Starwood Property Trust, Inc.: Form 10-Q for the period ended Mar 31, 2025

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the information included elsewhere in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (our “Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ significantly from the results discussed in the forward-looking statements. See “Special Note Regarding Forward-Looking Statements” at the beginning of this Quarterly Report on Form 10-Q.

Overview

Starwood Property Trust, Inc. (“STWD” and, together with its subsidiaries, “we” or the “Company”) is a Maryland corporation that commenced operations in August 2009, upon the completion of our initial public offering. We are focused primarily on originating, acquiring, financing and managing mortgage loans and other real estate investments in the United States (“U.S.”), Europe and Australia. As market conditions change over time, we may adjust our strategy to take advantage of changes in interest rates and credit spreads as well as economic and credit conditions.

We have four reportable business segments as of March 31, 2025 and we refer to the investments within these segments as our target assets:

• Real estate commercial and residential lending (the “Commercial and Residential Lending Segment”)—engages primarily in originating, acquiring, financing and managing commercial first mortgages, non-agency residential mortgages (“residential loans”), subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities (“CMBS”), residential mortgage-backed securities (“RMBS”) and other real estate and real estate-related debt investments in the U.S., Europe and Australia (including distressed or non-performing loans). Our residential loans are secured by a first mortgage lien on residential property and primarily consist of non-agency residential loans that are not guaranteed by any U.S. Government agency or federally chartered corporation.
• Infrastructure lending (the “Infrastructure Lending Segment”)—engages primarily in originating, acquiring, financing and managing infrastructure debt investments.
• Real estate property (the “Property Segment”)—engages primarily in acquiring and managing equity interests in stabilized and to be stabilized commercial real estate properties, including multifamily properties, that are held for investment.
• Real estate investing and servicing (the “Investing and Servicing Segment”)—includes (i) a servicing business in the U.S. that manages and works out problem assets, (ii) an investment business that selectively acquires and manages unrated, investment grade and non-investment grade rated CMBS, including subordinated interests of securitization and resecuritization transactions, (iii) a mortgage loan business which originates conduit loans for the primary purpose of selling these loans into securitization transactions and (iv) an investment business that selectively acquires commercial real estate assets, including properties acquired from CMBS trusts.

Our segments exclude the consolidation of securitization variable interest entities (“VIEs”).

Refer to Note 1 of our condensed consolidated financial statements included herein (the “Condensed Consolidated Financial Statements”) for further discussion of our business and organization.

Economic Environment

Recently announced tariffs have significantly increased economic uncertainty and global market volatility, which increases the possibility of an economic slowdown as well as inflationary pressures in the U.S. Although the Federal Reserve began to lower interest rates in September 2024, it is not clear what actions it may take given the uncertain economic effects of the tariffs. Elevated interest rates and tariffs over time may adversely affect our existing borrowers and lead to nonperformance as higher costs may dampen consumer spending and slow income growth, which may negatively impact the collateral underlying certain of our loans. Additionally, elevated interest rates could adversely affect the value of commercial real estate we own and that collateralizes our loans. It remains difficult to predict the full impact of recent events and any future changes in tariffs, interest rates, inflation and overall economic activity.

In addition, following the onset of the COVID-19 pandemic, the U.S. office sector has been adversely affected by the increase in remote working arrangements and, over the past several years, the retail sector has been adversely affected by electronic commerce and the multifamily sector has been strained by sustained higher interest rates. These negative factors have been considered in the determination of our current expected credit loss (“CECL”) allowance as discussed in Note 4 to the Condensed Consolidated Financial Statements. We may be required to record further increases to our CECL reserves in the future, depending on the performance of our portfolio and broader market conditions, and there may be volatility in the level of our CECL reserves, particularly if market conditions relevant to the office sector do not improve. Any such reserve increases are difficult to predict.

Developments During the First Quarter of 2025

Commercial and Residential Lending Segment

• Originated or acquired $1.4 billion of commercial loans during the quarter, including the following:
• $550.0 million first mortgage and mezzanine loan for the construction of a pre-leased data center located in Utah, of which the Company funded $264.3 million.
• €220.5 million ($228.9 million) first mortgage loan secured by a portfolio of apartment buildings located in Germany, of which the Company funded $151.5 million.
• $190.3 million first mortgage loan for the construction of a luxury 81 unit condominium project located in Florida, of which the Company funded $61.1 million. Refer to Note 16 to the Condensed Consolidated Financial Statements for further discussion.
• $162.0 million first mortgage loan secured by an industrial building located in California, which the Company fully funded.
• $116.0 million first mortgage loan secured by a student housing property located in California, of which the Company funded $112.2 million.
• Funded $250.5 million of previously originated commercial loan commitments and investment securities.
• Received gross proceeds of $363.3 million ($256.1 million, net of debt repayments) from maturities and principal repayments on our commercial loans and investment securities.

Infrastructure Lending Segment

• Acquired $676.5 million of infrastructure loans and funded $4.6 million of pre-existing infrastructure loan commitments.
• Received proceeds of $435.7 million from principal repayments on our infrastructure loans and bonds.
• Amended an infrastructure credit facility, increasing the facility size by $125.0 million and reducing the spread by 20 bps.

Investing and Servicing

• Originated commercial conduit loans of $234.3 million.
• Received proceeds of $297.3 million from sales of previously originated commercial conduit loans.
• Acquired CMBS for a purchase price of $12.0 million.
• Obtained one new special servicing assignment for a CMBS trust with a total unpaid principal balance of $908.4 million, while $3.5 billion matured, bringing our total named special servicing portfolio to $107.0 billion.

Corporate

• Repaid the remaining $250.0 million of $500.0 million 4.75% Senior Notes due March 2025 upon maturity.
• In January 2025, we amended our January 2030 term loan facility, increasing the facility size to $900.0 million, reducing the spread by 73 bps and extending the maturity date from July 2026 to January 2030. We also amended our existing revolving credit facility, increasing the facility by $50.0 million, to $200.0 million, and extending the maturity date from April 2026 to January 2030.

Subsequent Events

Refer to Note 24 to the Condensed Consolidated Financial Statements for disclosure regarding significant transactions that occurred subsequent to March 31, 2025.

Results of Operations

The discussion below is based on accounting principles generally accepted in the United States of America (“GAAP”) and therefore reflects the elimination of certain key financial statement line items related to the consolidation of securitization variable interest entities (“VIEs”), particularly within revenues and other income, as discussed in Note 2 to the Condensed Consolidated Financial Statements. For a discussion of our results of operations excluding the impact of Accounting Standards Codification (“ASC”) Topic 810 as it relates to the consolidation of securitization VIEs, refer to the section captioned “Non-GAAP Financial Measures.”

The following table compares our summarized results of operations for the three months ended March 31, 2025, December 31, 2024 and March 31, 2024 by business segment (amounts in thousands):

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Three Months Ended March 31, 2025 Compared to the Three Months Ended December 31, 2024

Commercial and Residential Lending Segment

Revenues

For the three months ended March 31, 2025, revenues of our Commercial and Residential Lending Segment decreased $31.4 million to $325.5 million, compared to $356.9 million for the three months ended December 31, 2024. This was primarily due to a decrease in interest income from loans of $31.1 million comprised of (i) a $31.0 million decrease from commercial loans, reflecting lower prepayment related income, lower average index rates and spreads and additional loans placed on nonaccrual, and (ii) a $0.1 million decrease from residential loans reflecting lower average balances.

Costs and Expenses

For the three months ended March 31, 2025, costs and expenses of our Commercial and Residential Lending Segment decreased $89.8 million to $163.7 million, compared to $253.5 million for the three months ended December 31, 2024. This decrease was primarily due to decreases of $77.0 million in the credit loss provision and $17.4 million in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio, partially offset by a $3.4 million increase in general and administrative expenses. The credit loss provision decreased to a $25.8 million reversal in the first quarter of 2025 compared to a $51.2 million provision in the fourth quarter of 2024 primarily due to improvement in the macroeconomic outlook. The decrease in interest expense was primarily due to lower average index rates and spreads.

Net Interest Income (amounts in thousands)

For the three months ended March 31, 2025, net interest income of our Commercial and Residential Lending Segment decreased $16.4 million to $148.6 million, compared to $165.1 million for the three months ended December 31, 2024. This decrease reflects the decrease in interest income, partially offset by the decrease in interest expense on our secured financing facilities, both as discussed in the sections above.

During the three months ended March 31, 2025 and December 31, 2024, the weighted average unlevered yields on the Commercial and Residential Lending Segment’s loans and investment securities, excluding retained RMBS and loans for which interest income is not recognized, were as follows:

For the three months ended March 31, 2025, the weighted average unlevered yields on our commercial loans decreased primarily due to lower prepayment related income and lower average index rates and spreads. The weighted average unlevered yields on our residential loans increased slightly primarily due to fluctuations in their fair value.

During the three months ended March 31, 2025 and December 31, 2024, the Commercial and Residential Lending Segment’s weighted average secured borrowing rates, inclusive of the amortization of deferred financing fees, were 6.6% and 6.9%, respectively. The decrease in borrowing rates primarily reflects lower average index rates. Interest rate hedges had the effect of reducing these weighted average borrowing costs to 5.9% and 6.1% during the three months ended March 31, 2025 and December 31, 2024, respectively.

Other Income (Loss)

For the three months ended March 31, 2025, other income of our Commercial and Residential Lending Segment increased $28.5 million to income of $19.6 million compared to a loss of $8.9 million for the three months ended December 31, 2024. This increase was primarily due to (i) a $141.8 million favorable change in fair value of residential loans, (ii) a $132.4 million favorable change in foreign currency gain (loss) and (iii) a $3.0 million favorable change in fair value of primarily RMBS investment securities, partially offset by (iv) a $250.5 million unfavorable change in gain (loss) on derivatives. The unfavorable change in gain (loss) on derivatives in the first quarter of 2025 reflects (i) a $136.2 million unfavorable change in gain (loss) on foreign currency hedges and (ii) a $114.3 million unfavorable change in gain (loss) on interest rate swaps principally related to residential loans, which is more than offset by the favorable change in fair value of those loans. The interest rate swaps are used primarily to hedge our interest rate risk on residential loans held-for-sale and to fix our interest rate payments on certain variable rate borrowings which fund fixed rate investments. The foreign currency hedges are used to fix the U.S. dollar amounts of cash flows (both interest and principal payments) we expect to receive from our foreign currency denominated loans and investments. The favorable change in foreign currency gain (loss) and the unfavorable change in gain (loss) on foreign currency hedges reflect the weakening of the U.S. dollar against the pound sterling (“GBP”), Euro (“EUR”) and Australian dollar (“AUD”) in the first quarter of 2025, compared to a strengthening of the U.S. dollar against each of those currencies in the fourth quarter of 2024.

Infrastructure Lending Segment

Revenues

For the three months ended March 31, 2025, revenues of our Infrastructure Lending Segment decreased $1.8 million to $61.6 million, compared to $63.4 million for the three months ended December 31, 2024. This was primarily due to a $1.1 million decrease in interest income on cash balances and a $0.7 million decrease in interest income from loans reflecting lower average index rates, the effect of which was partially offset by higher average loan balances.

Costs and Expenses

For the three months ended March 31, 2025, costs and expenses of our Infrastructure Lending Segment increased $0.1 million to $42.9 million, compared to $42.8 million for the three months ended December 31, 2024.

Net Interest Income (amounts in thousands)

For the three months ended March 31, 2025, net interest income of our Infrastructure Lending Segment increased $0.1 million to $25.5 million, compared to $25.3 million for the three months ended December 31, 2024. The increase reflects the decrease in interest income from loans as discussed above, which was more than offset by a decrease in interest expense on the secured financing facilities used to fund this segment’s investment portfolio.

During the three months ended March 31, 2025 and December 31, 2024, the weighted average unlevered yield on the Infrastructure Lending Segment’s loans and investment securities, excluding those for which interest income is not recognized, was 9.3% and 9.6%, respectively, primarily reflecting lower average index rates in the first quarter of 2025.

During the three months ended March 31, 2025 and December 31, 2024, the Infrastructure Lending Segment’s weighted average secured borrowing rate, inclusive of the amortization of deferred financing fees, was 7.0% and 7.3%, respectively, reflecting lower average index rates in the first quarter of 2025.

Other (Loss) Income

For the three months ended March 31, 2025, other income of our Infrastructure Lending Segment decreased $1.6 million to a loss of $0.4 million, compared to income of $1.2 million for the three months ended December 31, 2024, primarily due to an unfavorable change in earnings (loss) from unconsolidated entities.

Property Segment

Change in Results by Portfolio (amounts in thousands)

See Notes 6 and 7 to the Condensed Consolidated Financial Statements for a description of the above-referenced Property Segment portfolios and fund.

Revenues

For the three months ended March 31, 2025 and December 31, 2024, revenues of our Property Segment remained relatively unchanged at $16.5 million.

Costs and Expenses

For the three months ended March 31, 2025, costs and expenses of our Property Segment decreased $0.2 million to $22.2 million, compared to $22.4 million for the three months ended December 31, 2024.

Other Income

For the three months ended March 31, 2025, other income of our Property Segment decreased $89.3 million to $2.9 million compared to $92.2 million for the three months ended December 31, 2024. The decrease is primarily due to an $87.9 million unfavorable change in income (loss) attributable to investments of the Woodstar Fund, primarily related to unrealized changes in fair value.

Investing and Servicing Segment

Revenues

For the three months ended March 31, 2025, revenues of our Investing and Servicing Segment increased $0.1 million to $58.9 million, compared to $58.8 million for the three months ended December 31, 2024. The increase in revenues is primarily due to a $2.5 million net increase in interest income from CMBS investments and conduit loans, partially offset by a $2.2 million decrease in servicing fees.

Costs and Expenses

For the three months ended March 31, 2025, costs and expenses of our Investing and Servicing Segment decreased $7.2 million to $35.7 million, compared to $42.9 million for the three months ended December 31, 2024. The decrease reflects decreases in general and administrative expenses of $5.6 million, primarily related to decreased loan origination and securitization activity, and interest expense of $1.8 million, primarily related to financing of conduit loans.

Other (Loss) Income

For the three months ended March 31, 2025, other income of our Investing and Servicing Segment decreased $24.4 million to a loss of $7.7 million, compared to income of $16.7 million for the three months ended December 31, 2024. The decrease is primarily due to (i) a $9.0 million decreased gain in fair value of conduit loans, (ii) an $8.3 million greater decrease in fair value of CMBS investments, (iii) a $4.4 million unfavorable change in gain (loss) on derivatives which primarily hedge our interest rate risk on conduit loans and CMBS investments and (iv) a $2.5 million unfavorable change in fair value of servicing rights.

Corporate and Other Items

Corporate Costs and Expenses

For the three months ended March 31, 2025, corporate expenses increased $2.3 million to $120.0 million, compared to $117.7 million for the three months ended December 31, 2024. This increase is primarily due to a $2.3 million increase in interest expense, primarily reflecting higher average balances of unsecured senior notes outstanding.

Corporate Other Income (Loss)

For the three months ended March 31, 2025, corporate other income (loss) improved $76.8 million to income of $27.3 million, compared to a loss of $49.5 million for the three months ended December 31, 2024. This was primarily due to a favorable change in gain (loss) on our fixed-to-floating interest rate swaps which hedge a portion of our unsecured senior notes.

Securitization VIE Eliminations

Securitization VIE eliminations primarily reclassify interest income and servicing fee revenues to other income (loss) for the CMBS and RMBS VIEs that we consolidate as primary beneficiary. Such eliminations have no overall effect on net income (loss) attributable to Starwood Property Trust. The reclassified revenues, along with applicable changes in fair value of investment securities and servicing rights, comprise the other income (loss) caption “Change in net assets related to consolidated VIEs,” which represents our beneficial interest in those consolidated VIEs. The magnitude of the securitization VIE eliminations is merely a function of the number of CMBS and RMBS trusts consolidated in any given period, and as such, is not a meaningful indicator of operating results. The eliminations primarily relate to CMBS trusts for which the Investing and Servicing Segment is deemed the primary beneficiary and, to a much lesser extent, some CMBS and RMBS trusts for which the Commercial and Residential Lending Segment is deemed the primary beneficiary.

Income Tax (Provision) Benefit

Our consolidated income taxes principally relate to the taxable nature of our loan servicing and loan securitization businesses which are housed in taxable REIT subsidiaries (“TRSs”). For the three months ended March 31, 2025, our income tax provision increased $5.9 million to a provision of $3.8 million compared to a benefit of $2.1 million for the three months ended December 31, 2024. This change is due to taxable income of our TRSs in the first quarter of 2025 compared to a net tax loss in the fourth quarter of 2024.

Net Income Attributable to Non-controlling Interests

During the three months ended March 31, 2025, net income attributable to non-controlling interests decreased $15.4 million to $3.8 million, compared to $19.2 million during the three months ended December 31, 2024. The decrease was primarily due to non-controlling interests in unfavorable changes in fair value of the Woodstar Fund investments, partially offset by decreased unrealized losses of a consolidated CMBS joint venture in the first quarter of 2025.

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Commercial and Residential Lending Segment

Revenues

For the three months ended March 31, 2025, revenues of our Commercial and Residential Lending Segment decreased $105.1 million to $325.5 million, compared to $430.6 million for the three months ended March 31, 2024. This decrease was primarily due to decreases in interest income from loans of $104.2 million and investment securities of $7.5 million, partially offset by a $4.6 million increase in rental income from foreclosed properties. The decrease in interest income from loans reflects (i) a $102.2 million decrease from commercial loans, reflecting lower average balances, lower prepayment related income, lower average index rates and spreads, and additional loans placed on nonaccrual, and (ii) a $2.0 million decrease from residential loans principally due to lower average balances. The decrease in interest income from investment securities was primarily due to lower average commercial investment balances due to repayments.

Costs and Expenses

For the three months ended March 31, 2025, costs and expenses of our Commercial and Residential Lending Segment decreased $129.1 million to $163.7 million, compared to $292.8 million for the three months ended March 31, 2024. This decrease was primarily due to decreases of (i) $70.6 million in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio and (ii) $60.7 million in credit loss provision, partially offset by (iii) a $3.5 million increase in costs of rental operations of foreclosed properties. The decrease in interest expense was primarily due to lower average borrowings outstanding due to paydowns from net loan repayments and excess cash balances and the effect of lower average index rates and spreads. The credit loss provision decreased to a $25.8 million reversal in the first quarter of 2025 compared to a $34.9 million provision in the first quarter of 2024 primarily due to improvement in the macroeconomic outlook.

Net Interest Income (amounts in thousands)

For the three months ended March 31, 2025, net interest income of our Commercial and Residential Lending Segment decreased $41.1 million to $148.6 million, compared to $189.7 million for the three months ended March 31, 2024. This decrease reflects the decrease in interest income, partially offset by the decrease in interest expense on our secured financing facilities, both as discussed in the sections above.

During the three months ended March 31, 2025 and 2024, the weighted average unlevered yields on the Commercial and Residential Lending Segment’s loans and investment securities, excluding retained RMBS and loans for which interest income is not recognized, were as follows:

The weighted average unlevered yield on our commercial loans decreased primarily due to lower prepayment related income and lower average index rates and spreads. The unlevered yield on our residential loans was relatively unchanged.

During the three months ended March 31, 2025 and 2024, the Commercial and Residential Lending Segment’s weighted average secured borrowing rates, inclusive of the amortization of deferred financing fees, were 6.6% and 7.6%, respectively. The decrease in borrowing rates primarily reflects lower average index rates and spreads. Interest rate hedges had the effect of adjusting these weighted average borrowing costs to 5.9% and 6.7% during the three months ended March 31, 2025 and 2024, respectively.

Other Income

For the three months ended March 31, 2025, other income of our Commercial and Residential Lending Segment decreased $6.8 million to $19.6 million, compared to $26.4 million for the three months ended March 31, 2024. This decrease primarily reflects (i) a $176.8 million unfavorable change in gain (loss) on derivatives and (ii) a $6.0 million decrease in earnings from unconsolidated entities primarily due to the nonrecurrence of an observable price change in an equity investment in the first quarter of 2024, partially offset by (iii) an $83.2 million favorable change in fair value of residential loans, (iv) a $76.4 million favorable change in foreign currency gain (loss) and (v) a $14.4 million favorable change in fair value of primarily RMBS investment securities. The unfavorable change in gain (loss) on derivatives during the three months ended March 31, 2025 reflects (i) a $96.4 million unfavorable change in gain (loss) on interest rate swaps principally related to residential loans and (ii) an $80.4 million unfavorable change in gain (loss) on foreign currency hedges. The interest rate swaps are used primarily to hedge our interest rate risk on residential loans held-for-sale and to fix our interest rate payments on certain variable rate borrowings which fund fixed rate investments. The foreign currency hedges are used to fix the U.S. dollar amounts of cash flows (both interest and principal payments) we expect to receive from our foreign currency denominated loans and investments. The favorable change in foreign currency gain (loss) and the unfavorable change in gain (loss) on foreign currency hedges reflect the weakening of the U.S. dollar against the GBP, EUR and AUD during the first quarter of 2025, compared to a strengthening of the U.S. dollar against each of those currencies in the first quarter of 2024.

Infrastructure Lending Segment

Revenues

For the three months ended March 31, 2025, revenues of our Infrastructure Lending Segment decreased $5.3 million to $61.6 million, compared to $66.9 million for the three months ended March 31, 2024. This decrease was primarily due to a $5.9 million decrease in interest income from loans, partially offset by a $0.6 million increase in interest income on cash balances. The decrease in interest income from loans reflects lower average index rates and spreads, partially offset by higher prepayment related income.

Costs and Expenses

For the three months ended March 31, 2025, costs and expenses of our Infrastructure Lending Segment decreased $2.9 million to $42.9 million, compared to $45.8 million for the three months ended March 31, 2024. The decrease was primarily due to a $3.8 million decrease in interest expense reflecting lower average index rates, partially offset by higher average borrowings outstanding.

Net Interest Income (amounts in thousands)

For the three months ended March 31, 2025, net interest income of our Infrastructure Lending Segment decreased $2.1 million to $25.5 million, compared to $27.6 million for the three months ended March 31, 2024. The decrease reflects the decrease in interest income from loans, partially offset by the decrease in interest expense on the secured financing facilities, both as discussed in the sections above.

During the three months ended March 31, 2025 and 2024, the weighted average unlevered yields on the Infrastructure Lending Segment’s loans and investment securities, excluding those for which interest income is not recognized, were 9.3% and 10.4%, respectively, reflecting lower average index rates and spreads, partially offset by higher prepayment related income, in the first quarter of 2025.

During the three months ended March 31, 2025 and 2024, the Infrastructure Lending Segment’s weighted average secured borrowing rates, inclusive of the amortization of deferred financing fees, were 7.0% and 8.0%, respectively, reflecting lower average index rates in the first quarter of 2025.

Other Loss

For the three months ended March 31, 2025 and 2024, other loss of our Infrastructure Lending Segment decreased $0.2 million to $0.4 million, compared to $0.2 million for the three months ended March 31, 2024.

Property Segment

Change in Results by Portfolio (amounts in thousands)

Revenues

For the three months ended March 31, 2025, revenues of our Property Segment decreased $4.4 million to $16.5 million, compared to $20.9 million for the three months ended March 31, 2024, primarily due to the sale of our Master Lease Portfolio on February 29, 2024.

Costs and Expenses

For the three months ended March 31, 2025, costs and expenses of our Property Segment decreased $3.9 million to $22.2 million, compared to $26.1 million for the three months ended March 31, 2024. The decrease is primarily due to (i) a $2.9 million decrease in interest expense on variable rate borrowings of the Medical Office Portfolio, reflecting lower refinanced balances and index rates, and (ii) the sale of our Master Lease Portfolio on February 29, 2024.

Other Income

For the three months ended March 31, 2025, other income of our Property Segment decreased $99.1 million to $2.9 million, compared to $102.0 million for the three months ended March 31, 2024. The decrease is primarily due to (i) the nonrecurrence of a $90.8 million net gain on sale of the Master Lease Portfolio in the first quarter of 2024, (ii) a $5.5 million decrease in income attributable to investments of the Woodstar Fund primarily due to greater unrealized decreases in fair value and (iii) a $1.8 million unfavorable change in gain (loss) on derivatives which hedge our interest rate risk on borrowings secured by our Medical Office Portfolio.

Investing and Servicing Segment

Revenues

For the three months ended March 31, 2025, revenues of our Investing and Servicing Segment increased $16.8 million to $58.9 million, compared to $42.1 million for the three months ended March 31, 2024. The increase in revenues is primarily due to (i) an $8.8 million increase in servicing fees principally related to default interest and (ii) a $7.6 million increase in interest income primarily due to higher interest recoveries on CMBS investments.

Costs and Expenses

For the three months ended March 31, 2025, costs and expenses of our Investing and Servicing Segment decreased $0.4 million to $35.7 million, compared to $36.1 million for the three months ended March 31, 2024. The decrease primarily reflects lower general and administrative expenses.

Other Loss

For the three months ended March 31, 2025, other loss of our Investing and Servicing Segment increased $2.9 million to $7.7 million, compared to $4.8 million for the three months ended March 31, 2024. The increase in other loss was primarily due to (i) a $6.2 million greater decrease in fair value of CMBS investments and (ii) a $4.1 million unfavorable change in gain (loss) on derivatives which primarily hedge our interest rate risk on conduit loans and CMBS investments, partially offset by (iii) a $4.2 million greater increase in fair value of conduit loans and (iv) a $3.3 million lesser decrease in fair value of servicing rights.

Corporate and Other Items

Corporate Costs and Expenses

For the three months ended March 31, 2025, corporate expenses increased $11.3 million to $120.0 million, compared to $108.7 million for the three months ended March 31, 2024. This increase was primarily due to (i) a $15.1 million increase in interest expense reflecting higher average balances of unsecured senior notes outstanding, partially offset by lower variable interest rates on our secured term loans, and (ii) a $1.4 million increase in general and administrative expenses, partially offset by (iii) a $5.2 million decrease in management fees, primarily reflecting lower incentive fees.

Corporate Other Income (Loss)

For the three months ended March 31, 2025, corporate other income (loss) improved $41.2 million to income of $27.3 million, compared to a loss of $13.9 million for the three months ended March 31, 2024. This was due to a favorable change in gain (loss) on fixed-to-floating interest rate swaps which hedge a portion of our unsecured senior notes.

Securitization VIE Eliminations

Refer to the preceding comparison of the three months ended March 31, 2025 to the three months ended December 31, 2024 for a discussion of the effect of securitization VIE eliminations.

Income Tax Provision

Our consolidated income taxes principally relate to the taxable nature of our loan servicing and loan securitization businesses which are housed in TRSs. For the three months ended March 31, 2025, our income tax provision increased $2.6 million to $3.8 million, compared to $1.2 million for the three months ended March 31, 2024 due to higher taxable income of our TRSs in the first quarter of 2025 compared to the first quarter of 2024.

Net Income Attributable to Non-controlling Interests

For the three months ended March 31, 2025, net income attributable to non-controlling interests decreased $1.7 million to $3.8 million, compared to $5.5 million for the three months ended March 31, 2024. The decrease was primarily due to non-controlling interests in (i) lower income of the Woodstar Fund, reflecting greater unrealized decreases in fair value, and (ii) increased unrealized losses of a consolidated CMBS joint venture.

Non-GAAP Financial Measures

Distributable Earnings is a non-GAAP financial measure. We calculate Distributable Earnings as GAAP net income (loss) excluding the following: (i) non-cash equity compensation expense; (ii) the incentive fee due under our management agreement; (iii) acquisition and investment pursuit costs associated with successful acquisitions; (iv) depreciation and amortization of real estate and associated intangibles; (v) unrealized gains (losses), net of realized gains (losses), as described further below; (vi) other non-cash items; and (vii) to the extent deducted from net income (loss), distributions payable with respect to equity securities of subsidiaries issued in exchange for properties or interests therein (i.e. the Woodstar II Class A units), with each of the above adjusted for any related non-controlling interest. Distributable Earnings may be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash adjustments as determined by our Manager and approved by a majority of our independent directors.

As noted in (v) above, we exclude unrealized gains and losses from our calculation of Distributable Earnings and include realized gains and losses. The nature of these adjustments is described more fully in the footnotes to our reconciliation tables. In order to present each of these items within our Distributable Earnings reconciliation tables in a manner which can be agreed more easily to our GAAP financial statements, we reverse the entirety of those items within our GAAP financial statements which contain unrealized and realized components (i.e. those assets and liabilities carried at fair value, including loans or securities for which the fair value option has been elected, investment company assets and liabilities, derivatives, foreign currency conversions, and accumulated depreciation related to sold properties). The realized portion of these items is then separately included in the reconciliation table, along with a description as to how the amount was determined.

The CECL reserve and any property impairment losses have been excluded from Distributable Earnings consistent with other unrealized losses pursuant to our existing policy for reporting Distributable Earnings. We expect to only recognize such potential credit or property impairment losses in Distributable Earnings if and when such amounts are deemed nonrecoverable upon a realization event. This is generally at the time a loan is repaid, or in the case of a foreclosure or other property, when the underlying asset is sold. Non-recoverability may also be determined if, in our determination, it is nearly certain the carrying amounts will not be collected or realized upon sale. The realized loss amount reflected in Distributable Earnings will equal the difference between the cash received, or expected to be received, and the Distributable Earnings basis of the asset, and is reflective of our economic experience as it relates to the ultimate realization of the asset. The timing of any such loss realization in our Distributable Earnings may differ materially from the timing of the corresponding CECL reserves, charge-offs or impairments in our consolidated financial statements prepared in accordance with GAAP.

We believe that Distributable Earnings provides meaningful information to consider in addition to our net income (loss) and cash flows from operating activities determined in accordance with GAAP. We believe Distributable Earnings is a useful financial metric for existing and potential future holders of our common stock as historically, over time, Distributable Earnings has been a strong indicator of our dividends per share. As a REIT, we generally must distribute annually at least 90% of our REIT taxable income, subject to certain adjustments, and therefore we believe our dividends are one of the principal reasons stockholders may invest in our common stock. Further, Distributable Earnings helps us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations, and is a performance metric we consider when declaring our dividends. We also use Distributable Earnings (previously defined as “Core Earnings”) to compute the incentive fee due under our management agreement.

Distributable Earnings does not represent net income (loss) or cash generated from operating activities and should not be considered as an alternative to GAAP net income (loss), or an indication of our GAAP cash flows from operations, a measure of our liquidity, taxable income, or an indication of funds available for our cash needs. In addition, our methodology for calculating Distributable Earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures, and accordingly, our reported Distributable Earnings may not be comparable to the Distributable Earnings reported by other companies.

As discussed in Note 2 to the Condensed Consolidated Financial Statements, consolidation of securitization variable interest entities (“VIEs”) results in the elimination of certain key financial statement line items, particularly within revenues and other income, including unrealized changes in fair value of loans and investment securities. These line items are essential to understanding the true financial performance of our business segments and the Company as a whole. For this reason, as referenced in Note 2 to our Condensed Consolidated Financial Statements, we present business segment data in Note 23 without consolidation of these VIEs. This is how we manage our business and is the basis for all data reviewed with our board of directors, investors and analysts. This presentation also allows for a more transparent reconciliation of the unrealized gain (loss) adjustments below to the segment data presented in Note 23.

The weighted average diluted share count applied to Distributable Earnings for purposes of determining Distributable Earnings per share (“EPS”) is computed using the GAAP diluted share count, adjusted for the following:

(i) Unvested stock awards – Currently, unvested stock awards are excluded from the denominator of GAAP EPS. The related compensation expense is also excluded from Distributable Earnings. In order to effectuate dilution from these awards in the Distributable Earnings computation, we adjust the GAAP diluted share count to include these shares.

(ii) Convertible Notes – Conversion of our Convertible Notes is an event that is contingent upon numerous factors, none of which are in our control, and is an event that may or may not occur. Consistent with the treatment of other unrealized adjustments to Distributable Earnings, we adjust the GAAP diluted share count to exclude the potential shares issuable upon conversion until a conversion occurs.

(iii) Subsidiary equity – The intent of a February 2018 amendment to our management agreement (the “Amendment”) is to treat subsidiary equity in the same manner as if parent equity had been issued. The Class A Units issued in connection with the acquisition of assets in our Woodstar II Portfolio are currently excluded from our GAAP diluted share count, with the subsidiary equity represented as non-controlling interests in consolidated subsidiaries on our GAAP balance sheet. Consistent with the Amendment, we adjust GAAP diluted share count to include these subsidiary units.

The following table presents our diluted weighted average shares used in our GAAP EPS calculation reconciled to our diluted weighted average shares used in our Distributable EPS calculation (amounts in thousands):

As noted above, the definition of Distributable Earnings allows management to make adjustments, subject to the approval of a majority of our independent directors. This is done in situations where such adjustments are considered appropriate in order for Distributable Earnings to be calculated in a manner consistent with its definition and objective. No adjustments to the definition of Distributable Earnings became effective during the three months ended March 31, 2025.

The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the three months ended March 31, 2025, by business segment (amounts in thousands, except per share data).

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The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the three months ended December 31, 2024, by business segment (amounts in thousands, except per share data).

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The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the three months ended March 31, 2024, by business segment (amounts in thousands, except per share data):

(1) The reconciling items in this section are exactly equivalent to the amounts recognized within GAAP net income (before the consolidation of VIEs), each of which can be agreed back to the respective lines within Note 23 to our Condensed Consolidated Financial Statements. They reflect both unrealized and realized (gains) and losses. For added transparency and consistency of presentation, the entire amount recognized in GAAP income is reversed in this section, and the realized components of these amounts are reflected in the next section entitled “Recognition of Distributable realized gains / (losses).”

(2) Represents the realized portion of GAAP gains (losses) on residential and commercial conduit loans carried under the fair value option that were sold during the period or expected to be sold in the near term subject to a binding agreement. The amount is calculated as the difference between (i) the net proceeds received or expected to be received in connection with a securitization or sale of loans and (ii) such loans’ historical cost basis.

(3) Represents loan losses that are deemed nonrecoverable, which is generally upon a realization event, such as when a loan is repaid, or in the case of foreclosure, when the underlying asset is sold. Non-recoverability may also be determined if, in our determination, it is nearly certain that the carrying amounts will not be collected or realized upon sale. The loss amount is calculated as the difference between the cash received or expected to be received and the Distributable Earnings basis of the asset.

(4) Represents the realized portion of GAAP gains (losses) on CMBS and RMBS carried under the fair value option that are sold or impaired during the period. Upon sale, the difference between the cash proceeds received and the historical cost basis of the security is treated as a realized gain or loss for Distributable Earnings purposes. We consider a CMBS or an RMBS credit loss to be realized when such amounts are deemed nonrecoverable. Non-recoverability is generally at the time the underlying assets within the securitization are liquidated, but non-recoverability may also be determined if, in our determination, it is nearly certain that all amounts due will not be collected. The amount is calculated as the difference between the cash received and the historical cost basis of the security.

(5) Represents GAAP income from the Woodstar Fund investments excluding unrealized changes in the fair value of its underlying assets and liabilities. The amount is calculated as the difference between the Woodstar Fund’s GAAP net income and its unrealized gains (losses), which represents changes in working capital and actual cash distributions received.

(6) Represents the realized portion of GAAP gains or losses on the termination or settlement of derivatives that are accounted for at fair value. Derivatives are only treated as realized for Distributable Earnings when they are terminated or settled, and cash is exchanged. The amount of cash received or paid to terminate or settle the derivative is the amount treated as realized for Distributable Earnings purposes at the time of such termination or settlement.

(7) Represents the realized portion of foreign currency gains (losses) related to assets and liabilities denominated in a foreign currency. Realization occurs when the foreign currency is converted back to USD. The amount is calculated as the difference between the foreign exchange rate at the time the asset was placed on the balance sheet and the foreign exchange rate at the time cash is received and is offset by any gains or losses on the related foreign currency derivative at settlement.

(8) Represents GAAP earnings (loss) from unconsolidated entities excluding non-cash items and unrealized changes in fair value recorded on the books and records of the unconsolidated entities. The difference between GAAP and Distributable Earnings for these entities principally relates to depreciation and unrealized changes in the fair value of mortgage loans and securities.

(9) Represents the realized gain (loss) on sales of properties held at depreciated cost. Because depreciation is a non-cash expense that is excluded from Distributable Earnings, GAAP gains upon sale of a property are higher, and GAAP losses are lower, than the respective realized amounts reflected in Distributable Earnings. The amount is calculated as net sales proceeds less undepreciated cost, adjusted for any noncontrolling interest.

Three Months Ended March 31, 2025 Compared to the Three Months Ended December 31, 2024

Commercial and Residential Lending Segment

The Commercial and Residential Lending Segment’s Distributable Earnings decreased by $13.9 million, from $192.7 million during the fourth quarter of 2024 to $178.8 million in the first quarter of 2025. After making adjustments for the calculation of Distributable Earnings, revenues were $331.9 million, costs and expenses were $183.1 million, other income was $30.0 million and there was no income tax provision or benefit.

Revenues, consisting principally of interest income on loans, decreased by $29.6 million in the first quarter of 2025, primarily due to decreases in interest income from loans of $29.2 million comprised of (i) a $29.1 million decrease from commercial loans, reflecting lower prepayment related income, lower average index rates and spreads and additional loans placed on nonaccrual, and (ii) a $0.1 million decrease from residential loans reflecting lower average balances.

Costs and expenses decreased by $13.4 million in the first quarter of 2025, primarily due to (i) a $17.4 million decrease in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio, primarily reflecting lower average index rates and spreads, partially offset by (ii) a $3.1 million increase in general and administrative expenses.

Other income increased by $2.3 million in the first quarter of 2025.

Infrastructure Lending Segment

The Infrastructure Lending Segment’s Distributable Earnings decreased by $1.8 million, from $21.8 million during the fourth quarter of 2024 to $20.0 million in the first quarter of 2025. After making adjustments for the calculation of Distributable Earnings, revenues were $61.6 million, costs and expenses were $41.5 million and other loss was $0.1 million.

Revenues, consisting principally of interest income on loans, decreased by $1.8 million in the first quarter of 2025, primarily due to a $1.1 million decrease in interest income on cash balances and a $0.7 million decrease in interest income from loans, reflecting lower average index rates, partially offset by higher average loan balances.

Costs and expenses increased by $0.4 million in the first quarter of 2025.

Other loss decreased by $0.4 million in the first quarter of 2025.

Property Segment

Distributable Earnings by Portfolio (amounts in thousands)

The Property Segment’s Distributable Earnings increased by $2.8 million, from $13.5 million during the fourth quarter of 2024 to $16.3 million in the first quarter of 2025. After making adjustments for the calculation of Distributable Earnings, revenues were $17.0 million, costs and expenses were $16.3 million, other income was $19.4 million and the deduction of income attributable to non-controlling interests in the Woodstar Fund was $3.8 million.

Revenues remained relatively unchanged in the first quarter of 2025.

Costs and expenses decreased by $1.1 million in the first quarter of 2025, primarily due to a $1.5 million decrease in interest expense on variable rate borrowings secured by our Medical Office Portfolio, partially offset by a $0.6 million increase in general and administrative expenses.

Other income increased by $2.5 million in the first quarter of 2025, primarily due to a $4.2 million increase in distributable earnings from the Woodstar Fund.

Income attributable to non-controlling interests in the Woodstar Fund increased by $0.8 million in the first quarter of 2025.

Investing and Servicing Segment

The Investing and Servicing Segment’s Distributable Earnings increased by $0.7 million, from $48.9 million during the fourth quarter of 2024 to $49.6 million in the first quarter of 2025. After making adjustments for the calculation of Distributable Earnings, revenues were $74.1 million, costs and expenses were $32.9 million, other income was $11.6 million, there was no income tax provision or benefit, and the deduction of income attributable to non-controlling interests was $3.2 million.

Revenues increased by $5.3 million in the first quarter of 2025, primarily due to a $7.6 million net increase in interest income primarily due to higher interest recoveries on CMBS investments partially offset by a $2.2 million decrease in servicing fees. The treatment of CMBS interest income on a GAAP basis is complicated by our application of the ASC 810 consolidation rules. In an attempt to treat these securities similar to the trust’s other investment securities, we compute distributable interest income pursuant to an effective yield methodology. In doing so, we segregate the portfolio into various categories based on the components of the bonds’ cash flows and the volatility related to each of these components. We then accrete interest income on an effective yield basis using the components of cash flows that are reliably estimable. Other minor adjustments are made to reflect management’s expectations for other components of the projected cash flow stream.

Costs and expenses decreased by $7.0 million in the first quarter of 2025, primarily due to decreases in general and administrative expenses of $5.7 million, primarily related to the decreased loan origination and securitization activity, and interest expense of $1.8 million, primarily related to the financing of conduit loans.

Other income includes profit realized upon securitization of loans by our conduit business, gains on sales of CMBS and operating properties, gains and losses on derivatives that were either effectively terminated or novated, and earnings from unconsolidated entities. These items are typically offset by a decrease in the fair value of our domestic servicing rights intangible which reflects the expected amortization of this deteriorating asset, net of increases in fair value due to the attainment of new servicing contracts. Derivatives include instruments which hedge interest rate risk and credit risk on our conduit loans and CMBS investments. For GAAP purposes, the loans, CMBS and derivatives are accounted for at fair value, with all changes in fair value (realized or unrealized) recognized in earnings. The adjustments to Distributable Earnings outlined above are also applied to the GAAP earnings of our unconsolidated entities. Other income decreased by $13.8 million in the first quarter of 2025, primarily due to an $11.2 million decrease in realized gains on conduit loans, a $9.4 million unfavorable change in realized gain (loss) on derivatives which primarily hedge our interest rate risk on conduit loans and CMBS investments and a $2.5 million unfavorable change in fair value of servicing rights, partially offset by a $9.1 million decrease in recognized credit losses on CMBS investments.

Income attributable to non-controlling interests decreased $2.2 million in the first quarter of 2025, primarily due to non-controlling interests in lower distributable earnings of a consolidated CMBS joint venture.

Corporate

Corporate loss decreased by $1.8 million, from $110.2 million during the fourth quarter of 2024 to $108.4 million in the first quarter of 2025, primarily due to a $4.5 million decrease in realized losses on our fixed-to-floating interest rate swaps which hedge a portion of our unsecured senior notes, partially offset by a $2.3 million increase in interest expense primarily reflecting higher average balances of unsecured senior notes outstanding.

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Commercial and Residential Lending Segment

The Commercial and Residential Lending Segment’s Distributable Earnings decreased by $26.4 million, from $205.2 million during the first quarter of 2024 to $178.8 million in the first quarter of 2025. After making adjustments for the calculation of Distributable Earnings, revenues were $331.9 million, costs and expenses were $183.1 million, other income was $30.0 million and there was no income tax provision or benefit.

Revenues, consisting principally of interest income on loans, decreased by $104.5 million in the first quarter of 2025, primarily due to decreases in interest income from loans of $102.3 million and investment securities of $8.8 million, partially offset by a $4.6 million increase in rental income from foreclosed properties. The decrease in interest income from loans reflects (i) a $100.3 million decrease from commercial loans, reflecting lower average balances, lower prepayment related income, lower average index rates and spreads, and additional loans placed on nonaccrual, and (ii) a $2.0 million decrease from residential loans principally due to lower average balances. The decrease in interest income from investment securities was primarily due to lower average commercial investment balances due to repayments.

Costs and expenses decreased by $70.7 million in the first quarter of 2025, primarily due to a $70.6 million decrease in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio, reflecting lower average borrowings outstanding due to paydowns from net loan repayments and excess cash balances and the effect of lower average index rates and spreads.

Other income increased by $7.4 million in the first quarter of 2025, primarily due to an $11.2 million decrease in recognized credit losses on RMBS investments and residential loans, partially offset by a $5.7 million decrease in realized gains on derivative financial instruments, net of related foreign currency gains (losses).

Infrastructure Lending Segment

The Infrastructure Lending Segment’s Distributable Earnings decreased by $0.4 million, from $20.4 million during the first quarter of 2024 to $20.0 million in the first quarter of 2025. After making adjustments for the calculation of Distributable Earnings, revenues were $61.6 million, costs and expenses were $41.5 million and other loss was $0.1 million.

Revenues, consisting principally of interest income on loans, decreased by $5.3 million in the first quarter of 2025, primarily due to a $5.9 million decrease in interest income from loans, partially offset by a $0.6 million increase in interest income on cash balances. The decrease in interest income from loans reflects lower average index rates and spreads, partially offset by higher prepayment related income.

Costs and expenses decreased by $4.5 million in the first quarter of 2025, primarily due to a $3.8 million decrease in interest expense, reflecting lower average index rates, partially offset by higher average borrowings outstanding.

Other loss decreased by $0.4 million in the first quarter of 2025.

Property Segment

Distributable Earnings by Portfolio (amounts in thousands)

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The Property Segment’s Distributable Earnings decreased by $42.9 million, from $59.2 million during the first quarter of 2024 to $16.3 million in the first quarter of 2025. After making adjustments for the calculation of Distributable Earnings, revenues were $17.0 million, costs and expenses were $16.3 million, other income was $19.4 million and the deduction of income attributable to non-controlling interests in the Woodstar Fund was $3.8 million.

Revenues decreased by $4.3 million in the first quarter of 2025, primarily due to the sale of our Master Lease Portfolio on February 29, 2024.

Costs and expenses decreased by $6.0 million in the first quarter of 2025, primarily due to (i) a $4.4 million decrease in interest expense on variable rate borrowings of the Medical Office Portfolio, reflecting lower refinanced balances, interest rate derivative premium cost amortization and index rates, and (ii) the sale of our Master Lease Portfolio on February 29, 2024.

Other income decreased by $44.1 million in the first quarter of 2025, primarily due to the nonrecurrence of a $37.4 million net gain on sale of our Master Lease Portfolio and $8.0 million of realized gains on derivatives which primarily hedge our interest rate risk on borrowings secured by our Medical Office Portfolio, both of which were in the first quarter of 2024.

Income attributable to non-controlling interests in the Woodstar Fund increased $0.5 million in the first quarter of 2025.

Investing and Servicing Segment

The Investing and Servicing Segment’s Distributable Earnings increased by $50.5 million from a loss of $0.9 million during the first quarter of 2024 to earnings of $49.6 million in the first quarter of 2025. After making adjustments for the calculation of Distributable Earnings, revenues were $74.1 million, costs and expenses were $32.9 million, other income was $11.6 million, there was no income tax provision or benefit, and the deduction of income attributable to non-controlling interests was $3.2 million.

Revenues increased by $22.0 million in the first quarter of 2025, primarily due to a $12.7 million increase in interest income primarily due to higher interest recoveries on CMBS investments and an $8.8 million increase in servicing fees principally related to default interest.

Costs and expenses increased by $0.2 million in the first quarter of 2025.

Other income increased by $30.6 million in the first quarter of 2025, primarily due to a $28.3 million decrease in recognized credit losses on CMBS.

Income attributable to non-controlling interests increased $1.9 million, primarily due to higher distributable earnings of a consolidated CMBS joint venture.

Corporate

Corporate loss increased by $16.0 million, from $92.4 million during the first quarter of 2024 to $108.4 million in the first quarter of 2025, primarily due to a $15.1 million increase in interest expense reflecting higher average unsecured borrowings outstanding, partially offset by lower variable interest rates on our secured term loans.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet our cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make new investments where appropriate, pay dividends to our stockholders, and other general business needs. We closely monitor our liquidity position and believe that we have sufficient current liquidity and access to additional liquidity to meet our financial obligations for at least the next 12 months. Our strategy for managing liquidity and capital resources has not changed since December 31, 2024. Refer to our Form 10-K for a description of these strategies.

Sources of Liquidity

Our primary sources of liquidity are as follows:

Cash Flows for the Three Months Ended March 31, 2025 (amounts in thousands)

The discussion below is on a non-GAAP basis, after removing adjustments principally resulting from the consolidation of the securitization VIEs under ASC 810. These adjustments principally relate to (i) the purchase of CMBS, RMBS, loans and real estate from consolidated VIEs, which are reflected as repayments of VIE debt on a GAAP basis and (ii) sales, principal collections and redemptions of CMBS and RMBS related to consolidated VIEs, which are reflected as VIE distributions on a GAAP basis. There is no net impact to overall cash resulting from these consolidations. Refer to Note 2 to the Condensed Consolidated Financial Statements for further discussion.

Cash and cash equivalents increased by $137.9 million during the three months ended March 31, 2025, reflecting net cash provided by financing activities of $738.0 million and net cash provided by operating activities of $238.9 million, partially offset by net cash used in investing activities of $839.0 million.

Net cash provided by operating activities of $238.9 million during the three months ended March 31, 2025 related primarily to cash interest income of $345.0 million from our loans and $44.2 million from our investment securities. Other cash inflows included sales and principal collections, net of originations and purchases of loans held-for-sale of $118.4 million, servicing fees of $22.6 million, net rental income of $15.4 million, distributions from our affordable housing fund investments of $11.9 million and receipts from our interest rate derivatives of $11.0 million. Offsetting these cash inflows was cash interest expense of $265.1 million, general and administrative expenses of $62.9 million and a net change in operating assets and liabilities of $11.1 million.

Net cash used in investing activities of $839.0 million for the three months ended March 31, 2025 related primarily to the origination and acquisition of loans held-for-investment of $1.7 billion and the purchase and funding of investment securities of $18.5 million. Offsetting these cash outflows was proceeds received from principal collections and sale of loans held-for-investment of $747.2 million and investment securities of $126.4 million.

Net cash provided by financing activities of $738.0 million for the three months ended March 31, 2025 related primarily to borrowings on our debt, net of repayments and deferred loan costs, of $908.0 million, partially offset by dividend distributions of $162.3 million.

Our Investment Portfolio

The following is a review of our investment portfolio by segment.

Commercial and Residential Lending Segment

The following table sets forth the amount of each category of investments we owned across various property types within our Commercial and Residential Lending Segment as of March 31, 2025 and December 31, 2024 (dollars in thousands):

(1) First mortgages include first mortgage loans and any contiguous mezzanine loan components because as a whole, the expected credit quality of these loans is more similar to that of a first mortgage loan. The application of this methodology resulted in mezzanine loans with carrying values of $1.1 billion and $0.9 billion being classified as first mortgages as of both March 31, 2025 and December 31, 2024, respectively.

(2) Subordinated mortgages include B-Notes and junior participation in first mortgages where we do not own the senior A-Note or senior participation. If we own both the A-Note and B-Note, we categorize the loan as a first mortgage loan.

(3) Eliminated in consolidation against VIE liabilities pursuant to ASC 810.

(4) CMBS held-to-maturity (“HTM”) and mandatorily redeemable preferred equity interests in commercial real estate entities.

(5) Represents the weighted average coupon of residential mortgage loans.

(6) Calculated using applicable index rates for variable rate investments as of the respective period end and excludes loans for which interest income is not recognized. In addition to cash coupon, unlevered return includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees.

As of March 31, 2025 and December 31, 2024, our Commercial and Residential Lending Segment’s investment portfolio, excluding residential loans, RMBS, properties and other investments, had the following characteristics based on carrying values:

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Infrastructure Lending Segment

The following table sets forth the amount of each category of investments we owned within our Infrastructure Lending Segment as of March 31, 2025 and December 31, 2024 (dollars in thousands):

(1) Calculated using applicable index rates for variable rate investments as of the respective period end and excludes loans for which interest income is not recognized. In addition to cash coupon, unlevered return includes the amortization of deferred purchase discounts.

As of March 31, 2025 and December 31, 2024, our Infrastructure Lending Segment’s investment portfolio had the following characteristics based on carrying values:

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Property Segment

The following table sets forth the amount of each category of investments held within our Property Segment as of March 31, 2025 and December 31, 2024 (amounts in thousands):

The following table sets forth our net investment and other information regarding the Property Segment’s properties and lease intangibles as of March 31, 2025 (dollars in thousands):

As of March 31, 2025 and December 31, 2024, our Property Segment’s investment portfolio had the following geographic characteristics based on carrying values:

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Investing and Servicing Segment

The following table sets forth the amount of each category of investments we owned within our Investing and Servicing Segment as of March 31, 2025 and December 31, 2024 (amounts in thousands):

(1) Includes $1.12 billion and $1.20 billion of CMBS eliminated in consolidation against VIE liabilities pursuant to ASC 810 as of March 31, 2025 and December 31, 2024, respectively. Also includes $141.1 million and $148.6 million of non-controlling interests in the consolidated entities which hold certain of these CMBS as of March 31, 2025 and December 31, 2024, respectively.

(2) Includes $28.1 million and $30.3 million of non-controlling interests in the consolidated entities which hold certain debt balances as of March 31, 2025 and December 31, 2024, respectively.

(3) Includes $34.9 million and $35.7 million of servicing rights intangibles eliminated in consolidation against VIE assets pursuant to ASC 810 as of March 31, 2025 and December 31, 2024, respectively.

(4) Includes $14.9 million and $14.8 million of investments in unconsolidated entities eliminated in consolidation against VIE assets pursuant to ASC 810 as of March 31, 2025 and December 31, 2024, respectively.

Secured Borrowings

The following table is a summary of our secured borrowings as of March 31, 2025 (dollars in thousands):

(a) Subject to certain conditions as defined in the respective facility agreement.

(b) Approved but undrawn capacity represents the total draw amount that has been approved by the lenders related to those assets that have been pledged as collateral, less the drawn amount.

(c) Unallocated financing amount represents the maximum facility size less the total draw capacity that has been approved by the lenders.

(d) For certain facilities, borrowings collateralized by loans existing at maturity may remain outstanding until such loan collateral matures, subject to certain specified conditions.

(e) Certain facilities with an outstanding balance of $2.6 billion as of March 31, 2025 are indexed to EURIBOR, BBSY, SARON and SONIA. The remainder are indexed to SOFR.

(f) Certain facilities with an aggregate initial maximum facility size of $10.9 billion may be increased to $11.3 billion, subject to certain conditions. The $11.3 billion amount includes such upsizes.

(g) Certain facilities with an outstanding balance of $322.2 million as of March 31, 2025 carry a rolling 12-month term which may reset quarterly with the lender’s consent. These facilities carry no maximum facility size.

(h) A facility with an outstanding balance of $322.4 million as of March 31, 2025 has a weighted average fixed annual interest rate of 3.94%. All other facilities are variable rate with a weighted average rate of SOFR + 2.02%.

(i) Includes: (i) $322.4 million outstanding on a repurchase facility that is not subject to margin calls; and (ii) $28.1 million outstanding on one of our repurchase facilities that represents the 49% pro rata share owed by a non-controlling partner in a consolidated joint venture (see Note 15 to the Condensed Consolidated Financial Statements).

(j) The maximum facility size as of March 31, 2025 of $410.0 million may be increased to $750.0 million, subject to certain conditions.

(k) Certain facilities with an aggregate initial maximum facility size of $639.9 million may be increased to $739.9 million, subject to certain conditions. The $739.9 million amount includes such upsizes.

(l) These facilities are secured by the equity interests in certain of our subsidiaries which totaled $5.8 billion as of March 31, 2025.

Refer to Note 10 to the Condensed Consolidated Financial Statements for further disclosure regarding the terms of our secured financing arrangements, including a detailed discussion of new credit facilities and amendments to existing credit facilities executed since December 31, 2024.

Variance between Average and Quarter-End Credit Facility Borrowings Outstanding

The following table compares the average amount outstanding under our secured financing agreements during each quarter and the amount outstanding as of the end of each quarter, together with an explanation of significant variances (amounts in thousands):

(a) Variance primarily due to secured debt advances utilized to fund new commercial loan originations at quarter end.

Borrowings under Unsecured Senior Notes

During the three months ended March 31, 2025 and 2024, the weighted average effective borrowing rate on our unsecured senior notes was 6.1% and 5.1%, respectively. The effective borrowing rate includes the effects of underwriter purchase discount.

Refer to Note 11 to the Condensed Consolidated Financial Statements for further disclosure regarding the terms of our unsecured senior notes.

Scheduled Principal Repayments on Investments and Overhang on Financing Facilities

The following scheduled and/or projected principal repayments on our investments were based on amounts outstanding and extended contractual maturities of those investments as of March 31, 2025. The projected and/or required repayments of financing were based on the earlier of (i) the extended contractual maturity of each credit facility or (ii) the extended contractual maturity of each of the investments that have been pledged as collateral under the respective credit facility (amounts in thousands):

(a) Shortfall primarily relates to (i) $275.5 million of repayments under a Residential Loans repurchase facility which carries a one-year term that we extend every three months with lender’s consent and (ii) $232.2 million of repayments under securities facilities which carry a rolling 12-month term that we have historically extended, and intend to continue to extend with lender’s consent.

In the normal course of business, the Company is in discussions with its lenders to extend, amend or replace any financing facilities which contain near term expirations.

Issuances of Equity Securities

We may raise funds through capital market transactions by issuing capital stock. There can be no assurance, however, that we will be able to access the capital markets at any particular time or on any particular terms. We have authorized 100,000,000 shares of preferred stock and 500,000,000 shares of common stock. At March 31, 2025, we had 100,000,000 shares of preferred stock available for issuance and 160,623,677 shares of common stock available for issuance.

Other Potential Sources of Financing

In the future, we may also use other sources of financing to fund the acquisition of our target assets and maturities of our unsecured senior notes, including other secured as well as unsecured forms of borrowing and sale of senior loan interests and other assets.

Leverage Policies

Our strategies with regards to use of leverage have not changed significantly since December 31, 2024. Refer to our Form 10-K for a description of our strategies regarding use of leverage.

Cash Requirements

Dividends

U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income. We generally intend to distribute substantially all of our taxable income (which does not necessarily equal our GAAP net income) to our stockholders each year, if and to the extent authorized by our board of directors. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating and debt service requirements. 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. Refer to Note 17 to the Condensed Consolidated Financial Statements and our Form 10-K for a detailed dividend history.

Contractual Obligations and Commitments

Our material contractual obligations and commitments as of March 31, 2025 are as follows (amounts in thousands):

(a) Represents the contractual maturity of the respective credit facility, inclusive of available extension options. If investments that have been pledged as collateral repay earlier than the contractual maturity of the debt, the related portion of the debt would likewise require earlier repayment. Refer to Note 10 to the Condensed Consolidated Financial Statements for the expected maturities by year.

(b) Represents the fully extended maturity of the underlying collateral.

(c) Excludes $143.7 million of loan funding commitments in which management projects the Company will not be obligated to fund in the future due to repayments made by the borrower earlier than, or in excess of, expectations.

(d) Represents contractual commitments of $164.9 million under revolvers and letters of credit, $87.4 million under delayed draw term loans and $318.5 million of outstanding infrastructure loan purchase commitments.

The table above does not include interest payable, amounts due under our management agreement, amounts due under our derivative agreements or amounts due under guarantees as those contracts do not have fixed and determinable payments.

Our secured financings, CLOs and SASB consist primarily of matched-term funding for our loans and investment securities and long-term mortgages on our owned properties. Repayments of such facilities are generally made from proceeds from maturities, prepayments or sales of such investments and operating cash flows from owned properties. In the normal course of business, we are in discussions with our lenders to extend, amend or replace any financing facilities which contain near term expirations.

Our unsecured senior notes are expected to be repaid from a combination of available cash on hand, approved but undrawn capacity under our secured financing agreements, and/or equity issuances or other potential sources of financing, as discussed above, including issuances of new unsecured senior notes.

Our future loan commitments are expected to be primarily matched-term funded under secured financing agreements with any difference funded from available cash on hand or other potential sources of financing discussed above.

Critical Accounting Estimates

Refer to the section of our Form 10-K entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” for a full discussion of our critical accounting estimates. Our critical accounting estimates have not materially changed since December 31, 2024.

Recent Accounting Developments

Refer to Note 2 to the Condensed Consolidated Financial Statements for a discussion of recent accounting developments and the expected impact to the Company.

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 we do not seek to avoid risk completely, we believe the risk can be quantified from historical experience and seek to actively manage that risk, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake. Our strategies for managing risk and our exposure to such risks, as described in Item 7A of our Form 10-K, have not changed materially since December 31, 2024 except as described below.

Credit Risk

Our loans and investments are subject to credit risk. The performance and value of our loans and investments depend upon the owners’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, our asset management team reviews our investment portfolios and is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary.

We seek to further manage credit risk associated with our Investing and Servicing Segment loans held-for-sale through the purchase of credit instruments. The following table presents our credit instruments as of March 31, 2025 and December 31, 2024 (dollars in thousands):

92

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 investments and the related financing obligations. In general, we seek to match the interest rate characteristics of our investments with the interest rate characteristics of any related financing obligations such as repurchase agreements, bank credit facilities, term loans, revolving facilities and securitizations. In instances where the interest rate characteristics of an investment and the related financing obligation are not matched, we mitigate such interest rate risk through the utilization of interest rate derivatives of the same duration. As discussed in Note 13 to the Condensed Consolidated Financial Statements, we entered into a series of derivative transactions during 2024 related to our residential loan portfolio in an effort to extend hedge duration. These transactions involved a series of reverse swap trades which effectively locked a portion of positive cash flows from our original hedges for a period of time. We simultaneously entered into a forward starting swap which will not be effective until June 2027. While the fair value of the forward starting swap will impact earnings, it will not impact net investment income until its effective date.

The following table presents financial instruments where we have utilized interest rate derivatives to hedge interest rate risk and the related interest rate derivatives as of March 31, 2025 and December 31, 2024 (dollars in thousands); however, consistent with Note 13 to the Condensed Consolidated Financial Statements, the notional value and number of credit instruments excludes the residential lending reverse swap trades and forward starting swaps as well as certain other interest rate swaps that were not effective as of March 31, 2025 and December 31, 2024:

The table below summarizes the estimated annual change in net investment income for our variable rate investments and our variable rate debt assuming increases or decreases in SOFR or other applicable index rates and adjusted for the effects of our interest rate hedging activities (amounts in thousands). However, this table excludes: (i) our floating rate residential loan debt along with its related hedges (see Note 13); (ii) certain other interest rate swaps that were not effective as of March 31, 2025 (see Note 13); and (iii) nonaccrual loans (see Note 4).

(1) Includes the notional value of interest rate derivatives.

Foreign Currency Risk

Our loans and investments that are denominated in a foreign currency are also subject to risks related to fluctuations in exchange rates. We generally mitigate this exposure by matching the currency of our foreign currency assets to the currency of the borrowings that finance those assets. As a result, we substantially reduce our exposure to changes in portfolio value related to changes in foreign exchange rates.

We intend to hedge our net currency exposures in a prudent manner. However, our currency hedging strategies may not eliminate all of our currency risk due to, among other things, uncertainties in the timing and/or amount of payments received on the related investments, and/or unequal, inaccurate, or unavailable hedges to perfectly offset changes in future exchange rates. Additionally, we may be required under certain circumstances to collateralize our currency hedges for the benefit of the hedge counterparty, which could adversely affect our liquidity.

Consistent with our strategy of hedging foreign currency exposure on certain investments, we typically enter into a series of forwards to fix the U.S. dollar amount of foreign currency denominated cash flows (interest income and principal payments) we expect to receive from our foreign currency denominated investments. Accordingly, the notional values and expiration dates of our foreign currency hedges approximate the amounts and timing of future payments we expect to receive on the related investments.

The following table represents our assets and liabilities that are denominated in Pounds Sterling (“GBP”), Euros (“EUR”), Australian dollars (“AUD”) and Swiss Francs (“CHF”), as well as our expected future net interest receipts (amounts in thousands):

(1) Primarily relates to expected net interest cash flows on the respective assets and liabilities over their term.

Substantially all of our net asset exposure to the GBP, EUR, AUD and CHF has been hedged with foreign currency forward contracts as of March 31, 2025, as indicated in the table above. Refer to Note 13 to the Condensed Consolidated Financial Statements for further detail regarding our foreign currency derivatives and their contractual maturities.

Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosures.

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting. No change in internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the quarter ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.