain expenses paid by the Manager on our behalf under the Management Agreement as compared to
$
1.1
million
and
$
4.9
million
for three and nine months ended September 30, 2024, respectively. Expenses incurred by the Manager and reimbursed by us are reflected in the respective condensed consolidated statement of operations expense category or our condensed consolidated balance sheets based on the nature of the item.
Included in payable to related party on our condensed consolidated balance sheets at September 30, 2025 and December 31, 2024 is approximately
$
8.6
million
and
$
8.7
million
, respectively, for base management fees incurred but not yet paid under the Management Agreement.
Term Loan
In June 2025, we refinanced our existing 2026 and 2028 Term Loans with the 2030 Term Loan (refer to "Note 8 – Senior Secured Term Loans, Net" for a full discussion). In connection with this refinance, Apollo Global Funding, LLC, an affiliate of the Manager, served as one of several arrangers in both the 2025 refinancing and the original 2028 Term Loan issuance, receiving $
1.0
million and $
0.2
million in arrangement fees, respectively. Additionally, funds managed by an affiliate of the Manager invested $
30.0
million in the 2028 Term Loan, and $
25.0
million in the 2030 Term Loan.
Senior Secured Notes
In June 2021, Apollo Global Securities, LLC, an affiliate of the Manager, served as one of the eight initial purchasers in the issuance of our 2029 Notes and received $
0.4
million of initial purchasers' discounts and commissions.
33
Italian Direct Lending Structure
In the fourth quarter of 2021, we formed an Italian closed-end alternative investment fund, managed by Apollo Investment Management Europe (Luxembourg) S.A R.L, a regulated alternative investment fund manager (the "AIFM"), an affiliate of the Manager. The management fees incurred during the three and nine months ended September 30, 2025 and 2024, respectively were de minimis. As of September 30, 2025 and December 31, 2024, the fees payable to the AIFM were de minimis.
Atlas Facilities
In February 2023, in connection with the acquisition by certain subsidiaries of Atlas, which is a wholly-owned investment of a fund managed by an affiliate of the Manager, the Credit Suisse Facility was acquired by Atlas. In order to effect the assignment of the Credit Suisse Facility and related agreements, the Company and one of its subsidiaries, similar to the other sellers and guarantors party to the subject agreements in the transaction, entered into an Omnibus Assignment, Assumption and Amendment Agreement as well as certain related agreements with Credit Suisse AG and Atlas. At the time of acquisition, we had $
632.3
million of secured debt on the Credit Suisse Facility consisting of four commercial mortgage loans. During the third quarter of 2025, we entered into the Atlas Facility - EUR.
As of September 30, 2025 and December 31, 2024, respectively, we had
$
779.7
million
and
$
462.9
million
of secured debt on the Atlas Facilities. Refer to "Note 7 – Secured Debt Arrangements, Net" for additional discussion.
Massachusetts Healthcare
In September 2024, we, along with the Apollo Co-Lenders, formed a joint venture of which we held a
41.2
% equity interest. Through this joint venture, we and the Apollo Co-Lenders foreclosed on one of the eight Massachusetts hospitals that previously secured our loan. In accordance with ASC Topic 323, "Investments – Equity Method and Joint Ventures" our
41.2
% interest in the joint venture was deemed an equity method investment. There was
a balance of
$
23.4
million
in the joint venture as of September 30, 2025, recorded within Other Assets on our condensed consolidated balance sheet. There was no balance in the joint venture as of December 31, 2024
. See "Massachusetts Healthcare" within "Note 6 – Other Assets" for further discussion.
Note 14 – Share-Based Payments
On June 17, 2024, our board of directors adopted the Apollo Commercial Real Estate Finance, Inc. 2024 Equity Incentive Plan ("2024 LTIP"). Following the approval of the 2024 LTIP by our stockholders at our 2024 annual meeting of stockholders on June 7, 2024, no additional awards have been or will be granted under the Apollo Commercial Real Estate Finance, Inc. 2019 Equity Incentive Plan ("2019 LTIP," and together with the 2024 LTIP, the "LTIPs" or "Equity Incentive Plans") and all outstanding awards granted under the 2019 LTIP remain in effect in accordance with the terms in the 2019 LTIP.
The 2024 LTIP provides for grants of restricted common stock, restricted stock units ("RSUs") and other equity-based awards up to an aggregate of
7,500,000
shares of our common stock. The LTIPs are administered by the compensation committee of our board of directors (the "Compensation Committee") and all grants under the LTIPs must be approved by the Compensation Committee.
We recognized stock-based compensation expense related to restricted stock and RSU vesting of
$
3.4
million
and
$
10.2
million
during the three and nine months ended September 30, 2025, respectively, and
$
4.2
million
and
$
12.5
million
during the three and nine months ended September 30, 2024, respectively.
34
The following table summarizes the grants, vesting and forfeitures of restricted common stock and RSUs during the
nine months ended September 30, 2025:
Type
Restricted Stock
RSUs
Grant Date Fair Value ($ in millions)
Outstanding at December 31, 2024
63,980
2,243,259
Granted
71,134
—
$
0.7
Vested
(
63,980
)
(
7,865
)
N/A
Forfeiture
—
(
17,978
)
N/A
Outstanding at September 30, 2025
71,134
2,217,416
Below is a summary of restricted stock and RSU vesting dates as of September 30, 2025:
Vesting Year
Restricted Stock
RSUs
Total Awards
2025
—
1,177,803
1,177,803
2026
71,134
693,813
764,947
2027
—
345,800
345,800
Total
71,134
2,217,416
2,288,550
As of September 30, 2025, we had unrecognized compensation expense of approximately
$
0.3
million
and
$
13.6
million
related to the vesting of restricted stock awards and RSUs, respectively, presented in the table above.
The unrecognized compensation expense related to the vesting of restricted stock awards and RSUs are expected to be recognized over a weighted-average period of
1.2
years.
RSU Deliveries
During the nine months ended September 30, 2025 and 2024, we delivered
698,061
and
759,984
shares of common stock for
1,246,704
and
1,395,966
vested RSUs, respectively. We allow RSU participants to settle their tax liabilities with a reduction of their share delivery from the originally granted and vested RSUs. The amount, when agreed to by the participant, results in a cash payment to the Manager related to this tax liability and a corresponding adjustment to additional paid in capital on our condensed consolidated statement of changes in stockholders' equity. The adjustment was
$
5.0
million
and
$
7.4
million
for the nine months ended September 30, 2025 and 2024
, respectively. The adjustment is a reduction of capital related to our equity incentive plan and is presented net of increases of capital related to our equity incentive plan in our condensed consolidated statement of changes in stockholders' equity.
Note 15 – Stockholders' Equity
Our authorized capital stock consists of
450,000,000
shares of common stock, $
0.01
par value per share and
50,000,000
shares of preferred stock, $
0.01
par value per share. As of
September 30, 2025,
138,943,831
shares of common stock were issued and outstanding and
6,770,393
shares of our
7.25
% Series B-1 Cumulative Redeemable Perpetual Preferred Stock ("Series B-1 Preferred Stock") were issued and outstanding. The Series B-1 Preferred Stock, with a par value $
0.01
per share, have a liquidation preference of $
25.00
per share.
Dividends.
The following table details our dividend activity:
Three Months Ended September 30,
Nine Months Ended September 30,
Dividends declared per share of:
2025
2024
2025
2024
Common Stock
$
0.25
$
0.25
$
0.75
$
0.95
Series B-1 Preferred Stock
$
0.45
$
0.45
$
1.35
$
1.35
Common Stock Repurchases.
There was no common stock repurchase activity during the three and nine months ended September 30, 2025. During the three and nine months ended September 30, 2024
, we repurchased
289,633
and
4,013,405
shares,
35
respectively,
of our common stock at a weighted-average price of
$
9.96
and $
10.15
per share, respectively. As of
September 30, 2025, the approximate dollar value of shares that may yet be purchased under our stock repurchase program was
$
131.6
million
.
Note 16 – Commitments and Contingencies
Legal Proceedings
From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business.
AmBase Corporation:
On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57th Investment LLC (together, "Plaintiffs") commenced a now-dismissed action captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No 653251/2018) in New York Supreme Court (the "Apollo Action"). The complaint named as defendants (i) a wholly-owned subsidiary of the Company (the "Subsidiary"), (ii) the Company, and (iii) certain funds managed by Apollo, who were co-lenders on a mezzanine loan against the development of a residential condominium building in Manhattan, NY. Plaintiffs alleged that the defendants tortiously interfered with the Plaintiffs' joint venture agreement with the developers of the project, and that the defendants aided and abetted breaches of fiduciary duty by the developers of the project. The Plaintiffs alleged the loss of a $
70.0
million investment plus punitive damages. The defendants' motion to dismiss was granted on October 23, 2019 and the Court entered judgment dismissing the complaint in its entirety on November 8, 2019. Plaintiffs appealed, the parties fully briefed the appeal, and then Plaintiffs dropped the appeal, and the case remains dismissed.
Plaintiffs amended the complaint in a separate action in 2021, 111 West 57th Investment LLC v. 111W57 Mezz Investor LLC (No. 655031/2017) also in New York Supreme Court (the "April 2021 Action") to name Apollo Global Management, Inc., the Subsidiary, the Company, and certain funds managed by Apollo as defendants. The April 2021 Action concerns overlapping claims and the same condominium development project that the Apollo Action concerned. The defendants filed a motion to dismiss, which was granted in part and denied in part on December 15, 2022. The Court dismissed the claim against Apollo Global Management, Inc. and the Company. Apollo appealed the decision with respect to the remaining claim. On October 5, 2023, the Appellate Division, First Department granted Apollo's appeal, thereby dismissing the remaining claim against the Apollo entities who were co-lenders on the mezzanine loan, including the Subsidiary. Plaintiffs filed a motion for leave with the Court of Appeals on November 3, 2023 which the Court denied on April 23, 2024. On July 12, 2024, Plaintiffs filed new motions for leave to appeal to the Court of Appeals. On February 18, 2025, the Court of Appeals granted Plaintiffs’ motion for leave to appeal and briefing of the appeal is now complete. No reasonable estimate of possible loss, if any, can be made at this time. The Company believes the appeal is without merit.
Massachusetts Healthcare:
O
n September 4, 2024, Saint Elizabeth LLC, which is indirectly owned by a subsidiary of the Company and certain affiliates of Apollo, filed a lawsuit against the Commonwealth of Massachusetts, as well as Governor Maura Healey and the Massachusetts Secretary of Health and Human Services. The action was filed in the Land Court in Boston, Massachusetts. The lawsuit sought equitable relief, including declaring that the taking of the real property associated with St. Elizabeth’s Medical Center was void and of no effect. Saint Elizabeth LLC and the Commonwealth executed a settlement agreement dated as of July 22, 2025. In addition to $
21.9
million ($
9.0
million attributable to ARI), that the Commonwealth already paid in November 2024, the Commonwealth paid St. Elizabeth LLC an additional $
44.0
million ($
18.1
million attributable to ARI). On August 19, 2025, the lawsuit was dismissed with prejudice.
The parties’ settlement agreement includes releases of any and all claims or potential disputes relating to the Commonwealth’s taking of the property, as more fully set forth in the settlement agreement.
Loan Commitments
As described in "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" at September 30, 2025, we had
$
1.0
billion
of unfunded commitments related to our commercial mortgage and subordinate loans. The timings and amounts of fundings are uncertain as these commitments relate to loans for construction costs, capital expenditures, leasing costs, interest and carry costs, among others. As such, the timings and amounts of future fundings depend on the progress and performance of the underlying assets of our loans. Certain of our lenders are contractually obligated to fund their ratable portion of these loan commitments over time, while other lenders have some degree of discretion over future loan funding obligations. The total unfunded commitment is expected to be funded over the remaining
4.2
ye
ars weighted-average tenor of these loans.
36
Note 17 – Fair Value of Financial Instruments
The following table presents the carrying value and estimated fair value of our financial instruments not carried at fair value on our condensed consolidated balance sheets at
September 30, 2025 and December 31, 2024 ($ in thousands):
September 30, 2025
December 31, 2024
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
Cash and cash equivalents
$
245,856
$
245,856
$
317,396
$
317,396
Commercial mortgage loans, net
8,149,855
8,034,179
6,715,347
6,616,694
Subordinate loans, net
153,790
153,790
388,809
388,780
Secured debt arrangements, net
(
5,896,015
)
(
5,896,015
)
(
4,814,973
)
(
4,814,973
)
Senior secured term loans, net
(
728,358
)
(
751,866
)
(
754,210
)
(
757,772
)
Senior secured notes, net
(
497,026
)
(
478,750
)
(
496,433
)
(
432,500
)
Debt related to real estate owned, held for investment, net
(
402,945
)
(
402,945
)
(
324,587
)
(
324,587
)
To determine estimated fair values of the financial instruments listed above, market rates of interest, which include credit assumptions, are used to discount contractual cash flows. The estimated fair values are not necessarily indicative of the amount we could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. Estimates of fair value for cash and cash equivalents, Senior Secured Notes, net, and Term Loans, net are measured using observable Level I inputs as defined in "Note 3 – Fair Value Disclosure." Estimates of fair value for all other financial instruments in the table above are measured using significant estimates, or unobservable Level III inputs as defined in "Note 3 – Fair Value Disclosure."
Note 18 – Net Income (Loss) per Share
ASC Topic 260, "Earnings Per Share" requires the use of the two-class method of computing both basic and diluted earnings (loss) per share for all periods presented for each class of common stock and participating securities. Under the two-class method, all earnings (distributed and undistributed) are allocated to common shares and participating securities according to their respective rights to receive dividends. The unvested RSUs granted under our Equity Incentive Plans to certain employees of the Manager qualify as participating securities as RSUs have non-forfeitable rights to participate in dividends. Therefore, unvested RSUs are included in the calculation of basic earnings per share.
For the three and nine months ended September 30, 2025 and 2024, dilutive earnings per share was calculated under the more dilutive computation of the treasury stock method and the if converted method. Under the treasury stock method, the denominator includes the weighted-average outstanding common shares plus the incremental shares related to participating securities. The incremental shares are determined by subtracting the average unrecognized compensation cost for the period divided by the average stock price from the unvested RSUs.
37
The table below presents the computation of basic and diluted net income (loss) per share of common stock for the
three and nine months ended September 30, 2025 and 2024 ($ in thousands except per share data):
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
Net income (loss)
$
50,791
$
(
91,549
)
$
97,521
$
(
160,288
)
Less: Preferred dividends
(
3,068
)
(
3,068
)
(
9,204
)
(
9,204
)
Less: Earnings attributable to participating securities
(
196
)
—
(
196
)
—
Less: Dividends on participating securities
(
554
)
(
614
)
(
1,671
)
(
2,380
)
Net income (loss) attributable to common stockholders, basic and diluted
$
46,973
$
(
95,231
)
$
86,450
$
(
171,872
)
Number of Shares:
Basic weighted-average shares of common stock outstanding
138,943,831
138,246,827
138,843,250
140,177,962
Diluted weighted-average shares of common stock outstanding
139,667,116
138,246,827
139,300,645
140,177,962
Earnings (Loss) Per Share Attributable to Common Stockholders
Basic
$
0.34
$
(
0.69
)
$
0.62
$
(
1.23
)
Diluted
$
0.34
$
(
0.69
)
$
0.62
$
(
1.23
)
For the three and nine months ended September 30, 2025,
723,285
and
457,395
incremental shares, respectively, were included in the calculation of diluted net income per share because the effect was dilutive. For the three months ended September 30, 2024,
519,184
incremental shares were included in the calculation of diluted net income per share because the effect was dilutive. For the
nine months ended September 30, 2024,
355,339
incremental shares were excluded in the calculation of diluted net income per share because the effect was anti-dilutive.
Note 19 – Segment Reportin
g
We currently operate as
one
segment, which is also our sole reportable segment. Our chief operating decision maker ("CODM") is our senior management team, comprised of our
chief executive officer, our chief financial officer, and the chief investment officer of the Manager
. The accounting policies of our single reportable segment are consistent with those outlined in our summary of significant accounting policies (refer to "Note 2 – Summary of Significant Accounting Policies" to our consolidated financial statements of our most recent Annual Report on Form 10-K). We generate our revenue primarily from originating, acquiring, investing in, and managing performing commercial mortgage loans, subordinate financings, and other commercial real estate-related debt investments. Additionally, we may find it necessary or desirable to foreclose on certain of the loans we originate or acquire, and if we cannot sell the related property, we would operate the property as real estate owned. The CODM evaluates the performance of any real estate owned assets with that of our commercial mortgage loans, subordinate financings, and other commercial real estate-related debt investments. Additionally, we seek to enhance our returns on equity by utilizing leverage, and generally finance our mortgage loans with leverage obtained through a variety of sources, including secured credit facilities, a revolving credit facility, private securitizations, and corporate-level debt.
The CODM evaluates performance and allocates resources based on consolidated net income (loss), which is also reported as consolidated net income (loss) on our consolidated statement of operations. Our consolidated net income (loss) is primarily derived through the difference between the interest income earned on our loans and the cost at which we are able to finance them. Accordingly, interest expense, as reported on our consolidated statement of operations, is our most significant segment expense. Additionally, the measure of segment assets is reflected on the balance sheet as total consolidated assets. The CODM uses consolidated net income (loss) to make key operating decisions, such as identifying attractive investment opportunities, evaluating underwriting standards, determining the appropriate level of leverage to enhance returns on equity and deciding on the sources of financing.
38
Note 20 – Subsequent Events
Subsequent to the quarter ended September 30, 2025, the following events took place:
Investment Activity:
We closed $
388.0
million in new commitments across two first mortgage loans with $
324.3
million funded at close. Additionally, we funded approximately
$
51.4
million
for previously closed loans.
Loan Repayments:
We received approximately
$
271.3
million
from loan repayments, including a full repayment of a £
149.8
million ($
199.9
assuming conversion into USD) first mortgage secured by a portfolio of senior housing properties located throughout the United Kingdom.
39
Item 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING INFORMATION
We make forward-looking statements herein and will make forward-looking statements in future filings with the SEC, press releases or other written or oral communications within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For these statements, we claim the protections of the safe harbor for forward-looking statements contained in such Sections. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. When we use the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions, it intends to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: higher interest rates and inflation; market trends in our industry, real estate values, the debt securities markets or the general economy; the demand for commercial real estate loans; our business and investment strategy; our operating results; actions and initiatives of the U.S. government and governments outside of the United States, changes to government policies and the execution and impact of these actions, initiatives and policies; the state of the economy generally or in specific geographic regions; the impact of a shutdown of the U.S. federal government; economic trends and economic recoveries; our ability to obtain and maintain financing arrangements, including secured debt arrangements and securitizations; the timing and amount of expected future fundings of unfunded commitments; the availability of debt financing from traditional lenders; the volume of short-term loan extensions; the demand for new capital to replace maturing loans; expected leverage; general volatility of the securities markets in which we participate; changes in the value of our assets; the scope of our target assets; interest rate mismatches between our target assets and any borrowings used to fund such assets; changes in interest rates and the market value of our target assets; changes in prepayment rates on our target assets; effects of hedging instruments on our target assets; rates of default or decreased recovery rates on our target assets; the degree to which hedging strategies may or may not protect us from interest rate volatility; impact of and changes in governmental regulations, tax law and rates, accounting, legal or regulatory issues or guidance and similar matters; our continued maintenance of our qualification as a REIT for U.S. federal income tax purposes; our continued exclusion from registration under the Investment Company Act of 1940, as amended (the "1940 Act"); the availability of opportunities to acquire commercial mortgage-related, real estate-related and other securities; the availability of qualified personnel; estimates relating to our ability to make distributions to our stockholders in the future; our present and potential future competition; and unexpected costs or unexpected liabilities, including those related to litigation.
The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. See Item 1A. "Risk Factors" and Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our most recent Annual Report on Form 10-K. These and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that we file with the SEC, could cause our actual results to differ materially from those included in any forward-looking statements we make. All forward-looking statements speak only as of the date they are made. New risks and uncertainties arise over time, and it is not possible to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
We are a Maryland corporation and have elected to be taxed as a REIT for U.S. federal income tax purposes. We primarily originate, acquire, invest in and manage performing commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments. These asset classes are referred to as our target assets.
We are externally managed and advised by the Manager, an indirect subsidiary of Apollo, a global, high-growth alternative asset manager with assets under management of approximately $839.6 billion as of June 30, 2025.
40
The Manager is led by an experienced team of senior real estate professionals who have significant expertise in underwriting and structuring commercial real estate financing transactions. We benefit from Apollo's global infrastructure and operating platform, through which we are able to source, evaluate and manage potential investments in our target assets.
In March 2024, the SEC adopted amendments to its rules under the Securities Act and the Exchange Act that require disclosure of certain climate-related information in registration statements and annual reports, when material. In April 2024, the SEC chose to stay its newly adopted climate disclosure rules, pending the completion of judicial review of certain legal challenges. In March 2025, the SEC voted to end its defense of the new rules. In September 2025, the U.S. Court of Appeals for the Eighth Circuit ordered that the litigation regarding the climate disclosure rules would be held in abeyance until such time as the SEC reconsider or renews its defense of the climate disclosure rules. We are continuing to monitor the developments pertaining to the new rules and to evaluate the impact of these rules, if the stay is lifted, on our disclosures.
Current Market Conditions
Certain external events such as public health issues, natural disasters, political and economic instability abroad, concerns regarding the stability of the sovereign debt of certain European countries, and other geopolitical issues, have adversely impacted the global economy and have contributed to significant volatility in financial markets. Due to various uncertainties caused by such external events and recent macroeconomic trends, including inflation and higher interest rates, further business risks could arise. Some of the factors that impacted us to date and may continue to affect us are outlined in Item 1A. "Risk Factors" in our most recent Annual Report on Form 10-K.
Results of Operations
Net Income (Loss) Available to Common Stockholders
For the three months ended September 30, 2025 and 2024, our net income available to common stockholders was $47.7 million, or $0.34 per diluted share of common stock, and ($94.6) million, or ($0.69) per diluted share of common stock, respectively.
For the nine months ended September 30, 2025 and 2024, our net income (loss) available to common stockholders was $88.3 million, or $0.62 per diluted share of common stock, and ($169.5) million, or ($1.23) per diluted share of common stock, respectively.
41
Operating Results
The following table sets forth information regarding our condensed consolidated results of operations and certain key operating metrics compared to the most recently reported period ($ in thousands):
Three Months Ended
September 30, 2025
June 30, 2025
Change
Net interest income:
Interest income from commercial mortgage loans
$
155,317
$
166,691
$
(11,374
)
Interest income from subordinate loans and other lending assets
86
557
(471
)
Interest expense
(115,368
)
(124,178
)
8,810
Net interest income
40,035
43,070
(3,035
)
Operations related to real estate owned:
Revenue from real estate owned operations
21,584
27,832
(6,248
)
Operating expenses related to real estate owned
(19,451
)
(21,113
)
1,662
Depreciation and amortization on real estate owned
(2,783
)
(2,531
)
(252
)
Net income (loss) related to real estate owned
(650
)
4,188
(4,838
)
Operating expenses:
General and administrative expenses
(6,651
)
(6,561
)
(90
)
Management fees to related party
(8,637
)
(8,356
)
(281
)
Total operating expenses
(15,288
)
(14,917
)
(371
)
Other income, net
2,388
1,943
445
Income (loss) from equity method investment
17,067
(711
)
17,778
Net realized loss on investments
(7,436
)
—
(7,436
)
Decrease in Specific CECL Allowance, net
7,500
—
7,500
Increase in General CECL Allowance, net
(1,134
)
(3,113
)
1,979
Decrease (increase) in valuation allowance, loans and other lending assets held for sale
1,236
(1,236
)
2,472
Gain (loss) on foreign currency forward contracts
24,247
(82,139
)
106,386
Foreign currency translation gain (loss)
(16,940
)
73,705
(90,645
)
Gain on interest rate hedging instruments
—
65
(65
)
Net income before taxes
$
51,025
$
20,855
$
30,170
Income tax provision
(234
)
(116
)
(118
)
Net income
$
50,791
$
20,739
$
30,052
Net Interest Income
Net interest income decreased by $3.0 million during the three months ended September 30, 2025 compared to the three months ended June 30, 2025. The net decrease was primarily attributable to a lower average loan balance and lower average index rates during the three months ended September 30, 2025 compared to the three months ended June 30, 2025. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Operations Related to Real Estate Owned
For the three months ended September 30, 2025, we recorded a net loss related to real estate owned of $0.7 million compared to net income of $4.2 million for the three months ended June 30, 2025. The net loss was primarily due to the seasonality of hotel operations which led to $2.8 million and $1.1 million lower net income from operations, prior to depreciation, for the D.C. Hotel and the Atlanta Hotel, respectively, during the three months ended September 30, 2025 as compared to the three months ended June 30, 2025. Additionally, the net loss in the current quarter is attributable to cessation of expense capitalization for a component of our Brooklyn Multifamily Development, which reached substantial completion during the quarter. Refer to "Note 5 – Real Estate Owned" for further discussion of operations related to real estate owned.
Income from Equity Method Investment
For the three months ended September 30, 2025, we recorded net income from equity method investment of $17.1 million compared to a net loss of $0.7 million for the three months ended June 30, 2025. The increase in net income attributable to the
42
Massachusetts Healthcare JV was due to a $17.4 million gain on litigation settlement recorded during the three months ended September 30, 2025. Refer to "Note 6 – Other Assets" and "Note 16 – Commitments and Contingencies" for additional information.
Decrease in Specific CECL Allowance, net
Our Specific CECL Allowance decreased by $7.5 million during the three months ended September 30, 2025, which was comprised of a $1.3 million reversal and a $6.2 million write-off of our Specific CECL Allowance related to the discounted payoff of our Michigan Office Loan. There was no change to our Specific CECL Allowance during the three months ended June 30, 2025. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional information.
Increase in General CECL Allowance, net
Our General CECL Allowance increased by $1.1 million during the three months ended September 30, 2025 and by $3.1 million during the three months ended June 30, 2025, which in both periods was driven by the effect of loan originations as well as extending our expected loan repayment dates. The smaller increase during the three months ended September 30, 2025 is due to repayment activity in the quarter outpacing originations which led to the relative decrease of the loan portfolio quarter over quarter.
Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional information related to our General CECL Allowance.
Decrease (increase) in valuation allowance, loans and other lending assets held for sale and net realized loss on investments
As of June 30, 2025, we held a promissory note classified as held for sale. Notes held for sale are carried at the lower of amortized cost or fair value less costs to sell unless the fair value option is elected at origination. As of June 30, 2025, the note’s amortized cost exceeded its fair value. Accordingly, during the three months ended June 30, 2025, we recorded a fair value adjustment of $1.2 million (representing the difference between the note’s amortized cost and the note’s fair value as of June 30, 2025).
The note was subsequently sold during the three months ended September 30, 2025 at a price of 97.0%, upon which we reversed the $1.2 million valuation allowance and recorded an equivalent realized loss included within realized loss on investments on our condensed consolidated statement of operations for the three and nine months ended September 30, 2025. Additionally, during the three months ended September 30, 2025, we recognized a realized loss of $6.2 million related to the discounted payoff of our Michigan Office Loan. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" and "Note 3 – Fair Value Disclosure" for further discussion.
Foreign currency translation gain and loss on derivative instruments
Foreign currency gains and losses on derivative instruments are evaluated on a combined basis and the net impact for the three months ended September 30, 2025 and the three months ended June 30, 2025 were a net gain of $7.3 million and a net loss of $8.4 million, respectively. The net gain for the three months ended September 30, 2025 compared to the net loss for three months ended June 30, 2025 was predominantly due to lower forward point estimates for the three months ended September 30, 2025.
43
The following table sets forth information regarding our condensed consolidated results of operations and certain key operating metrics for the nine months ended September 30, 2025 and 2024 ($ in thousands):
Nine months ended
September 30, 2025
September 30, 2024
Change
Net interest income:
Interest income from commercial mortgage loans
$
465,993
$
543,025
$
(77,032
)
Interest income from subordinate loans and other lending assets
1,200
2,901
(1,701
)
Interest expense
(344,603
)
(390,447
)
45,844
Net interest income
122,590
155,479
(32,889
)
Operations related to real estate owned:
Revenue from real estate owned operations
75,747
77,737
(1,990
)
Operating expenses related to real estate owned
(61,331
)
(61,539
)
208
Depreciation and amortization on real estate owned
(7,770
)
(9,285
)
1,515
Net income related to real estate owned
6,646
6,913
(267
)
Operating expenses:
General and administrative expenses
(19,864
)
(22,408
)
2,544
Management fees to related party
(25,557
)
(27,395
)
1,838
Total operating expenses
(45,421
)
(49,803
)
4,382
Other income, net
6,214
2,784
3,430
Income from equity method investment
15,667
—
15,667
Net realized loss on investments
(7,436
)
(128,191
)
120,755
Decrease (increase) in Specific CECL Allowance
7,500
(149,500
)
157,000
Increase in General CECL Allowance, net
(8,255
)
(7,543
)
(712
)
Loss on foreign currency forward contracts
(96,864
)
(29,760
)
(67,104
)
Foreign currency translation gain
97,323
39,177
58,146
Gain on interest rate hedging instruments
23
436
(413
)
Net income (loss) before taxes
$
97,987
$
(160,008
)
$
257,995
Income tax provision
(466
)
(280
)
(186
)
Net income (loss)
$
97,521
$
(160,288
)
$
257,809
Net Interest Income
Net interest income decreased by $32.9 million during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. This decrease was primarily attributable to lower average index rates during the nine months ended September 30, 2025, realization of a loss on investment during the third quarter of 2024 and modification of two of our commercial mortgage loans converting them from floating rate loans to fixed rate loans during the second quarter of 2024. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Operations Related to Real Estate Owned
Net income related to real estate owned remained generally the same for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. Refer to "Note 5 – Real Estate Owned" for full discussion of operations related to real estate owned.
Operating Expenses
General and administrative expenses decreased by $2.5 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 due to a decrease in amortization of RSUs.
Management fees expense decreased by $1.8 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The decrease was primarily due to lower Stockholders' Equity (as defined in the Management Agreement) during the nine months ended September 30, 2025.
Income from Equity Method Investment
44
During the nine months ended September 30, 2025, we recorded net income from equity method investment of $15.7 million. The increase in net income attributable to the Massachusetts Healthcare JV was due to a $17.4 million gain on litigation settlement recorded during the nine months ended September 30, 2025. This income was partially offset with a net loss from operations of the Massachusetts Healthcare JV during the nine months ended September 30, 2025. There was no such activity during the nine months ended September 30, 2024, as the Massachusetts Healthcare JV was formed at the end of the third quarter of 2024.
Refer to "Note 6 – Other Assets" and "Note 16 – Commitments and Contingencies" for additional information.
Net Realized loss on Investments
During the nine months ended September 30, 2025, we recorded a $7.4 million net realized loss on investments, consisting of (i) a $1.2 million realized loss on the sale of a promissory note related to the sale of one of the eight hospitals that previously secured the Massachusetts Healthcare Loan and (ii) a $6.2 million realized loss related to the discounted payoff of the Michigan Office Loan.
During the nine months ended September 30, 2024, we recorded a $128.2 million net realized loss on investments, consisting of (i) a $0.7 million realized loss related to the sale of a commercial mortgage loan collateralized by a hotel property located in Honolulu, HI, which was previously classified as held for sale and was sold at a price of 99.5% and (ii) a $127.5 million realized loss related to the extinguishment of the Massachusetts Healthcare Loan.
Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Decrease (increase) in Specific CECL Allowance, net
During the nine months ended September 30, 2025, there was a $7.5 million decrease in our Specific CECL Allowance, which was comprised of a $1.3 million reversal and a $6.2 million write-off of our Specific CECL Allowance related to the discounted payoff of our Michigan Office Loan.
Comparatively, during the nine months ended September 30, 2024, we recorded a $149.5 million Specific CECL Allowance related to two of our subordinate loans. This amount consisted of: (i) a $142.0 million allowance recorded in the first quarter of 2024 for a mezzanine loan secured by an ultra-luxury residential property in Manhattan, NY; and (ii) a $7.5 million allowance recorded during the second quarter of 2024 for the Michigan Office Loan. Additionally, we recorded an increase and subsequent write-off of $127.5 million of our Specific CECL Allowance related to the Massachusetts Healthcare Loan. The $127.5 million write-off was recorded as a realized loss within net realized loss on investments in our September 30, 2024 condensed consolidated statement of operations.
Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" and "Note 6 – Other Assets" for additional detail.
Increase in General CECL Allowance, net
During the nine months ended September 30, 2025, we recorded a net increase in our General CECL Allowance of $8.3 million. The increase was primarily driven by the effect of loan originations and extending our expected loan repayment dates, which was partially offset by the favorable impacts of portfolio seasoning.
During the nine months ended September 30, 2024, we recorded a net increase in our General CECL Allowance of $7.5 million, primarily driven by new loan originations as well as a more adverse macroeconomic outlook on our office portfolio. The increase was partially offset by the favorable impacts of portfolio seasoning.
Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional detail.
Foreign currency translation gain and loss on derivative instruments
Foreign currency gains and losses on derivative instruments are evaluated on a combined basis and the net impact for the nine months ended September 30, 2025 and nine months ended September 30, 2024 was a net gain of $0.5 million and a net gain
45
of $9.4 million, respectively. The decrease in the net gain for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was predominantly due to higher forward point estimates for the nine months ended September 30, 2025.
Subsequent Events
Refer to "Note 20 – Subsequent Events" to the accompanying condensed consolidated financial statements for disclosure regarding significant transactions that occurred subsequent to September 30, 2025.
Non-GAAP Financial Measures
Distributable Earnings
Distributable Earnings, a non-GAAP financial measure, is defined as net income available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity-based compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share settlement to satisfy income tax withholding), (ii) any unrealized gains or losses or other non-cash items (including depreciation and amortization related to real estate owned) included in net income available to common stockholders, (iii) unrealized income from unconsolidated joint ventures, (iv) foreign currency gains (losses), other than (a) realized gains/(losses) related to interest income, and (b) forward point gains/(losses) realized on our foreign currency hedges, and (v) provision for current expected credit losses. Distributable Earnings may also be adjusted to exclude certain other non-cash items, as determined by the Manager and approved by a majority of our independent directors.
A significant limitation associated with Distributable Earnings as a measure of our financial performance over any period is that it excludes unrealized gains (losses) from investments. In addition, our presentation of Distributable Earnings may not be comparable to similarly-titled measures of other companies, that use different calculations. As a result, Distributable Earnings should not be considered as a substitute for our GAAP net income as a measure of our financial performance or any measure of our liquidity under GAAP. Distributable Earnings are reduced for realized losses and increased for realized gains.
For the three months ended September 30, 2025 and June 30, 2025, our Distributable Earnings were $41.8 million, or $0.30 per share, and $36.4 million, or $0.26 per share, respectively.
The table below summarizes the reconciliation from weighted-average diluted shares under GAAP to the weighted-average diluted shares used for Distributable Earnings:
Three Months Ended
September 30, 2025
June 30, 2025
Weighted-Averages
Shares
Shares
Diluted shares - GAAP
139,667,116
139,208,860
Unvested RSUs, net
(1)
1,495,926
1,969,894
Diluted shares - Distributable Earnings
141,163,042
141,178,754
(1)
Unvested RSUs are net of incremental shares assumed repurchased under the treasury stock method, if dilutive. For the three months ended September 30, 2025 and June 30, 2025, there were 723,285 and 265,295 incremental shares included, respectively.
As a REIT, U.S. federal income tax law generally requires us to distribute annually at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that we pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our net taxable income. Given these requirements and our belief that dividends are generally one of the principal reasons stockholders invest in a REIT, we generally intend over time to pay dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our board of directors. Distributable Earnings is a key factor considered by the board of directors in setting the dividend and as such we believe Distributable Earnings is useful to investors.
Distributable Earnings Prior to Realized Loss on Investments and Realized Gain from Litigation Settlement
46
We believe it is useful to our investors to present Distributable Earnings prior to realized loss on investments and realized gain from litigation settlement to reflect our operating results because (i) our operating results are primarily comprised of earning interest income on our investments net of borrowing and administrative costs, which comprise our ongoing operations and (ii) it has been a useful factor related to our dividend per share because it is one of the considerations when a dividend is determined. We believe that our investors use Distributable Earnings and Distributable Earnings prior to realized loss on investments and realized gain from litigation settlement, or a comparable supplemental performance measure, to evaluate and compare the performance of our company and our peers.
During three months ended September 30, 2025, we recorded a realized loss on investments of $7.4 million consisting of (i) a $1.2 million realized loss on the sale of a promissory note previously recorded as Note receivable, held for sale and (ii) a $6.2 million realized loss related to the discounted payoff of the Michigan Office Loan. We also recorded a realized gain of $17.4 million within Income from equity method investment on our condensed consolidated statement of operations from a litigation settlement with the Commonwealth of Massachusetts relating to the Massachusetts Healthcare Loan. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net", "Note 6 – Other Assets" and "Note 16 – Commitments and Contingencies" for further discussion.
There were no realized losses on investments or realized gains on litigation settlement for the three months ended June 30, 2025.
Accordingly, the table below summarizes the reconciliation from net income available to common stockholders to Distributable Earnings and Distributable Earnings prior to realized loss on investments and realized gain on litigation settlement ($ in thousands):
Three Months Ended
September 30, 2025
June 30, 2025
Net income available to common stockholders
$
47,723
$
17,671
Adjustments:
Equity-based compensation expense
3,416
3,400
Loss (gain) on foreign currency forwards
(24,247
)
82,139
Foreign currency loss (gain), net
16,940
(73,705
)
Unrealized loss on interest rate cap
133
72
Realized losses relating to interest income on foreign currency hedges, net
(895
)
(671
)
Realized gains relating to forward points on foreign currency hedges, net
3,563
630
Depreciation and amortization on real estate owned
2,783
2,531
Increase (decrease) in valuation allowance, loans and other lending assets held for sale
(1,236
)
1,236
Increase (decrease) in current expected credit loss allowance, net
(6,366
)
3,113
Realized loss on investments
7,436
—
Realized gain on litigation settlement
(17,394
)
—
Total adjustments:
(15,867
)
18,745
Distributable Earnings prior to realized loss on investments and realized gain on litigation settlement
$
31,856
$
36,416
Realized loss on investments
$
(7,436
)
$
—
Realized gain on litigation settlement
17,394
—
Distributable Earnings
$
41,814
$
36,416
Diluted Distributable Earnings per share prior to realized loss on investments and realized gain on litigation settlement
$
0.23
$
0.26
Diluted Distributable Earnings per share of common stock
The following table calculates our book value per share ($ in thousands, except per share data):
September 30, 2025
December 31, 2024
Stockholders' Equity
$
1,862,175
$
1,874,481
Series B-1 Preferred Stock (Liquidation Preference)
(169,260
)
(169,260
)
Common Stockholders' Equity
$
1,692,915
$
1,705,221
Common Stock
138,943,831
138,174,636
Book value per share
$
12.18
$
12.34
Investment Guidelines
Our current investment guidelines, approved by our board of directors, are comprised of the following:
1.
no investment will be made that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes;
2.
no investment will be made that would cause us to register as an investment company under the 1940 Act;
3.
investments will be predominantly in our target assets;
4.
no more than 20% of our net equity (on a consolidated basis) will be invested in any single investment at the time of the investment; in determining compliance with the investment guidelines, the amount of the investment is the net equity in the investment (gross investment less amount of third-party financing) plus the amount of any recourse on the financing secured by the investment; and
5.
until appropriate investments can be identified, the Manager may invest the proceeds of any offering in interest bearing, short-term investments, including money market accounts and/or funds, that are consistent with our intention to qualify as a REIT.
The board of directors must approve any change in or waiver to these investment guidelines.
Investment Activity
During the nine months ended September 30, 2025, we committed $3.1 billion of capital to new loans ($2.2 billion was funded at closing), and provided $701.5 million of add-on fundings. During the nine months ended September 30, 2025, we received $2.1 billion in repayments and sales of loans and other lending assets.
Loan Portfolio Overview
Loan Portfolio Details
The following table sets forth certain information regarding our loan portfolio as of September 30, 2025 ($ in thousands):
Description
Carrying Value
Weighted-Average Coupon
(1)
Weighted-Average All-in Yield
(1)(2)
Secured Debt Arrangements
(3)
Cost of Funds
(4)
Equity at cost
(5)
Commercial mortgage loans, net
$
8,149,855
7.0
%
7.8
%
$
5,905,560
5.9
%
$
2,244,295
Subordinate loans, net
153,790
0.0
%
0.0
%
—
—
153,790
Total/Weighted-Average
$
8,303,645
6.9
%
7.7
%
$
5,905,560
5.9
%
$
2,398,085
(1)
Weighted-Average Coupon and Weighted-Average All-in Yield are based on the applicable benchmark rates as of September 30, 2025 on the floating rate loans.
(2)
Weighted-Average All-in Yield includes the amortization of deferred origination fees, loan origination costs and accrual of both extension and exit fees. Weighted-Average All-in Yield excludes the benefit of forward points on currency hedges relating to loans denominated in currencies other than USD.
(3)
Gross of deferred financing costs of $9.5 million.
(4)
Cost of funds includes weighted-average spread and applicable benchmark rates as of September 30, 2025 on secured debt arrangements.
(5)
Represents loan portfolio at carrying value less secured debt outstanding.
48
The following table provides additional details of our commercial mortgage loan portfolio and subordinate loan portfolio as of September 30, 2025 ($ in millions):
Amortized cost for these loans is net of the recorded Specific CECL Allowance.
(2)
Loans are secured by the same property.
(3)
Includes portfolio of office, industrial, and retail property types.
(4)
Total may not foot due to rounding.
Our average asset and debt balances for the nine months ended September 30, 2025 were ($ in thousands):
Average month-end balances
(1)
Description
Assets
Related debt
Commercial mortgage loans
$
7,922,751
$
5,812,588
Subordinate loans
566,554
—
Note receivable, held for sale
27,467
—
(1)
Average month-end balances reflect principal and borrowings outstanding for assets and related debt, respectively.
Portfolio Management
Our portfolio benefits from our core investment strategy whereby we target assets that are secured by institutional quality real estate throughout the United States and Europe. As discussed in Item 1. "Business—Investment Strategy" in our most recent Annual Report on Form 10-K, the Manager has implemented underwriting standards which place a particular emphasis on due diligence of prospective investments' sponsors and borrowers, as well as assessment of the risk/return profile and appropriate structure of each investment opportunity. As of September 30, 2025, our portfolio's weighted-average origination LTV ratio was 57%, excluding risk-rated "5" loans. This reflects significant equity value which we believe our loan sponsors would be committed to protect during periods of volatility and market disruption.
We maintain a strong relationship with our borrowers and actively manage the assets in our portfolio on an ongoing basis. A dedicated team of asset management professionals performs surveillance of all loans in our portfolio, on an individual basis, from closing through final repayment. This robust monitoring process includes continuous assessment of asset level performance against underwritten criteria, changes in borrowers' financial position, as well as the impact of macroeconomic trends and microeconomic developments on loan assets and respective underlying collateral performance.
In addition to ongoing asset management, as further described in "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" to our condensed consolidated financial statements, we perform a quarterly review of our portfolio whereby each loan is assigned a risk rating of "1" through "5," from less risk to greater risk, respectively. This analysis includes assessment of loans based on a variety of factors, including, without limitation, LTV ratio, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. In performing the analysis with respect to each loan, these various factors are assessed holistically, with a focus on their interplay, whereby no single factor on its own (whether quantitative or qualitative) is given more weight in the assessment or is prescriptive as to which specific risk rating is assigned to a specific loan. We apply these various factors on a case-by-case basis depending on the facts and circumstances for each loan, and the different factors may be given different weightings in different situations. As of September 30, 2025, the weighted-average risk rating of the loan portfolio was 3.0.
50
The following table presents the carrying value of our loans by internal risk rating as of September 30, 2025 ($ in thousands):
Risk Rating
Number of Loans
Total
(1)
% of Portfolio
1
—
$
—
— %
2
2
684,207
8.2
%
3
49
7,461,533
89.4
%
4
1
73,112
0.9
%
5
2
124,050
1.5
%
Total
54
$
8,342,902
100.0
%
General CECL Allowance
(2)
(39,257
)
Total carrying value, net
$
8,303,645
(1)
Net of Specific CECL Allowance.
(2)
$5.8 million of the General CECL Allowance for 2025 is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheets.
Leverage Policies
We use leverage for the sole purpose of financing our portfolio and not for the purpose of speculating on changes in interest rates. In addition to our secured debt arrangements, senior secured notes and senior secured term loan, we access additional sources of borrowings. Our charter and bylaws do not limit the amount of indebtedness we can incur; however, we are subject to and carefully monitor the limits placed on us by our credit providers and those that assign ratings on our company.
At September 30, 2025, our debt-to-equity ratio was 3.8 and our portfolio was comprised of $8.1 billion of commercial mortgage loans and $0.2 billion of subordinate loans. In order to achieve our return on equity, we generally finance our mortgage loans with 2.0 to 3.0 turns of leverage and generally do not finance our subordinate loan portfolio given built-in inherent structural leverage. Consequently, depending on our portfolio mix, our debt-to-equity ratio may exceed our previously disclosed thresholds.
Debt-to-Equity Ratio
The following table presents our debt-to-equity ratio:
September 30, 2025
December 31, 2024
Debt to Equity Ratio
(1)
3.8
3.2
(1)
Represents total debt less cash and net loan proceeds held by servicer (recorded with Other Assets, see "Note 6
–
Other Assets" for more information) to total stockholders' equity.
Contractual Obligations, Liquidity, and Capital Resources
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to fund and maintain our assets and operations, repay borrowings, make distributions to our stockholders and other general business needs. We utilize various sources of cash in order to meet our liquidity needs in the next twelve months, which is considered the short-term, and the longer term.
Our current debt obligations consist of $1.2 billion, at face value, of corporate debt, $5.9 billion of secured debt arrangements, and $404.5 million of debt related to real estate owned, held for investment. Our corporate debt includes $748.1 million of term loan borrowings and $500.0 million of senior secured notes. Our secured debt arrangements are generally term-matched to the underlying loans, and we anticipate repayments of $0.8 billion of secured debt arrangements in the short term. Specifics about our secured debt arrangements and corporate debt maturities and obligations are discussed below.
In addition to our debt obligations, as of September 30, 2025, we had $1.0 billion of unfunded loan commitments. We expect that approximately $779.4 million will be funded to existing borrowers in the short term.
Our primary sources of liquidity as of September 30, 2025 were represented with $245.9 million of cash on hand, $12.8 million of loan proceeds held by servicer, $53.3 million of available borrowings under our financing arrangements based on existing collateral and cash flows from operations. Additionally, we held approximately $359.5 million of unencumbered assets
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and have $57.6 million of additional capacity on our construction financing secured by our Brooklyn Multifamily Development property which is available to fund future construction costs.
We maintain policies relating to our use of leverage. See "Leverage Policies" above. In the future, we may seek to raise further equity or debt capital or engage in other forms of borrowings in order to fund future investments or to refinance expiring indebtedness.
We generally intend to hold our assets for investment, although we may sell certain of our investments in order to manage our interest rate risk and liquidity needs, meet other operating objectives and adapt to market conditions.
To maintain our qualification as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain. These distribution requirements limit our ability to retain earnings and replenish or increase capital for operations.
Borrowings Under Various Financing Arrangements
The following table summarizes the outstanding balances and maturities for our various financing arrangements:
September 30, 2025
December 31, 2024
Borrowings Outstanding
(1)
Maturity
(2)
Borrowings Outstanding
(1)
Maturity
(2)
Secured Credit Facilities
(3)
$
4,225,435
December 2029
$
3,235,982
November 2026
Barclays Private Securitization
(4)
1,680,125
February 2028
1,587,780
May 2027
Revolving Credit Facility
—
August 2028
—
March 2026
Total Secured Debt Arrangements
5,905,560
4,823,762
Debt Related to Real Estate Owned
404,535
July 2027
327,662
July 2027
Senior Secured Term Loans
(5)
748,125
June 2030
761,250
January 2027
Senior Secured Notes
500,000
June 2029
500,000
June 2029
Total Borrowings
$
7,558,220
$
6,412,674
(1)
Borrowings Outstanding represent principal balances as of the respective reporting periods.
(2)
Maturity dates represent weighted-average maturities based on borrowings outstanding and assumes extensions at our option are exercised with consent of financing providers, where applicable.
(3)
As of September 30, 2025, we had six secured credit counterparties through wholly-owned subsidiaries.
(4)
As of September 30, 2025, we had £800.3 million, €335.2 million, and kr2.0 billion ($1.7 billion assuming conversion into USD as of September 30, 2025) of borrowings outstanding under the Barclays Private Securitization secured by certain of our commercial mortgage loans.
(5)
As of September 30, 2025, we held one senior secured term loan, our 2030 Term Loan, which represents the refinancing of our 2026 and 2028 Term Loans that were outstanding as of December 31, 2024. Refer to "Note 8 – Senior Secured Term Loans, Net" for discussion of the refinance.
Refer to "Note 7 – Secured Debt Arrangements, Net" of our condensed consolidated financial statements for additional disclosure regarding our secured credit facilities, Barclays Private Securitization, and revolving credit facility.
Refer to "Note 8 – Senior Secured Term Loans, Net" and "Note 9 – Senior Secured Notes, Net" of our condensed consolidated financial statements for additional disclosure regarding our Senior Secured Term Loans and Senior Secured Notes, respectively.
Refer to "Note 5 – Real Estate Owned" of our condensed consolidated financial statements for additional disclosure regarding our debt related to real estate owned.
Dividends
We intend to continue to make regular quarterly distributions to holders of our common stock. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that we pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our net taxable income. We generally intend over time to pay dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our board of directors. Any distributions we make are at the discretion of our board of directors and depend upon, among other things, our actual results of operations. These results and our ability to pay distributions are affected by various factors, including the net interest and other income from our portfolio,
52
our operating expenses and any other expenditures. If our cash available for distribution is less than our net taxable income, we could be required to sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.
As of September 30, 2025 and December 31, 2024, we had 6,770,393 shares of our Series B-1 Preferred Stock outstanding. The Series B-1 Preferred Stock pay cumulative cash dividends, which are payable quarterly in equal amounts in arrears on the 15th day of each January, April, July and October: at a rate of 7.25% per annum of the $25.00 per share liquidation preference. Except under certain limited circumstances, the Series B-1 Preferred Stock is generally not convertible into or exchangeable for any other property or any other of our securities at the election of the holders. On and after July 15, 2026, we may, at our option, redeem the shares at a redemption price of $25.00, plus any accrued unpaid dividends to, but not including, the date of the redemption.
The following table details our dividend activity:
Three Months Ended September 30,
Nine Months Ended September 30,
Dividends declared per share of:
2025
2024
2025
2024
Common Stock
$
0.25
$
0.25
$
0.75
$
0.95
Series B-1 Preferred Stock
$
0.45
$
0.45
$
1.35
$
1.35
Critical Accounting Policies and Use of Estimates
Our financial statements are prepared in accordance with GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and use of assumptions as to future uncertainties. The most critical accounting policies involve decisions and assessments that affect our reported assets and liabilities, as well as reported revenues and expenses. We believe that all of the decisions and assessments upon which these financial statements are based are reasonable based upon information currently available to us. The accounting policies and estimates that we consider to be most critical to an investor's understanding of our financial results and condition and require complex management judgment are discussed below.
There have been no material changes to our Critical Accounting Policies described in our most recent Annual Report on Form 10-K under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Use of Estimates."
For a complete listing and description of our significant accounting policies, refer to "Note 2 – Summary of Significant Accounting Policies" to our consolidated financial statements of our most recent Annual Report on Form 10-K.
Real Estate Owned (and Related Debt)
In order to maximize recovery against a defaulted loan, we may assume legal title or physical possession of the underlying collateral through foreclosure or deed-in-lieu of foreclosure. Foreclosed properties are classified as real estate owned and recognized at fair value on our condensed consolidated balance sheets in accordance with the acquisition method under ASC 805. Real estate assets acquired may include land, building, FF&E, and intangible assets. In accordance ASC 820, we may utilize the income, market, or cost approach (or combination thereof) to determine fair value.
When determining the fair value of a real estate asset under the income approach, we make certain assumptions including, but not limited to, consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon our estimate of a capitalization rate and discount rate.
When determining the fair value of real estate assets under the market or sales comparison approach, we compare the property to similar properties in the marketplace. Although we exercise significant judgment to identify similar properties, and may also consult independent third-party valuation experts to assist, our assessment of fair value is subject to uncertainty and sensitive to our selection of comparable properties.
53
When determining the fair value of real estate assets under the cost approach, we measure fair value as the replacement cost of these assets. This approach also requires significant judgment, and our estimate of replacement cost could vary from actual replacements costs.
At times we may classify real estate assets as held for sale in the period in which they meet the criteria under ASC 360 as discussed in "Note 2 – Summary of Significant Accounting Policies" to our consolidated financial statements of our most recent Annual Report on Form 10-K. Once a real estate asset is classified as held for sale, depreciation is no longer recorded, and the asset is reported at the lower of its carrying value or fair value less cost to sell. The fair value of real estate assets classified as held for sale is determined using the appropriate methodologies noted in the preceding paragraph and the real estate asset's fair value is subject to uncertainty, as the actual sales price of the real estate asset could differ from those assumed in our valuations.
Once real estate assets have been recorded at fair value, they are evaluated for impairment on a quarterly basis. A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows to be generated by the real estate asset over the estimated remaining holding period is less than the carrying value of such real estate asset. An impairment charge is recorded equal to the excess of the carrying value of the real estate asset over the fair value. When determining the fair value of a real estate asset for the purpose of assessing impairment, we make certain assumptions including, but not limited to: consideration of projected operating cash flows, intended holding period of the real estate, comparable selling prices and projected cash flows from the eventual disposition of the real estate based upon our estimate of a capitalization rate and discount rate. While we exercise significant judgment in generating our assumptions, the asset's fair value is subject to uncertainty, as actual operating cash flows and disposition proceeds could differ from those assumed in our valuations. Additionally, the output is sensitive to the assumptions used in calculating any potential impairment.
Please refer to "Note 3 – Fair Value Disclosure" and "Note 5 – Real Estate Owned" for more information regarding real estate owned and our valuation methodology as well as "Note 2 – Summary of Significant Accounting Policies" to our consolidated financial statements of our most recent Annual Report on Form 10-K.
Current Expected Credit Losses
We measure and record potential expected credit losses related to our loan portfolio in accordance with the CECL Standard. The CECL Standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. We have adopted the WARM method to determine a General CECL Allowance for the majority of loans in our portfolio, applied on a collective basis by assets with similar risk characteristics. If we determine that a borrower or sponsor is experiencing financial difficulty, we will record loan-specific allowances (our Specific CECL Allowance) in accordance with a practical expedient prescribed by the CECL Standard.
General CECL Allowance
There are a number of significant assumptions required to estimate our General CECL Allowance which include deriving and applying an annual historical loss rate, estimating the impacts of current and future macroeconomic conditions, and forecasting the timing of expected repayments, satisfactions and future fundings.
We derive an annual historical loss rate based on a CMBS database with historical losses from 1998 through the third quarter of 2025 provided by Trepp. We apply various filters to arrive at a CMBS dataset most analogous to our current portfolio from which we determine an appropriate historical loss rate. This historical loss rate, and ultimately the General CECL Allowance we derive, is sensitive to the CMBS dataset we select.
We adjust our determined annual historical loss rate based on our outlook of the macroeconomic environment, for a reasonable and supportable forecast period. Selection of a forecast period is a matter of judgment and our General CECL Allowance is sensitive to this input.
We develop our expectations for the future macroeconomic environment and its potential impact on the performance of loans in our portfolio by analyzing various market factors, such as unemployment rate, market liquidity and price indexes relevant to commercial real estate sector. This assessment requires the use of significant judgment in selecting relevant market factors and
54
analyzing their correlation with historical loss rates. The future macroeconomic environment is subject to uncertainty as the actual future macroeconomic environment could vary from our expectations.
Additionally, there are assumptions provided to us by the Manager that represent their best estimate as to loan expected term, future fundings, and timing of loan repayments. These assumptions, although made with the most available information at the time of the estimate, are subjective and actual activity may not follow the estimated schedule. These assumptions impact the future balances that the loss rate will be applied to and as such impact our General CECL Allowance. As we acquire new loans and the Manager monitors loan and sponsor performance, these estimates may change each period. Refer to "Note 2 – Summary of Significant Accounting Policies" and "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for further discussion regarding our General CECL Allowance.
Specific CECL Allowance
When we determine that a borrower or sponsor is experiencing financial difficulty, we evaluate the related loan for loan-specific allowances, under the practical expedient prescribed by the CECL Standard. Determining that a borrower or sponsor is experiencing financial difficulty requires the use of significant judgment and can be based on several factors subject to uncertainty. These factors can include, but are not limited to, whether cash from the borrower's operations are sufficient to cover current and future debt service requirements, the borrower's ability to potentially refinance the loan, and other circumstances that can affect the borrower's ability to satisfy their obligations in accordance the terms of the loan. When utilizing the practical expedient for collateral dependent loans, the current expected credit losses is determined as the difference between the fair value of the underlying collateral, adjusted for estimated costs to sell when applicable, and the carrying value of the loan (prior to the current expected credit losses), as repayment or satisfaction of a loan is dependent on a sale of the underlying collateral. Collateral-dependent loans evaluated for a Specific CECL Allowance are removed from the General CECL Allowance pool.
The fair value of the underlying collateral is determined by using method(s) such as discounted cash flow, the market approach, or direct capitalization approach. These methods require the use of key unobservable inputs, which are inherently uncertain and subjective.
Our estimate of fair value is sensitive to both the valuation methodology selected and inputs used. Determining a suitable valuation method and selecting the appropriate key unobservable inputs and assumptions requires significant judgment and consideration of factors specific to the underlying collateral being assessed. Additionally, the key unobservable inputs and assumptions used may vary depending on the information available to us and market conditions as of the valuation date. As such, the fair value that we derive and use in calculating our Specific CECL Allowance, is subject to uncertainty and any actual losses, if incurred, could differ materially from our current expected credit losses. Refer to "Note 2 – Summary of Significant Accounting Policies" and "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for further discussion regarding our Specific CECL Allowance.
Refer to "Note 2 – Summary of Significant Accounting Policies" to our consolidated financial statements of our most recent Annual Report on Form 10-K for the complete listing and description of our significant accounting policies.
Supplemental U.S. Federal Income Tax Considerations
The following discussion supplements and updates the disclosures under the heading "U.S. Federal Income Tax Considerations" in each of the prospectus dated May 6, 2024, contained in our Registration Statement on Form S-3 (File No. 333-279158) filed with the SEC on May 6, 2024 and the prospectus dated November 3, 2023, contained in our Registration Statement on Form S-3 (File No. 333-275310) (the "Existing Tax Disclosure"). Capitalized terms herein that are not otherwise defined shall have the same meaning as when used in the Existing Tax Disclosure.
On July 4, 2025, H.R. 1, informally known as the One Big Beautiful Bill Act (the "OBBB"), was enacted. The OBBB makes major changes to the Code, including some provisions of the Code that affect the taxation of REITs and their investors. In particular:
•
For taxable years beginning on or after January 1, 2026, the OBBB relaxed the REIT asset test requirement with respect to taxable REIT subsidiaries, providing that not more than 25% (relaxed from 20%) of the gross value of a REIT’s assets may be represented by securities of one or more taxable REIT subsidiaries.
55
•
The OBBB permanently extended the pass-through qualified business income deduction, generally allowing individuals to deduct 20% of the aggregate amount of ordinary REIT dividends distributed by a REIT. This deduction was due to expire for tax years beginning on or after January 1, 2026.
•
The OBBB permanently extended the maximum U.S. federal income tax rate of 37%, which applies to ordinary income recognized by individuals and other non-corporate U.S. stockholders, for tax years beginning on or after January 1, 2026.
To the extent the information set forth in the Existing Tax Disclosure is inconsistent with this supplemental information, this supplemental information supersedes the information in the Existing Tax Disclosure. This supplemental information is provided on the same basis and subject to the same qualifications as are set forth in the first six paragraphs of the Existing Tax Disclosure as if those paragraphs were set forth in this Quarterly Report on Form 10-Q.
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Item 3. Quantitative and Quali
tative Disclosures About Market Risk
We seek to manage our risks related to the credit quality of our assets, interest rates, liquidity, prepayment speeds, and market value, while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns through ownership of our capital stock. While risks are inherent in any business enterprise, we seek to quantify and justify risks in light of available returns and to maintain capital levels consistent with the risks we undertake.
Credit Risk
One of our strategic focuses is acquiring assets that we believe to be of high credit quality. We believe this strategy will generally keep our credit losses and financing costs low. However, we are subject to varying degrees of credit risk in connection with our other target assets. We seek to mitigate this risk by seeking to acquire high quality assets, at appropriate prices given anticipated and unanticipated losses, and by deploying a value-driven approach to underwriting and diligence, consistent with the Manager's historical investment strategy, with a focus on current cash flows and potential risks to cash flow. The Manager seeks to enhance its due diligence and underwriting efforts by accessing the Manager's knowledge base and industry contacts. Nevertheless, unanticipated credit losses could occur, which could adversely impact our operating results.
Interest Rate Risk
Interest rates are highly sensitive to many factors, including fiscal and monetary policies, and domestic and international economic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk in connection with our target assets and our related financing obligations.
To the extent consistent with maintaining our REIT qualification, we seek to manage risk exposure to protect our portfolio of financial assets against the effects of major interest rate changes. We generally seek to manage this risk by:
•
attempting to structure our financing agreements to have a range of different maturities, terms, amortization, and interest rate adjustment periods;
•
using hedging instruments and interest rate swaps, when we deem appropriate; and
•
to the extent available and appropriate, using securitization financing to better match the maturity of our financing with the duration of our assets.
The following table estimates the hypothetical impact on our net interest income for the twelve-month period following September 30, 2025, assuming an immediate increase or decrease of 50 basis points in the applicable interest rate benchmark by currency ($ in thousands, except per share data):
50 basis point increase
50 basis point decrease
Currency
Net floating rate
assets subject to
interest rate sensitivity
(1)
Increase to net
interest income
(2)(3)
Increase to net
interest income
(per share)
(2)(3)
Decrease to net
interest income
(2)(3)
Decrease to net
interest income
(per share)
(2)(3)
USD
$
192,022
$
1,478
$
0.01
$
(268
)
$
(0.00
)
GBP
614,442
3,072
0.02
(3,072
)
(0.02
)
EUR
278,584
640
0.00
318
0.00
SEK
52,670
263
0.00
(263
)
(0.00
)
Total:
$
1,137,718
$
5,453
$
0.04
$
(3,285
)
$
(0.02
)
(1)
Excludes floating rate loans on nonaccrual
(2)
Any such hypothetical impact on interest rates on our variable rate borrowings does not consider the effect of any change in overall economic activity that could occur in a rising or falling interest rate environment. Further, in the event of a change in interest rates of that magnitude, we may take actions to further mitigate our exposure to such a change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, this analysis assumes no changes in our financial structure.
(3)
Certain of our floating rate loans are subject to index floors.
57
Prepayment Risk
Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, causing the return on an asset to be less than expected. In certain cases, we adapt to prepayment risk by stating prepayment penalties in loan agreements.
Market Risk
Commercial mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; retroactive changes to building or similar codes; pandemics; natural disasters and other acts of god. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans or loans, as the case may be, which could also cause us to suffer losses.
Inflation
Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our financial statements are prepared in accordance with GAAP and distributions are determined by our board of directors consistent with our obligation to distribute to our stockholders at least 90% of our REIT taxable income, excluding net capital gains and determined without regard to the dividends paid deduction, on an annual basis in order to maintain our REIT qualification. In each case, our activities and balance sheets are measured with reference to historical cost and/or fair market value without considering inflation.
Currency Risk
Some of our loans and secured debt arrangements are denominated in a foreign currency and subject to risks related to fluctuations in currency rates. We seek to mitigate this exposure through foreign currency forward contracts, which match the net principal and interest of our foreign currency loans and secured debt arrangements.
Item 4. Controls an
d Procedures.
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) required by paragraph (b) of Rule 13a-15 or Rule 15d-15, have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to our company that would potentially be subject to disclosure under the Exchange Act, and the rules and regulations promulgated thereunder.
During the period ended September 30, 2025, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within our company to disclose material information otherwise required to be set forth in our periodic reports.
58
PART II - OTHER
INFORMATION
Item 1. Legal Pro
ceedings
From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. Refer to "Note 16 – Commitments and Contingencies" for further detail regarding legal proceedings.
Item 1A. Risk
Factors
For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed in "Item 1A. Risk Factors" in our most recent Annual Report on Form 10-K.
Item 2. Unregistered Sale
s of Equity Securities and Use of Proceeds
Not Applicable.
Item 3. Defaults Upo
n Senior Securities
None.
Item 4. Mine Safet
y Disclosures
Not Applicable.
Item 5. Other I
nformation
Not Applicable
.
59
Item 6. Exhibits and
Financial Statement Schedules.
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*
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104*
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*
Filed herewith.
60
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Apollo Commercial Real Estate Finance, Inc.
October 30, 2025
By:
/s/ Stuart A. Rothstein
Stuart A. Rothstein
President and Chief Executive Officer (Principal Executive Officer)
October 30, 2025
By:
/s/ Anastasia Mironova
Anastasia Mironova
Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer)
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