# BrightSpire Capital, Inc.: Form 10-Q for the period ended Mar 31, 2023

- Company: [BrightSpire Capital, Inc.](/companies/brsp.md) (CIK 1717547)
- Form: 10-Q
- Filed: 2023-05-03
- Accepted by EDGAR: May 3, 2023, 16:24 ET
- Period: 2023-03-31
- Accession: 0001717547-23-000064
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1717547/000171754723000064/brsp-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1717547/000171754723000064/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $110.3m | us-gaap:Revenues |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $42.7m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $390.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$4.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.03 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.03 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 126,665,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $39.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 3 months, 2023-01-01 to 2023-03-31 | $26.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2023-03-31 | $313.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-03-31 | $4.60bn | us-gaap:Assets |
| Total liabilities | at 2023-03-31 | $3.25bn | us-gaap:Liabilities |
| Long-term debt | at 2023-03-31 | $3.07bn | us-gaap:LongTermDebt |
| Shareholders' equity | at 2023-03-31 | $1.35bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 129,996 characters.

The following discussion should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes thereto, which are included in Item 1 of this Quarterly Report, as well as the information contained in our Form 10-K for the year ended December 31, 2022, which is accessible on the SEC’s website at www.sec.gov.

### Introduction

We are a commercial real estate (“CRE”) credit real estate investment trust (“REIT”) focused on originating, acquiring, financing and managing a diversified portfolio consisting primarily of CRE debt investments and net leased properties predominantly in the United States. CRE debt investments primarily consist of first mortgage loans, which is our primary investment strategy. Additionally, we may also selectively originate mezzanine loans and preferred equity investments, which may include profit participations. The mezzanine loans and preferred equity investments may be in conjunction with our origination of corresponding first mortgages on the same properties. Net leased properties consist of CRE properties with long-term leases to tenants on a net-lease basis, where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance capital expenditures and real estate taxes. We continue to target net leased equity investments on a selective basis.

We were organized in the state of Maryland on August 23, 2017 and maintain key offices in New York, New York and Los Angeles, California. We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, beginning with our taxable year ended December 31, 2018. We conduct all our activities and hold substantially all our assets and liabilities through our operating subsidiary, BrightSpire Capital Operating Company, LLC (the “OP”).

### Our Target Assets

Our investment strategy is to originate and selectively acquire our target assets, which consist of the following:

- ***Senior Loans.*** Our primary focus is originating and selectively acquiring senior loans that are backed by CRE assets. These loans are secured by a first mortgage lien on a commercial property and provide mortgage financing to a commercial property developer or owner. The loans may vary in duration, bear interest at a fixed or floating rate and amortize, if at all, over varying periods, often with a balloon payment of principal at maturity. Senior loans may include junior participations in our originated senior loans for which we have syndicated the senior participations to other investors and retained the junior participations for our portfolio. We believe these junior participations are more like the senior loans we originate than other loan types given their credit quality and risk profile.
- ***Mezzanine Loans.*** We may originate or acquire mezzanine loans, which are structurally subordinate to senior loans, but senior to the borrower’s equity position. Generally, we will originate or acquire these loans if we believe we have the ability to protect our position and fund the first mortgage, if necessary. Mezzanine loans may be structured such that our return accrues and is added to the principal amount rather than paid on a current basis. We may also pursue equity participation opportunities in instances when the risk-reward characteristics of the investment warrant additional upside participation in the possible appreciation in value of the underlying assets securing the investment.
- ***Preferred Equity.*** We may make investments that are subordinate to senior and mezzanine loans, but senior to the common equity in the mortgage borrower. Preferred equity investments may be structured such that our return accrues and is added to the principal amount rather than paid on a current basis. We also may pursue equity participation opportunities in preferred equity investments, like such participations in mezzanine loans.
- ***Net Leased and Other Real Estate.*** We may occasionally invest directly in well-located commercial real estate with long-term leases to tenants on a net lease basis, where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance capital expenditures and real estate taxes. In addition, tenants of our properties typically pay rent increases based on: (1) increases in the consumer price index (typically subject to ceilings), (2) fixed increases, or (3) additional rent calculated as a percentage of the tenants’ gross sales above a specified level. We believe that a portfolio of properties under long-term, net lease agreements generally produces a more predictable income stream than many other types of real estate portfolios, while continuing to offer the potential for growth in rental income.

Our operating segments include senior and mezzanine loans and preferred equity, net leased and other real estate, all of which are included in our target assets, and CRE debt securities and corporate.

The allocation of our capital among our target assets will depend on prevailing market conditions at the time we invest and may change over time in response to different prevailing market conditions. In addition, in the future, we may invest in assets other than our target assets or change our target assets. With respect to all our investments, we invest so as to maintain our qualification as a REIT for U.S. federal income tax purposes and our exclusion or exemption from regulation under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

We believe that events in the financial markets from time to time, including the ongoing impact of the COVID-19 pandemic, have created and will continue to create dislocation between price and intrinsic value in certain asset classes as well as a supply and demand imbalance of available credit to finance these assets. We believe that our in-depth understanding of CRE and real estate-related investments, in-house underwriting, asset management and resolution capabilities, provides an extensive platform to regularly evaluate our investments and determine primary, secondary or alternative disposition strategies. This includes intermediate servicing and negotiating, restructuring of non-performing investments, foreclosure considerations, management or development of owned real estate, in each case to reposition and achieve optimal value realization for us and our stockholders. Depending on the nature of the underlying investment, we may pursue repositioning strategies through judicious capital investment in order to extract maximum value from the investment or recognize unanticipated losses to reinvest resulting liquidity in higher-yielding performing investments.

### Our Business Segments

We present our business as one portfolio. We conduct our operations through the following business segments:

- Senior and Mezzanine Loans and Preferred Equity—CRE debt investments including senior loans, mezzanine loans, and preferred equity interests as well as participations in such loans.
- Net Leased and Other Real Estate—direct investments in commercial real estate with long-term leases to tenants on a net lease basis, where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance, capital expenditures and real estate taxes. It also includes other real estate, currently consisting of two investments with direct ownership in commercial real estate, with an emphasis on properties with stable cash flow.
- CRE Debt Securities— securities investments previously consisting of BBB and some BB rated CMBS (including Non-Investment Grade “B-pieces” of a CMBS securitization pool). It currently only includes a sub-portfolio of private equity funds.
- Corporate—includes corporate-level asset management and other fees including expenses related to our secured revolving credit facility (the “Bank Credit Facility”), compensation and benefits and restructuring charges.

### Significant Developments

During the three months ended March 31, 2023, and through May 2, 2023, significant developments affecting our business and results of operations of our portfolio included the following:

### Capital Resources

- As of the date of this report, we have approximately $424.0 million of liquidity, consisting of $259.0 million cash on hand and $165.0 million available on our Bank Credit Facility; and
- Declared and paid a first quarter $0.20 per share dividend on April 17, 2023.

### Our Portfolio

- Generated GAAP net loss of $4.1 million, or $(0.03) per basic and diluted share, Distributable Earnings (Loss) of $11.5 million, or $(0.09) per share and Adjusted Distributable Earnings of $34.5 million or $0.27 per share for the three months ended March 31, 2023;
- For the three months ended March 31, 2023, we:
- Recorded specific current expected credit loss (“CECL”) reserves of $55.0 million related to two senior loans and one mezzanine loan; (refer to “Our Portfolio - Asset Specific Loan Summaries” section for further discussion);
- We realized a one-time gain from our ratable share of dispute resolution proceeds of approximately $9.0 million from the senior mezzanine lender of our prior Los Angeles, California mixed-use project construction mezzanine loan and retained B-participation investment. In connection with the settlement, effective January 26, 2023, we have no further interest in the loan or investment;
- Received loan repayment proceeds of $101.2 million from four loans;
- In April 2023, we amended and restructured a development mezzanine loan to bifurcate it into a $30.2 million mezzanine A note and a $14.5 million mezzanine B note (the “Mezzanine B Note”). We subsequently placed the Mezzanine B Note on nonaccrual status (refer to “Our Portfolio - Asset Specific Loan Summaries” section for further discussion); and
- Subsequent to March 31, 2023, we placed the second of our two Long Island City, New York Office Senior Loans on nonaccrual status (refer to “Our Portfolio - Asset Specific Loan Summaries” section for further discussion).

### Trends Affecting Our Business

#### Global Markets

The current global markets are characterized by volatility, driven by a tightening of monetary policy and geopolitical uncertainty, coupled with the ongoing impacts of COVID-19. In response to heightened inflation, the Federal Reserve continues to raise interest rates, which has tempered the loan financing market and created further uncertainty for the economy and for our borrowers and tenants. These current macroeconomic conditions may continue or intensify. This may cause the United States economy or other global economies to experience an economic slowdown or recession. While we monitor macroeconomic conditions closely, we believe there are too many uncertainties to predict and quantify the full impact that these factors may have on our business.

#### Office Property Market

The market for office properties was particularly negatively impacted by the COVID-19 pandemic and remains distressed, with increases in vacancy as newly developed or renovated properties become available for leasing and high overall vacancy rates due to the normalization of work from home and the hybrid attendance model. As a result of fewer employees commuting to their offices, businesses are re-evaluating their need for physical office space. To the extent certain borrowers are experiencing significant financial dislocation as a result of economic conditions, we have and may continue to consider the use of interest and other reserves and/or replenishment obligations of the borrower and/or guarantors to meet current interest payment obligations, for a limited period. Given the uncertainty in the office market, there is risk of future valuation impairment or investment loss on our loans secured by office properties.

### Factors Impacting Our Operating Results

Our results of operations are affected by a number of factors and depend primarily on, among other things, the ability of the borrowers of our assets to service our debt as it is due and payable, the ability of our tenants to pay rent and other amounts due under their leases, our ability to actively and effectively service any sub-performing and non-performing loans and other assets we may have from time to time in our portfolio, the market value of our assets and the supply of, and demand for, CRE senior loans, mezzanine loans, preferred equity, debt securities, net leased properties and our other assets, and the level of our net operating income (“NOI”). Our net interest income, which includes the amortization of purchase premiums and the accretion of purchase discounts, varies primarily as a result of changes in market interest rates, prepayment rates and frequency on our CRE loans and the ability of our borrowers to make scheduled interest payments. Interest rates and prepayment rates vary according to the type of investment, conditions in the financial markets, creditworthiness of our borrowers, competition and other factors, none of which can be predicted with any certainty. Our net property operating income depends on our ability to maintain the historical occupancy rates of our real estate equity investments, lease currently available space and continue to attract new tenants.

#### Changes in fair value of our assets

We consider and treat our assets as long-term investments. As a result, we do not expect that changes in market value will impact our operating results. However, at least on a quarterly basis, we assess both our ability and intent to hold such assets for the long-term. As part of this process, we monitor our assets for impairment. A change in our ability and/or intent to continue to hold any of our assets may result in our recognizing an impairment charge or realizing losses upon the sale of such investments.

#### Changes in market interest rates

With respect to our proposed business operations, increases in interest rates, in general, may over time cause:

- the value of our fixed-rate investments to decrease;
- prepayments on certain assets in our portfolio to slow, thereby slowing the amortization of our purchase premiums and the accretion of our purchase discounts;
- coupons on our floating and adjustable-rate mortgage loans to reset, although on a delayed basis, to higher interest rates;
- interest rate caps required by our borrowers to increase in cost;
- to the extent we use leverage to finance our assets, the interest expense associated with our borrowings to increase; and
- to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase.

Conversely, decreases in interest rates, in general, may over time cause:

- the value of the fixed-rate assets in our portfolio to increase;
- prepayments on certain assets in our portfolio to increase, thereby accelerating the amortization of our purchase premiums and the accretion of our purchase discounts;
- to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to decrease;
- coupons on our floating and adjustable-rate mortgage loans to reset, although on a delayed basis, to lower interest rates; and
- to the extent we use leverage to finance our assets, the interest expense associated with our borrowings to decrease.

#### Credit risk

We are subject to varying degrees of credit risk in connection with our 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 employing a comprehensive review and asset selection process and by careful ongoing monitoring of acquired assets. Nevertheless, unanticipated credit losses could occur, which could adversely impact our operating results.

#### Size of investment portfolio

The size of our portfolio, as measured by the aggregate principal balance of our commercial mortgage loans, other commercial real estate-related debt investments and the other assets we own, is also a key revenue driver. Generally, as the size of our portfolio grows, the amount of interest income we earn increases. However, a larger portfolio may result in increased expenses to the extent that we incur additional interest expense to finance our assets.

### Our Portfolio

As of March 31, 2023, our portfolio consisted of 111 investments representing approximately $4.1 billion in carrying value (based on our share of ownership and excluding cash, cash equivalents and certain other assets). Our senior and mezzanine loans and preferred equity consisted of 100 senior loans, mezzanine and preferred loans and had a weighted average cash coupon of 3.8% and a weighted average all-in unlevered yield of 8.8%. Our net leased and other real estate consisted of approximately 6.4 million total square feet of space and total first quarter 2023 NOI of that portfolio was approximately $16.3 million. Refer to “Non-GAAP Supplemental Financial Measures” below for further information on NOI.

As of March 31, 2023, our portfolio consisted of the following investments (dollars in thousands):

| Our Portfolio | Count(1) | Carrying value (Consolidated) | Carrying value (at BRSP share)(2) | Net carrying value (Consolidated)(3) | Net carrying value (at BRSP share)(4) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Senior loans | 93 | $3,258,992 | $3,258,992 | $802,416 | $802,416 |
| Mezzanine loans | 6 | 101,006 | 101,006 | 101,006 | 101,006 |
| Preferred equity | 1 | 22,723 | 22,723 | 22,723 | 22,723 |
| Subtotal | 100 | 3,382,721 | 3,382,721 | 926,145 | 926,145 |
| Net leased real estate | 8 | 589,411 | 589,411 | 144,611 | 144,611 |
| Other real estate | 2 | 171,951 | 158,876 | (1,439) | (1,616) |
| Private equity interests | 1 | 2,790 | 2,790 | 2,790 | 2,790 |
| **Total/Weighted average Our Portfolio** | 111 | $4,146,873 | $4,133,798 | $1,072,107 | $1,071,930 |

(1) Count for net leased real estate and other real estate represents number of investments.

(2) Carrying value at our share represents the proportionate carrying value based on ownership by asset as of March 31, 2023.

(3) Net carrying value represents carrying value less any associated financing as of March 31, 2023.

(4) Net carrying value at our share represents the proportionate carrying value based on asset ownership less any associated financing based on ownership as of March 31, 2023.

#### Underwriting Process

We use an investment and underwriting process that has been developed by our senior management team leveraging their extensive commercial real estate expertise over many years and real estate cycles. The underwriting process focuses on some or all of the following factors designed to ensure each investment is evaluated appropriately: (i) macroeconomic conditions that may influence operating performance; (ii) fundamental analysis of underlying real estate, including tenant rosters, lease terms, zoning, necessary licensing, operating costs and the asset’s overall competitive position in its market; (iii) real estate market factors that may influence the economic performance of the investment, including leasing conditions and overall competition; (iv) the operating expertise and financial strength and reputation of a tenant, operator, partner or borrower; (v) the cash flow in place and projected to be in place over the term of the investment and potential return; (vi) the appropriateness of the business plan and estimated costs associated with tenant buildout, repositioning or capital improvements; (vii) an internal and third-party valuation of a property, investment basis relative to the competitive set and the ability to liquidate an investment through a sale or refinancing; (viii) review of third-party reports including appraisals, engineering and environmental reports; (ix) physical inspections of properties and markets; (x) the overall legal structure of the investment, contractual implications and the lenders’ rights; and (xi) the tax and accounting impact.

#### Loan Risk Rankings

In addition to reviewing loans held for investment for impairment quarterly, we evaluate loans held for investment to determine if a current expected credit losses reserve should be established. In conjunction with this review, we assess the risk factors of each senior and mezzanine loans and preferred equity and assign a risk ranking based on a variety of factors, including, without limitation, underlying real estate performance and asset value, values of comparable properties, durability and quality of property cash flows, sponsor experience and financial wherewithal, and the existence of a risk-mitigating loan structure. Additional key considerations include loan-to-value ratios, debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, our loans held for investment are rated “1” through “5,” from less risk to greater risk. At the time of origination or purchase, loans held for investment are ranked as a “3” and will move accordingly going forward based on the ratings which are defined as follows:

1\. *Very Low Risk—*The loan is performing as agreed. The underlying property performance has exceeded underwritten expectations with very strong NOI, debt service coverage ratio, debt yield and occupancy metrics. Sponsor is investment grade, very well capitalized, and employs a very experienced management team.

2\. *Low Risk—*The loan is performing as agreed. The underlying property performance has met or exceeds underwritten expectations with high occupancy at market rents, resulting in consistent cash flow to service the debt. Strong sponsor that is well capitalized with an experienced management team.

3\. *Average Risk—*The loan is performing as agreed. The underlying property performance is consistent with underwriting expectations. The property generates adequate cash flow to service the debt, and/or there is enough reserve or loan structure to provide time for sponsor to execute the business plan. Sponsor has routinely met its obligations and has experience owning/operating similar real estate.

4\. *High Risk/Delinquent/Potential for Loss—*The loan is in excess of 30 days delinquent and/or has a risk of a principal loss. The underlying property performance is behind underwritten expectations. Loan covenants may require occasional waivers/modifications. Sponsor has been unable to execute its business plan and local market fundamentals have deteriorated. Operating cash flow is not sufficient to service the debt and debt service payments may be coming from sponsor equity/loan reserves.

5\. *Impaired/Defaulted/Loss Likely—*The loan is in default, or a default is imminent, and has a high risk of a principal loss, or has incurred a principal loss. The underlying property performance is significantly worse than underwritten expectation and sponsor has failed to execute its business plan. The property has significant vacancy and current cash flow does not support debt service. Local market fundamentals have significantly deteriorated resulting in depressed comparable property valuations versus underwriting.

During the first quarter of 2023, two loans changed to a risk ranking of 5 from a risk ranking of 4, two loans changed to a risk ranking of 4 from a risk ranking of 3, and one loan changed to a risk ranking of 3 from a risk ranking of 2. Additionally, one loan changed to a risk ranking of 4 from a risk ranking of 5 and two loans changed to a risk ranking of 3 from a risk ranking of 4. Two loans with a risk ranking of 2 and one loan with a risk ranking of 3 were repaid, and one mezzanine loan with a risk ranking of 5 was resolved. As a result, our weighted average risk ranking at March 31, 2023 is unchanged from December 31, 2022 at 3.2.

### Senior and Mezzanine Loans and Preferred Equity

The following tables provides a summary of our senior loans, mezzanine loans and preferred equity based on our internal risk rankings, collateral property type and geographic distribution as of March 31, 2023 (dollars in thousands):

| Risk Ranking | Count | Carrying Value (at BRSP share)(1) Senior loans(2) | Mezzanine loans | Preferred Equity | Total | % of Total |
| ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| 2 | 4 | $119,708 | $— | $— | $119,708 | 3.5% |
| 3 | 83 | 2,637,311 | 29,249 | 22,723 | 2,689,283 | 79.5% |
| 4 | 9 | 434,013 | 13,478 | — | 447,491 | 13.2% |
| 5 | 4 | 96,000 | 30,239 | — | 126,239 | 3.7% |
|  | 100 | $3,287,032 | $72,966 | $22,723 | $3,382,721 | 100.0% |
| Weighted average risk ranking |  |  |  |  |  | 3.2 |

(1) Carrying value at our share represents the proportionate carrying value based on ownership by asset as of March 31, 2023.

(2) Includes one mezzanine loan totaling $28.0 million where we are also the senior lender.

| Collateral property type | Carrying value (at BRSP share) Count | Senior loans | Mezzanine loans | Preferred Equity | Total | % of Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Multifamily | 56 | $1,579,925 | $59,488 | $22,723 | $1,662,136 | 49.1% |
| Office | 33 | 1,093,804 | 1,028 | — | 1,094,832 | 32.4% |
| Hotel | 5 | 382,232 | 40,490 | — | 422,722 | 12.5% |
| Other (Mixed-use)(1) | 3 | 151,699 | — | — | 151,699 | 4.5% |
| Industrial | 3 | 51,332 | — | — | 51,332 | 1.5% |
| **Total** | 100 | $3,258,992 | $101,006 | $22,723 | $3,382,721 | 100.0% |

(1) Other includes commercial and residential development and predevelopment assets.

| Region | Carrying value (at BRSP share) Count | Senior loans | Mezzanine loans | Preferred Equity | Total | % of Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| US West | 42 | $1,455,803 | $83,079 | $22,723 | $1,561,605 | 46.2% |
| US Southwest | 37 | 1,113,392 | 4,449 | — | 1,117,841 | 33.0% |
| US Northeast | 13 | 484,221 | 13,478 | — | 497,699 | 14.7% |
| US Southeast | 8 | 205,576 | — | — | 205,576 | 6.1% |
| **Total** | 100 | $3,258,992 | $101,006 | $22,723 | $3,382,721 | 100.0% |

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The following table provides asset level detail for our senior loans, mezzanine loans and preferred equity as of March 31, 2023 (dollars in thousands):

| Loan Type Origination Date City, State Multifamily | Carrying value(1) | Principal balance | Coupon type Cash Coupon(2) | Unlevered all-in yield(3) | Extended maturity date | Loan-to-value(4) | Q1 Risk ranking(5) |
| --- | ---: | ---: | --- | ---: | --- | ---: | ---: |
| Loan 1(6) Senior 6/18/2019 Santa Clara, CA | $57,442 | $57,442 | Floating 4.4% | 9.5% | 6/18/2024 | 65% | 4 |
| Loan 2 Senior 7/19/2021 Dallas, TX | 50,034 | 49,999 | Floating 3.4% | 8.7% | 8/9/2026 | 74% | 3 |
| Loan 3 Senior 3/8/2022 Austin, TX | 49,972 | 50,103 | Floating 3.3% | 8.7% | 3/9/2027 | 75% | 3 |
| Loan 4 Senior 5/17/2022 Las Vegas, NV | 49,448 | 49,758 | Floating 3.6% | 8.9% | 6/9/2027 | 74% | 3 |
| Loan 5 Senior 5/26/2021 Las Vegas, NV | 46,104 | 46,101 | Floating 3.5% | 8.7% | 6/9/2026 | 70% | 3 |
| Loan 6 Senior 11/30/2021 Phoenix, AZ | 44,571 | 44,572 | Floating 3.5% | 9.1% | 12/9/2026 | 74% | 4 |
| Loan 7 Senior 2/3/2021 Arlington, TX | 43,680 | 43,580 | Floating 3.7% | 9.0% | 2/9/2026 | 81% | 3 |
| Loan 8 Senior 3/1/2021 Richardson, TX | 43,276 | 43,411 | Floating 3.4% | 8.5% | 3/9/2026 | 75% | 3 |
| Loan 9 Senior 7/15/2021 Jersey City, NJ | 42,919 | 43,000 | Floating 3.0% | 8.2% | 8/9/2026 | 66% | 2 |
| Loan 10 Senior 12/21/2020 Austin, TX | 42,745 | 42,850 | Floating 3.7% | 8.8% | 1/9/2026 | 54% | 3 |
| **Subtotal top 10 multifamily** | $470,191 | $470,816 | 14% of total loans |  |  |  |  |
| Loan 11 Senior 3/22/2021 Fort Worth, TX | $41,247 | $41,286 | Floating 3.6% | 8.8% | 4/9/2026 | 83% | 3 |
| Loan 12 Senior 12/7/2021 Denver, CO | 39,237 | 39,372 | Floating 3.3% | 8.6% | 12/9/2026 | 74% | 3 |
| Loan 13 Senior 7/15/2021 Dallas, TX | 39,136 | 39,206 | Floating 3.1% | 8.5% | 8/9/2026 | 77% | 3 |
| Loan 14 Senior 3/31/2022 Long Beach, CA | 37,223 | 37,429 | Floating 3.4% | 8.7% | 4/9/2027 | 74% | 3 |
| Loan 15 Senior 3/31/2022 Louisville, KY | 37,201 | 37,326 | Floating 3.7% | 9.1% | 4/9/2027 | 72% | 3 |
| Loan 16 Senior 7/12/2022 Irving, TX | 36,847 | 37,096 | Floating 3.6% | 8.9% | 8/9/2027 | 73% | 3 |
| Loan 17 Senior 9/28/2021 Carrollton, TX | 36,098 | 36,282 | Floating 3.2% | 8.4% | 10/9/2025 | 73% | 3 |
| Loan 18 Senior 1/18/2022 Dallas, TX | 35,542 | 35,575 | Floating 3.5% | 8.9% | 2/9/2027 | 75% | 3 |
| Loan 19 Senior 1/12/2022 Los Angeles, CA | 35,310 | 35,551 | Floating 3.4% | 8.5% | 2/9/2027 | 65% | 3 |
| Loan 20 Senior 12/29/2020 Fullerton, CA | 34,776 | 34,860 | Floating 3.8% | 8.9% | 1/9/2026 | 70% | 3 |
| **Subtotal top 20 multifamily** | $842,808 | $844,799 | 25% of total loans |  |  |  |  |
| Loan 21 Senior 3/16/2021 Fremont, CA | $33,550 | $33,550 | Floating 3.5% | 8.8% | 4/9/2026 | 76% | 3 |
| Loan 22 Senior 7/29/2021 Phoenix, AZ | 32,408 | 32,562 | Floating 3.4% | 8.5% | 8/9/2026 | 74% | 3 |
| Loan 23 Senior 3/31/2021 Mesa, AZ | 31,403 | 31,434 | Floating 3.8% | 9.0% | 4/9/2026 | 83% | 3 |
| Loan 24(7) Mezzanine 12/3/2019 Milpitas, CA | 30,239 | 44,716 | Fixed 8.0% | 13.3% | 12/3/2024 | 58% - 85% | 5 |
| Loan 25 Senior 4/29/2021 Las Vegas, NV | 29,697 | 29,736 | Floating 3.2% | 8.3% | 5/9/2026 | 76% | 2 |
| Loan 26 Senior 4/15/2022 Mesa, AZ | 29,142 | 29,354 | Floating 3.4% | 8.5% | 5/9/2027 | 75% | 3 |
| Loan 27 Senior 7/13/2021 Plano, TX | 28,935 | 28,994 | Floating 3.2% | 8.3% | 2/9/2025 | 82% | 3 |

58

| Loan Type Origination Date City, State | Carrying value(1) | Principal balance | Coupon type | Cash Coupon(2) | Unlevered all-in yield(3) | Extended maturity date | Loan-to-value(4) | Q1 Risk ranking(5) |
| --- | ---: | ---: | --- | ---: | ---: | --- | ---: | ---: |
| Loan 28 Senior 5/19/2022 Denver, CO | 28,152 | 28,327 | Floating | 3.5% | 8.8% | 6/9/2027 | 73% | 3 |
| Loan 29 Senior 5/27/2021 Houston, TX | 27,977 | 28,000 | Floating | 3.0% | 8.4% | 6/9/2026 | 67% | 3 |
| Loan 30 Senior 2/17/2022 Long Beach, CA | 27,746 | 27,901 | Floating | 3.4% | 8.7% | 3/9/2027 | 67% | 3 |
| Loan 31 Senior 8/31/2021 Glendale, AZ | 27,345 | 27,486 | Floating | 3.3% | 8.4% | 9/9/2026 | 75% | 3 |
| Loan 32 Senior 12/16/2021 Fort Mill, SC | 26,822 | 26,976 | Floating | 3.3% | 8.4% | 1/9/2027 | 71% | 3 |
| Loan 33(6) Mezzanine 2/8/2022 Las Vegas, NV | 24,799 | 24,887 | Fixed | 7.0% | 12.3% | 2/8/2027 | 56% - 79% | 3 |
| Loan 34 Senior 12/21/2021 Phoenix, AZ | 24,720 | 24,876 | Floating | 3.6% | 8.7% | 1/9/2027 | 75% | 3 |
| Loan 35 Senior 7/12/2022 Irving, TX | 24,505 | 24,674 | Floating | 3.6% | 8.9% | 8/9/2027 | 72% | 3 |
| Loan 36 Senior 3/8/2022 Glendale, AZ | 23,768 | 23,937 | Floating | 3.5% | 8.6% | 3/9/2027 | 73% | 3 |
| Loan 37 Senior 7/1/2021 Aurora, CO | 23,647 | 23,753 | Floating | 3.2% | 8.3% | 7/9/2026 | 73% | 3 |
| Loan 38 Senior 3/31/2022 Phoenix, AZ | 23,098 | 23,265 | Floating | 3.7% | 8.8% | 4/9/2027 | 75% | 3 |
| Loan 39 Senior 11/4/2021 Austin, TX | 22,900 | 23,031 | Floating | 3.4% | 8.5% | 11/9/2026 | 71% | 3 |
| Loan 40 Preferred 11/30/2022 Milpitas, CA | 22,723 | 22,941 | Fixed | 6.0% | 12.1% | 12/1/2032 | n/a | 3 |
| Loan 41 Senior 7/13/2021 Oregon City, OR | 21,720 | 21,764 | Floating | 3.4% | 8.5% | 8/9/2026 | 73% | 3 |
| Loan 42 Senior 6/22/2021 Phoenix, AZ | 21,163 | 21,262 | Floating | 3.3% | 8.4% | 7/9/2026 | 75% | 2 |
| Loan 43 Senior 9/22/2021 Denton, TX | 19,709 | 19,761 | Floating | 3.3% | 8.4% | 10/9/2025 | 70% | 3 |
| Loan 44 Senior 1/12/2022 Austin, TX | 19,684 | 19,769 | Floating | 3.4% | 8.7% | 2/9/2027 | 75% | 3 |
| Loan 45 Senior 8/6/2021 La Mesa, CA | 19,535 | 19,570 | Floating | 3.0% | 8.3% | 8/9/2025 | 70% | 3 |
| Loan 46 Senior 12/21/2021 Gresham, OR | 19,378 | 19,455 | Floating | 3.6% | 8.9% | 1/9/2027 | 74% | 3 |
| Loan 47 Senior 9/1/2021 Bellevue, WA | 19,267 | 19,308 | Floating | 3.0% | 8.3% | 9/9/2025 | 64% | 3 |
| Loan 48 Senior 6/24/2021 Phoenix, AZ | 19,038 | 19,071 | Floating | 3.4% | 8.7% | 7/9/2026 | 63% | 3 |
| Loan 49 Senior 5/5/2022 Charlotte, NC | 18,396 | 18,500 | Floating | 3.5% | 8.8% | 5/9/2027 | 61% | 3 |
| Loan 50 Senior 7/14/2021 Salt Lake City, UT | 18,279 | 18,315 | Floating | 3.4% | 8.5% | 8/9/2026 | 73% | 3 |
| Loan 51 Senior 4/29/2022 Tacoma, WA | 17,744 | 17,852 | Floating | 3.3% | 8.6% | 5/9/2027 | 72% | 3 |
| Loan 52 Senior 6/25/2021 Phoenix, AZ | 17,189 | 17,263 | Floating | 3.2% | 8.3% | 7/9/2026 | 75% | 3 |
| Loan 53 Senior 7/21/2021 Durham, NC | 15,083 | 15,150 | Floating | 3.3% | 8.4% | 8/9/2026 | 58% | 3 |
| Loan 54 Senior 2/11/2021 Provo, UT | 14,039 | 14,082 | Floating | 3.9% | 9.0% | 3/9/2026 | 72% | 3 |
| Loan 55 Senior 3/8/2022 Glendale, AZ | 11,079 | 11,158 | Floating | 3.5% | 8.6% | 3/9/2027 | 73% | 3 |
| Loan 56 Mezzanine 7/30/2014 Various - TX | 4,449 | 4,449 | Fixed | 9.5% | 9.5% | 8/11/2024 | 71% - 83% | 3 |
| **Total/Weighted average multifamily loans** | $1,662,136 | $1,681,928 | 49% of total loans | 3.6% | 8.9% | 3.4 years |  | 3.0 |

59

| Loan Type Origination Date City, State Office | Carrying value(1) | Principal balance | Coupon type Cash Coupon(2) | Unlevered all-in yield(3) | Extended maturity date | Loan-to-value(4) | Q1 Risk ranking(5) |
| --- | ---: | ---: | --- | ---: | --- | ---: | ---: |
| Loan 57 Senior 2/17/2022 Boston, MA | $80,969 | $81,420 | Floating 3.8% | 9.1% | 3/9/2027 | 54% | 3 |
| Loan 58 Senior 12/7/2018 Carlsbad, CA | 76,411 | 76,411 | Floating 4.4% | 9.3% | 12/9/2023 | 73% | 3 |
| Loan 59 Senior 8/28/2018 San Jose, CA | 73,147 | 73,147 | Floating 2.5% | 7.6% | 8/28/2025 | 75% | 3 |
| Loan 60 Senior 1/19/2021 Phoenix, AZ | 72,229 | 72,460 | Floating 3.7% | 8.8% | 2/9/2026 | 70% | 3 |
| Loan 61 Senior 2/13/2019 Baltimore, MD | 56,730 | 56,730 | Floating 3.6% | 8.6% | 2/9/2025 | 74% | 4 |
| Loan 62 Senior 5/23/2022 Plano, TX | 40,143 | 40,300 | Floating 4.3% | 9.4% | 6/9/2027 | 64% | 3 |
| Loan 63 Senior 4/27/2022 Plano, TX | 39,310 | 39,434 | Floating 4.1% | 9.3% | 5/9/2027 | 70% | 3 |
| Loan 64 Senior 11/23/2021 Tualatin, OR | 38,945 | 39,102 | Floating 4.0% | 9.3% | 12/9/2026 | 66% | 4 |
| Loan 65 Senior 9/28/2021 Reston, VA | 36,677 | 36,784 | Floating 4.1% | 9.4% | 10/9/2026 | 71% | 3 |
| Loan 66 Senior 11/17/2021 Dallas, TX | 36,172 | 36,309 | Floating 4.0% | 9.3% | 12/9/2025 | 61% | 3 |
| **Subtotal top 10 office loans** | $550,733 | $552,097 | 16% of total loans |  |  |  |  |
| Loan 67(8) Senior 4/5/2019 L.I. City, NY | $35,000 | $68,330 | Floating 3.3% | 8.3% | 4/9/2024 | 58% | 5 |
| Loan 68(9) Senior 5/29/2019 L.I. City, NY | 34,000 | 68,432 | n/a/(9) n/a/(9) | n/a/(9) | 6/9/2024 | 59% | 5 |
| Loan 69 Senior 4/7/2022 San Jose, CA | 33,572 | 33,750 | Floating 4.2% | 9.5% | 4/9/2027 | 70% | 3 |
| Loan 70 Senior 6/2/2021 South Pasadena, CA | 33,136 | 33,091 | Floating 4.9% | 10.3% | 6/9/2026 | 69% | 3 |
| Loan 71 Senior 4/30/2021 San Diego, CA | 31,237 | 31,365 | Floating 3.6% | 8.7% | 5/9/2026 | 55% | 3 |
| Loan 72 Senior 6/16/2017 Miami, FL | 30,348 | 30,008 | Floating 5.8% | 10.6% | 6/9/2023 | 73% | 3 |
| Loan 73 Senior 11/19/2021 Gardena, CA | 28,296 | 28,505 | Floating 3.5% | 8.7% | 12/9/2026 | 69% | 3 |
| Loan 74 Senior 3/31/2022 Blue Bell, PA | 27,975 | 27,988 | Floating 4.2% | 10.0% | 4/9/2025 | 59% | 3 |
| Loan 75 Senior 10/21/2021 Blue Bell, PA | 27,930 | 27,930 | Floating 3.8% | 8.9% | 11/9/2023 | 67% | 3 |
| Loan 76(10) Senior 7/12/2019 Washington, D.C. | 27,000 | 56,935 | n/a/(10) n/a/(10) | n/a/(10) | 8/9/2024 | 68% | 5 |
| **Subtotal top 20 office loans** | $859,227 | $958,431 | 27% of total loans |  |  |  |  |
| Loan 77 Senior 2/26/2019 Charlotte, NC | $25,929 | $26,052 | Floating 3.3% | 8.3% | 7/9/2025 | 51% | 2 |
| Loan 78 Senior 11/23/2021 Oakland, CA | 24,906 | 25,000 | Floating 4.3% | 9.6% | 12/9/2026 | 57% | 4 |
| Loan 79 Senior 12/7/2021 Hillsboro, OR | 24,413 | 24,511 | Floating 4.0% | 9.3% | 12/9/2024 | 71% | 3 |
| Loan 80 Senior 9/16/2019 San Francisco, CA | 23,465 | 23,465 | Floating 3.3% | 8.3% | 10/9/2024 | 82% | 3 |
| Loan 81 Senior 7/30/2021 Denver, CO | 22,863 | 22,986 | Floating 4.4% | 9.5% | 8/9/2026 | 66% | 3 |
| Loan 82 Senior 8/27/2019 San Francisco, CA | 22,121 | 22,121 | Floating 2.9% | 8.0% | 9/9/2024 | 79% | 4 |
| Loan 83 Senior 10/29/2020 Denver, CO | 18,657 | 18,708 | Floating 3.7% | 8.8% | 11/9/2025 | 64% | 3 |
| Loan 84 Senior 10/13/2021 Burbank, CA | 15,910 | 16,011 | Floating 4.0% | 9.1% | 11/9/2026 | 57% | 3 |
| Loan 85 Senior 8/31/2021 Los Angeles, CA | 15,183 | 15,229 | Floating 4.6% | 9.9% | 9/9/2026 | 58% | 3 |
| Loan 86 Senior 11/16/2021 Charlotte, NC | 15,120 | 15,223 | Floating 4.5% | 9.6% | 12/9/2026 | 67% | 3 |
| Loan 87 Senior 11/10/2021 Richardson, TX | 13,486 | 13,507 | Floating 4.1% | 9.4% | 12/9/2026 | 71% | 3 |
| Loan 88 Senior 9/26/2019 Salt Lake City, UT | 12,524 | 12,524 | Floating 2.7% | 7.8% | 10/9/2024 | 72% | 3 |
| Loan 89 Mezzanine 2/13/2023 Baltimore, MD | 1,028 | 1,028 | Fixed n/a/(11) | 13.0% | 2/7/2025 | 74% - 75% | 4 |
| **Total/Weighted average office loans** | $1,094,832 | $1,194,796 | 32 % of total loans 3.6% | 8.5% | 2.6 years |  | 3.3 |

60

| Loan Type Origination Date City, State Hotel | Carrying value(1) | Principal balance | Coupon type | Cash Coupon(2) | Unlevered all-in yield(3) | Extended maturity date | Loan-to-value(4) | Q1 Risk ranking(5) |
| --- | ---: | ---: | --- | ---: | ---: | --- | ---: | ---: |
| Loan 90 Senior 1/2/2018 San Jose, CA | $189,298 | $189,298 | Floating | 4.8% | 9.6% | 11/9/2026 | 79% | 4 |
| Loan 91 Senior 6/28/2018 Berkeley, CA | 119,934 | 120,000 | Floating | 3.2% | 8.3% | 7/9/2025 | 66% | 3 |
| Loan 92 Senior 6/25/2018 Englewood, CO | 73,000 | 73,000 | Floating | 3.5% | 8.3% | 2/9/2025 | 62% | 3 |
| Loan 93 Mezzanine 9/23/2019 Berkeley, CA | 28,040 | 28,040 | Fixed | 11.5% | 11.5% | 7/9/2025 | 66% - 81% | 3 |
| Loan 94 Mezzanine 1/9/2017 New York, NY | 12,450 | 12,330 | Floating | 11.0% | 16.8% | 12/15/2023 | 67% - 80% | 4 |
| **Total/Weighted average hotel loans** | $422,722 | $422,668 |  | 4.7% | 9.3% | 2.8 years |  | 3.5 |
| **Other (Mixed-use)** |  |  |  |  |  |  |  |  |
| Loan 95 Senior 10/24/2019 Brooklyn, NY | $77,669 | $77,669 | Floating | 4.2% | 9.2% | 11/9/2024 | 70% | 3 |
| Loan 96 Senior 1/13/2022 New York, NY | 45,516 | 45,705 | Floating | 3.5% | 8.8% | 2/9/2027 | 67% | 3 |
| Loan 97 Senior 5/3/2022 Brooklyn, NY | 28,514 | 28,665 | Floating | 4.4% | 9.7% | 5/9/2027 | 68% | 3 |
| **Total/Weighted average other (mixed-use) loans** | $151,699 | $152,039 |  | 4.0% | 9.2% | 2.8 years |  | 3.0 |
| **Industrial** |  |  |  |  |  |  |  |  |
| Loan 98 Senior 7/13/2022 Ontario, CA | $23,353 | $23,539 | Floating | 3.3% | 8.4% | 8/9/2027 | 66% | 3 |
| Loan 99 Senior 3/25/2022 City of Industry, CA | 16,996 | 17,096 | Floating | 3.4% | 8.7% | 4/9/2027 | 67% | 3 |
| Loan 100 Senior 3/21/2022 Commerce, CA | 10,983 | 11,040 | Floating | 3.3% | 8.6% | 4/9/2027 | 71% | 3 |
| **Total/Weighted average industrial loans** | $51,332 | $51,675 |  | 3.3% | 8.5% | 4.2 years |  | 3.0 |
| **Total/Weighted average senior and mezzanine loans and preferred equity - Our Portfolio** | $3,382,721 | $3,503,106 |  | 3.8% | 8.8% | 3.0 years |  | 3.2 |

(1) Represents carrying values at our share as of March 31, 2023.

(2) Represents the stated coupon rate for loans; for floating rate loans, does not include USD 1-month London Interbank Offered Rate (“LIBOR”) or Secured Overnight Financing Rate (“SOFR”), which were 4.86% and 4.80%, respectively, as of March 31, 2023.

(3) In addition to the stated cash coupon rate, unlevered all-in yield includes non-cash payment in-kind interest income and the accrual of origination, extension and exit fees. Unlevered all-in yield for the loan portfolio assumes the applicable floating benchmark rate as of March 31, 2023, for weighted average calculations.

(4) Except for construction loans, senior loans reflect the initial loan amount divided by the as-is value as of the date the loan was originated, or the principal amount divided by the appraised value as of the date of the most recent as-is appraisal. Mezzanine loans include attachment loan-to-value and detachment loan-to-value, respectively. Attachment loan-to-value reflects initial funding of loans senior to our position divided by the as-is value as of the date the loan was originated, or the principal amount divided by the appraised value as of the date of the most recent appraisal. Detachment loan-to-value reflects the cumulative initial funding of our loan and the loans senior to our position divided by the as-is value as of the date the loan was originated, or the cumulative principal amount divided by the appraised value as of the date of the most recent appraisal.

(5) On a quarterly basis, the Company’s senior and mezzanine loans are rated “1” through “5,” from less risk to greater risk. Represents risk ranking as of March 31, 2023.

(6) Construction senior loans’ loan-to-value reflect the total commitment amount of the loan divided by as-completed appraised value, or the total commitment amount of the loan divided by the projected total cost basis. Construction mezzanine loans include attachment loan-to-value and detachment loan-to-value. Attachment loan-to-value reflects the total commitment amount of loans senior to our position divided by as-completed appraised value, or the total commitment amount of loans senior to our position divided by projected total cost basis. Detachment loan-to-value reflect the cumulative commitment amount of our loan and the loans senior to our position divided by as-completed appraised value, or the cumulative commitment amount of our loan and loans senior to our position divided by projected total cost basis.

(7) Subsequent to March 31, 2023, $14.5 million of unpaid principal balance relating to Loan 24 was placed on nonaccrual status; as such, no income will be recognized on this portion of the loan beginning in April 2023.

(8) Subsequent to March 31, 2023, Loan 67 was placed on nonaccrual status; as such, no income will be recognized beginning in April 2023.

(9) Loan 68 was placed on nonaccrual status in September 2022; as such, no income is being recognized.

(10) Loan 76 was placed on nonaccrual status in February 2023; as such, no income is being recognized.

(11) Loan 89 has a payment-in-kind provision and accrues interest at 13.0%.

At March 31, 2023, our general CECL reserve for our outstanding loans and future loan funding commitments is $34.1 million, which is 0.97% of the aggregate commitment amount of our loan portfolio, excluding loans that were evaluated for specific CECL reserves. This represents a decrease of $15.4 million from $49.5 million or 1.34% of the aggregate commitment amount of our loan portfolio at December 31, 2022. This decrease was primarily driven by the removal of two loans from the general CECL reserve pool, which were evaluated individually for specific CECL reserves, partially offset by increased reserves recorded on our portfolio of office loans. During the first quarter of 2023, we recorded $55.0 million of specific CECL reserves related to two senior loans and one mezzanine loan. For further discussion on these specific CECL reserves see “Asset Specific Loan Summaries” below.

### Asset Specific Loan Summaries

#### Long Island City, New York Office Senior Loans

|  | Loan Type | Collateral type | Origination Date | Carrying value | Principal balance | Coupon type | Cash Coupon | Unlevered all-in yield | Extended maturity date | Loan-to-value(1) | Q1 Risk ranking |
| --- | --- | --- | --- | ---: | ---: | --- | ---: | ---: | --- | ---: | ---: |
| Loan 67(2) | Senior | Office | 4/5/2019 | $35,000 | $68,330 | Floating | 3.3% | 8.3% | 4/9/2024 | 58% | 5 |
| Loan 68 | Senior | Office | 5/29/2019 | 34,000 | 68,432 | n/a/(3) | n/a/(3) | n/a/(3) | 6/9/2024 | 59% | 5 |

(1) Loan-to-value is calculated using the as-is value on the date of loan origination.

(2) Subsequent to March 31, 2023, Loan 67 was placed on nonaccrual status; as such, no income will be recognized beginning in April 2023.

(3) Loan 68 was placed on nonaccrual status in September 2022; as such, no income is being recognized.

We originated two senior loans on two transitional office properties to the same sponsorship group. The borrowing entities are unrelated and the loans are neither cross-collateralized nor cross defaulted.

The New York City (“NYC”) metro office markets have experienced and continue to experience higher vacancy rates due to the ongoing impact of COVID-19 and the continued impact of employee work from home arrangements. The Long Island City market has seen increases in vacancy as newly developed or renovated properties have become available for leasing. Additionally, the availability of significant sub-lease space in Long Island City has created additional supply putting downward pressure on rents.

#### Loan 67

As of March 31, 2023, Loan 67 has in-place leases for 30% of the property and generates incremental revenue from license agreements for rooftop signage and antenna space. In the fourth quarter of 2022, the property received a certificate of eligibility for the industrial and commercial abatement program (“ICAP”) resulting in significant tax savings for the current year and will result in lower real estate taxes for the next 15 years, subject to renewal on an annual basis.

The Loan 67 property cash flows are insufficient to cover the debt service payments. In March 2021, and again in January 2022, we modified the loan, allowing the borrower to use certain future funding advances from the tenant improvements and leasing costs account to cover interest carry and operations shortfalls, provided that the borrower made incremental deposits for interest and carry reserves to support the property. Given the continued negative market conditions surrounding NYC metro office buildings, including the lack of leasing activity, we utilized the estimated fair value of the collateral to estimate a specific CECL reserve of $22.7 million during the third quarter of 2022.

Borrower reserves have been exhausted and the loan is in maturity default and was placed on nonaccrual status as of April 2023. In the first quarter of 2023, the borrower cooperated with a consensual sale process through a national commercial real estate sales advisor. Given recent events in the banking sector, the results of the sale process were not satisfactory. We are evaluating a potential hold of the asset until market conditions improve. The loan has a mezzanine component which would facilitate a timely foreclosure in a proceeding pursuant to the Uniform Commercial Code, if required.

During the first quarter of 2023, we recorded an additional specific CECL reserve of $10.6 million based on feedback from the sales process and the estimated value to be recovered following a potential sale.

#### Loan 68

As of March 31, 2023, Loan 68 has in-place leases for 10% of the property and generates incremental revenue from a license agreement from rooftop signage. In the second quarter of 2022, the property received a certificate of eligibility for the ICAP resulting in significant tax savings for the current year and will result in lower real estate taxes for the next 15 years, subject to renewal on an annual basis.

Loan 68 property cash flows are insufficient to cover the debt service payments. In March 2021, and again in January 2022, we modified the loan, allowing the borrower to use certain future funding advances from the tenant improvements and leasing costs account to cover interest carry and operations shortfalls, provided that the borrower made incremental deposits for interest and carry reserves to support the property.

Borrower reserves have been exhausted and the loan has been in payment default since October 2022, and was placed on nonaccrual status as of September 2022. Given the continued negative market conditions surrounding NYC metro office buildings, including the lack of leasing activity, we utilized the estimated fair value of the collateral to estimate a specific CECL reserve of $34.5 million during the third quarter of 2022. The borrower is cooperating with a consensual sale process through a national commercial real estate sales advisor. Given recent events in the banking sector, the results of the sale process were not satisfactory. We are evaluating a potential hold of the asset until market conditions improve. The loan has a mezzanine component which would facilitate a timely foreclosure in a proceeding pursuant to the Uniform Commercial Code, if required.

#### Santa Clara, California Pre-development Senior Loan

|  | Loan Type | Collateral type | Origination Date | Carrying value | Principal balance | Coupon type | Cash Coupon | Unlevered all-in yield | Extended maturity date | Loan-to-value(1) | Q1 Risk ranking |
| --- | --- | --- | --- | ---: | ---: | --- | ---: | ---: | --- | ---: | ---: |
| Loan 1 | Senior | Multifamily | 6/18/2019 | $57,442 | $57,442 | Floating | 4.4% | 9.5% | 6/18/2024 | 65% | 4 |

(1) Loan-to-value is calculated using the as-is value on the date of loan origination.

We originated a $108.0 million senior mortgage loan in 2019 secured by a collection of six parcels totaling 14.5 acres in Santa Clara, CA (the “Pre-development Senior Loan”). At the time of origination, the property was improved with nine income-producing, low-rise structures across the two phases. The property is fully entitled for the development of 1,600 units (“DU”) in two phased assemblages, entitled for 700 DU and 900 DU, respectively.

As of March 31, 2023, the underwritten pre-development for Phase I and Phase II is complete, and the Pre-development Senior Loan is fully funded. In June 2021, the sponsor did not qualify for their first extension option. The maturity was ultimately extended for twelve months to June 2022 in exchange for certain lender required terms and conditions.

In June 2022, Phase I was released, the sponsor paid down the Pre-development Senior Loan by $50.6 million, and the Loan qualified for their second twelve month extension option. After the release of Phase I, our remaining collateral is the 900 DU in Phase II. The sponsor’s current plan for Phase II is to secure the necessary financing to repay the remaining loan and complete the pre-development of Phase II. We are coordinating with the borrower on seeking new financing alternatives. Given the uncertainty in the finance markets, it is possible that financing is unavailable to recapitalize the project and fund pre-development work for Phase II pursuant to the current business plan and may result in a future valuation impairment or investment loss.

#### Washington, D.C Office Senior Loan

|  | Loan Type | Collateral type | Origination Date | Carrying value | Principal balance | Coupon type | Cash Coupon | Unlevered all-in yield | Extended maturity date | Loan-to-value(1) | Q1 Risk ranking |
| --- | --- | --- | --- | ---: | ---: | --- | --- | --- | --- | ---: | ---: |
| Loan 76 | Senior | Office | 7/12/2019 | $27,000 | $56,935 | n/a/(2) | n/a/(2) | n/a/(2) | 8/9/2024 | 68% | 5 |

(1) Loan-to-value is calculated using the as-is value on the date of loan origination.

(2) Loan 76 was placed on nonaccrual status in February 2023; as such, no income is being recognized

We originated a $65.4 million senior mortgage loan in 2019 to finance the acquisition, capital improvements and leasing of a twelve story, 185,000 square foot, multi-tenant, Class-B office building located in the Dupont Circle neighborhood of Washington, D.C. (the “DC Office Loan”). Since acquisition, the sponsor has been converting a portion of the vacant office space into coworking space, which includes private offices, suites, and an amenity floor.

The Washington, D.C. (“DC”) office market, like many markets, was hit hard by the COVID-19 pandemic and remains distressed, with high overall vacancy rates due to the normalization of work from home and the hybrid attendance model. As a result of fewer employees commuting to their offices, businesses are re-evaluating their need for physical office space. The federal government has adopted a telework work from home program for many employees who are not critical for office attendance, which further compounds the issue for the DC office market. The federal government has been reducing their office requirements which is especially impacting the DC market area. As of March 2023, the DC Office Loan property is 51% leased and in addition to vacancy issues, the property has tenant leases that expire at the end of 2023, creating uncertainty around the ability to re-lease vacant space should these tenants elect not to renew.

The DC Office Loan’s second maturity was in August 2022, and it did not pass the extension tests. The sponsor requested that we waive the debt service coverage and debt yield hurdles required for their twelve-month extension option. We granted the sponsor a sixty-day extension so the sponsor could raise equity for a paydown to extend their loan for twelve months. At the end of the sixty-day extension, the sponsor requested an additional ninety-day extension, which we granted.

At the end of the ninety-day extension, we were unable to reach extension terms with the borrower and as a result, the DC Office Loan defaulted in January 2023 and was placed on nonaccrual status as of February 2023. We completed a foreclosure filing in March 2023 and expect to complete the foreclosure process and take possession of the underlying property by the end of the second quarter of 2023. We are examining all options to maximize value including a potential change of use of the property. Given market conditions surrounding D.C. metro offices, including the lack of leasing activity, the value maximizing use of this asset may be a conversion to multifamily. We utilized the estimated fair value of the collateral and therefore recorded a specific CECL reserve of $29.9 million during the first quarter of 2023.

#### Milpitas, California Development Mezzanine Loan

|  | Loan Type | Collateral type | Origination Date | Carrying value | Principal balance | Coupon type | Cash Coupon | Unlevered all-in yield | Extended maturity date | Loan-to-value(1) | Q1 Risk ranking |
| --- | --- | --- | --- | ---: | ---: | --- | ---: | ---: | --- | --- | ---: |
| Loan 24 | Mezzanine | Multifamily | 12/3/2019 | $30,239 | $44,716 | Fixed | 8.0% | 13.3% | 12/3/2024 | 58% - 85% | 5 |

(1) Loan-to-value is calculated using the as-is value on the date of loan origination.

We originated a $38.6 million mezzanine loan in 2019 to finance the development of a 213-unit luxury multifamily property, with 13,000 square feet of ground floor retail, located in Milpitas, California (the “Development Mezzanine Loan”). Our Development Mezzanine Loan sits behind a $84.0 million senior loan in the capital stack.

Construction of the property is complete, and the sponsor is currently leasing all available units. As of April 2023, the property’s multifamily component is 89% leased and no retail leases have been signed. The Development Mezzanine Loan’s initial maturity date was in December 2022, and it did not pass all required extension tests.

We, and the senior loan lender, extended the interim maturity date to effectuate a restructuring of the capital stack. In April 2023, we amended and restructured our Development Mezzanine Loan, bifurcating it into a $30.2 million Mezzanine A Note (the “Mezzanine A Note”) and a $14.5 million Mezzanine B Note (the “Mezzanine B Note”) to facilitate a new equity contribution from the borrower behind the Mezzanine A Note and ahead of the Mezzanine B Note. As part of the restructuring, we extended the terms of both Mezzanine A Note and Mezzanine B Note to be conterminous with the senior loan which was extended to March 2025, with an additional one-year extension option to March 2026. In connection with this amendment and restructuring of the loan in April 2023, during the first quarter of 2023, we recorded a specific CECL reserve of $14.5 million based on the estimated proceeds we expect to receive upon the resolution of the asset. Additionally, we placed the Mezzanine B Note on nonaccrual status in April 2023.

#### San Jose, California Hotel Senior Loan

|  | Loan Type | Collateral type | Origination Date | Carrying value | Principal balance | Coupon type | Cash Coupon | Unlevered all-in yield | Extended maturity date | Loan-to-value(1) | Q1 Risk ranking |
| --- | --- | --- | --- | ---: | ---: | --- | ---: | ---: | --- | ---: | ---: |
| Loan 90 | Senior | Hotel | 1/2/2018 | $189,928 | $189,928 | Floating | 4.8% | 9.6% | 11/9/2026 | 79% | 4 |

(1) Loan-to-value is calculated using the as-is value on the date of loan origination.

We originated a $173.5 million senior loan for the sponsor’s purchase of the San Jose Hotel (the “San Jose Hotel Loan”) in 2018. The San Jose Hotel Loan included an initial funding of $166.6 million with an additional $6.9 million of future advances. At closing, the borrower contributed approximately $90.0 million of equity toward the acquisition.

The onset of the COVID-19 pandemic in the spring of 2020 created challenges, which included lower occupancy rates, weaker financial performance and borrower funding of approximately $18.6 million of shortfalls to maintain operations, which ultimately led the borrower to close the San Jose, California hotel and file for Chapter 11 bankruptcy in March 2021. We entered into a restructuring support agreement with the borrower with respect to the bankruptcy process, in our capacity as the sole secured creditor. The bankruptcy court authorized the rejection of the existing hotel management agreement and approved a restructuring plan for the borrower to exit bankruptcy with Signia by Hilton as the new brand and hotel manager, and a $25 million mezzanine loan to support the re-opening, property improvement plans, certain operating expenses and all expenses associated with the bankruptcy process.

In November 2021 the borrower emerged from bankruptcy and the court confirmed the amended and restated senior mortgage loan terms in the amount of $184.9 million, an upsize which reflected accrued interest and fees, collapsed the prior preferred equity investment into the restated senior mortgage loan, and included certain other costs and expenses associated with bankruptcy. The San Jose hotel reopened in April 2022.

The San Jose Hotel Loan’s property performance continues to improve but not without its challenges. Office attendance in the city of San Jose is among the lowest among major cities in the nation. In February 2023 we upsized the $184.9 million loan by $7.0 million to fund renovations of all guest rooms and to fund debt service shortfalls anticipated until the hotel stabilizes later in 2023.

The 805-room property consists of a main hotel tower and a second expansion annex tower. The borrower has entered into a PSA to sell the 264-room hotel annex tower in third quarter of 2023. The prospective buyer is in the due diligence phase and the transaction is in early stages. If the transaction occurs, proceeds from the sale will be primarily applied to pay down the San Jose Hotel Loan, which will meaningfully improve the credit profile of our remaining investment. For the time being, the San Jose Hotel Loan remains risk rated four.

### Net Leased and Other Real Estate

Our net leased real estate investment strategy focuses on direct ownership in commercial real estate with an emphasis on properties with stable cash flow, which may be structurally senior to a third-party partner’s equity. In addition, we may own net leased real estate investments through joint ventures with one or more partners. As part of our net leased real estate strategy, we explore a variety of real estate investments including multi-tenant office, multifamily, student housing and industrial. Additionally, we have two investments in direct ownership of commercial real estate and own these operating real estate investments through joint ventures with one or more partners. Our properties are typically well-located with strong operating partners.

As of March 31, 2023, $748.3 million or 18.1% of our assets were invested in net leased and other real estate properties and these properties were 96.7% occupied. The following table presents our net leased and other real estate investments as of March 31, 2023 (dollars in thousands):

|  | Count(1) | Carrying Value(2) | NOI three months ended March 31, 2023(3) |
| --- | ---: | ---: | ---: |
| Net leased real estate | 8 | $589,411 | $12,365 |
| Other real estate | 2 | 158,876 | 3,905 |
| **Total/Weighted average net leased and other real estate** | 10 | $748,287 | $16,270 |

(1) Count represents the number of investments.

(2) Represents carrying values at our share as of March 31, 2023; includes real estate tangible assets, deferred leasing costs and other intangible assets less intangible liabilities.

(3) Refer to “Non-GAAP Supplemental Financial Measures” for further information on NOI.

The following table provides asset-level detail of our net leased and other real estate as of March 31, 2023:

| Collateral type City, State Net leased real estate | Number of Properties | Rentable square feet (“RSF”) / units/keys(1) | Weighted average % leased(2) | Weighted average lease term (yrs)(3) |
| --- | ---: | --- | ---: | ---: |
| Net lease 1 Industrial Various - U.S. | 2 | 2,787,343 RSF | 100% | 15.4 |
| Net lease 2 Office Stavanger, Norway | 1 | 1,290,926 RSF | 100% | 7.2 |
| Net lease 3 Office Aurora, CO | 1 | 183,529 RSF | 100% | 4.7 |
| Net lease 4 Office Indianapolis, IN | 1 | 338,000 RSF | 100% | 7.8 |
| Net lease 5 Retail Various - U.S. | 7 | 319,600 RSF | 100% | 4.7 |
| Net lease 6 Retail Keene, NH | 1 | 45,471 RSF | 100% | 5.8 |
| Net lease 7(4) Retail South Portland, ME | 1 | 52,900 RSF | 100% | 8.8 |
| Net lease 8 Retail Fort Wayne, IN | 1 | 50,000 RSF | 100% | 1.4 |
| **Total/Weighted average net leased real estate** | 15 | 5,067,769 RSF | 100% | 10.4 |
| **Other real estate** |  |  |  |  |
| Other real estate 1(4) Office Creve Coeur, MO | 7 | 847,604 RSF | 87% | 3.8 |
| Other real estate 2(4) Office Warrendale, PA | 5 | 496,414 RSF | 84% | 3.3 |
| **Total/Weighted average other real estate** | 12 | 1,344,018 RSF | 85% | 3.6 |
| **Total/Weighted average net leased and other real estate** | 27 |  |  |  |

(1) Rentable square feet based on carrying value at our share as of March 31, 2023.

(2) Represents the percent leased as of March 31, 2023. Weighted average calculation based on carrying value at our share as of March 31, 2023.

(3) Based on in-place leases (defined as occupied and paying leases) as of March 31, 2023, and assumes that no renewal options are exercised. Weighted average calculation based on carrying value at our share as of March 31, 2023.

(4) The current maturity of the debt on Net lease 7 is June 2023, the debt on Other real estate 1 is October 2024 and the debt on Other real estate 2 is January 2025.

### Asset Specific Net Leased Summaries

#### Warehouse Distribution Portfolio Net Lease

|  | Collateral type | City, State | Number of Properties | Rentable square feet (“RSF”) / units/keys | Weighted average % leased | Weighted average lease term (yrs) |
| --- | --- | --- | ---: | --- | ---: | ---: |
| Net lease 1 | Industrial | Various - U.S. | 2 | 2,787,343 RSF | 100% | 15.4 |

In August 2018 we acquired two warehouse distribution facilities located in Tracy, California and Tolleson, Arizona (the “Warehouse Distribution Portfolio”) for $292 million. These two properties are 100% occupied by a single tenant that is rated investment grade Ba1 from Moody’s. The tenant is a national grocer and these properties form a part of its national distribution network. The Warehouse Distribution Portfolio lease (the “Warehouse Distribution Portfolio Lease”) requires the tenant to pay for all real estate-related expenses, including operational expenditures, capital expenditures and taxes. The tenant has invested a significant amount of capital expenditures into each property over the past few years and has plans for additional capital expenditures in 2023. The Warehouse Distribution Portfolio Lease has a remaining lease term of 15.4 years ending in 2038. The tenant has the option to extend the lease for nine five-year periods at the same terms with rent adjusted to market rent. The Warehouse Distribution Portfolio Lease also has annual rent increases of 1.5%. Financing on the Warehouse Distribution Portfolio consists of mortgage and mezzanine debt for a total combined amount payable of $200 million. The debt is interest only at a blended fixed rate of 4.8% and matures in September 2028. The debt has a defeasance provision for any early loan prepayment. The tenant has made all rent payments and is current on all its financial obligations under the Warehouse Distribution Portfolio Lease. The tenant has recently announced a merger with another national grocer, which is pending regulatory approval. If the merger is approved, it is not expected to impact our lease agreement.

The Warehouse Distribution Portfolio has generated net operating income for the three months ended March 31, 2023, of $5.0 million; and the asset value on our consolidated balance sheet is $251.6 million as of March 31, 2023.

#### Stavanger, Norway Office Net Lease

|  | Collateral type | City, State | Number of Properties | Rentable square feet (“RSF”) / units/keys | Weighted average % leased | Weighted average lease term (yrs) |
| --- | --- | --- | ---: | --- | ---: | ---: |
| Net lease 2 | Office | Stavanger, Norway | 1 | 1,290,926 RSF | 100% | 7.2 |

In July 2018, we acquired a class A office campus in Stavanger, Norway (the “Norway Net Lease”) for $320 million (NOK 2.6 billion). This property is 100% occupied by a single tenant that is rated investment grade AA-/Aa2 from S&P and Moody’s, respectively. The property serves as their global headquarters. The Norway Net Lease requires the tenant to pay for all real estate-related expenses, including operational expenditures, capital expenditures and municipality taxes. The Norway Net Lease has a weighted average remaining lease term of seven years and the tenant has the option to extend for two five-year periods at the same terms with rent adjusted to market rent, and there is a risk that the rent can decrease at that time. The Norway Net Lease also has annual rent increases based on the Norwegian CPI Index through 2030. The rent increase in 2023 was 6.1%. Our tenant has injected a significant amount of capital into improvements of the property over the past 10 years.

Financing on the Norway Net Lease consists of a mortgage payable of $153.3 million (NOK 1.6 billion) with a fixed rate of 3.9%, which matures in June 2025, at which time there will be five years remaining on the initial lease term. The financing includes a provision for annual appraisal valuation each May with loan-to-value (“LTV”) tests declining from 75% LTV beginning in year five, to 70% LTV after year eight and 65% LTV after year nine. The most recent valuation in May of 2022 resulted in an LTV of 67%. Market conditions could impact property valuations and continuing compliance with those annual tests, resulting in a cash trap subject to LTV rebalancing.

This five-year remaining lease term along with risk of a downward rent adjustment at the 2030 renewal, and the increase in interest rates, could adversely impact the refinancing or sale of the asset. Furthermore, we have no assurances that the tenant will remain at the property beyond 2030. The tenant has made all rent payments and is current on all its financial obligations under the lease. Both the lease payments and mortgage debt service are NOK denominated currency. We maintain a series of USD-NOK forward swaps in order to minimize our foreign currency cash flow risk. These forward swaps occur quarterly through May 2024, where we have agreed to sell NOK and buy USD at a locked in forward curve rate. However, only the lease payments are hedged through May 2024. The net equity and lease payments beyond May 2024 are not hedged at this time. Therefore, the Norway Net Lease net book value may be subject to fluctuations based on the USD-NOK impact on unhedged values.

### Results of Operations

The following table summarizes our portfolio results of operations for the three months ended March 31, 2023, and December 31, 2022 (dollars in thousands):

| Net interest income | Three Months Ended March 31, 2023 | Three Months Ended December 31, 2022 | Q1’23 vs Q4’22 Amount |
| --- | ---: | ---: | ---: |
| Interest income | $75,616 | $74,856 | $760 |
| Interest expense | (42,662) | (41,336) | (1,326) |
| Interest income on mortgage loans held in securitization trusts | — | 3,471 | (3,471) |
| Interest expense on mortgage obligations issued by securitization trusts | — | (3,383) | 3,383 |
| Net interest income | 32,954 | 33,608 | (654) |
| **Property and other income** |  |  |  |
| Property operating income | 22,551 | 21,978 | 573 |
| Other income | 3,056 | 3,382 | (326) |
| Total property and other income | 25,607 | 25,360 | 247 |
| **Expenses** |  |  |  |
| Property operating expense | 5,852 | 6,418 | (566) |
| Transaction, investment and servicing expense | 835 | 397 | 438 |
| Interest expense on real estate | 5,509 | 6,997 | (1,488) |
| Depreciation and amortization | 7,996 | 8,213 | (217) |
| Increase of CECL reserve | 39,613 | 20,609 | 19,004 |
| Compensation and benefits | 8,805 | 8,163 | 642 |
| Operating expense | 3,473 | 2,677 | 796 |
| Total expenses | 72,083 | 53,474 | 18,609 |
| **Other income** |  |  |  |
| Unrealized gain on mortgage loans and obligations held in securitization trusts, net | — | 854 | (854) |
| Realized loss on mortgage loans and obligations held in securitization trusts, net | — | (854) | 854 |
| Other gain, net | 655 | 40 | 615 |
| **Income (loss) before equity in earnings of unconsolidated ventures and income taxes** | (12,867) | 5,534 | (18,401) |
| Equity in earnings of unconsolidated ventures | 9,055 | — | 9,055 |
| Income tax expense | (390) | (1,304) | 914 |
| **Net income (loss)** | $(4,202) | $4,230 | $(8,432) |

### Comparison of Three Months Ended March 31, 2023 and December 31, 2022

### Net Interest Income

#### Interest income

Interest income increased by $0.8 million to $75.6 million for the three months ended March 31, 2023 as compared to the three months ended December 31, 2022. The increase was primarily due to $6.4 million related to higher LIBOR and SOFR interest rates partially offset by $4.9 million related to loan repayments and $0.5 million of higher yield maintenance and accelerated amortization income recognized during the three months ended December 31, 2022.

#### Interest expense

Interest expense increased by $1.3 million to $42.7 million for the three months ended March 31, 2023 as compared to the three months ended December 31, 2022. The increase was driven by $3.4 million related to higher LIBOR and SOFR rates offset by $2.3 million related to payoffs of financings in connection with loan repayments.

#### Net interest income on mortgage loans and obligations held in securitization trusts, net

We did not hold any retained interests of securitization trusts, net during the three months ended March 31, 2023 following the sale of the retained interests of a securitization trust during the fourth quarter of 2022. We recorded $0.1 million of net interest income on mortgage loans and obligations held in securitization trusts, net during the three months ended December 31, 2022.

### Property and other income

#### Property operating income

Property operating income increased by $0.6 million to $22.6 million for the three months ended March 31, 2023, as compared to the three months ended December 31, 2022, primarily due to an increase in rental income related to an office property.

#### Other income

Other income decreased by $0.3 million to $3.1 million during the three months ended March 31, 2023, as compared to the three months ended December 31, 2022, primarily due to lower reimbursement income related to an office property partially offset by higher income from money market investments.

### Expenses

#### Property operating expense

Property operating expense decreased by $0.6 million to $5.9 million for the three months ended March 31, 2023, as compared to the three months ended December 31, 2022, primarily due to decreased expenses related to an office property.

#### Transaction, investment and servicing expense

Transaction, investment and servicing expense increased by $0.4 million to $0.8 million for the three months ended March 31, 2023 as compared to the three months ended December 31, 2022, primarily due to costs associated with a secondary offering of shares of our class A common stock.

#### Interest expense on real estate

Interest expense on real estate decreased by $1.5 million to $5.5 million for the three months ended March 31, 2023, as compared to the three months ended December 31, 2022. The decrease was primarily due to amortization recorded during the three months ended March 31, 2023.

#### Depreciation and amortization

Depreciation and amortization expense decreased by $0.2 million to $8.0 million for the three months ended March 31, 2023, as compared to the three months ended December 31, 2022. The decrease was primarily due to fully depreciating and amortizing assets associated with a retail property.

#### Increase (decrease) of CECL reserve

We recorded CECL reserves of $39.6 million for the three months ended March 31, 2023, as compared to reserves of $20.6 million for three months ended December 31, 2022. The increase was driven by specific CECL reserves related to two office senior loans and one development mezzanine loan. Refer to “Our Portfolio - Asset Specific Loan Summaries” section for further discussion.

#### Compensation and benefits

Compensation and benefits increased by $0.6 million to $8.8 million for the three months ended March 31, 2023, as compared to the three months ended December 31, 2022. This was primarily due to an increase in employee stock compensation expense and payroll taxes related to stock vesting events, which occur annually during the first quarter.

#### Operating expense

Operating expense increased by $0.8 million to $3.5 million for the three months ended March 31, 2023, as compared to the three months ended December 31, 2022. The increase was primarily due to higher third-party costs incurred during the first quarter of 2023.

### Other income (loss)

#### Unrealized gain on mortgage loans and obligations held in securitization trusts, net

During the three months ended December 31, 2022, we recorded a $0.9 million unrealized gain on mortgage loans and obligations held in securitization trusts, net due to the sale of the retained interests of a securitization trust during the fourth quarter of 2022.

#### Realized loss on mortgage loans and obligations held in securitization trusts, net

During the three months ended December 31, 2022, we recorded a $0.9 million realized loss on mortgage loans and obligations held in securitization trusts, net due to the sale of the retained interests of a securitization trust during the fourth quarter of 2022.

#### Other gain, net

During the three months ended March 31, 2023, we recorded other gain, net of $0.7 million, primarily due to gains related to foreign currency hedges. During the three months ended December 31, 2022, we recorded a de minimis gain primarily due to the gain on sale of a securitization trust offset by losses related to foreign currency hedges.

### Equity in earnings of unconsolidated ventures

We realized a one-time gain from our ratable share of dispute resolution proceeds of approximately $9.0 million from the senior mezzanine lender of the Development Mezzanine Loan in connection with our prior Los Angeles, California mixed-use project and retained B-participation investment. In connection with the settlement, effective January 26, 2023, we have no further interest in the loan or investment. We did not record equity in earnings of unconsolidated ventures during the three months ended December 31, 2022.

### Income tax benefit (expense)

Income tax expense decreased by $0.9 million to $0.4 million for the three months ended March 31, 2023, as compared to the three months ended December 31, 2022, due to return to provision adjustments booked in the quarter ended December 31, 2022.

| Net interest income | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Q1’23 vs Q1’22 Amount |
| --- | ---: | ---: | ---: |
| Interest income | $75,616 | $44,570 | $31,046 |
| Interest expense | (42,662) | (16,072) | (26,590) |
| Interest income on mortgage loans held in securitization trusts | — | 9,375 | (9,375) |
| Interest expense on mortgage obligations issued by securitization trusts | — | (8,488) | 8,488 |
| Net interest income | 32,954 | 29,385 | 3,569 |
| **Property and other income** |  |  |  |
| Property operating income | 22,551 | 24,168 | (1,617) |
| Other income | 3,056 | 276 | 2,780 |
| Total property and other income | 25,607 | 24,444 | 1,163 |
| **Expenses** |  |  |  |
| Property operating expense | 5,852 | 6,724 | (872) |
| Transaction, investment and servicing expense | 835 | 1,124 | (289) |
| Interest expense on real estate | 5,509 | 7,556 | (2,047) |
| Depreciation and amortization | 7,996 | 8,594 | (598) |
| Increase (decrease) of CECL reserve | 39,613 | (866) | 40,479 |
| Compensation and benefits | 8,805 | 8,225 | 580 |
| Operating expense | 3,473 | 4,349 | (876) |
| Total expenses | 72,083 | 35,706 | 36,377 |
| **Other income** |  |  |  |
| Other gain, net | 655 | 10,288 | (9,633) |
| **Income (loss) before equity in earnings of unconsolidated ventures and income taxes** | (12,867) | 28,411 | (41,278) |
| Equity in earnings of unconsolidated ventures | 9,055 | 25 | 9,030 |
| Income tax expense | (390) | (36) | (354) |
| **Net income (loss)** | $(4,202) | $28,400 | $(32,602) |

### Comparison of Three Months Ended March 31, 2023 and March 31, 2022

### Net Interest Income

#### Interest income

Interest income increased by $31.0 million to $75.6 million for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The increase was primarily due to $25.2 million related to higher LIBOR and SOFR interest rates and $16.6 million related to loan originations, which was offset by $10.5 million following loan repayments.

#### Interest expense

Interest expense increased by $26.6 million to $42.7 million for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The increase was primarily due to $15.3 million related to higher LIBOR and SOFR rates and $12.8 million related to financings on new loans. This was partially offset by $2.1 million related to paydowns on financings.

#### Net interest income on mortgage loans and obligations held in securitization trusts, net

We did not hold any retained interests of securitization trusts, net during the three months ended March 31, 2023 following the sale of the retained interests of a securitization trust during the fourth quarter of 2022. We recorded $0.9 million of net interest income on mortgage loans and obligations held in securitization trusts, net during the three months ended March 31, 2022.

### Property and other income

#### Property operating income

Property operating income decreased by $1.6 million to $22.6 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The decrease was primarily due to real estate properties sold in the first quarter of 2022.

#### Other income

Other income increased by $2.8 million to $3.1 million for the three months ended March 31, 2023, primarily due to higher income from money market investments.

### Expenses

#### Property operating expense

Property operating expense decreased by $0.9 million to $5.9 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The decrease was primarily due to real estate properties sold in the first quarter of 2022.

#### Transaction, investment and servicing expense

Transaction, investment and servicing expense decreased by $0.3 million to $0.8 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022 primarily due to lower tax-related costs incurred in the first quarter of 2023.

#### Interest expense on real estate

Interest expense on real estate decreased by $2.0 million to $5.5 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The decrease was primarily due to amortization recorded during the three months ended March 31, 2023.

#### Depreciation and amortization

Depreciation and amortization expense decreased by $0.6 million to $8.0 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The decrease was primarily due to fully depreciating and amortizing assets associated with a retail property.

#### Increase (decrease) of CECL reserve

During the three months ended March 31, 2023, we recorded CECL reserves of $39.6 million. This was driven by specific reserves related to two office senior loans and one development mezzanine loan. Refer to “Our Portfolio - Asset Specific Loan Summaries” section for further discussion.

#### Compensation and benefits

Compensation and benefits increased by $0.6 million to $8.8 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022 primarily due to an increase in employee stock compensation expense and payroll taxes related to stock vesting events.

#### Operating expense

Operating expense decreased by $0.9 million to $3.5 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The decrease was primarily due to lower legal, audit and insurance costs.

### Other income (loss)

#### Other gain, net

Other gain, net decreased by $9.6 million to $0.7 million during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to realized gains associated with two property sales recorded in the first quarter of 2022.

### Equity in earnings of unconsolidated ventures

We realized a one-time gain from its ratable share of dispute resolution proceeds of approximately $9.0 million from the senior mezzanine lender at our prior Los Angeles, California mixed-use project construction mezzanine loan and retained B-participation investment. In connection with the settlement, effective January 26, 2023, we have no further interest in the loan or investment. We recorded de minimis equity in earnings of unconsolidated ventures during the three months ended March 31, 2022.

### Income tax benefit (expense)

Income tax expense increased by $0.4 million to $0.4 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, primarily due to an increase in taxable income.

### Book Value Per Share

The following table calculates our GAAP book value per share and undepreciated book value per share ($ in thousands, except per share data):

|  | March 31, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Stockholders’ Equity excluding noncontrolling interests in investment entities | $1,353,418 | $1,387,768 |
| Shares |  |  |
| Class A common stock | 129,946 | 128,872 |
| Total outstanding | 129,946 | 128,872 |
| GAAP book value per share | $10.41 | $10.77 |
| Accumulated depreciation and amortization per share | $1.33 | $1.29 |
| Undepreciated book value per share(1) | $11.74 | $12.06 |

(1) Excludes the impact of our pro rata share of accumulated depreciation and amortization on real estate investments (including related intangible assets and liabilities).

### Non-GAAP Supplemental Financial Measures

#### Distributable Earnings

We present Distributable Earnings, which is a non-GAAP supplemental financial measure of our performance. We believe that Distributable Earnings provides meaningful information to consider in addition to our net income and cash flow from operating activities determined in accordance with GAAP, and this metric is a useful indicator for investors in evaluating and comparing our operating performance to our peers and our ability to pay dividends. We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, beginning with our taxable year ended December 31, 2018. As a REIT, we are required to distribute substantially all of our taxable income and we believe that dividends are one of the principal reasons investors invest in credit or commercial mortgage REITs such as our company. Over time, Distributable Earnings has been a useful indicator of our dividends per share and we consider that measure in determining the dividend, if any, to be paid. This supplemental financial measure also 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 portfolio and operations.

We define Distributable Earnings as GAAP net income (loss) attributable to our common stockholders (or, without duplication, the owners of the common equity of our direct subsidiaries, such as our OP) and excluding (i) non-cash equity compensation expense, (ii) the expenses incurred in connection with our formation or other strategic transactions, (iii) the incentive fee, (iv) acquisition costs from successful acquisitions, (v) gains or losses from sales of real estate property and impairment write-downs of depreciable real estate, including unconsolidated joint ventures and preferred equity investments, (vi) general CECL reserves determined by probability of default/loss given default (“PD/LGD”) model, (vii) depreciation and amortization, (viii) any unrealized gains or losses or other similar non-cash items that are included in net income for the current quarter, regardless of whether such items are included in other comprehensive income or loss, or in net income, (ix) one-time events pursuant to changes in GAAP and (x) certain material non-cash income or expense items that in the judgment of management should not be included in Distributable Earnings. For clauses (ix) and (x), such exclusions shall only be applied after approval by a majority of our independent directors. Distributable Earnings include specific CECL reserves when realized. Loan losses are realized when such amounts are deemed nonrecoverable at the time the loan is repaid, or if the underlying asset is sold following foreclosure, or if we determine that it is probable that all amounts due will not be collected; realized loan losses to be included in Distributable Earnings is the difference between the cash received, or expected to be received, and the book value of the asset.

Additionally, we define Adjusted Distributable Earnings as Distributable Earnings excluding (i) realized gains and losses on asset sales, (ii) fair value adjustments, which represent mark-to-market adjustments to investments in unconsolidated ventures based on an exit price, defined as the estimated price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants, (iii) unrealized gains or losses, (iv) realized specific CECL reserves and (v) one-time gains or losses that in the judgement of management should not be included in Adjusted Distributable Earnings. We believe Adjusted Distributable Earnings is a useful indicator for investors to further evaluate and compare our operating performance to our peers and our ability to pay dividends, net of the impact of any gains or losses on assets sales or fair value adjustments, as described above.

Distributable Earnings and Adjusted Distributable Earnings do not represent net income or cash generated from operating activities and should not be considered as an alternative to GAAP net income or an indication of our cash flows from operating activities determined in accordance with GAAP, a measure of our liquidity, or an indication of funds available to fund our cash needs. In addition, our methodology for calculating Distributable Earnings and Adjusted Distributable Earnings may differ from methodologies employed by other companies to calculate the same or similar non-GAAP supplemental financial measures, and accordingly, our reported Distributable Earnings and Adjusted Distributable Earnings may not be comparable to the Distributable Earnings and Adjusted Distributable Earnings reported by other companies.

The following table presents a reconciliation of net income (loss) attributable to our common stockholders to Distributable Earnings and Adjusted Distributable Earnings attributable to our common stockholders and noncontrolling interest of the Operating Partnership (dollars and share amounts in thousands, except per share data) for the three months ended March 31, 2023 and 2022:

|  | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 |
| --- | ---: | ---: |
| Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders | $(4,127) | $27,724 |
| Adjustments: |  |  |
| Net income (loss) attributable to noncontrolling interest of the Operating Partnership | — | 654 |
| Non-cash equity compensation expense | 2,295 | 1,880 |
| Depreciation and amortization | 6,556 | 8,603 |
| Net unrealized loss (gain): |  |  |
| Other unrealized (gain) loss on investments | (550) | 1,448 |
| General CECL reserves | (15,394) | (866) |
| Gain on sales of real estate, preferred equity and investments in unconsolidated joint ventures | — | (10,503) |
| Adjustments related to noncontrolling interests | (258) | (165) |
| Distributable Earnings (Loss) attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership | $(11,478) | $28,775 |
| Distributable Earnings (Loss) per share(1) | $(0.09) | $0.22 |
| Adjustments: |  |  |
| Specific CECL reserves | $55,007 | $— |
| Fair value adjustments | (9,055) | — |
| Adjusted Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership | $34,474 | $28,775 |
| Adjusted Distributable Earnings per share(1) | $0.27 | $0.22 |
| Weighted average number of common shares and OP units(1) | 129,202 | 132,821 |

(1) We calculate Distributable Earnings (Loss) per share, and Adjusted Distributable Earnings per share, non-GAAP financial measures, based on a weighted-average number of common shares and OP units (held by members other than us or our subsidiaries). For the three months ended March 31, 2022 included 3.1 million OP units.

#### NOI

We believe NOI to be a useful measure of operating performance of our net leased and other real estate portfolios as they are more closely linked to the direct results of operations at the property level. NOI excludes historical cost depreciation and amortization, which are based on different useful life estimates depending on the age of the properties, as well as adjustments for the effects of real estate impairment and gains or losses on sales of depreciated properties, which eliminate differences arising from investment and disposition decisions. Additionally, by excluding corporate level expenses or benefits such as interest expense, any gain or loss on early extinguishment of debt and income taxes, which are incurred by the parent entity and are not directly linked to the operating performance of the Company’s properties, NOI provides a measure of operating performance independent of the Company’s capital structure and indebtedness. However, the exclusion of these items as well as others, such as capital expenditures and leasing costs, which are necessary to maintain the operating performance of the Company’s properties, and transaction costs and administrative costs, may limit the usefulness of NOI. NOI may fail to capture significant trends in these components of GAAP net income (loss) which further limits its usefulness.

NOI should not be considered as an alternative to net income (loss), determined in accordance with GAAP, as an indicator of operating performance. In addition, our methodology for calculating NOI involves subjective judgment and discretion and may differ from the methodologies used by other companies, when calculating the same or similar supplemental financial measures and may not be comparable with other companies.

The following tables present a reconciliation of net income (loss) on our net leased and other real estate portfolios attributable to our common stockholders to NOI attributable to our common stockholders (dollars in thousands) for the three months ended March 31, 2023 and 2022:

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders | $(4,127) | $27,724 |
| Adjustments: |  |  |
| Net (income) loss attributable to non-net leased and other real estate portfolios(1) | 7,636 | (16,242) |
| Net income (loss) attributable to noncontrolling interests in investment entities | (75) | 22 |
| Amortization of above- and below-market lease intangibles | (139) | (41) |
| Interest expense on real estate | 5,509 | 7,556 |
| Transaction, investment and servicing expense | 35 | 100 |
| Depreciation and amortization | 7,938 | 8,551 |
| Operating expense | 1 | 32 |
| Other gain on investments, net | (553) | (10,369) |
| Income tax expense | 345 | 69 |
| NOI attributable to noncontrolling interest in investment entities | (300) | (309) |
| Total NOI, at share | $16,270 | $17,093 |

(1) Net income (loss) attributable to non-net leased and other real estate portfolios includes net (income) loss on our senior and mezzanine loans and preferred equity, CRE debt securities and corporate business segments.

### Liquidity and Capital Resources

### Overview

Our material cash commitments include commitments to repay borrowings, finance our assets and operations, meet future funding obligations, make distributions to our stockholders and fund other general business needs. We use significant cash to make investments, meet commitments to existing investments, repay the principal of and interest on our borrowings and pay other financing costs, make distributions to our stockholders and fund our operations.

Our primary sources of liquidity include cash on hand, cash generated from our operating activities and cash generated from asset sales and investment maturities. However, subject to maintaining our qualification as a REIT and our Investment Company Act exclusion, we may use several sources to finance our business, including bank credit facilities (including term loans and revolving facilities), master repurchase facilities and securitizations, as described below. In addition to our current sources of liquidity, there may be opportunities from time to time to access liquidity through public offerings of debt and equity securities. We have sufficient sources of liquidity to meet our material cash commitments for the next 12 months and beyond.

### Financing Strategy

We have a multi-pronged financing strategy that includes an up to $165.0 million secured revolving credit facility as of March 31, 2023, up to approximately $2.3 billion in secured revolving repurchase facilities, $1.1 billion in non-recourse securitization financing, $618.2 million in commercial mortgages and $27.9 million in other asset-level financing structures (refer to “Bank Credit Facility” section below for further discussion). In addition, we may use other forms of financing, including additional warehouse facilities, public and private secured and unsecured debt issuances and equity or equity-related securities issuances by us or our subsidiaries. We may also finance a portion of our investments through the syndication of one or more interests in a whole loan. We will seek to match the nature and duration of the financing with the underlying asset’s cash flow, including using hedges, as appropriate.

#### Debt-to-Equity Ratio

The following table presents our debt-to-equity ratio:

|  | March 31, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Debt-to-equity ratio(1) | 2.0x | 2.0x |

(1) Represents (i) total outstanding secured debt less cash and cash equivalents of $313.5 million and $306.3 million at March 31, 2023 and December 31, 2022, respectively to (ii) total equity, in each case, at period end.

### Potential Sources of Liquidity

As discussed in greater detail above under “Trends Affecting our Business,” and “Factors Impacting Our Operating Results” overall market uncertainty coupled with rising inflation and interest rates have tempered the loan financing markets recently. A rising interest rate environment will result in increased interest expense on our variable rate debt that is not hedged and may result in disruptions to our borrowers’ and tenants’ ability to finance their activities, which would similarly adversely impact their ability to make their monthly mortgage payments and meet their loan obligations. Additionally, due to the current market conditions, warehouse lenders may take a more conservative stance by increasing funding costs, which may lead to margin calls.

Our primary sources of liquidity include borrowings available under our credit facilities, master repurchase facilities and monthly mortgage payments from our borrowers.

#### Bank Credit Facilities

We use bank credit facilities (including term loans and revolving facilities) to finance our business. These financings may be collateralized or non-collateralized and may involve one or more lenders. Credit facilities typically have maturities ranging from two to five years and may accrue interest at either fixed or floating rates.

On January 28, 2022, the OP (together with certain subsidiaries of the OP from time to time party thereto as borrowers, collectively, the “Borrowers”) entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and the several lenders from time to time party thereto (the “Lenders”), pursuant to which the Lenders agreed to provide a revolving credit facility in the aggregate principal amount of up to $165.0 million, of which up to $25.0 million is available as letters of credit. Loans under the Credit Agreement may be advanced in U.S. dollars and certain foreign currencies, including euros, pounds sterling and Swiss francs. The Credit Agreement amended and restated the OP’s prior $300.0 million revolving credit facility that would have matured on February 1, 2022.

The Credit Agreement also includes an option for the Borrowers to increase the maximum available principal amount of up to $300.0 million, subject to one or more new or existing Lenders agreeing to provide such additional loan commitments and satisfaction of other customary conditions.

Advances under the Credit Agreement accrue interest at a per annum rate equal to, at the applicable Borrower’s election, either (x) an adjusted SOFR rate plus a margin of 2.25%, or (y) a base rate equal to the highest of (i) the Wall Street Journal’s prime rate, (ii) the federal funds rate plus 0.50% and (iii) the adjusted SOFR rate plus 1.00%, plus a margin of 1.25%. An unused commitment fee at a rate of 0.25% or 0.35%, per annum, depending on the amount of facility utilization, applies to un-utilized borrowing capacity under the Credit Agreement. Amounts owed under the Credit Agreement may be prepaid at any time without premium or penalty, subject to customary breakage costs in the case of borrowings with respect to which a SOFR rate election is in effect.

The maximum amount available for borrowing at any time under the Credit Agreement is limited to a borrowing base valuation of certain investment assets, with the valuation of such investment assets generally determined according to a percentage of adjusted net book value. As of date hereof, the borrowing base valuation is sufficient to permit borrowings of up to $165.0 million. If any borrowing is outstanding for more than 180 days after its initial draw, the borrowing base valuation will be reduced by 50% until all outstanding borrowings are repaid in full. The ability to borrow new amounts under the Credit Agreement terminates on January 31, 2026, at which time the OP may, at its election and by written notice to the Administrative Agent, extend the termination date for two (2) additional terms of six (6) months each, subject to the terms and conditions in the Credit Agreement, resulting in a latest termination date of January 31, 2027.

The obligations of the Borrowers under the Credit Agreement are guaranteed pursuant to a Guarantee and Collateral Agreement by substantially all material wholly owned subsidiaries of the OP (the “Guarantors”) in favor of the Administrative Agent (the “Guarantee and Collateral Agreement”) and, subject to certain exceptions, secured by a pledge of substantially all equity interests owned by the Borrowers and the Guarantors, as well as by a security interest in deposit accounts of the Borrowers and the Guarantors in which the proceeds of investment asset distributions are maintained.

The Credit Agreement contains various affirmative and negative covenants, including, among other things, the obligation of the Company to maintain REIT status and be listed on the New York Stock Exchange, and limitations on debt, liens and restricted payments. In addition, the Credit Agreement includes the following financial covenants applicable to the OP and its consolidated subsidiaries: (a) minimum consolidated tangible net worth of the OP to be greater than or equal to the sum of (i) $1,112,000,000 and (ii) 70% of the net cash proceeds received by the OP from any offering of its common equity after September 30, 2021 and of the net cash proceeds from any offering by the Company of its common equity to the extent such proceeds are contributed to the OP, excluding any such proceeds that are contributed to the OP within ninety (90) days of receipt and applied to acquire capital stock of the OP; (b) the OP’s ratio of EBITDA plus lease expenses to fixed charges for any period of four consecutive fiscal quarters to be not less than 1.50 to 1.00; (c) the OP’s minimum interest coverage ratio to be not less than 3.00 to 1.00; and (d) the OP’s ratio of consolidated total debt to consolidated total assets to be not more than 0.80 to 1.00. The Credit Agreement also includes customary events of default, including, among other things, failure to make payments when due, breach of covenants or representations, cross default to material indebtedness, material judgment defaults, bankruptcy matters involving any Borrower or any Guarantor and certain change of control events. The occurrence of an event of default will limit the ability of the OP and its subsidiaries to make distributions and may result in the termination of the credit facility, acceleration of repayment obligations and the exercise of remedies by the Lenders with respect to the collateral.

As of March 31, 2023, we were in compliance with all of our financial covenants under the Credit Agreement.

#### Master Repurchase Facilities

Currently, our primary source of financing is our Master Repurchase Facilities, which we use to finance the origination of senior loans. Repurchase agreements effectively allow us to borrow against loans that we own in an amount generally equal to (i) the market value of such loans multiplied by (ii) the applicable advance rate. Under these agreements, we sell our loans to a counterparty and agree to repurchase the same loans from the counterparty at a price equal to the original sales price plus an interest factor. During the term of a repurchase agreement, we receive the principal and interest on the related loans and pay interest to the lender under the master repurchase agreement. We intend to maintain formal relationships with multiple counterparties to obtain master repurchase financing of favorable terms.

The following table presents a summary of our Master Repurchase and Bank Credit Facilities as of March 31, 2023 (dollars in thousands):

| Master Repurchase Facilities | Maximum Facility Size | Current Borrowings | Weighted Average Final Maturity (Years) | Weighted Average Interest Rate(1) |
| --- | ---: | ---: | ---: | --- |
| Bank 1 | $600,000 | $522,677 | 4.0 | SOFR + 2.17% |
| Bank 2 | 600,000 | 309,113 | 3.0 | LIBOR/SOFR + 1.88% |
| Bank 3 | 400,000 | 236,718 | 4.2 | SOFR + 1.74% |
| Bank 4 | 400,000 | 223,668 | 4.3 | SOFR + 1.86% |
| Bank 5 | 250,000 | — | 2.2 | LIBOR/SOFR + 1.86% |
| **Total Master Repurchase Facilities** | 2,250,000 | 1,292,176 |  |  |
| **Bank Credit Facility** | 165,000 | — | — | SOFR + 2.25% |
| **Total Facilities** | $2,415,000 | $1,292,176 |  |  |

(1) The Company utilized the Secured Overnight Financing Rate (“SOFR”) for all deals beginning January 1, 2022.

The following table presents the quarterly average unpaid principal balance (“UPB”), end of period UPB and the maximum UPB at any month-end related to our Master Repurchase Facilities, Bank Credit Facility and CMBS Credit Facilities dollars in thousands):

| Quarter Ended | Quarterly Average UPB | End of Period UPB | Maximum UPB at Any Month-End |
| --- | ---: | ---: | ---: |
| March 31, 2023 | $1,778,135 | $1,292,176 | $1,320,246 |
| December 31, 2022 | 1,436,829 | 1,339,993 | 1,434,901 |
| September 30, 2022 | 1,510,616 | 1,533,664 | 1,537,511 |
| June 30, 2022 | 1,343,678 | 1,487,567 | 1,503,297 |
| March 31, 2022 | 1,052,455 | 1,199,789 | 1,199,789 |

The decrease in our end of period UPB from December 31, 2022 to March 31, 2023 was driven by payoffs of loans during the period.

#### Securitizations

We may seek to utilize non-recourse long-term securitizations of our investments in mortgage loans, especially loan originations, to the extent consistent with the maintenance of our REIT qualification and exclusion from the Investment Company Act in order to generate cash for funding new investments. This would involve conveying a pool of assets to a special purpose vehicle (or the issuing entity), which would issue one or more classes of non-recourse notes pursuant to the terms of an indenture. The notes would be secured by the pool of assets. In exchange for the transfer of assets to the issuing entity, we would receive the cash proceeds on the sale of non-recourse notes and a 100% interest in the equity of the issuing entity. The securitization of our portfolio investments might magnify our exposure to losses on those portfolio investments because any equity interest we retain in the issuing entity would be subordinate to the notes issued to investors and we would, therefore, absorb all of the losses sustained with respect to a securitized pool of assets before the owners of the notes experience any losses.

In October 2019, we executed a securitization transaction through our wholly-owned subsidiaries, CLNC 2019-FL1, Ltd. and CLNC 2019-FL1, LLC (collectively, “CLNC 2019-FL1”), which resulted in the sale of $840.4 million of investment grade notes.

On March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”) announced that LIBOR tenors relevant to CLNC 2019-FL1 would cease to be published or no longer be representative after June 30, 2023. The Alternative Reference Rates Committee (the “ARRC”) interpreted this announcement to constitute a benchmark transition event. As of June 17, 2021, the benchmark index interest rate was converted from LIBOR to SOFR, plus a benchmark adjustment of 11.448 basis points with a lookback period equal to the number of calendar days in the applicable Interest Accrual Period plus two SOFR business days, conforming with the indenture agreement and recommendations from the ARRC. Compounded SOFR for any interest accrual period shall be the “30-Day Average SOFR” as published by the Federal Reserve Bank of New York on each benchmark determination date.

As of February 19, 2022, the benchmark index interest rate was converted from Compounded SOFR to Term SOFR, plus a benchmark adjustment of 11.448 basis points, pursuant to the indenture agreement. Term SOFR for any interest accrual period shall be the one-month CME Term SOFR reference rate as published by the CME Group benchmark administration on each benchmark determination date.

As of March 31, 2023, less than half of the CLNC 2019-FL1 mortgage assets are indexed to LIBOR and the borrowings under CLNC 2019-FL1 are indexed to Term SOFR, creating an underlying benchmark index rate basis difference between a portion of the CLNC 2019-FL1 assets and liabilities, which is meant to be mitigated by the benchmark replacement adjustment described above. We have the right to transition the CLNC 2019-FL1 mortgage assets to SOFR, eliminating the basis difference between CLNC 2019-FL1 assets and liabilities, and will make the determination taking into account the loan portfolio as a whole. The transition to SOFR is not expected to have a material impact to CLNC 2019-FL1’s assets and liabilities and related interest expense.

CLNC 2019-FL1 included a two-year reinvestment feature that allowed us to contribute existing or newly originated loan investments in exchange for proceeds from repayments or repurchases of loans held in CLNC 2019-FL1, subject to the satisfaction of certain conditions set forth in the indenture. The reinvestment period for CLNC 2019-FL1 expired on October 19, 2021. During the first quarter of 2023 and through May 2, 2023, one loan held in CLNC 2019-FL was fully repaid and one loan was partially repaid totaling $36.2 million. The proceeds from the repayments were used to amortize the securitization bonds in accordance with the securitization priority of payments. As of May 2, 2023, the securitization advance rate was 73.8% at a weighted average cost of funds of Adjusted Term SOFR plus 1.87% (before transaction costs). At March 31, 2023, we had $632.6 million of unpaid principal balance of CRE debt investments financed with CLNC 2019-FL1.

Additionally, CLNC 2019-FL1 contains note protection tests that can be triggered as a result of contributed loan defaults, losses, and certain other events outlined in the indenture, beyond established thresholds. A note protection test failure that is not remedied can result in the redirection of interest proceeds from the below investment grade tranches to amortize the most senior outstanding tranche. While we continue to closely monitor all loan investments contributed to CLNC 2019-FL1, a deterioration in the performance of an underlying loan could negatively impact our liquidity position.

In July 2021, we executed a securitization transaction through our subsidiaries BRSP 2021-FL1 Ltd. and BRSP 2021-FL1, LLC, which resulted in the sale of $670 million of investment grade notes. The securitization reflects an advance rate of 83.75% at a weighted cost of funds of LIBOR plus 1.49% (before transaction expenses) and is collateralized by a pool of 28 senior loan investments.

BRSP 2021-FL1 includes a two-year reinvestment feature that allows us to contribute existing or newly originated loan investments in exchange for proceeds from repayments or repurchases of loans held in BRSP 2021-FL1, subject to the satisfaction of certain conditions set forth in the indenture. In addition to existing eligible loans available for reinvestment, the continued origination of securitization eligible loans is required to ensure that we reinvest the available proceeds within BRSP 2021-FL1. During the first quarter of 2023 and through May 2, 2023, two loans held in BRSP 2021-FL1 were fully repaid, totaling $48.0 million. We replaced the repaid loans by contributing existing loan investments of equal value. At March 31, 2023, we had $800.0 million of unpaid principal balance of CRE debt investments financed with BRSP 2021-FL1.

Additionally, BRSP 2021-FL1 contains note protection tests that can be triggered as a result of contributed loan defaults, losses, and certain other events outlined in the indenture, beyond established thresholds. A note protection test failure that is not remedied can result in the redirection of interest proceeds from the below investment grade tranches to amortize the most senior outstanding tranche. We will continue to closely monitor all loan investments contributed to BRSP 2021-FL1, a deterioration in the performance of an underlying loan could negatively impact our liquidity position.

#### Other potential sources of financing

In the future, we may also use other sources of financing to fund the acquisition of our target assets, including secured and unsecured forms of borrowing and selective wind-down and dispositions of assets. We may also seek to raise equity capital or issue debt securities in order to fund our future investments.

### Liquidity Needs

In addition to our loan origination activity and general operating expenses, our primary liquidity needs include interest and principal payments under our Bank Credit Facility, securitization bonds, and secured debt. Information concerning our contractual obligations and commitments to make future payments, including our commitments to repay borrowings, is included in the following table as of March 31, 2023. This table excludes our obligations that are not fixed and determinable (dollars in thousands):

|  | Payments Due by Period Total | Less than a Year | 1-3 Years | 3-5 Years | More than 5 Years |
| --- | ---: | ---: | ---: | ---: | ---: |
| Bank credit facility(1) | $1,554 | $413 | $825 | $316 | $— |
| Secured debt(2) | 2,373,999 | 828,893 | 1,172,161 | 120,348 | 252,597 |
| Securitization bonds payable(3) | 1,168,256 | 723,943 | 444,313 | — | — |
| Ground lease obligations(4) | 26,020 | 2,947 | 4,265 | 3,741 | 15,067 |
| Office leases | 7,953 | 1,283 | 2,608 | 2,669 | 1,393 |
|  | $3,577,782 | $1,557,479 | $1,624,172 | $127,074 | $269,057 |
| Lending commitments(5) | 256,252 |  |  |  |  |
| Total | $3,834,034 |  |  |  |  |

(1) Future interest payments were estimated based on the applicable index at March 31, 2023 and unused commitment fee of 0.25% per annum, assuming principal is repaid on the current maturity date of January 2027.

(2) Amounts include minimum principal and interest obligations through the initial maturity date of the collateral assets. Interest on floating rate debt was determined based on the applicable index at March 31, 2023.

(3) The timing of future principal payments was estimated based on expected future cash flows of underlying collateral loans. Repayments are estimated to be earlier than contractual maturity only if proceeds from underlying loans are repaid by the borrowers.

(4) The amounts represent minimum future base rent commitments through initial expiration dates of the respective noncancellable operating ground leases, excluding any contingent rent payments. Rents paid under ground leases are recoverable from tenants.

(5) Future lending commitments may be subject to certain conditions that borrowers must meet to qualify for such fundings. Commitment amount assumes future fundings meet the terms to qualify for such fundings.

#### Share Repurchases

In April 2023, our board of directors authorized a stock repurchase program (“Stock Repurchase Program”) under which we may repurchase up to $50.0 million of our outstanding Class A common stock until April 30, 2024. The Stock Repurchase Program replaces the prior stock repurchase program authorization which expired on April 30, 2023. Under the Stock Repurchase Program, we may repurchase shares in open market purchases, in privately negotiated transactions or otherwise. We have a written trading plan as part of the Share Repurchase Program that provides for share repurchases in open market transactions that is intended to comply with Rule 10b-18 under the “Exchange Act”. The Stock Repurchase Program will be utilized at our discretion and in accordance with the requirements of the SEC. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate requirements and other conditions.

During the three months ended March 31, 2023, we did not make any share repurchases, and as of March 31, 2023, there was $81.7 million remaining available to make repurchases under the prior stock repurchase program.

### Cash Flows

The following presents a summary of our consolidated statements of cash flows for the three months ended March 31, 2023 and 2022 (dollars in thousands):

| Cash flow provided by (used in): | Three Months Ended March 31, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Operating activities | $39,673 | $32,357 | $7,316 |
| Investing activities | 69,622 | (218,802) | 288,424 |
| Financing activities | (114,408) | 169,948 | (284,356) |

### Operating Activities

Cash inflows from operating activities are generated primarily through interest received from loans receivable and securities, and property operating income from our real estate portfolio. This is partially offset by payment of interest expenses for credit facilities and mortgages payable, and operating expenses supporting our various lines of business, including property management and operations, loan servicing and workout of loans in default, investment transaction costs, as well as general administrative costs.

Our operating activities provided net cash inflows of $39.7 million and $32.4 million for the three months ended March 31, 2023 and 2022, respectively. Net cash provided by operating activities increased for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to higher income earned as a result of higher interest rates.

We believe cash flows from operations, available cash balances and our ability to generate cash through short and long-term borrowings are sufficient to fund our operating liquidity needs.

### Investing Activities

Investing activities include cash outlays for acquisition of real estate and disbursements on new and/or existing loans, which are partially offset by repayments and sales of loan receivables, proceeds from sale of real estate, as well as proceeds from maturity or sale of securities.

Investing activities generated net cash inflows of $69.6 million for the three months ended March 31, 2023. Net cash provided by investing activities in 2023 resulted primarily from repayments on loans and preferred equity held for investment, net of $101.4 million, partially offset by future advances on our loans and preferred equity held for investment, net of $16.4 million.

Investing activities used net cash outflows of $218.8 million for the three months ended March 31, 2022. Net cash used in investing activities in 2022 resulted primarily from originations and future advances on our loans and preferred equity held for investment, net of $498.2 million partially offset by repayments on loans and preferred equity held for investment, net of $215.3 million, proceeds from sales of real estate of $55.6 million and repayments of principal in mortgage loans held in securitization trusts of $13.3 million.

### Financing Activities

We finance our investing activities largely through borrowings secured by our investments along with capital from third party or affiliated co-investors. We also have the ability to raise capital in the public markets through issuances of common stock, as well as draw upon our corporate credit facility, to finance our investing and operating activities. Accordingly, we incur cash outlays for payments on third party debt, dividends to our common stockholders and through May 27, 2022, on distributions to our noncontrolling interests.

Financing activities used net cash of $114.4 million for the three months ended March 31, 2023, which resulted primarily from repayment of credit facilities of $158.2 million, repayment of securitization bonds of $36.2 million, and distributions paid on common stock of $26.0 million partially offset by borrowings from credit facilities of $110.3 million.

Financing activities provided net cash of $169.9 million for the three months ended March 31, 2022, which resulted which resulted primarily from borrowings from credit facilities of $383.3 million partially offset by repayment of credit facilities of $88.7 million, repayment of mortgage notes of $43.3 million, repayment of securitization bonds of $40.7 million, distributions paid on common stock of $23.9 million and repayment of mortgage obligations issued by securitization trusts of $13.3 million.

### Our Investment Strategy

Our objective is to generate consistent and attractive risk-adjusted returns to our stockholders. We seek to achieve this objective primarily through cash distributions and the preservation of invested capital. We believe our investment strategy provides flexibility through economic cycles to achieve attractive risk-adjusted returns. This approach is driven by a disciplined investment strategy, focused on:

- leveraging long standing relationships, our organization structure and the experience of the team;
- the underlying real estate and market dynamics to identify investments with attractive risk-return profiles;
- primarily originating and structuring CRE senior loans and selective investments in mezzanine loans and preferred equity with attractive return profiles relative to the underlying value and financial operating performance of the real estate collateral, given the strength and quality of the sponsorship;
- structuring transactions with a prudent amount of leverage, if any, given the risk of the underlying asset’s cash flows, attempting to match the structure and duration of the financing with the underlying asset’s cash flows, including through the use of hedges, as appropriate; and
- operating our net leased real estate investments and selectively pursuing new investments based on property location and purpose, tenant credit quality, market lease rates and potential appreciation of, and alternative uses for, the real estate.

The period for which we intend to hold our investments will vary depending on the type of asset, interest rates, investment performance, micro and macro real estate environment, capital markets and credit availability, among other factors. We generally expect to hold debt investments until the stated maturity and equity investments in accordance with each investment’s proposed business plan. We may sell all or a partial ownership interest in an investment before the end of the expected holding period if we believe that market conditions have maximized its value to us, or the sale of the asset would otherwise be in the best interests of our stockholders.

Our investment strategy is flexible, enabling us to adapt to shifts in economic, real estate and capital market conditions and to exploit market inefficiencies. We may expand or change our investment strategy or target assets over time in response to opportunities available in different economic and capital market conditions. This flexibility in our investment strategy allows us to employ a customized, solutions-oriented approach, which we believe is attractive to borrowers and tenants. We believe that our diverse portfolio, our ability to originate, acquire and manage our target assets and the flexibility of our investment strategy positions us to capitalize on market inefficiencies and generate attractive long-term risk-adjusted returns for our stockholders through a variety of market conditions and economic cycles.

### Underwriting, Asset and Risk Management

We closely monitor our portfolio and actively manage risks associated with, among other things, our assets and interest rates. Prior to investing in any particular asset, the underwriting team, in conjunction with third party providers, undertakes a rigorous asset-level due diligence process, involving intensive data collection and analysis, to ensure that we understand fully the state of the market and the risk-reward profile of the asset. Beginning in 2021, our investment and portfolio management and risk assessment practices diligence the environmental, social and governance (“ESG”) standards of our business counterparties, including borrowers, sponsors and that of our investment assets and underlying collateral, which may include sustainability initiatives, recycling, energy efficiency and water management, volunteer and charitable efforts, anti-money laundering and know-your-client policies, and diversity, equity and inclusion practices in workforce leadership, composition and hiring practices. Prior to making a final investment decision, we focus on portfolio diversification to determine whether a target asset will cause our portfolio to be too heavily concentrated with, or cause too much risk exposure to, any one borrower, real estate sector, geographic region, source of cash flow for payment or other geopolitical issues. If we determine that a proposed acquisition presents excessive concentration risk, it may determine not to acquire an otherwise attractive asset.

For each asset that we acquire, our asset management team engages in active management of the asset, the intensity of which depends on the attendant risks. The asset manager works collaboratively with the underwriting team to formulate a strategic plan for the particular asset, which includes evaluating the underlying collateral and updating valuation assumptions to reflect changes in the real estate market and the general economy. This plan also generally outlines several strategies for the asset to extract the maximum amount of value from each asset under a variety of market conditions. Such strategies may vary depending on the type of asset, the availability of refinancing options, recourse and maturity, but may include, among others, the restructuring of non-performing or sub-performing loans, the negotiation of discounted pay-offs or other modification of the terms governing a loan, and the foreclosure and management of assets underlying non-performing loans in order to reposition them for profitable disposition. We continuously track the progress of an asset against the original business plan to ensure that the attendant risks of continuing to own the asset do not outweigh the associated rewards. Under these circumstances, certain assets will require intensified asset management in order to achieve optimal value realization.

Our asset management team engages in a proactive and comprehensive on-going review of the credit quality of each asset it manages. In particular, for debt investments on at least an annual basis, the asset management team will evaluate the financial wherewithal of individual borrowers to meet contractual obligations as well as review the financial stability of the assets securing such debt investments. Further, there is ongoing review of borrower covenant compliance including the ability of borrowers to meet certain negotiated debt service coverage ratios and debt yield tests. For equity investments, the asset management team, with the assistance of third-party property managers, monitors and reviews key metrics such as occupancy, same store sales, tenant payment rates, property budgets and capital expenditures. If through this analysis of credit quality, the asset management team encounters declines in credit quality not in accord with the original business plan, the team evaluates the risks and determine what changes, if any, are required to the business plan to ensure that the attendant risks of continuing to hold the investment do not outweigh the associated rewards.

In addition, the audit committee of our Board of Directors, in consultation with management, periodically reviews our policies with respect to risk assessment and risk management, including key risks to which we are subject, including credit risk, liquidity risk and market risk, and the steps that management has taken to monitor and control such risks.

### 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 significantly more than inflation does. A change in interest rates may correlate with the inflation rate. Substantially all of the leases at our multifamily properties allow for monthly or annual rent increases which provide us with the opportunity to achieve increases, where justified by the market, as each lease matures. Such types of leases generally minimize the risks of inflation on our multifamily properties.

Refer to Item 3, “Quantitative and Qualitative Disclosures About Market Risk” for additional details.

### Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. There have been no material changes to our critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

### Recent Accounting Updates

For recent accounting updates, refer to Note 2, “Summary of Significant Accounting Policies” in our accompanying consolidated financial statements included in Part I, Item 1, “Financial Statements.”

## Market risk

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Our primary market risks are interest rate risk, prepayment risk, extension risk, credit risk, real estate market risk, capital market risk and foreign currency risk, either directly through the assets held or indirectly through investments in unconsolidated ventures.

#### Interest Rate Risk

Interest rate risk relates to the risk that the future cash flow of a financial instrument will fluctuate because of changes in market interest rates. Interest rate risk is highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, international conflicts, inflation and other factors beyond our control. Credit curve spread risk is highly sensitive to the dynamics of the markets for loans and securities we hold. Excessive supply of these assets combined with reduced demand will cause the market to require a higher yield. This demand for higher yield will cause the market to use a higher spread over the U.S. Treasury securities yield curve, or other benchmark interest rates, to value these assets.

As U.S. Treasury securities are priced to a higher yield and/or the spread to U.S. Treasuries used to price the assets increases, the price at which we could sell some of our fixed rate financial assets may decline. Conversely, as U.S. Treasury securities are priced to a lower yield and/or the spread to U.S. Treasuries used to price the assets decreases, the value of our fixed rate financial assets may increase. Fluctuations in LIBOR and SOFR may affect the amount of interest income we earn on our floating rate borrowings and interest expense we incur on borrowings indexed to LIBOR and SOFR, including under credit facilities and investment-level financing.

We utilize a variety of financial instruments on some of our investments, including interest rate swaps, caps, floors and other interest rate exchange contracts, in order to limit the effects of fluctuations in interest rates on their operations. The use of these types of derivatives to hedge interest-earning assets and/or interest-bearing liabilities carries certain risks, including the risk that losses on a hedge position will reduce the funds available for distribution and that such losses may exceed the amount invested in such instruments. A hedge may not perform its intended purpose of offsetting losses of rising interest rates. Moreover, with respect to certain of the instruments used as hedges, there is exposure to the risk that the counterparties may cease making markets and quoting prices in such instruments, which may inhibit the ability to enter into an offsetting transaction with respect to an open position. Our profitability may be adversely affected during any period as a result of changing interest rates.

As of March 31, 2023, a hypothetical 100 basis point increase or decrease in the applicable interest rate benchmark on our loan portfolio would increase or decrease interest income by $8.0 million annually, net of interest expense.

See the “Factors Impacting Our Operating Results” section in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion on interest rates.

#### Prepayment risk

Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, resulting in a less than expected return on an investment. As prepayments of principal are received, any premiums paid on such assets are amortized against interest income, while any discounts on such assets are accreted into interest income. Therefore, an increase in prepayment rates has the following impact: (i) accelerates amortization of purchase premiums, which reduces interest income earned on the assets; and conversely, (ii) accelerates accretion of purchase discounts, which increases interest income earned on the assets.

#### Extension risk

The weighted average life of assets is projected based on assumptions regarding the rate at which borrowers will prepay or extend their mortgages. If prepayment rates decrease or extension options are exercised by borrowers at a rate that deviates significantly from projections, the life of fixed rate assets could extend beyond the term of the secured debt agreements. This in turn could negatively impact liquidity to the extent that assets may have to be sold and losses may be incurred as a result.

#### Credit risk

Investment in loans held for investment is subject to a high degree of credit risk through exposure to loss from loan defaults. Default rates are subject to a wide variety of factors, including, but not limited to, borrower financial condition, property performance, property management, supply/demand factors, construction trends, consumer behavior, regional economics, interest rates, the strength of the U.S. economy and other factors beyond our control, all of which have and may continue to be detrimentally impacted by the COVID-19 pandemic. All loans are subject to a certain probability of default. We manage credit risk through the underwriting process, acquiring investments at the appropriate discount to face value, if any, and establishing loss assumptions. Performance of the loans is carefully monitored, including those held through joint venture investments, as well as external factors that may affect their value.

We are also subject to the credit risk of the tenants in our properties, including business closures, occupancy levels, meeting rent or other expense obligations, lease concessions, and ESG standards and practices among other factors, all of which have and may continue to be detrimentally impacted by the COVID-19 pandemic. We seek to undertake a rigorous credit evaluation of the tenants prior to acquiring properties. This analysis includes an extensive due diligence investigation of the tenants’ businesses, as well as an assessment of the strategic importance of the underlying real estate to the respective tenants’ core business operations. Where appropriate, we may seek to augment the tenants’ commitment to the properties by structuring various credit enhancement mechanisms into the underlying leases. These mechanisms could include security deposit requirements or guarantees from entities that are deemed credit worthy.

We are working closely with our borrowers and tenants to address any impact of COVID-19 on their businesses. Our in-depth understanding of CRE and real estate-related investments, and in-house underwriting, asset management and resolution capabilities, provides us and management with a sophisticated full-service platform to regularly evaluate our investments and determine primary, secondary or alternative strategies to manage the credit risks described above. This includes intermediate servicing and complex and creative negotiating, restructuring of non-performing investments, foreclosure considerations, intense management or development of owned real estate, in each case to manage the risks faced to achieve value realization events in our interests and our stockholders. Solutions considered may include defensive loan or lease modifications, temporary interest or rent deferrals or forbearances, converting current interest payment obligations to payment-in-kind, repurposing reserves and/or covenant waivers. Depending on the nature of the underlying investment and credit risk, we may pursue repositioning strategies through judicious capital investment in order to extract value from the investment or limit losses.

There can be no assurance that the measures taken will be sufficient to address the negative impact the ongoing effects of COVID-19 may have on our future operating results, liquidity and financial condition.

#### Real estate market risk

We are exposed to the risks generally associated with the commercial real estate market. The market values of commercial real estate 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, as well as changes or weakness in specific industry segments, and other macroeconomic factors beyond our control, including the COVID-19 pandemic, which have and may continue to affect occupancy rates, capitalization rates and absorption rates. This in turn could impact the performance of tenants and borrowers. We seek to manage these risks through our underwriting due diligence and asset management processes and the solutions-oriented process described above.

#### Capital markets risk

We are exposed to risks related to the debt capital markets, specifically the ability to finance our business through borrowings under secured revolving repurchase facilities, secured and unsecured warehouse facilities or other debt instruments. We seek to mitigate these risks by monitoring the debt capital markets to inform our decisions on the amount, timing and terms of our borrowings.

The COVID-19 pandemic has had a direct and volatile impact on the global markets, including the commercial real estate equity and debt capital markets. The continued disruption caused by COVID-19 has led to a negative impact on asset valuations and significant constraints on liquidity in the capital markets, which have led to restrictions on lending activity, downward pressure on covenant compliance and requirements to post margin or repayments under master repurchase financing arrangements. Our Master Repurchase Facilities are partial recourse, and margin call provisions do not permit valuation adjustments based on capital markets events; rather they are limited to collateral-specific credit marks generally determined on a commercially reasonable basis. For the three months ended March 31, 2023, and through May 2, 2023, we have not received any margin calls under our Master Repurchase Facilities.

We have amended our Bank Credit Facility and Master Repurchase Facilities to adjust certain covenants (such as the tangible net worth covenant), reduce advance rates on certain financed assets, obtain margin call holidays and permitted modification flexibilities, in an effort to mitigate the risk of future compliance issues, including margin calls, under our financing arrangements.

#### Foreign Currency Risk

We have foreign currency rate exposures related to our foreign currency-denominated investments held by our foreign subsidiaries. Changes in foreign currency rates can adversely affect the fair values and earning of our non-U.S. holdings. We generally mitigate this foreign currency risk by utilizing currency instruments to hedge our net investments in our foreign subsidiaries. The type of hedging instruments that we employ on our foreign subsidiary investments are put options.

At March 31, 2023, we had approximately NOK 615.8 million or a total of $59.0 million, in net investments in our European subsidiaries. A 1.0% change in the foreign currency rate would result in a $0.6 million increase or decrease in translation gain or loss included in other comprehensive income in connection with our European subsidiary.

A summary of the foreign exchange contracts in place at March 31, 2023, including notional amount and key terms, is included in Note 14, “Derivatives,” to Part I, Item 1, “Financial Statements.” The maturity dates of these instruments approximate the projected dates of related cash flows for specific investments. Termination or maturity of currency hedging instruments may result in an obligation for payment to or from the counterparty to the hedging agreement. We are exposed to credit loss in the event of non-performance by counterparties for these contracts. To manage this risk, we select major international banks and financial institutions as counterparties and perform a quarterly review of the financial health and stability of our trading counterparties. Based on our review at March 31, 2023, we do not expect any counterparty to default on its obligations.

## Controls and procedures

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### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(b) under the Exchange Act, our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2023, our disclosure controls and procedures were effective at providing reasonable assurance regarding the reliability of the information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

### Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 508 characters.

In addition to the other information in this Quarterly Report on Form 10-Q, you should carefully consider the risks described in our Annual Report on Form 10-K for the year ended December 31, 2022, in Part I, Item 1A, Risk Factors, and in our other filings with the SEC. These factors may materially affect our business, financial condition and operating results. There have been no material changes to the risk factors relating to the Company disclosed in our Form 10-K for the year ended December 31, 2022.

Filed May 3, 2023.
Source: SEC EDGAR, the filing index for accession 0001717547-23-000064. Last ingested by Listed: Oct 31, 2026, 12:33 ET. No prices; not investment advice.