Claros Mortgage Trust, Inc. - Quarter Report: 2022 September (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40993

Claros Mortgage Trust, Inc.

(Exact Name of Registrant as Specified in its Charter)


Maryland	47-4074900
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
c/o Mack Real Estate Credit Strategies, L.P.
60 Columbus Circle, 20th Floor, New York, NY	10023
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 484-0050

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

CMTG

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 8, 2022, the registrant had 138,376,144 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Changes in Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	56
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	57
Item 5.	Other Information	57
Item 6.	Exhibits	58
Signatures		60

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Claros Mortgage Trust, Inc.

Consolidated Balance Sheets

(unaudited, in thousands, except share data)


	September 30, 2022			December 31, 2021
Assets
Cash and cash equivalents	$	225,556		$	310,194
Restricted cash		37,110			23,942
Loan principal payments held by servicer		7,651			154,600
Loans receivable held-for-investment		7,329,411			6,407,305
Less: current expected credit loss reserve		(59,188	)		(67,010	)
Loans receivable held-for-investment, net		7,270,223			6,340,295
Equity method investment		40,731			-
Interests in loans receivable held-for-investment, net		-			161,850
Real estate owned, net		402,830			406,887
Other assets		73,803			57,503
Total assets	$	8,057,904		$	7,455,271

Liabilities and Stockholders' Equity
Repurchase agreements	$	3,993,720		$	3,489,511
Loan participations sold, net		263,656			167,744
Notes payable, net		123,841			48,000
Secured term loan, net		737,516			739,762
Debt related to real estate owned, net		289,258			289,806
Other liabilities		52,581			54,457
Dividends payable		52,219			51,741
Management fee payable - affiliate		9,928			9,983
Total liabilities		5,522,719			4,851,004

Commitments and contingencies - Note 14

Stockholders' Equity
Common stock, $0.01 par value, 500,000,000 shares authorized, 140,055,714 and 140,055,714 shares issued and 138,970,498 and 139,840,088 shares outstanding at September 30, 2022 and December 31, 2021, respectively		1,400			1,400
Additional paid-in capital		2,716,376			2,726,190
Dividends declared		(982,008	)		(825,659	)
Retained earnings		799,417			664,700
Total Claros Mortgage Trust, Inc. equity		2,535,185			2,566,631
Non-controlling interests		-			37,636
Total stockholders' equity		2,535,185			2,604,267

Total liabilities and stockholders' equity	$	8,057,904		$	7,455,271

The accompanying notes are an integral part of these consolidated financial statements.

Claros Mortgage Trust, Inc.

Consolidated Statements of Operations

(unaudited, in thousands, except share and per share data)


	Three Months Ended						Nine Months Ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Revenue
Interest and related income	$	126,520		$	103,876		$	316,207		$	314,326
Less: interest and related expense		67,985			45,430			154,436			138,187
Net interest income		58,535			58,446			161,771			176,139
Revenue from real estate owned		17,882			8,550			41,813			15,620
Total revenue		76,417			66,996			203,584			191,759
Expenses
Management fees - affiliate		9,944			9,789			29,594			29,152
General and administrative expenses		4,819			1,330			13,910			5,393
Stock-based compensation expense		3,426			(186	)		4,030			(376	)
Operating expenses from real estate owned		11,366			7,948			29,682			16,739
Interest expense on debt related to real estate owned		3,903			2,640			9,206			13,001
Depreciation on real estate owned		2,064			1,940			6,002			5,173
Total expenses		35,522			23,461			92,424			69,082
Realized gain on sale of loan		-			-			30,090			-
Unrealized gain on interest rate cap		2,776			-			5,613			-
Gain on foreclosure of real estate owned		-			-			-			1,430
Income from equity method investment		929			-			929			-
Other income		-			-			-			5,855
(Provision) reversal of current expected credit loss reserve		(2,352	)		9,306			(12,984	)		17,413
Income before income taxes		42,248			52,841			134,808			147,375
Income tax benefit		-			-			-			6,025
Net income		42,248			52,841			134,808			153,400
Net income (loss) attributable to non-controlling interests		177			(40	)		91			(118	)
Net income attributable to preferred stock		-			4			-			12
Net income attributable to common stock	$	42,071		$	52,877		$	134,717		$	153,506
Net income per share of common stock:
Basic and diluted	$	0.30		$	0.40		$	0.95		$	1.15
Weighted-average shares of common stock outstanding:
Basic and diluted		139,430,153			133,433,487			139,592,500			133,491,390

The accompanying notes are an integral part of these consolidated financial statements.

Claros Mortgage Trust, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited, in thousands, except share data)


								Additional								Non-			Total
	Common Stock				Repurchased			Paid-In			Dividends			Retained		controlling			Stockholders'
	Shares		Par Value		Shares			Capital			Declared			Earnings		Interests			Equity
Balance at December 31, 2021		140,055,714	$	1,400		(215,626	)	$	2,726,190		$	(825,659	)	$	664,700	$	37,636		$	2,604,267
Repurchased shares		-		-		(186,289	)		(3,179	)		-			-		-			(3,179	)
Contributions from non-controlling interests		-		-		-			-			-			-		539			539
Offering costs		-		-		-			(30	)		-			-		-			(30	)
Dividends declared on common stock		-		-		-			-			(51,672	)		-		-			(51,672	)
Net income (loss)		-		-		-			-			-			29,412		(41	)		29,371
Balance at March 31, 2022		140,055,714	$	1,400		(401,915	)	$	2,722,981		$	(877,331	)	$	694,112	$	38,134		$	2,579,296
Repurchased shares		-		-		(33,721	)		(592	)		-			-		-			(592	)
Contributions from non-controlling interests		-		-		-			-			-			-		367			367
Dividends declared on common stock and participating securities		-		-		-			-			(52,458	)		-		-			(52,458	)
Stock-based compensation expense		-		-		-			604			-			-		-			604
Net income (loss)		-		-		-			-			-			63,234		(45	)		63,189
Balance at June 30, 2022		140,055,714	$	1,400		(435,636	)	$	2,722,993		$	(929,789	)	$	757,346	$	38,456		$	2,590,406
Repurchased shares		-		-		(649,580	)		(10,092	)		-			-		-			(10,092	)
Dividends declared on common stock and participating securities		-		-		-			-			(52,219	)		-		-			(52,219	)
Stock-based compensation expense		-		-		-			3,475			-			-		-			3,475
Net income		-		-		-			-			-			42,071		177			42,248
Deconsolidation of subsidiary		-		-		-			-			-			-		(38,633	)		(38,633	)
Balance at September 30, 2022		140,055,714	$	1,400		(1,085,216	)	$	2,716,376		$	(982,008	)	$	799,417	$	-		$	2,535,185

The accompanying notes are an integral part of these consolidated financial statements.

Claros Mortgage Trust, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited, in thousands, except share data)


										Additional									Non-			Total			Redeemable
	Preferred Stock					Common Stock				Paid-In			Dividends			Retained			controlling			Stockholders'			Common
	Shares		Par Value			Shares		Par Value		Capital			Declared			Earnings			Interests			Equity			Stock
Balance at December 31, 2020		125	$	125			125,541,736	$	1,255	$	2,491,836		$	(573,677	)	$	526,205		$	35,286		$	2,481,030		$	141,356
Adoption of ASU 2016-13		-		-			-		-		-			-			(73,975	)		-			(73,975	)		(4,276	)
Stock-based compensation expense		-		-			-		-		(7,394	)		-			-			-			(7,394	)		-
Contributions from non-controlling interests		-		-			-		-		-			-			-			897			897			-
Offering costs		-		-			-		-		(28	)		-			-			-			(28	)		(2	)
Dividends paid/accrued on preferred stock		-		(4	)		-		-		-			-			-			-			(4	)		-
Dividends declared on common stock, redeemable common stock and vested restricted stock units		-		-			-		-		-			(47,262	)		-			-			(47,262	)		(2,738	)
Accrued dividends on unvested restricted stock units		-		-			-		-		-			389			-			-			389			-
Accretion of redeemable common stock		-		-			-		-		81			-			-			-			81			(81	)
Net income (loss)		-		4			-		-		-			-			55,400			(37	)		55,367			3,208
Balance at March 31, 2021		125	$	125			125,541,736	$	1,255	$	2,484,495		$	(620,550	)	$	507,630		$	36,146		$	2,409,101		$	137,467
Issuance of common stock		-		-			584,767		6		(6	)		-			-			-			-			-
Stock-based compensation expense		-		-			-		-		1,452			-			-			-			1,452			-
Contributions from non-controlling interests		-		-			-		-		-			-			-			539			539			-
Dividends paid/accrued on preferred stock		-		(4	)		-		-		-			-			-			-			(4	)		-
Dividends declared on common stock, redeemable common stock and vested restricted stock units		-		-			-		-		-			(47,262	)		-			-			(47,262	)		(2,738	)
Accrued dividends on unvested restricted stock units		-		-			-		-		-			(300	)		-			-			(300	)		-
Accretion of redeemable common stock		-		-			-		-		(63	)		-			-			-			(63	)		63
Net income (loss)		-		4			-		-		-			-			39,720			(41	)		39,683			2,301
Balance at June 30, 2021		125	$	125			126,126,503	$	1,261	$	2,485,878		$	(668,112	)	$	547,350		$	36,644		$	2,403,146		$	137,093
Restricted stock units earned		-		-			-		-		(147	)		-			-			-			(147	)		-
Contributions from non-controlling interests		-		-			-		-		-			-			-			539			539			-
Offering costs		-		-			-		-		(202	)		-			-			-			(202	)		(12	)
Dividends paid/accrued on preferred stock		-		(4	)		-		-		-			-			-			-			(4	)		-
Dividends declared/paid on common stock, redeemable common stock and vested restricted stock units		-		-			-		-		-			(47,262	)		-			-			(47,262	)		(2,738	)
Dividends declared on unvested restricted stock units		-		-			-		-		-			57			-			-			57			-
Accretion of redeemable common stock		-		-			-		-		5			-			-			-			5			(5	)
Net income		-		4			-		-		-			-			49,981			(40	)		49,945			2,896
Balance at September 30, 2021		125	$	125			126,126,503	$	1,261	$	2,485,534		$	(715,317	)	$	597,331		$	37,143		$	2,406,077		$	137,234

The accompanying notes are an integral part of these consolidated financial statements.

Claros Mortgage Trust, Inc.

Consolidated Statements of Cash Flows

(unaudited, in thousands)


	Nine Months Ended
	September 30, 2022			September 30, 2021
Cash flows from operating activities
Net income	$	134,808		$	153,400
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of origination fees on loans receivable		(19,351	)		(18,677	)
Accretion of origination fees on interests in loans receivable		(204	)		(849	)
Amortization of financing costs		14,651			16,277
Non-cash stock-based compensation		4,079			(376	)
Other income		-			(5,855	)
Depreciation on real estate owned		6,002			5,173
Unrealized gain on interest rate cap		(5,613	)		-
Income from equity method investment		(929	)		-
Distribution from equity method investment		408			-
Realized gain on sale of loan		(30,090	)		-
Gain on foreclosure of real estate owned		-			(1,430	)
Non-cash advances on loans receivable in lieu of interest		(51,842	)		(55,792	)
Non-cash advances on interests in loans receivable in lieu of interest		(2,427	)		(15,149	)
Non-cash advances on secured financings in lieu of interest		155			15,161
Repayment of non-cash advances on loans receivable in lieu of interest		20,128			97,087
Repayment of non-cash advances on interests in loans receivable in lieu of interest		13,178			363
Repayment of non-cash advances on secured financings in lieu of interest		-			(22,285	)
Provision (reversal) of current expected credit loss reserve		12,984			(17,413	)
Changes in operating assets and liabilities:
Other assets		(12,981	)		(13,356	)
Other liabilities		8,038			8,506
Management fee payable - affiliate		10			(60	)
Incentive fee payable - affiliate		-			(187	)
Net cash provided by operating activities		91,004			144,538
Cash flows from investing activities
Deconsolidation of subsidiary		(515	)		-
Loan originations, acquisitions and advances, net of fees		(2,394,662	)		(1,272,396	)
Advances of interests in loans receivable		(14,653	)		(86,022	)
Repayments of loans receivable		1,458,389			1,046,111
Repayments of interests in loans receivable		165,468			2,977
Proceeds from sale of mortgage loan receivable		132,151			-
Extension and exit fees received from loans receivable		5,963			8,066
Extension and exit fees received from interests in loans receivable		502			-
Cash, cash equivalents and restricted cash from foreclosure of properties		-			9,580
Foreclosure of real estate owned		-			(11,463	)
Reserves and deposits held for loans receivable		(1,575	)		659
Capital expenditures on real estate owned		(1,945	)		-
Net cash used in investing activities		(650,877	)		(302,488	)

The accompanying notes are an integral part of these consolidated financial statements.

Claros Mortgage Trust, Inc.

Consolidated Statements of Cash Flows

(unaudited, in thousands)


	Nine Months Ended
	September 30, 2022			September 30, 2021
Cash flows from financing activities
Repurchase of common stock		(13,863	)		-
Contributions from non-controlling interests		906			1,975
Offering costs		(300	)		(30	)
Dividends paid on common stock and restricted stock units		(155,871	)		(141,792	)
Dividends paid on redeemable common stock		-			(8,208	)
Dividends paid on preferred stock		-			(8	)
Proceeds from secured financings		1,927,139			1,014,627
Payment of financing costs		(16,498	)		(14,335	)
Payment of exit fees on secured financings		-			(443	)
Repayments of secured financings		(1,247,390	)		(849,141	)
Repayments of secured term loan		(5,720	)		(5,837	)
Repayments of debt related to real estate owned		-			(10,000	)
Net cash provided by (used in) financing activities		488,403			(13,192	)

Net increase (decrease) in cash, cash equivalents and restricted cash		(71,470	)		(171,142	)
Cash, cash equivalents and restricted cash, beginning of period		334,136			430,974
Cash, cash equivalents and restricted cash, end of period	$	262,666		$	259,832
Cash and cash equivalents, beginning of period	$	310,194		$	427,512
Restricted cash, beginning of period		23,942			3,462
Cash, cash equivalents and restricted cash, beginning of period	$	334,136		$	430,974
Cash and cash equivalents, end of period	$	225,556		$	235,596
Restricted cash, end of period		37,110			24,236
Cash, cash equivalents and restricted cash, end of period	$	262,666		$	259,832
Supplemental disclosure of cash flow information:
Cash paid for interest	$	141,497		$	121,257
Supplemental disclosure of non-cash investing and financing activities:
Dividends accrued	$	52,219		$	53,196
Loan principal payments held by servicer	$	7,651		$	252,946
Accrued financing costs	$	3,750		$	6,251
Accrued offering costs	$	-		$	2,231
Deposits applied against sale proceeds	$	14,761		$	-
Deconsolidation of subsidiary:
Loan receivable	$	78,507
Other assets		17			-
Other liabilities		(130	)		-
Management fee payable - affiliate		(65	)		-
Net carrying value of deconsolidated subsidiary's net assets	$	78,329		$	-
Working capital consolidated	$	-		$	(18,546	)
Settlement of loan receivable	$	-		$	103,901
Real estate acquired in settlement of loan receivable	$	-		$	414,000
Assumption of debt related to real estate owned	$	-		$	(300,000	)
Conversion of restricted stock units to common shares - common stock	$	-		$	6
Conversion of restricted stock units to common shares - additional paid in capital	$	-		$	(6	)

The accompanying notes are an integral part of these consolidated financial statements.

Claros Mortgage Trust, Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 1. Organization

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

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

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

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

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

References to common stock in 2021 include redeemable common stock.

These unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of our financial position, results of operations and cash flows have been included. Our results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year or any other future period. The consolidated balance sheet at December 31, 2021 was derived from the audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Estimates that are particularly susceptible to our judgment include, but are not limited to, the adequacy of allowance for loan losses, the determination of effective yield for recognition of interest income and interest expense, and impairment of certain assets.

The novel coronavirus (“COVID-19”) pandemic has evolved since its onset during the first quarter of 2020, and while the global economy has begun to recover, uncertainty around future developments remain. The ongoing pandemic state has also affected global supply chains, the labor market, and inflation, which continue to impact many industries, including the collateral underlying certain of our loans. In response, the Federal Reserve has begun raising interest rates in 2022 and has indicated that it foresees further interest rate increases through the end of the year. The overall impact to the global economy will depend largely on the recovery of disrupted supply chains and industries, the extent of the labor market interruptions, the result of the Federal Reserves’ policies, and other government interventions. The current and future financial, economic and capital markets environment could remain uneven, and presents uncertainty and risk with respect to the performance of our loans receivable and real estate owned, our financial condition, results of operations, liquidity, and ability to pay dividends.

Current Expected Credit Losses

The current expected credit loss (“CECL”) reserve required under ASU 2016-13 “Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments (Topic 326)” (“ASU 2016-13”), reflects our current estimate of potential credit losses related to our loan portfolio. The initial CECL allowance recorded on January 1, 2021 was reflected as a direct charge to retained earnings on our consolidated statements of changes in stockholders’ equity. Subsequent changes to the CECL allowance are recognized through net income on our consolidated statements of operations. ASU 2016-13 specifies the reserve should be based on relevant information about past events, including historical loss experience, current portfolio, market conditions and reasonable and supportable forecasts for the duration of each respective loan.

General CECL Allowance

Our loans are typically collateralized by real estate, or in the case of mezzanine loans, by an equity interest in an entity that owns real estate. We consider key credit quality indicators in underwriting loans and estimating credit losses, including, but not limited to: the capitalization of borrowers and sponsors; the expertise of the borrowers and sponsors in a particular real estate sector and geographic market; collateral type; geographic region; use and occupancy of the property; property market value; loan-to-value (“LTV”) ratio; loan amount and lien position; our risk rating for the same and similar loans; and prior experience with the borrower and sponsor. This information is used to assess the financial and operating capability, experience and profitability of the borrower/sponsor. Ultimate repayment of our loans is sensitive to interest rate changes, general economic conditions, liquidity, LTV ratio, existence of a liquid investment sales market for commercial properties, and availability of replacement short-term or long-term financing.

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

Commencing the third quarter of 2022, we arrived at our general CECL reserve using the Weighted Average Remaining Maturity, or WARM method, which has been identified as an acceptable loss-rate method for estimating CECL reserves by the Financial Accounting Standards Board ("FASB"). The application of the WARM method to estimate a general CECL reserve requires judgment, including the appropriate historical loan loss reference data, the expected timing and amount of future loan fundings and repayments, the current credit quality of our portfolio, and our expectations of performance and market conditions over the relevant time period.

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

When evaluating the current and future macroeconomic environment, we consider the aforementioned macroeconomic factors. Historical data for each metric is compared to historical commercial real estate loan losses in order to determine the relationship between the two variables. We use projections of each macroeconomic factor, obtained from a third party, to approximate the impact the macroeconomic outlook may have on our loss rate. Selections of these economic forecasts require judgement about future events that, while based on the information available to us as of the balance sheet date, are ultimately unknowable with certainty, and the actual economic conditions could vary significantly from the estimates we made. Following a reasonable and supportable forecast period, we use a straight-line method of reverting to the historical loss rate. Additionally, we assess the obligation to extend credit through our unfunded loan commitments over each loan’s contractual period, which is considered in the estimate of the general CECL reserve. This

component of the general CECL reserve will similarly impact our consolidated net income. For both the funded and unfunded portions of our loans, we consider our internal risk rating of each loan as the primary credit quality indicator underlying our assessment.

We evaluate the credit quality of each of our loans receivable on an individual basis and assign a risk rating at least quarterly. We have developed a loan grading system for all of our outstanding loans receivable that are collateralized directly or indirectly by real estate. Grading criteria include as-is or as-stabilized debt yield, term of loan, property type, loan type and other more subjective variables that include property or collateral location, as-is or as-stabilized collateral value, market conditions, industry conditions and sponsor’s financial stability. We utilize the grading system to determine each loan’s risk of loss and to provide a determination as to whether an individual loan is impaired and whether a special loan loss allowance is necessary. Based on a 5-point scale, the loans are graded “1” through “5,” from less risk to greater risk, which gradings are defined as follows:

Very Low Risk

Low Risk

Medium Risk

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

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

Specific CECL Allowance

In certain circumstances we may determine that a loan is no longer suited for the WARM method due to its unique risk characteristics, where we have deemed the borrower/sponsor to be experiencing financial difficulty, or because the repayment of the loan’s principal is collateral-dependent. We may instead elect to employ different methods to estimate loan losses that also conform to ASU 2016-13 and related guidance. If the recovery of a loan’s principal balance is entirely collateral-dependent, we may assess such an asset individually and elect to apply a practical expedient in accordance with ASU 2016-13.

For such loan we would measure the specific allowance of each loan separately by using the fair value of the collateral or the net present value of its expected future cash flows. If the fair value of the collateral is less than the carrying value of the loan, an asset-specific allowance is created as a component of our overall allowance for loan losses (following the adoption of CECL, or as a loan loss allowance prior to the adoption of CECL). Specific allowances are equal to the excess of a loan’s carrying value to the present value of its expected cash flows discounted at the loan’s effective rate or the fair value of the collateral, less estimated costs to sell, if recovery of our investment is expected solely from the collateral.

If we have determined that a loan or a portion of a loan is uncollectible, we will write off the loan through a charge to our current expected credit loss reserve based on the present value of expected future cash flows or the fair value of the collateral less costs to sell, if repayment is expected solely from the collateral. Significant judgment is required in determining impairment and in estimating the resulting credit loss reserve, and actual losses, if any, could materially differ from those estimates.

For additional information on our General and Specific CECL Allowance please refer to Note 3—"Loans Portfolio—Current Expected Credit Losses”.

Real Estate Owned (and Associated Debt)

We may assume legal title or physical possession of the underlying collateral of a defaulted loan through foreclosure. If we intend to hold, operate or develop the property for a period of at least 12 months, the asset is classified as real estate owned, net. If we intend to market a property for sale in the near subsequent term, the asset is classified as real estate held for sale. Real estate owned is initially recorded at estimated fair value and is subsequently presented net of accumulated depreciation. Depreciation is computed using a straight-line method over the estimated useful lives.

Real estate assets are evaluated for indicators of impairment on a quarterly basis. Factors that we may consider in our impairment analysis include, among others: (1) significant underperformance relative to historical or anticipated operating results; (2) significant negative industry or economic trends; (3) costs necessary to extend the life or improve the real estate asset; (4) significant increase in competition; and (5) ability to hold and dispose of the real estate asset in the ordinary course of business. A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate asset over the estimated remaining holding period is less than the carrying amount of such real estate asset. Cash flows include operating cash flows net of anticipated capital proceeds generated by the real estate asset. If the sum of such estimated cash flows are less than the fair value of the real estate, an impairment charge is recorded equal to the excess of the carrying value of the real estate asset over the fair value. When determining the fair value of a real estate asset, we make certain assumptions including, but not limited to, consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon our estimate of a capitalization rate and discount rate.

Debt assumed in an acquisition/foreclosure of real estate is recorded at its estimated fair value at the time of the acquisition. Debt related to real estate owned is non-recourse to us.

Equity Method Investment

We account for our investments in entities in which we have the ability to influence, but do not have a controlling interest, by using the equity method of accounting. Under the equity method for which we have not elected a fair value option, the investment, originally recorded at cost, is adjusted to recognize our share of earnings or losses as they occur and for additional contributions made or distributions received. We look at the nature of the cash distributions received to determine the proper character of cash flow distributions on the accompanying consolidated statement of cash flows as either returns on investment, which would be included in operating activities, or returns of investment, which would be included in investing activities.

At each reporting period we assess whether there are any indicators of impairment of our equity investments. There were no impairments of our equity method investment as of and for the three and nine months ended September 30, 2022.

Derivative Financial Instruments

In the normal course of business, we are exposed to the effect of interest rate changes and may undertake a strategy to limit these risks through the use of derivatives. We may use derivatives primarily to reduce the impact that increases in interest rates will have on our floating rate liabilities, which may consist of interest rate swaps, interest rate caps, collars, and floors.

We recognize all derivatives on the consolidated balance sheets at fair value within other assets. To determine the fair value of derivative instruments, we use a variety of methods and assumptions that are based on market conditions as of the balance sheet date, such as discounted cash flows and option-pricing models.

We have not designated derivatives as hedges to qualify for hedge accounting for financial reporting purposes and fluctuations in the fair value of these derivatives have been recognized currently as unrealized gain on interest rate cap in the accompanying consolidated statements of operations.

Other Assets

Other assets include interest receivable, miscellaneous receivables, prepaid expenses, deferred tax asset (net of any valuation allowance), deposits funded relating to unclosed transactions, deferred financing costs related to our repurchase agreements and acquisition facility, derivative financial instruments, and repurchased shares not yet settled.

Other Liabilities

Other liabilities include interest payable, accounts payable and accrued expenses, our general CECL reserve related to our unfunded loan commitments, reserves held for loans receivable, and deposits held.

Revenue Recognition

Interest income from loans receivable is recorded on the accrual basis based on the outstanding principal amount and the contractual terms of the loans. Recognition of fees, premiums, discounts and direct costs associated with these investments is deferred until the loan is advanced and is then amortized or accreted into interest income over the term of the loan as an adjustment to yield using the effective interest method based on expected cash flows through the expected recovery period. Income accrual may be suspended for loans when we determine that the payment of income and principal is no longer probable. Factors considered when making this determination include our assessment of the underlying collateral value, delinquency in excess of 90 days, and overall market conditions. While on non-accrual status, based on our estimation as to collectability of principal, loans are either accounted for on a cash basis, where interest income is recognized only upon actual receipt of cash, or on a cost-recovery basis, where all cash receipts reduce a loan's carrying value. If and when a loan is brought back into compliance with its contractual terms, and our Manager has determined that the borrower has demonstrated an ability and willingness to continue to make contractually required payments related to the loan, we resume accrual of interest.

Revenue from real estate owned represents revenue associated with the operations of hotel properties classified as real estate owned. Revenue from the operations of the hotel properties is recognized when guestrooms are occupied, services have been rendered or fees have been earned. Revenues are recorded net of any discounts and sales and other taxes collected from customers. Revenues consist of room sales, food and beverage sales and other hotel revenues.

Reportable Segments

We evaluate the operating performance of our investments as a whole. We previously determined that we had two operating segments and one reporting segment as a result of the foreclosure of the hotel portfolio on February 8, 2021. In the first quarter of 2022, we had a change in our Chief Operating Decision Maker (CODM) who determined that we evaluate the operating performance of our investments as a whole and make operating decisions accordingly. Therefore, we have one operating segment and one reporting segment, with activities related to investing in income-producing loans collateralized by institutional quality commercial real estate. This change has been applied retrospectively to all periods presented.

Reclassifications

Certain prior period amounts in the accompanying consolidated financial statements have been reclassified to conform with the current period presentation. These reclassifications had no effect on the results of operations or financial position for any period presented.

Recent Accounting Guidance

On March 31, 2022, the FASB issued ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures”, (“ASU 2022-02”). The standard eliminates the recognition and measurement guidance for troubled debt restructurings (“TDRs”) for creditors that have adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, ("CECL"). In addition to eliminating the TDR accounting guidance, ASU 2022-02 changes existing disclosure requirements and introduces new disclosures related to certain modifications of instruments with borrowers experiencing financial difficulty. The standard is effective for periods beginning after December 15, 2022, with early adoption permitted. During the second quarter of 2022, we adopted this standard effective January 1, 2022 and the adoption did not have a material impact on our financial statements.

The FASB issued ASU 2019-12, Income Taxes (Topic 740), (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. ASU 2019-12 also improves the consistent application of, and simplifies, GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2021, with early adoption permitted. We adopted ASU 2019-12 on January 1, 2022 and the adoption of ASU 2019-12 did not have a material impact on our consolidated financial statements.

The FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offering Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 is effective upon issuance of ASU 2020-04 for contract modifications and hedging relationships on a prospective basis. We have not adopted any of the optional expedients or exceptions through September 30, 2022, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

Note 3. Loans Portfolio

Loans Receivable

Our loans receivable portfolio as of September 30, 2022 was comprised of the following loans ($ in thousands, except for number of loans):


	Number of Loans	Loan Commitment(4)		Unpaid Principal Balance		Carrying Value			Weighted Average Spread(2)		Weighted Average Interest Rate(3)
Loans receivable held-for-investment:
Variable:
Senior loans(1)	69	$	8,920,827	$	7,156,048	$	7,105,113			+ 4.02%		7.10	%
Subordinate loans	2		61,500		59,481		59,602			+ 11.57%		14.71	%
	71		8,982,327		7,215,529		7,164,715			+ 4.08%		7.17	%
Fixed:
Senior loans(1)	4	$	41,787	$	39,050	$	39,049		N/A			7.61	%
Subordinate loans	2		125,927		125,927		125,647		N/A			8.49	%
	6		167,714		164,977		164,696					8.28	%
Total/Weighted Average	77	$	9,150,041	$	7,380,506	$	7,329,411		N/A			7.19	%
Current expected credit loss reserve							(59,188	)
Loans receivable held-for-investment, net						$	7,270,223

(1)

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

(2)

The weighted average spread is expressed as a spread over the relevant floating benchmark rates. One-month LIBOR as of September 30, 2022 was 3.14%. One-month term Secured Overnight Financing Rate ("SOFR") as of September 30, 2022 was 3.04%. Weighted average is based on outstanding principal as of September 30, 2022.

(3)

Reflects the weighted average interest rate based on the applicable floating benchmark rate (if applicable), including LIBOR/SOFR floors (if applicable). Weighted average is based on outstanding principal as of September 30, 2022 and includes loans on non-accrual status.

(4)

Loan commitment represents principal outstanding plus remaining unfunded loan commitments.

Our loans receivable portfolio as of December 31, 2021 was comprised of the following loans ($ in thousands, except for number of loans):


	Number of Loans	Loan Commitment(5)		Unpaid Principal Balance		Carrying Value			Weighted Average Spread(2)		Weighted Average Interest Rate(4)
Loans receivable held-for-investment:
Variable:
Senior loans(1,3)	51	$	7,163,032	$	6,119,619	$	6,085,351			+ 4.06%		5.16	%
Subordinate loans	3		137,079		133,119		133,552			+ 10.38%		11.37	%
	54		7,300,111		6,252,738		6,218,903			+ 4.19%		5.29	%
Fixed:
Senior loans(1)	3	$	62,573	$	62,573	$	62,782		N/A			10.09	%
Subordinate loans	2		125,927		125,927		125,620		N/A			8.49	%
	5		188,500		188,500		188,402					9.02	%
Total/Weighted Average	59	$	7,488,611	$	6,441,238	$	6,407,305		N/A			5.40	%
Current expected credit loss reserve							(67,010	)
Loans receivable held-for-investment, net						$	6,340,295

(1)

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

(2)

The weighted average spread is expressed as a spread over the relevant floating benchmark rates. One-month LIBOR as of December 31, 2021 was 0.10%. Weighted average is based on outstanding principal as of December 31, 2021.

(3)

Includes a fixed rate loan with an outstanding principal balance of $33.5 million and a loan commitment of $39.7 million as of December 31, 2021, which shares the same collateral as floating rate loans with an outstanding principal balance of $103.1 million and a loan commitment of $104.4 million at December 31, 2021.

(4)

Reflects the weighted average interest rate based on the applicable floating benchmark rate (if applicable), including LIBOR floors (if applicable). Weighted average is based on outstanding principal as of December 31, 2021 and includes loans on non-accrual status.

(5)

Loan commitment represents principal outstanding plus unfunded loan commitments.

Certain loans receivable held by us include LIBOR/SOFR floors, which establish the minimum interest rate a borrower may pay on a loan. The weighted average LIBOR/SOFR floor in place based on unpaid principal balance on floating rate loans is 0.85% as of September 30, 2022.

The following table presents the range of LIBOR/SOFR floors held in our loan portfolio as of September 30, 2022 based on outstanding principal ($ in thousands):


One-month LIBOR/SOFR Floor Range	Unpaid Principal Balance		% of Total			Cumulative %
2.00% - 2.50%	$	782,123		11	%		11	%
1.50% - 1.99%		1,569,759		21	%		32	%
1.00% - 1.49%		738,591		10	%		42	%
0.50% - 0.99%		342,086		5	%		47	%
< 0.50%		3,135,761		42	%		89	%
No floor		647,209		9	%		98	%
Total Floating Rate Loans		7,215,529
Total Fixed Rate Loans		164,977		2	%		100	%
Total Loans	$	7,380,506

The following table presents the carrying value and significant characteristics of our loans receivable on non-accrual status as of September 30, 2022 ($ in thousands):


Origination Date	Initial Maturity Date	Date Through Which Interest Collected	Risk Rating	Carrying Value		Unpaid Principal Balance		Specific CECL Reserve		Net Carrying Value			Interest Recognition Method(1)
8/2/2019	10/30/2021	11/1/2021	4	$	67,000	$	67,000	$	-	$	67,000		Cash Basis
7/1/2019	12/30/2020	7/1/2020	5		3,500		3,500		-		3,500		Cost Recovery
Total non-accrual(2)					70,500		70,500		-		70,500
Carrying value of associated financings										$	(33,500	)
Net carrying value										$	37,000

(1)

No interest income was recognized on these loans for the nine months ended September 30, 2022.

(2)

Loans classified as non-accrual represented 1.0% of the total loan portfolio at September 30, 2022, based on unpaid principal balance. Excludes two additional loans with an aggregate carrying value of $136.8 million that are in maturity default.

The following table presents the carrying value and significant characteristics of our loans receivable on non-accrual status as of December 31, 2021 ($ in thousands):


Origination Date	Initial Maturity Date	Date Through Which Interest Collected	Risk Rating	Carrying Value		Unpaid Principal Balance		Specific CECL Reserve			Net Carrying Value			Interest Recognition Method
5/5/2017	1/1/2023	12/1/2021	5	$	11,533	$	11,533	$	(333	)	$	11,200		Cost Recovery
7/10/2018	12/10/2023	12/1/2021	4		77,530		81,380		-			77,530		Cash Basis
Total current					89,063		92,913		(333	)		88,730
8/2/2019	10/30/2021	11/1/2021	4		67,000		67,000		-			67,000		Cash Basis
9/21/2018	10/1/2020	2/1/2020	4		116,211		116,020		-			116,211		Cash Basis
3/29/2018	1/26/2021	7/9/2020	4		76,069		75,579		-			76,069		Cash Basis
7/1/2019	12/30/2020	7/1/2020	5		15,000		15,000		(6,000	)		9,000		Cost Recovery
Total delinquent					274,280		273,599		(6,000	)		268,280
Total non-accrual(1)				$	363,343	$	366,512	$	(6,333	)	$	357,010
Carrying value of associated financings											$	(122,450	)
Net carrying value											$	234,560

(1)

Loans classified as non-accrual and delinquent on debt service represented 4.1% of the total loan portfolio at December 31, 2021, based on unpaid principal balance.

Activity relating to the loans receivable portfolio for the nine months ended September 30, 2022 ($ in thousands):


	Unpaid Principal Balance			Deferred Fees			Specific CECL Allowance			Carrying Value (1)
Balance at December 31, 2021	$	6,441,238		$	(33,933	)	$	(6,333	)	$	6,400,972
Initial funding of new loan originations and acquisitions		1,996,086			-			-			1,996,086
Advances on existing loans		429,901			-			-			429,901
Non-cash advances in lieu of interest		50,876			966			-			51,842
Origination fees, extension fees and exit fees		-			(37,288	)		-			(37,288	)
Repayments of loans receivable		(1,389,947	)		-			-			(1,389,947	)
Repayments of non-cash advances in lieu of interest		(20,128	)		-			-			(20,128	)
Accretion of fees		-			19,351			-			19,351
Sale proceeds		(146,912	)		-			-			(146,912	)
Gain (loss) on sale		30,892			(191	)		-			30,701
Specific CECL Allowance		-			-			(5,205	)		(5,205	)
Principal charge-offs		(11,500	)		-			11,500			-
Balance at September 30, 2022	$	7,380,506		$	(51,095	)	$	(38	)	$	7,329,373
General CECL Allowance										$	(59,150	)
Carrying Value										$	7,270,223

(1)

Balance at December 31, 2021 does not include general CECL allowance.

In the second quarter of 2022, we sold a senior loan with a carrying value of $116.2 million and recognized a realized gain of $30.1 million. The financial asset was legally isolated, the transferee has the ability to pledge the assets without constraint and control has been transferred to the transferee. We have determined the transaction constituted a sale.

Through CMTG/TT Mortgage REIT LLC ("CMTG/TT"), a previously consolidated joint venture, we held a 51.0% interest in $78.5 million of subordinate loans secured by land in New York, which had been on non-accrual status since October 2021. During the third quarter of 2022, we directly acquired the senior position of the loan of $73.5 million and converted the whole loan from a land loan into a construction loan to finance the development of a hotel. The borrower simultaneously committed additional equity to the project. Immediately following the conversion of the loan, we own $115.3 million of total loan commitments, of which $75.0 million has been funded and is included in loans receivable held-for-investments on our consolidated balance sheet as of September 30, 2022, as well as 51.0% of the remaining $78.5 million of subordinate loans held through CMTG/TT which is accounted for under the equity method of accounting on our consolidated financial statements. See Note 4 - Equity Method Investment for further detail. The new loans accrue interest at the new contractual rates.

In the second quarter of 2022, we modified a loan with a borrower who was experiencing financial difficulties, resulting in a decrease in the index rate floor from 1.57% to 1.00% and modified extension requirements. As of September 30, 2022, the loan had an amortized cost basis of $87.8 million and represents approximately 1.21% of total loans receivable held-for-investment, net. The loan is considered as part of the general CECL allowance. The borrower is current on all contractually obligated payments.

Interests in Loans Receivable Held-for-Investment

We had no interests in loans receivable as of September 30, 2022.

Our interests in loans receivable portfolio as of December 31, 2021 was comprised of the following loan ($ in thousands):


	Number of Loans	Loan Commitment(3)		Unpaid Principal Balance		Carrying Value			Stated Rate (2)	Interest Rate (4)
Senior loans(1)	1	$	200,727	$	161,566	$	161,864		L + 4.25%	5.50%
Current expected credit loss reserve							(14	)
Interests in loans receivable held-for-investment, net						$	161,850

(1)

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

(2)

One-month LIBOR as of December 31, 2021 was 0.10% .

(3)

Loan commitment represents principal outstanding plus unfunded loan commitments.

(4)

Reflects the interest rate based on the applicable floating benchmark rate (if applicable), including LIBOR/SOFR floors (if applicable).

Activity relating to the interests in loans receivable portfolio for the nine months ended September 30, 2022 ($ in thousands):


	Unpaid Principal Balance			Deferred Fees			Carrying Value (1)
Balance at December 31, 2021	$	161,566		$	298		$	161,864
Advances on existing interests in loans receivable		14,653			-			14,653
Non-cash advances in lieu of interest		2,427			-			2,427
Origination fees, extension fees and exit fees		-			(502	)		(502	)
Repayments of interests in loans receivable		(165,468	)		-			(165,468	)
Repayment of non-cash advances in lieu of interest		(13,178	)		-			(13,178	)
Accretion of origination fees, net		-			204			204
Balance at September 30, 2022	$	-		$	-		$	-

(1)

Balance at December 31, 2021 does not include general CECL allowance.

The following table details overall statistics for our loans receivable and interests in loans receivable portfolio ($ in thousands):

Loans Receivable

Interests in Loans Receivable

September 30, 2022

December 31, 2021

September 30, 2022

December 31, 2021

Weighted average yield to maturity

7.7

5.6

N/A

6.7

Weighted average term to fully extended maturity

3.5 years

3.3 years

N/A

1.6 years

Concentration of Risk

The following table presents our loans receivable and interests in loans receivable portfolio by loan type, as well as property type and geographic location of the properties collateralizing these loans as of September 30, 2022 and December 31, 2021 ($ in thousands):


	September 30, 2022						December 31, 2021
Loan Type	Carrying Value			Percentage			Carrying Value			Percentage
Senior loans(1)	$	7,144,162			97	%	$	6,309,997			96	%
Subordinate loans		185,249			3	%		259,172			4	%
	$	7,329,411			100	%	$	6,569,169			100	%
Current expected credit loss reserve	$	(59,188	)				$	(67,024	)
	$	7,270,223					$	6,502,145

Property Type	Carrying Value			Percentage			Carrying Value			Percentage
Office	$	1,064,017			15	%	$	1,113,805			17	%
Mixed-use(2)		641,365			9	%		734,613			11	%
Hospitality		1,519,301			21	%		1,176,842			18	%
Land		441,894			6	%		631,713			10	%
Multifamily		3,019,352			41	%		1,986,628			30	%
For Sale Condo		466,299			6	%		710,660			11	%
Other		177,183			2	%		214,908			3	%
	$	7,329,411			100	%	$	6,569,169			100	%
Current expected credit loss reserve	$	(59,188	)				$	(67,024	)
	$	7,270,223					$	6,502,145

Geographic Location	Carrying Value			Percentage			Carrying Value			Percentage
United States
Northeast	$	1,994,376			28	%	$	2,734,550			41	%
Mid Atlantic		815,889			11	%		1,235,527			19	%
Midwest		454,945			6	%		309,298			5	%
Southeast		941,867			13	%		836,904			13	%
Southwest		692,144			9	%		269,461			4	%
West		2,423,852			33	%		1,156,896			18	%
Other		6,338			0	%		26,533			0	%
	$	7,329,411			100	%	$	6,569,169			100	%
Current expected credit loss reserve	$	(59,188	)				$	(67,024	)
	$	7,270,223					$	6,502,145

(1)

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

(2)

Mixed-use comprises of 5% office, 2% retail, 1% for sale condo, 1% multifamily, and immaterial hospitality and signage components.

Interest Income and Accretion

The following table summarizes our interest and accretion income from loans receivable held-for-investment, from interests in loans receivable held-for-investment, and from interest on cash balances, for the three and nine months ended September 30, 2022 and 2021, respectively ($ in thousands):


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Coupon interest	$	116,435	$	96,913	$	295,080	$	294,771
Interest on cash and cash equivalents		1,229		2		1,572		29
Accretion of fees		8,856		6,961		19,555		19,526
Total interest and related income(1)	$	126,520	$	103,876	$	316,207	$	314,326

(1)

We recognized $3.6 million and $4.5 million in pre-payment penalties and accelerated fees during the three and nine months ended September 30, 2022, respectively. We recognized $1.0 million and $2.1 million in pre-payment penalties and accelerated fees during the three and nine months ended September 30, 2021.

Loan Risk Ratings

As further described in Note 2 – Summary of Significant Accounting Policies, we evaluate the credit quality of our loan portfolio on a quarterly basis. In conjunction with our quarterly loan portfolio review, we assess the risk factors of each loan and assign a risk rating based on several factors. Factors considered in the assessment include, but are not limited to, current loan-to-value, debt yield, structure, cash flow volatility, exit plan, current market environment and sponsorship level. Loans are rated “1” (less risk) through “5” (greater risk), which ratings are defined in Note 2 – Summary of Significant Accounting Policies.

The following tables allocate the principal balance and carrying value of the loans receivable and interests in loans receivable based on our internal risk ratings ($ in thousands):


September 30, 2022
Risk Rating	Number of Loans	Unpaid Principal Balance		Carrying Value			% of Total of Unpaid Principal Balance
1	0	$	-	$	-		0%
2	1		927		907		0%
3	67		6,558,513		6,510,965		89%
4	7		814,728		811,201		11%
5	2		6,338		6,338		0%
	77	$	7,380,506	$	7,329,411
Current expected credit loss reserve					(59,188	)
				$	7,270,223


December 31, 2021
Risk Rating	Number of Loans	Unpaid Principal Balance		Carrying Value			% of Total of Unpaid Principal Balance
1	1	$	35,721	$	35,699		1%
2	6		705,886		703,714		10%
3	42		4,678,785		4,649,076		71%
4	9		1,155,879		1,154,147		18%
5	2		26,533		26,533		0%
	60	$	6,602,804	$	6,569,169
Current expected credit loss reserve					(67,024	)
				$	6,502,145

As of September 30, 2022 and December 31, 2021 , the average risk rating of our portfolio was 3.1 and 3.1, respectively, weighted by unpaid principal balance.

Current Expected Credit Losses

The current expected credit loss reserve required under GAAP reflects our current estimate of potential credit losses related to loans receivable, interests in loans receivable, accrued interest receivable and unfunded loan commitments. See Note 2 for further discussion of our allowance for loan losses.

During the nine months ended September 30, 2022, we recorded a principal charge-off of $11.5 million against a loan made to the personal estate of a former borrower. Prior to the charge-off, the loan had an unpaid principal balance $15.0 million and a specific CECL reserve of $6.0 million, resulting in a carrying value of $9.0 million. Following the charge-off, the loan's carrying value is $3.5 million, which represents estimated collection. The loan is on non-accrual status and is in maturity default.

In December of 2021, we received principal repayments of $81.7 million on a senior loan with an outstanding principal balance of $95.0 million, and a maturity date of May 31, 2021, and recorded a principal charge-off of $1.8 million. Following the repayment, the maturity date of the loan was extended to January 1, 2023. As of September 30, 2022 and December 31, 2021, the loan had a specific loan loss allowance of $38,000 and $0.3 million, respectively, which represents additional collectible interest through the maturity date. Subsequent to September 30, 2022, this loan was repaid in full.

During the three months ended September 30, 2022, we recorded a net provision of $2.4 million in the allowance for credit losses. The total allowance for loan losses increased to $75.0 million as of September 30, 2022. The increase was primarily attributable to the increase in the size of our loan portfolio and changes in macroeconomic conditions.

The following table illustrates the quarterly changes in the current expected credit loss reserve for the nine months ended September 30, 2022 and 2021, respectively ($ in thousands):


				General CECL Allowance
	Specific CECL Allowance (1)			Loans Receivable Held-for-Investment			Interests in Loans Receivable Held-for-Investment			Accrued Interest Receivable			Unfunded Loan Commitments (2)			Total
Total current expected credit loss reserve, December 31, 2020	$	6,000		$	-		$	-		$	-		$	-		$	6,000
Initial CECL allowance, January 1, 2021		-			64,274			406			357			13,214			78,251
Increase (reversal) in current credit loss reserve		-			1,547			(141	)		(14	)		(1,577	)		(185	)
Total current expected credit loss reserve, March 31, 2021	$	6,000		$	65,821		$	265		$	343		$	11,637		$	84,066
Increase (reversal) in current credit loss reserve		500			(3,954	)		270			(33	)		(4,705	)		(7,922	)
Total current expected credit loss reserve, June 30, 2021	$	6,500		$	61,867		$	535		$	310		$	6,932		$	76,144
Increase (reversal) in current credit loss reserve		2,000			(11,154	)		(306	)		(64	)		218			(9,306	)
Total current expected credit loss reserve, September 30, 2021	$	8,500		$	50,713		$	229		$	246		$	7,150		$	66,838

Total current expected credit loss reserve, December 31, 2021	$	6,333		$	60,677		$	14		$	218		$	6,286		$	73,528
Increase (reversal) in current credit loss reserve		(133	)		(1,269	)		28			(218	)		3,694			2,102
Total current expected credit loss reserve, March 31, 2022	$	6,200		$	59,408		$	42		$	-		$	9,980		$	75,630
Principal charge-offs		(11,500	)		-			-			-			-			(11,500	)
Increase (reversal) in current credit loss reserve		5,405			(113	)		(42	)		-			3,280			8,530
Total current expected credit loss reserve, June 30, 2022	$	105		$	59,295		$	-		$	-		$	13,260		$	72,660
Increase (reversal) in current credit loss reserve		(67	)		(145	)		-			-			2,564			2,352
Total current expected credit loss reserve, September 30, 2022	$	38		$	59,150		$	-		$	-		$	15,824		$	75,012
Percent of Unpaid Principal Balance at September 30, 2022																	1.0	%

(1)

As of December 31, 2020, amounts represent specific loan loss provisions recorded on assets before the adoption of ASU 2016-13. After the adoption of ASU 2016-13 on January 1, 2021, amounts represent specific CECL allowance.

(2)

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

Our primary credit quality indicator is our internal risk ratings, which are further discussed above. The following table presents the amortized cost basis of our loans receivable as of September 30, 2022 by year of origination and risk rating ($ in thousands):


					Amortized Cost Basis by Origination Year
Risk Rating	Number of Loans	Amortized Cost Basis			2022		2021		2020		2019			2018		2017
1	0	$	-		$	-	$	-	$	-	$	-		$	-	$	-
2	1		907			-		-		-		-			907		-
3	67		6,510,965			2,019,264		1,853,294		91,736		1,649,447			799,735		97,489
4	7		811,201			-		-		199,660		224,903			386,638		-
5	2		17,838			-		-		-		15,000			-		2,838
Charge-offs			(11,500	)		-		-		-		(11,500	)		-		-
	77	$	7,329,411		$	2,019,264	$	1,853,294	$	291,396	$	1,877,850		$	1,187,280	$	100,327

Note 4. Equity Method Investment

On June 8, 2016, we acquired a 51% interest in CMTG/TT upon commencement of its operations. During its active investment period, CMTG/TT originated loans collateralized by institutional quality commercial real estate. CMTG/TT has been consolidated in our financial statements from its inception through July 31, 2022. On August 1, 2022, the sole remaining loan held by this joint venture was converted to a new construction loan. In connection with the conversion, we amended the operating agreement of CMTG/TT. Effective August 1, 2022, we are not deemed to be the primary beneficiary of CMTG/TT in accordance with ASC 810 and do not consolidate the joint venture. We did not recognize a gain or loss as this transaction occured simultaneously with the conversion of the aforementioned loan, and thus there was no change in the underyling value of our 51% equity interest in CMTG/TT. See Note 3 for further details. As of September 30, 2022, the carrying value of our 51% equity interest in CMTG/TT approximated $40.7 million.

Note 5. Real Estate Owned, Net

On February 8, 2021, we acquired legal title to a portfolio of hotel properties located in New York, NY through a foreclosure. Prior to February 8, 2021, the hotel portfolio represented the collateral for a $103.9 million mezzanine loan held by us. The loan was in default as a result of the borrower failing to pay debt service. A $300.0 million securitized senior mortgage held by a third party was in default as well. The securitized senior mortgage is non-recourse to us. We recorded a gain of $1.4 million resulting from the foreclosure of the loan, which was based upon the estimated fair value of the hotel properties as determined by a third-party appraisal. The fair value of $414.0 million was determined using discount rates ranging from 8.50% to 8.75% and a terminal capitalization rate of 6.00%.

On June 2, 2021, terms of the securitized senior mortgage were modified to include an extension of the maturity date to February 9, 2024, a principal repayment of $10.0 million, and the payment of $7.6 million of fees and modification costs, which included among other items, $6.3 million of interest, $1.1 million of general and administrative expenses, and $0.2 million of debt issuance costs.

The following table presents additional detail related to our real estate owned, net as of September 30, 2022 and December 31, 2021 ($ in thousands):


	September 30, 2022			December 31, 2021
Land	$	123,100		$	123,100
Building		284,400			284,400
Capital improvements		1,945			-
Furniture, fixtures and equipment		6,500			6,500
Real estate assets		415,945			414,000
Less: accumulated depreciation		(13,115	)		(7,113	)
Real estate owned, net	$	402,830		$	406,887

Note 6. Repurchase Agreements, Loan Participations Sold, Net, Notes Payable, Net, Secured Term Loan, Net, Debt Related to Real Estate Owned, Net, and Acquisition Facility

As of September 30, 2022 and December 31, 2021, we financed certain of our loans receivables using repurchase agreements, the sale of loan participations, and notes payable. The financings bear interest at a rate equal to LIBOR/SOFR plus a credit spread or at a fixed rate. Financing agreements generally contain covenants that include certain financial requirements, including maintenance of minimum liquidity, minimum tangible net worth, maximum debt to tangible net worth ratio, and minimum debt service coverage ratio as defined in agreements. As of September 30, 2022 and December 31, 2021, we are in compliance with all covenants under our financing agreements.

The following table summarizes our portfolio financings as of September 30, 2022 and December 31, 2021 ($ in thousands):


	September 30, 2022						December 31, 2021
	Capacity		Borrowing Outstanding		Weighted Average Spread(1)		Capacity		Borrowing Outstanding		Weighted Average Spread(1)
Repurchase agreements	$	4,700,000	$	3,781,687		+ 2.16%	$	4,065,000	$	3,274,508		+ 2.00%
Repurchase agreements - Side Car		271,171		212,033		+ 4.51%		271,171		215,003		+ 4.50%
Loan participations sold		264,252		264,252		+ 3.77%		168,322		168,322		+ 3.79%
Notes payable		383,898		127,764		+ 3.09%		48,000		48,000		+ 4.00%
Secured Term Loan		756,997		756,997		+ 4.50%		762,717		762,717		+ 4.50%
Debt related to real estate owned		290,000		290,000		+ 2.78%		290,000		290,000		+ 2.78%
Total / weighted average	$	6,666,318	$	5,432,733		+ 2.71%	$	5,605,210	$	4,758,550		+ 2.65%

(1)

Weighted average spread over the applicable benchmark rate is based on unpaid principal balance. One-month LIBOR as of September 30, 2022 was 3.14%. One-month term SOFR at September 30, 2022 was 3.04%.

Repurchase Agreements

The following table summarizes our repurchase agreements by lender as of September 30, 2022 ($ in thousands):


Lender	Initial Maturity	Fully Extended Maturity (1)	Maximum Capacity		Borrowing Outstanding		Undrawn Capacity
JP Morgan Chase Bank, N.A. - Main Pool	6/29/2025	6/29/2027	$	1,500,000	$	1,235,227	$	264,773
JP Morgan Chase Bank, N.A. - Side Car	5/27/2023	5/27/2024		271,171		212,033		59,138
Morgan Stanley Bank, N.A.	1/26/2023	1/26/2025		1,000,000		875,493		124,507
Goldman Sachs Bank USA	5/31/2023	5/31/2025		500,000		393,398		106,602
Wells Fargo Bank, N.A.	9/29/2023	9/29/2026		800,000		745,603		54,397
Barclays Bank PLC	12/20/2022	12/20/2025		500,000		186,383		313,617
Deutsche Bank AG, New York Branch(2)	6/26/2023	6/26/2026		400,000		345,583		54,417
Total			$	4,971,171	$	3,993,720	$	977,451

(1)

Facility maturity dates may be extended based on certain conditions being met.

(2)

On August 17, 2022, this facility's capacity was increased to $400 million, the reference rate was changed from LIBOR to SOFR, and the fully extended maturity was extended to June 26, 2026.

The following table summarizes our repurchase agreements by lender as of December 31, 2021 ($ in thousands):


Lender	Initial Maturity	Fully Extended Maturity (1)	Maximum Capacity		Borrowing Outstanding		Undrawn Capacity
JP Morgan Chase Bank, N.A. - Main Pool(2)	6/29/2025	6/29/2027	$	1,250,000	$	1,173,280	$	76,720
JP Morgan Chase Bank, N.A. - Side Car	5/27/2023	5/27/2024		271,171		215,003		56,168
Morgan Stanley Bank, N.A.(3)	1/26/2023	1/26/2024		1,000,000		1,000,000		-
Goldman Sachs Bank USA	5/31/2022	5/31/2023		750,000		410,551		339,449
Barclays Bank PLC	12/20/2022	12/20/2025		500,000		193,884		306,116
Deutsche Bank AG, New York Branch	6/26/2022	6/26/2023		265,000		211,372		53,628
Wells Fargo Bank, N.A.	9/29/2023	9/29/2026		300,000		285,421		14,579
Total			$	4,336,171	$	3,489,511	$	846,660

(1)

Facility maturity dates may be extended based on certain conditions being met.

(2)

On January 14, 2022, this facility's capacity was increased to $1.5 billion.

(3)

On January 25, 2022, the reference rate on this facility was changed from LIBOR to SOFR, and the fully extended maturity was extended to January 26, 2025.

Liabilities under our repurchase agreements as of September 30, 2022 are summarized as follows ($ in thousands):


Lender	Weighted Average Term(1)		Borrowing Outstanding		Carrying Value		Carrying Value of Collateral
JP Morgan Chase Bank, N.A. - Main Pool		2.2	$	1,235,227	$	1,235,227	$	1,738,886
JP Morgan Chase Bank, N.A. - Side Car		0.5		212,033		212,033		456,176
Morgan Stanley Bank, N.A.		1.9		875,493		875,493		1,345,991
Goldman Sachs Bank USA		1.0		393,398		393,398		594,591
Wells Fargo Bank, N.A.		2.4		745,603		745,603		949,591
Barclays Bank PLC		1.2		186,383		186,383		287,009
Deutsche Bank AG, New York Branch		2.0		345,583		345,583		559,846
Total/Weighted Average		1.9	$	3,993,720	$	3,993,720	$	5,932,090

(1)

The weighted average term (years) is determined based on the contractual initial maturity date of the corresponding loans collateralizing each facility. Weighted average is based on borrowing outstanding as of September 30, 2022.

Liabilities under our repurchase agreements as of December 31, 2021 are summarized as follows ($ in thousands):


Lender	Weighted Average Term(1)		Borrowing Outstanding		Carrying Value		Carrying Value of Collateral
JP Morgan Chase Bank, N.A. - Main Pool		1.6	$	1,173,280	$	1,173,280	$	1,626,719
JP Morgan Chase Bank, N.A. - Side Car		0.9		215,003		215,003		436,325
Morgan Stanley Bank, N.A.		2.4		1,000,000		1,000,000		1,709,758
Goldman Sachs Bank USA		1.3		410,551		410,551		589,825
Barclays Bank PLC		1.4		193,884		193,884		283,716
Deutsche Bank AG, New York Branch		2.3		211,372		211,372		327,671
Wells Fargo Bank, N.A.		2.8		285,421		285,421		362,742
Total/Weighted Average		1.9	$	3,489,511	$	3,489,511	$	5,336,756

(1)

The repurchase facilities are partially recourse to us. The maximum guarantees under our repurchase agreements range from 25% to 50% of borrowings outstanding.

Loan Participations Sold

Our loan participations sold as of September 30, 2022 are summarized as follows ($ in thousands):


Contractual Maturity Date	Maximum Extension Date	Borrowing Outstanding		Carrying Value		Carrying Value of Collateral(1)
8/1/2023	8/1/2023	$	138,322	$	138,322	$	280,983
10/18/2023	10/18/2024		105,930		105,559		192,282
12/31/2024	12/31/2025		20,000		19,775		149,628
Total		$	264,252	$	263,656	$	622,893

(1)

Includes cash reserve balances.

Our loan participations sold as of December 31, 2021 are summarized as follows ($ in thousands):


Contractual Maturity Date	Maximum Extension Date	Borrowing Outstanding		Carrying Value		Carrying Value of Collateral
8/1/2022	8/1/2023	$	148,322	$	148,133	$	290,783
12/31/2024	12/31/2025		20,000		19,611		130,061
Total		$	168,322	$	167,744	$	420,844

Notes Payable

Our notes payable as of September 30, 2022 are summarized as follows ($ in thousands):


Contractual Maturity Date	Maximum Extension Date	Borrowing Outstanding		Carrying Value			Carrying Value of Collateral
12/31/2024	12/31/2025	$	103,592	$	102,327		$	149,628
6/30/2025	6/30/2026		4,777		4,348			7,137
2/2/2026	2/2/2027		19,395		18,400			23,225
9/2/2026	9/2/2027		-		(1,234	)		(1,763	)
Total		$	127,764	$	123,841		$	178,227

Our notes payable as of December 31, 2021 are summarized as follows ($ in thousands):


Contractual Maturity Date	Maximum Extension Date	Borrowing Outstanding		Carrying Value		Carrying Value of Collateral(1)
1/4/2022 (2)	1/4/2022	$	48,000	$	48,000	$	116,512

(1)

Includes all reserve balances held by servicer.

(2)

In January 2022, the initial maturity was extended to July 5, 2022 and the maximum maturity date was extended to January 4, 2023.

Secured Term Loan, Net

On August 9, 2019, we entered into a $450.0 million secured term loan. On December 1, 2020, the secured term loan was modified to increase the aggregate principal amount by $325.0 million, increase the interest rate, and to increase the quarterly amortization payment. On December 2, 2021, we entered into a modification of our secured term loan which reduced the interest rate to the greater of (i) one-month term SOFR plus a 0.10% credit spread adjustment, and (ii) 0.50%, plus a credit spread of 4.50%.

The secured term loan as of September 30, 2022 is summarized as follows ($ in thousands):

Contractual

Stated

Borrowing

Maturity Date

Rate (1)

Interest Rate

Outstanding

Carrying Value

8/9/2026

S + 4.50%

7.64%

756,997

737,516

(1)

One-month term SOFR at September 30, 2022 was 3.04%.

The secured term loan as of December 31, 2021 is summarized as follows ($ in thousands):

Contractual

Stated

Borrowing

Maturity Date

Rate (1)

Interest Rate

Outstanding

Carrying Value

8/9/2026

S + 4.50%

5.00%

762,717

739,762

(1)

One-month term SOFR at December 31, 2021 was 0.05%.

The secured term loan is partially amortizing, with principal payments of $1.9 million due in quarterly installments.

Debt Related to Real Estate Owned, Net

On February 8, 2021 we assumed a $300.0 million securitized senior mortgage in connection with a UCC foreclosure on a portfolio of seven limited service hotels. On June 2, 2021, we entered into an agreement to amend the terms of the securitized senior mortgage which included an extension of the maturity date to February 9, 2024, a principal repayment of $10.0 million, and the payment of $7.6 million of fees and modification costs, which included among other items, $6.3 million of interest expense, $1.1 million of general and administrative expenses, and $0.2 million of debt issuance costs.

Our debt related to real estate owned as of September 30, 2022 is summarized as follows ($ in thousands):

Contractual

Stated

Borrowing

Maturity Date

Rate (1)

Interest Rate

Outstanding

Carrying Value

February 9, 2024

L + 2.78%

5.78

290,000

289,258

(1)

One-month LIBOR at September 30, 2022 was 3.14%, which exceeded the 3.00% ceiling provided by our interest rate cap. See Note 7 - Derivatives for further detail of our interest rate cap.

Our debt related to real estate owned as of December 31, 2021 is summarized as follows ($ in thousands):

Contractual

Stated

Borrowing

Maturity Date

Rate (1)

Interest Rate

Outstanding

Carrying Value

February 9, 2024

L + 2.78%

3.53

290,000

289,806

(1)

One-month LIBOR at December 31, 2021 was 0.10%.

Acquisition Facility

On June 29, 2022, we entered into a $150.0 million full recourse credit facility. The facility generally provides interim financing for eligible loans for up to 180 days at an initial advance rate of 75%, which begins to decline after the 90th day. The facility matures on June 29, 2025 and earns interest at a rate of one-month term SOFR, plus a 0.10% credit spread adjustment, plus a spread of 2.25%. With the consent of our lenders, and subject to certain conditions, the commitment of the facility may be increased up to $500.0 million. As of September 30, 2022, the outstanding balance of the facility is $0.

Interest Expense and Amortization

The following table summarizes our interest and amortization expense on secured financings, debt related to real estate owned and on the secured term loan for the three and nine months ended September 30, 2022 and 2021, respectively ($ in thousands):


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Interest on secured financings	$	49,893	$	28,401	$	107,051	$	86,990
Interest on secured term loan		13,052		11,749		32,910		34,954
Interest on debt related to real estate owned (1)		3,903		2,640		9,206		13,001
Amortization of financing costs		5,040		5,280		14,475		16,243
Total interest and related expense	$	71,888	$	48,070	$	163,642	$	151,188

(1)

Interest on debt related to real estate owned includes $131,000 and $22,000 of amortization of financing costs for the three months ended September 30, 2022 and 2021, respectively. Interest on debt related to real estate owned includes $176,000 and $34,000 of amortization of financing costs for the nine months ended September 30, 2022 and 2021, respectively.

Note 7. Derivatives

As part of the agreement to amend the terms of our debt related to real estate owned on June 2, 2021, we acquired an interest rate cap with a notional amount of $290.0 million and a maturity date of February 15, 2024 for $275,000.

The interest rate cap effectively limits the maximum interest rate of our debt related to real estate owned to 5.78%. Increases or decreases in the fair value of our interest rate cap are recorded as an unrealized gain or loss on interest rate cap on our consolidated income statements and the fair value is recorded in other assets on our consolidated balance sheets. The fair value of the interest rate cap is $5.6 million at September 30, 2022.

Note 8. Fair Value Measurements

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

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

Financial Instruments Reported at Fair Value

The fair value of our interest rate cap is determined by using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the interest rate cap. The variable interest rates used in the calculation of projected receipts on the interest rate cap are based on a third-party expert's expectation of future interest rates

derived from observable market interest rate curves and volatilities. Our interest rate cap is classified as Level 2 in the fair value hierarchy and is valued at $5.6 million at September 30, 2022 and $0 at December 31, 2021.

Financial Instruments Not Reported at Fair Value

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


	September 30, 2022
							Fair Value Hierarchy Level
	Carrying Value		Unpaid Principal Balance		Fair Value		Level 1		Level 2		Level 3
Loans receivable held-for-investment, net	$	7,270,223	$	7,380,506	$	7,244,522	$	-	$	-	$	7,244,522
Repurchase agreements		3,993,720		3,993,720		3,993,720		-		-		3,993,720
Loan participations sold, net		263,656		264,252		260,619		-		-		260,619
Notes payable, net		123,841		127,764		126,820		-		-		126,820
Secured term loan, net		737,516		756,997		724,825		-		-		724,825
Debt related to real estate owned, net		289,258		290,000		280,040		-		-		280,040


	December 31, 2021
							Fair Value Hierarchy Level
	Carrying Value		Unpaid Principal Balance		Fair Value		Level 1		Level 2		Level 3
Loans receivable held-for-investment, net	$	6,340,295	$	6,441,238	$	6,434,157	$	-	$	-	$	6,434,157
Interests in loans receivable held-for- investment, net		161,850		161,566		161,883		-		-		161,883
Repurchase agreements		3,489,511		3,489,511		3,484,834		-		-		3,484,834
Loan participations sold, net		167,744		168,322		168,738		-		-		168,738
Notes payable, net		48,000		48,000		48,000		-		-		48,000
Secured term loan, net		739,762		762,717		762,717		-		-		762,717
Debt related to real estate owned, net		289,806		290,000		281,723		-		-		281,723

Note 9. Equity

Common Stock

Our charter provides for the issuance of up to 500,000,000 shares of common stock with a par value of $0.01 per share. We had 140,055,714 common shares issued and 138,970,498 and 139,840,088 common shares outstanding as of September 30, 2022 and December 31, 2021, respectively.

The following table provides a summary of the number of common shares outstanding during the nine months ended September 30, 2022 and 2021, respectively, including redeemable common stock:


	Nine Months Ended
Common Stock Outstanding	September 30, 2022			September 30, 2021
Beginning balance		139,840,088			132,848,720
Conversion of fully vested restricted stock units to common shares		-			584,767
Repurchase of common shares		(869,590	)		-
Ending balance		138,970,498			133,433,487

Repurchased Shares

We entered into an agreement (the “10b5-1 Purchase Plan”) with Morgan Stanley & Co. LLC, pursuant to which Morgan Stanley & Co. LLC, as our agent, will buy in the open market up to $25.0 million of our common stock in the aggregate during the period beginning on December 6, 2021 and ending at the earlier of 12 months and the date on which all the capital committed to the 10b5-1 Purchase Plan is expended. The 10b5-1 Purchase Plan will require Morgan Stanley & Co. LLC to purchase shares of our common stock on our behalf when the market price per share is below the book value per common share, subject to certain daily limits prescribed by

the 10b5-1 Purchase Plan. For the period from December 6, 2021 through September 30, 2022, we repurchased 1,085,216 shares of common stock under the repurchase program at an average price per share of $16.09 for a total of $17.5 million.

Dividends

The following table details our dividend activity for common and preferred stock ($ in thousands, except per share data):

For the Quarter Ended

March 31, 2022

June 30, 2022

September 30, 2022

Amount

Per Share

Amount

Per Share

Amount

Per Share

Dividends declared - common stock

51,672

0.37

51,659

0.37

51,419

0.37

Record Date - common stock

March 31, 2022

June 30, 2022

September 30, 2022

Payment Date - common stock

April 15, 2022

July 15, 2022

October 14, 2022


	For the Quarter Ended
	March 31, 2021				June 30, 2021				September 30, 2021
	Amount		Per Share		Amount		Per Share		Amount		Per Share
Dividends declared - common stock	$	50,000	$	0.37	$	50,000	$	0.37	$	50,000	$	0.37
Dividends declared - preferred stock(1)	$	4	$	0.03	$	4	$	0.03	$	4	$	0.03
Record Date - common stock	March 19, 2021				June 16, 2021				September 17, 2021
Payment Date - common stock	April 1, 2021				July 7, 2021				October 7, 2021

(1)

Includes 125 preferred units issued at a price of $1,000 per unit and entitled to a 12.50% dividend paid semi-annually that were redeemed on December 15, 2021 at a price of $1,000 per unit.

Note 10. Earnings Per Share

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

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

As of September 30, 2022 and 2021, we had no dilutive securities. As a result, basic and diluted EPS are the same. The calculation of basic and diluted EPS is as follows ($ in thousands, except for share and per share data):


	Three Months Ended					Nine Months Ended
	September 30, 2022			September 30, 2021		September 30, 2022			September 30, 2021
Net income attributable to common stockholders	$	42,071		$	52,877	$	134,717		$	153,506
Dividends on participating securities		(799	)		-		(1,598	)		-
Participating securities' share in earnings		-			-		-			-
Basic earnings	$	41,272		$	52,877	$	133,119		$	153,506
Weighted average number of common stock, basic and diluted		139,430,153			133,433,487		139,592,500			133,491,390
Net income per share of common stock, basic and diluted	$	0.30		$	0.40	$	0.95		$	1.15

For the nine months ended September 30, 2022 and 2021, 863,524 and 0 weighted average unvested restricted stock units ("RSUs"), respectively, were excluded from the calculation of diluted EPS because the effect was anti-dilutive. For the three months ended September 30, 2022 and 2021, 2,159,280 and 0 weighted average unvested RSUs, respectively, were excluded from the calculation of diluted EPS because the effect was anti-dilutive.

Note 11. Related Party Transactions

The activities of the Company are managed by the Manager. Pursuant to the terms of the Management Agreement, the Manager is responsible for originating investment opportunities, providing asset management services and administering the day-to-day operations of the Company. The Management Agreement will remain in-place until August 25, 2025 unless terminated at an earlier date upon the occurrence of certain events. The Manager is entitled to receive a management fee, an incentive fee and a termination fee as defined below.

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


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Management fees	$	9,944	$	9,789	$	29,594	$	29,152
Total	$	9,944	$	9,789	$	29,594	$	29,152

Management Fees

Effective October 1, 2015, the Manager earns a base management fee in an amount equal to 1.50% per annum of Stockholders’ Equity. Management fees are reduced by our pro rata share of any management fees and incentive fees (if incentive fees are not incurred by us) paid to the Manager by CMTG/TT. Management fees are paid quarterly, in arrears. Management fees of $9.9 million and $10.0 million were accrued and were included in management fee payable – affiliate, in the consolidated balance sheets at September 30, 2022 and December 31, 2021.

On August 2, 2022 our Management Agreement was amended and restated, primarily to provide for reimbursement of allocable costs, including compensation of the Manager’s non-investment professionals, to provide for automatic one-year renewals of the

agreement following its original expiration date, unless it is otherwise terminated by our Board, and to remove historical provisions that are no longer relevant to our business and certain reporting requirements that are not customary for a public company.

Incentive Fees

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

The Manager is entitled to an incentive fee equal to 3.33% of the excess of CMTG/TT’s Core Earnings on a rolling four-quarter basis, as defined in the Management Agreement, over a 7.00% return on Unitholders’ Equity of CMTG/TT.

There were no accrued incentive fees on the consolidated balance sheets at September 30, 2022 and December 31, 2021, respectively.

Termination Fees

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

Reimbursable Expenses

The Manager or its affiliates are entitled to reimbursement for certain documented costs and expenses incurred by them on our behalf, as set forth in the Management Agreement, excluding any expenses specifically required to be borne by the Manager under the Management Agreement. For the three months ended September 30, 2022 and 2021, we had $0.3 million and $0 of reimbursements of out-of-pocket costs incurred on our behalf by our Manager, respectively, which are included in general and administrative expenses. For the nine months ended September 30, 2022 and 2021, we reimbursed $0.4 million and $0.2 million of out-of-pocket costs incurred on our behalf by our Manager, respectively, which are included in general and administrative expenses.

Loans Receivable Held-for-Investment

As of September 30, 2022 and December 31, 2021, we have one loan with an outstanding principal balance of $92.8 million and $54.0 million, respectively, and a loan commitment of $141.1 million, whereby the borrower is an affiliate of a shareholder of our common stock who owns approximately 10.9% of common stock outstanding as of September 30, 2022 .

Note 12. Stock-Based Compensation

We are externally managed and do not currently have any employees. On March 30, 2016, we adopted the 2016 Incentive Award Plan (the “Plan”) to promote the success and enhance the value of the Company by linking the individual interests of employees of the Manager and its affiliates to those of our stockholders. The maximum number of shares that may be issued under the Plan is equal to 8,281,594 shares.

On April 4, 2019, the Board granted 877,498 time-based RSUs pursuant to the Plan which immediately became vested. Dividend equivalent payments accrued as if those shares were outstanding for all dividends declared during the period beginning August 25, 2015. The fair value of time-based RSUs was recognized immediately. The fair value of the 877,498 RSUs was determined to be $20.00 per share on the grant date based on our share issuances proximate to the grant date. On April 4, 2021, 584,767 fully vested RSUs were delivered and converted to common shares. During the nine months ended September 30, 2021, 292,731 time-based RSUs were forfeited prior to their delivery, resulting in the reversal of $5.9 million of previously recognized stock-based compensation expense which is included as other income in the consolidated statements of operations.

On April 4, 2019, the Board granted 1,622,499 performance-based RSUs pursuant to the Plan of which 0% to 100% were scheduled to vest at the conclusion of a three-year performance period commencing on January 1, 2019, at varying levels, if we achieved a minimum cumulative Total Stockholder Return Percentage in excess of 18% over that period. Total Stockholder Return Percentage is equal to the quotient of (i) the sum of (A) the tangible net book value per common share as of December 31, 2021 less $19.84 and (B) the aggregate amount of dividends paid with respect to common stock during the performance period, (ii) and $19.84, calculated on a fully diluted basis. Dividend equivalents were scheduled to accrue and be paid to participants at the conclusion of the performance period based on the number of RSUs that vested. The fair value of the 1,622,499 performance-based RSUs was determined to be $20.00 per share on the grant date based on our share issuances proximate to the grant date. In the event that a change in control or an initial public offering (“IPO”) had occurred prior to the completion of the performance period, the RSUs would have immediately vested prior

to such change in control or IPO and dividend equivalents would have become payable. Upon completion of our IPO in November 2021, 1,097,293 RSUs immediately vested and dividend equivalents of $4.9 million were paid.

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

The Board awards time-based RSUs to eligible non-employee Board members on an annual basis as part of such Board members’ annual compensation in accordance with the Non-Employee Director Compensation Program. The time-based awards are generally issued in the second quarter on the date of the annual meeting of our stockholders, in conjunction with the director’s election to the Board, and the awards vest on the earlier of (x) the one-year anniversary of the grant date and (y) the date of the next annual meeting of our stockholders following the grant date, subject to the applicable participants' continued service through such vesting date. In June 2022, the eligible non-employee members of the Board were automatically granted an aggregate of 29,280 time-based RSUs under the Plan. Each RSU was granted with the right to receive dividend equivalents. Additionally, certain directors elected to defer their RSUs pursuant to the terms of the Deferred Compensation Plan. Such deferred awards will become payable on the earliest to occur of the participant’s separation from service or a change in control. The fair value of the 29,280 RSUs was determined to be $20.49 per share on the grant date based on the closing price of common stock on such date.

Under our Deferred Compensation Plan, certain of our Board members elected to receive the annual fees and/or time-based RSUs to which they are entitled under our Non-Employee Director Compensation Program in the form of deferred RSUs. Accordingly, we issued 2,894 of deferred RSUs in lieu of cash fees to such directors, and recognized a related expense of $49,000, during the three and nine months ended September 30, 2022, which is classified in general and administrative expenses.

On June 14, 2022, the Board granted an aggregate of 2,130,000 time-based RSUs to employees of the Manager or its affiliates, which vest in three equal installments on each of the first, second and third anniversaries of July 1, 2022, subject to the applicable participant’s continued service through each vesting date. Each RSU was granted with the right to receive dividend equivalents. The fair value of the 2,130,000 RSUs was determined to be $18.72 per share on the grant date based on the closing price of common stock on such date.

For the three and nine months ended September 30, 2022 we recognized $3.4 million and $4.0 million, respectively, of stock-based compensation expense related to the RSUs. For the three and nine months ended September 30, 2021, we recognized a net reversal of previously recognized compensation expense of $0.2 million and $0.4 million, respectively. Stock-based compensation expense is considered non-cash compensation expense for the three and nine months ended September 30, 2022 and 2021.

Stock-based compensation expense is recognized in earnings on a straight-line basis over the applicable award’s vesting period. Forfeitures of stock-based compensation awards are recognized as they occur. As of September 30, 2022, total unrecognized compensation expense was $36.4 million based on the grant date fair value of RSUs granted. This expense is expected to be recognized over a remaining period of 2.7 years from September 30, 2022.

The following table details the time-based RSU activity during the nine months ended September 30, 2022 and 2021:


	Time-based Restricted Stock Units				Performance-based Restricted Stock Units
			Weighted-Average				Weighted-Average
	Number of		Grant Date Fair		Number of		Grant Date Fair
	Restricted Shares		Value Per Share		Restricted Shares		Value Per Share
Unvested, December 31, 2021		-	$	-		-	$	-
Granted		2,159,280	$	18.74		-	$	-
Unvested, September 30, 2022		2,159,280	$	18.74		-	$	-


	Time-based Restricted Stock Units				Performance-based Restricted Stock Units
			Weighted-Average					Weighted-Average
	Number of		Grant Date Fair		Number of			Grant Date Fair
	Restricted Shares		Value Per Share		Restricted Shares			Value Per Share
Unvested, December 31, 2020		-	$	-		1,622,499		$	20.00
Forfeited/cancelled		-	$	-		(525,206	)	$	20.00
Unvested, September 30, 2021		-	$	-		1,097,293		$	20.00

Note 13. Income Taxes

We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with our taxable year ended December 31, 2015 and expect to continue to operate so as to qualify as a REIT. As a result, we will generally not be subject to federal and state income tax on that portion of our income that we distribute to stockholders if we distribute at least 90% of our taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains and activity conducted within our taxable REIT subsidiary (“TRS”), and comply with certain other requirements to qualify as a REIT. Since Commencement of Operations, we have been in compliance with all REIT requirements and we plan to continue to operate so that we meet the requirements for taxation as a REIT. Therefore, other than amounts relating to our TRS, as described below, we have not provided for current income tax expense related to our REIT taxable income for the nine months ended September 30, 2022 and 2021, respectively. Additionally, no provision has been made for federal or state income taxes in the accompanying financial statements, as we believe we have met the prescribed requisite requirements.

Our real estate owned is held in a TRS. A TRS is a corporation that is owned directly or indirectly by a REIT and has jointly elected with the REIT to be treated as a TRS for tax purposes. TRSs provide REITs the flexibility to hold, up to 20% of their total assets, entities or investments that otherwise would not be permissible in the REIT structure. Our TRS is not consolidated for U.S. federal income tax purposes and is taxed separately as a corporation. For financial reporting purposes, a provision or benefit for current and deferred taxes is established for the portion of earnings or expense recognized by us with respect to our TRS. No current or deferred tax benefit or expense was recorded for the three and nine months ended September 30, 2022. We recorded a deferred income tax benefit of $0 and $6.0 million during the three and nine months ended September 30, 2021.

We did not have any deferred tax assets or deferred tax liabilities at September 30, 2022 or December 31, 2021 due to a full valuation allowance that was established against our deferred tax assets.

We recognize tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. Interest and penalties on uncertain tax positions are included as a component of the provision for income taxes in our consolidated statements of income. As of September 30, 2022 and December 31, 2021, we have not recorded any amounts for uncertain tax positions.

Our tax returns are subject to audit by taxing authorities. Tax years 2018 through 2021 remain open to examination by major taxing jurisdictions to which we are subject to taxes.

Note 14. Commitments and Contingencies

We hold a 51% interest in CMTG/TT as a result of committing to invest $124.9 million in CMTG/TT. Distributions representing repayment proceeds from CMTG/TT’s loans may be recalled by CMTG/TT, if the repayment occurred at least six months prior to the loan’s initial maturity date. As of September 30, 2022 and December 31, 2021, we contributed $163.1 million and $162.1 million, respectively, to CMTG/TT and have received return of capital distributions of $123.6 million, of which $111.1 million were recallable. As of September 30, 2022 and December 31, 2021, CMTG’s remaining capital commitment to CMTG/TT was $72.9 million and $73.8 million, respectively.

As of September 30, 2022 and December 31, 2021, we had aggregate unfunded loan commitments of $1.8 billion and $1.1 billion respectively, which amounts will generally be funded to finance lease-related or capital expenditures by our borrowers, subject to borrowers achieving certain conditions precedent to such funding. These future commitments will expire over the remaining term of the loans, none of which exceed five years.

Based on the fully extended maturity of our underlying loans, the contractual payments under all borrowings were as follows as of September 30, 2022 ($ in thousands):


Year	Amount
2022	$	1,907
2023(1)		386,660
2024		1,077,086
2025		730,406
2026 and thereafter		3,236,674
	$	5,432,733

(1)

Assumes two loans with aggregate borrowings outstanding of $75.2 million that are in maturity default have an extended maturity date in 2023.

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

Note 15. Subsequent Events

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

1. We originated two floating rate loan with an aggregate loan commitment of $246.5 million, of which $34.4 million was funded at closing.

2. We received the full repayment of two loans with an unpaid principal balance of $20.3 million at September 30, 2022.

3. We entered into a master participation and administration agreement with JP Morgan to finance certain of our mortgage loans. The facility has a maximum facility amount of $1.0 billion, of which $400.0 million was committed at closing. The financing is non-mark-to-market and matures five years after the date on which the last asset is financed under the facility.

4. On November 8, 2022 our Board of Directors authorized a share repurchase program that authorizes the repurchase of up to $100 million shares of our common stock. Under the share repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions, accelerated share repurchase programs, or otherwise.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q. References herein to “Claros Mortgage Trust,” “Company”, “we”, “us” or “our” refer to Claros Mortgage Trust, Inc. and its subsidiaries unless the context specifically require otherwise.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We make forward-looking statements herein and will make forward-looking statements in future filings with the SEC, press releases or other written or oral communications within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For these statements, we claim the protections of the safe harbor for forward-looking statements contained in such Sections. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. When we use the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions, it intends to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: the macro- and micro-economic impact of the COVID-19 pandemic on our financial condition, results of operations, liquidity and capital resources; market trends in our industry, interest rates, real estate values, the debt securities markets or the general economy; the demand for commercial real estate loans; our business and investment strategy; our operating results; actions and initiatives of the U.S. government and governments outside of the United States, changes to government policies and the execution and impact of these actions, initiatives and policies; the state of the economy generally or in specific geographic regions; economic trends and economic recoveries; our ability to obtain and maintain financing arrangements, including secured debt arrangements and securitizations; the timing and amount of expected future fundings of unfunded commitments; the availability of debt financing from traditional lenders; the volume of short-term loan extensions; the demand for new capital to replace maturing loans; expected leverage; general volatility of the securities markets in which we participate; changes in the value of our assets; the scope of our target assets; interest rate mismatches between our target assets and any borrowings used to fund such assets; changes in interest rates and the market value of our target assets; changes in prepayment rates on our target assets; effects of hedging instruments on our target assets; rates of default or decreased recovery rates on our target assets; the degree to which hedging strategies may or may not protect us from interest rate volatility; impact of and changes in governmental regulations, tax law and rates, accounting, legal or regulatory issues or guidance and similar matters; our continued maintenance of our qualification as a REIT for U.S. federal income tax purposes; our continued exclusion from registration under the Investment Company Act of 1940, as amended (the "1940 Act"); the availability of opportunities to acquire commercial mortgage-related, real estate-related and other securities; the availability of qualified personnel; estimates relating to our ability to make distributions to our stockholders in the future; our present and potential future competition; and unexpected costs or unexpected liabilities, including those related to litigation.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. See "Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q and our Annual Report. These and other risks, uncertainties, and factors, including those described in the annual, quarterly and current reports that we file with the SEC, could cause our actual results to differ materially from those included in any forward-looking statements we make. All forward-looking statements speak only as of the date they are made. New risks and uncertainties arise over time and it is not possible to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Introduction

We are a CRE finance company focused primarily on originating senior and subordinate loans on transitional CRE assets located in major U.S. markets, including mortgage loans secured by a first priority or subordinate mortgage on transitional CRE assets, and subordinate loans including mezzanine loans secured by a pledge of equity ownership interests in the direct or indirect property owner rather than directly in the underlying commercial properties. These loans are subordinate to a mortgage loan but senior to the property owner’s equity ownership interests. Transitional CRE assets are properties that require repositioning, renovation, rehabilitation, leasing, development or redevelopment or other value-added elements in order to maximize value. We believe our Sponsor’s real estate development, ownership and operations experience and infrastructure differentiates us in lending on these transitional CRE assets. Our objective is to be a premier provider of debt capital for transitional CRE assets and, in doing so, to generate attractive risk-adjusted returns for our stockholders over time, primarily through dividends. We strive to create a diversified investment portfolio of CRE loans that we generally intend to hold to maturity. We focus primarily on originating loans ranging from $50 million to $300 million on transitional CRE assets located in major markets with attractive fundamental characteristics supported by macroeconomic tailwinds.

We were organized as a Maryland corporation on April 29, 2015 and commenced operations on August 25, 2015, and are traded on the New York Stock Exchange, or NYSE, under the symbol “CMTG”. We have elected and believe we have qualified to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2015. We are externally managed and advised by our Manager, an investment adviser registered with the SEC pursuant to the Investment Advisers Act of 1940, as amended. We operate our business in a manner that permits us to maintain our exclusion from registration under the 1940 Act.

I. Key Financial Measures and Indicators

As a CRE finance company, we believe the key financial measures and indicators for our business are net income per share, dividends declared per share, Distributable Earnings per share, book value per share, adjusted book value per share, Net Debt-to-Equity Ratio and Total Leverage Ratio. During the three months ended September 30, 2022, we had net income per share of $0.30, Distributable Earnings per share of $0.33, and declared dividends of $0.37 per share. As of September 30, 2022, our book value per share was $17.96, our adjusted book value per share was $18.58, our Net-Debt-to-Equity Ratio was 2.0x, and our Total Leverage Ratio was 2.4x. We use Net Debt-to-Equity Ratio and Total Leverage Ratio, financial measures which are not prepared in accordance with GAAP, to evaluate our financial leverage, which in the case of our Total Leverage Ratio, makes certain adjustments that we believe provide a more conservative measure of our financial condition.

Net Income Per Share and Dividends Declared Per Share

The following table sets forth the calculation of basic and diluted net income per share and dividends declared per share ($ in thousands, except share and per share data):


	Three Months Ended
	September 30, 2022		June 30, 2022
Basic and diluted earnings	$	41,272	$	62,404
Weighted average shares of common stock outstanding, basic and diluted		139,430,153		139,637,949
Basic and diluted net income per share of common stock	$	0.30	$	0.45
Dividends declared per share of common stock	$	0.37	$	0.37

Distributable Earnings

Distributable Earnings is a non-GAAP measures used to evaluate our performance excluding the effects of certain transactions, non-cash items and GAAP adjustments, as determined by our Manager, that we believe are not necessarily indicative of our current performance and operations. Distributable Earnings is a non-GAAP measure, which we define as net income as determined in accordance with GAAP, excluding (i) non-cash stock-based compensation expense (income), (ii) real estate depreciation and amortization, (iii) any unrealized gains or losses from mark-to-market valuation changes (other than permanent impairments) that are included in net income for the applicable period, (iv) one-time events pursuant to changes in GAAP and (v) certain non-cash items, which in the judgment of our Manager, should not be included in Distributable Earnings. Pursuant to the Management Agreement, we use Core Earnings, which is substantially the same as Distributable Earnings excluding incentive fees, to determine the incentive fees we pay our Manager. Distributable Earnings is substantially the same as Core Earnings, as defined in the Management Agreement, for the periods presented.

Distributable Earnings, and other similar measures, have historically been a useful indicator of a mortgage REITs’ ability to cover its dividends, and to mortgage REITs themselves in determining the amount of any dividends. Distributable Earnings is a key factor, among others, considered by the Board in setting the dividend and as such we believe Distributable Earnings is useful to investors. Accordingly, we believe providing Distributable Earnings on a supplemental basis to our net income as determined in accordance with GAAP is helpful to our stockholders in assessing the overall performance of our business.

We believe that Distributable Earnings provides meaningful information to consider in addition to our net income and cash flows from operating activities determined in accordance with GAAP. We believe Distributable Earnings helps us to evaluate our performance excluding the effects of certain transactions, non-cash items and GAAP adjustments, as determined by our Manager, that we believe are not necessarily indicative of our current performance and operations. Distributable Earnings does not represent net income or cash flows from operating activities and should not be considered as an alternative to GAAP net income, an indication of our cash flows from operating activities, a measure of our liquidity or an indication of funds available for our cash needs. In addition, our methodology for calculating Distributable Earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures and, accordingly, our reported Distributable Earnings may not be comparable to the Distributable Earnings reported by other companies.

While Distributable Earnings excludes the impact of our unrealized current provision for credit losses, loan losses are charged off and recognized through Distributable Earnings when deemed non-recoverable. Non-recoverability is determined (i) upon the resolution of a loan (i.e. when the loan is repaid, fully or partially, or in the case of foreclosure, when the underlying asset is sold), or (ii) with respect to any amount due under any loan, when such amount is determined to be non-collectible. During the three months ended September 30, 2022, we recorded a $2.4 million increase in the CECL reserve, which has been excluded from Distributable Earnings.

In determining distributable earnings per share, the dilutive effect of unvested RSUs are considered. The weighted-average diluted shares outstanding used for Distributable Earnings has been adjusted from weighted-average diluted shares under GAAP to include unvested RSUs.

The table below summarizes the reconciliation from weighted-average diluted shares under GAAP to the weighted-average diluted shares used for Distributable Earnings:


	Three Months Ended
Weighted-Averages	September 30, 2022		June 30, 2022
Diluted Shares - GAAP		139,430,153		139,637,949
Unvested RSUs		2,159,280		407,565
Diluted Shares - Distributable Earnings		141,589,433		140,045,514

The following table provides a reconciliation of net income attributable to common stock to Distributable Earnings ($ in thousands, except share and per share data):


	Three Months Ended
	September 30, 2022			June 30, 2022
Net income attributable to common stock:	$	42,071		$	63,234
Adjustments:
Non-cash stock-based compensation expense		3,426			604
Provision for current expected credit loss reserve		2,352			8,530
Depreciation expense		2,064			1,998
Unrealized gain on interest rate cap		(2,776	)		(2,837	)
Distributable Earnings prior to principal charge-offs	$	47,137		$	71,529
Principal charge-offs		-			(11,500	)
Distributable Earnings	$	47,137		$	60,029
Weighted average diluted shares - Distributable Earnings		141,589,433			140,045,514
Diluted Distributable Earnings per share prior to principal charge-offs	$	0.33		$	0.51
Diluted Distributable Earnings per share	$	0.33		$	0.43

Book Value Per Share

We believe that presenting book value per share adjusted for the general allowance for loan losses and accumulated depreciation is useful for investors as it enhances the comparability across the industry. We believe that our investors and lenders consider book value excluding these items as an important metric related to our overall capitalization.

The following table sets forth the calculation of our book value and our adjusted book value per share ($ in thousands, except share and per share data):


	September 30, 2022		December 31, 2021
Total Stockholders’ Equity	$	2,535,185	$	2,604,267
Non-controlling interest		-		(37,636	)
Stockholders’ Equity, net of non-controlling interest	$	2,535,185	$	2,566,631
Number of shares common stock outstanding and RSUs		141,129,778		139,840,088
Book Value per share(1)	$	17.96	$	18.35
Add back: accumulated depreciation on real estate owned		0.09		0.05
Add back: general CECL reserve		0.53		0.48
Adjusted Book Value per share	$	18.58	$	18.88

(1)

Calculated as (i) total stockholders’ equity less non-controlling interest divided by (ii) number of shares of common stock outstanding and RSUs at period end.

II. Our Portfolio

The below table summarizes our loan portfolio as of September 30, 2022 ($ in thousands):


							Weighted Average(2)
	Number of Loans		Loan Commitment(1)		Unpaid Principal Balance		Yield to Maturity(3)			Term to Fully Extended Maturity (in years) (4)		LTV(5)
Senior and subordinate loans		77	$	9,150,041	$	7,380,506		7.7	%		3.5		67.8	%

(1)

Loan commitment represents principal outstanding plus remaining unfunded loan commitments.

(2)

Weighted averages are based on unpaid principal balance.

(3)

All-in yield represents the weighted average annualized yield to initial maturity of each loan, inclusive of coupon, and fees received, based on the applicable floating benchmark rate/floors (if applicable), in place as of September 30, 2022.

(4)

Fully extended maturity assumes all extension options are exercised by the borrower upon satisfaction of the applicable conditions.

(5)

LTV represents “loan-to-value” or “loan-to-cost”, which is calculated as our total loan commitment from time to time, as if fully funded, plus any financings that are pari passu with or senior to our loan, divided by our estimate of either (1) the value of the underlying real estate, determined in accordance with our underwriting process (typically consistent with, if not less than, the value set forth in a third-party appraisal) or (2) the borrower’s projected, fully funded cost basis in the asset, in each case as we deem appropriate for the relevant loan and other loans with similar characteristics. Underwritten values and projected costs should not be assumed to reflect our judgment of current market values or project costs, which may have changed materially since the date of origination. LTV is updated only in connection with a partial loan paydown and/or release of collateral, material changes to expected project costs, the receipt of a new appraisal (typically in connection with financing or refinancing activity) or a change in our loan commitment. Totals represent weighted average based on loan commitment, including non-consolidated senior interests.

Portfolio Activity and Overview

The following table summarizes changes in unpaid principal balance within our portfolio, for both our loans and for our interests in loans (i.e., loans in which we have acquired an interest in a loan for which the transferor did not account for the transaction as a sale under GAAP) for the three and nine months ended September 30, 2022 ($ in thousands):


	Three Months Ended September 30, 2022								Nine Months Ended September 30, 2022
	Loans Receivable			Interests in Loans Receivable		Total			Loans Receivable			Interests in Loans Receivable			Total
Unpaid principal balance, beginning of period	$	7,139,571		$	-	$	7,139,571		$	6,441,238		$	161,566		$	6,602,804
Initial funding of loans		687,550			-		687,550			1,996,086			-			1,996,086
Advances on loans		185,566			-		185,566			480,777			17,080			497,857
Loan repayments		(632,181	)		-		(632,181	)		(1,410,075	)		(178,646	)		(1,588,721	)
Sale of loan receivable		-			-		-			(116,020	)		-			(116,020	)
Principal charge-offs		-			-		-			(11,500	)		-			(11,500	)
Total net fundings	$	240,935		$	-	$	240,935		$	939,268		$	(161,566	)	$	777,702
Unpaid principal balance, end of period	$	7,380,506		$	-	$	7,380,506		$	7,380,506		$	-		$	7,380,506

The following table details our loan investments individually based on unpaid principal balances as of September 30, 2022 ($ in thousands):



Loan Number	Loan type	Origination Date	Loan Commitment(1)		Unpaid Principal Balance		Carrying Value		Fully Extended Maturity(2)	Property Type	Construction(4)	Location	Risk Rating
1	Senior	12/16/2021		405,000		396,420		393,600	6/16/2027	Multifamily	-	CA	3
2	Senior	11/1/2019		390,000		390,000		388,770	11/1/2026	Multifamily	-	NY	3
3	Senior	6/13/2018		280,000		280,000		280,983	8/1/2023	Hospitality	-	NY	3
4	Senior	10/18/2019		279,549		239,733		239,569	10/18/2024	For Sale Condo	Y	CA	3
5	Senior	10/4/2019		263,000		217,089		216,684	10/1/2025	Mixed-Use	Y	DC	3
6	Senior	6/30/2022		227,000		211,222		208,568	6/30/2029	Hospitality	-	CA	3
7	Senior	12/27/2018		210,000		207,548		207,548	2/1/2025	Mixed-Use	-	NY	4
8	Senior	8/17/2022		235,000		205,000		202,800	8/17/2027	Hospitality	-	CA	3
9	Senior	7/21/2021		225,000		200,529		199,143	7/26/2026	Hospitality	-	GA	3
10	Senior	9/7/2018		192,600		192,600		192,282	10/18/2024	Land	-	NY	3
11	Senior	2/15/2022		262,500		172,020		169,691	2/14/2027	Multifamily	Y	CA	3
12	Senior	1/14/2022		170,000		170,000		168,705	1/14/2027	Multifamily	-	CO	3
13	Senior	4/14/2022		193,400		166,700		165,061	4/14/2027	Multifamily	-	MI	3
14	Senior	9/27/2019		258,400		159,340		157,903	9/26/2026	Office	-	GA	4
15	Senior	9/20/2019		225,000		151,285		149,628	12/31/2025	For Sale Condo	Y	FL	3
16	Senior	2/28/2019		150,000		150,000		149,844	2/28/2024	Office	-	CT	3
17	Senior	1/9/2018		148,500		148,500		148,341	1/9/2024	Hospitality	-	VA	3
18	Senior	9/8/2022		160,000		148,500		146,945	9/8/2027	Multifamily	-	AZ	3
19	Senior	12/30/2021		147,500		147,500		147,144	12/30/2025	Multifamily	-	PA	3
20	Senior	8/8/2019		154,999		137,713		137,165	8/8/2026	Multifamily	-	CA	3
21	Senior	4/14/2022		151,698		133,059		131,453	4/26/2027	Multifamily	-	TX	3
22	Senior	12/10/2021		130,000		130,000		129,187	12/10/2026	Multifamily	-	VA	3
23	Subordinate	12/9/2021		125,000		125,000		124,740	1/1/2027	Office	-	IL	3
24	Senior	9/23/2021		127,535		122,535		121,637	9/24/2028	Hospitality	-	TX	3
25	Senior	9/30/2019		122,500		122,500		122,346	2/9/2027	Office	-	NY	3
26	Senior	4/29/2019		120,000		119,510		119,261	4/29/2024	Mixed-Use	-	NY	3
27	Senior	3/1/2022		122,000		118,600		117,714	2/28/2027	Multifamily	-	TX	3
28	Senior	8/8/2022		115,000		115,000		113,960	8/8/2027	Multifamily	-	CO	3
29	Senior	7/20/2021		113,500		113,500		113,178	7/19/2026	Multifamily	-	IL	3
30	Senior	2/13/2020		124,810		112,341		111,910	2/13/2025	Office	-	CA	4
31	Senior	6/17/2022		127,250		110,265		108,781	6/17/2027	Multifamily	-	TX	3
32	Senior	6/8/2018		104,250		104,250		105,342	1/15/2022	Land	-	NY	4
33	Senior	12/15/2021		103,000		103,000		102,319	12/13/2026	Multifamily	-	TN	3
34	Senior	10/11/2017		97,500		97,500		97,489	10/31/2023	Hospitality	-	CA	3
35	Senior	8/2/2021		100,000		95,969		95,398	8/2/2026	Office	-	CA	3
36	Senior	1/27/2022		100,800		95,633		94,918	1/27/2027	Multifamily	-	NV	3
37	Senior	4/1/2020		141,084		92,841		91,736	4/1/2026	Office	Y	TN	3



Loan Number	Loan type	Origination Date	Loan Commitment(1)		Unpaid Principal Balance		Carrying Value			Fully Extended Maturity(2)	Property Type	Construction(4)	Location	Risk Rating
38	Senior	3/31/2020		87,750		87,750		87,750		2/9/2025	Office	-	TX	4
39	Senior	6/13/2018		76,499		76,499		73,748		7/10/2025	Hospitality	-	CA	4
40	Senior	4/5/2019		75,500		75,500		75,406		4/5/2024	Mixed-Use	-	NY	3
41	Senior	12/14/2018		75,000		75,000		74,961		12/14/2023	Multifamily	-	DC	3
42	Senior	8/1/2022		115,250		74,998		74,639		7/30/2026	Hospitality	Y	NY	3
43	Senior	7/27/2022		76,000		72,426		71,894		7/27/2027	Multifamily	-	UT	3
44	Senior	8/26/2021		84,810		69,869		69,252		8/27/2026	Office	-	GA	3
45	Senior	8/2/2019		67,000		67,000		67,000		1/30/2022	Land	-	NY	4
46	Senior	12/22/2021		76,350		64,097		63,483		12/22/2026	Multifamily	-	TX	3
47	Senior	8/29/2018		60,000		60,000		59,862		8/31/2023	Hospitality	-	NY	3
48	Senior	3/22/2021		148,303		57,160		56,106		3/22/2026	Other	Y	MA	3
49	Senior	1/19/2022		73,677		52,716		52,091		1/19/2027	Hospitality	-	TN	3
50	Senior	11/2/2021		77,115		52,647		51,967		11/2/2026	Multifamily	Y	FL	3
51	Senior	6/3/2021		79,600		52,560		51,966		6/3/2026	Other	-	MI	3
52	Senior	3/15/2022		53,300		49,844		49,415		3/15/2027	Multifamily	-	AZ	3
53	Senior	12/30/2021		44,661		44,661		44,391		12/30/2025	For Sale Condo	-	VA	3
54	Senior	1/10/2022		130,461		40,841		39,538		1/9/2027	Other	Y	PA	3
55	Senior	2/4/2022		44,768		38,002		37,628		2/4/2027	Multifamily	-	TX	3
56	Subordinate	12/21/2018		31,300		31,300		31,456		6/21/2022	Land	-	NY	3
57	Senior	4/18/2019		30,000		30,000		29,913		5/1/2023	Office	-	MA	3
58	Subordinate	7/2/2021		30,200		28,181		28,146		7/2/2024	Land	-	FL	3
59	Senior	12/30/2021		141,791		25,856		24,491		12/30/2026	Mixed-use	Y	FL	3
60	Senior	2/2/2022		90,000		24,122		23,225		2/2/2027	Office	Y	WA	3
61	Senior	2/17/2022		28,479		23,924		23,698		2/17/2027	Multifamily	-	TX	3
62	Senior	8/2/2019		20,660		20,660		20,861		2/2/2024	For Sale Condo	-	NY	3
63	Senior	11/24/2021		60,255		20,070		19,478		11/22/2026	Multifamily	Y	NV	3
64(3)	Senior	4/9/2021		17,500		17,500		17,668		4/29/2023	Land	-	PA	3
65	Senior	1/31/2022		34,641		12,667		12,332		1/31/2027	Other	Y	FL	3
66	Senior	3/9/2018		14,789		12,052		11,850		5/31/2023	For Sale Condo	-	NY	3
67	Senior	6/30/2022		48,500		7,614		7,137		6/30/2026	Other	Y	NV	3
68	Senior	7/1/2019		3,500		3,500		3,500		12/30/2020	Other	-	NY	5
69(3)	Senior	5/5/2017		2,838		2,838		2,838		1/1/2023	Other	-	DC	5
70	Senior	1/4/2022		32,795		2,396		2,069		1/4/2027	Other	Y	GA	3
71	Subordinate	8/2/2018		927		927		907		7/9/2023	Other	-	NY	2
72	Senior	2/18/2022		32,083		913		592		2/18/2027	Other	Y	FL	3
73	Senior	4/19/2022		23,378		689		455		4/19/2027	Other	Y	GA	3
74	Senior	2/25/2022		53,984		525		(15	)	2/25/2027	Other	Y	GA	3
75	Senior	4/19/2022		24,245		-		(242	)	4/19/2027	Other	Y	GA	3
76	Senior	5/16/2022		202,500		-		(2,025	)	5/13/2027	Mixed-Use	Y	VA	3
77	Senior	9/2/2022		176,257		-		(1,763	)	9/2/2027	Multifamily	Y	UT	3

Total				9,150,041		7,380,506		7,329,411
CECL Allowance								(59,188	)
Grand Total/Weighted Average				9,150,041		7,380,506		7,270,223				28.0%		3.1

(1)

Loan commitment represents principal outstanding plus remaining unfunded loan commitments.

(2)

Fully extended maturity assumes all extension options are exercised by the borrower upon satisfaction of the applicable conditions.

(3)

Subsequent to September 30, 2022, this loan was repaid in full.

(4)

Weighted average is based on loan commitment as of September 30, 2022.

Real Estate Owned, Net

On February 8, 2021, we acquired legal title to a portfolio of hotel properties located in New York, NY through a foreclosure. Prior to February 8, 2021, the hotel portfolio represented the collateral for the $103.9 million mezzanine loan that we held, which was in default as a result of the borrower failing to pay debt service. The hotel portfolio appears as real estate owned, net on our balance sheet and, as of September 30, 2022, was encumbered by a $290.0 million securitized senior mortgage, which is included as a liability on our balance sheet. Refer to Note 5 to our consolidated financial statements for additional details.

Asset Management

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

From time to time, some of our borrowers may experience delays in the execution of their business plans. As a transitional lender, we work with our borrowers to execute loan modifications which typically include additional equity contributions from borrowers, repurposing of reserves, temporary deferrals of interest or principal, and partial deferral of coupon interest as payment-in-kind interest.

We have completed a number of loan modifications to date, and we may continue to make additional modifications depending on the business plans, financial condition, liquidity and results of operations of our borrowers.

Our Manager reviews our entire loan portfolio at least quarterly, undertakes an assessment of the performance of each loan, and assigns it a risk rating between “1” and “5,” from least risk to greatest risk, respectively. The weighted average risk rating of our total loan exposure was 3.1 at September 30, 2022.

Current Expected Credit Losses

On January 1, 2021, we adopted ASU 2016-13, which implemented the CECL accounting model. Following adoption, we recorded a $78.3 million cumulative effect adjustment to retained earnings.

During the second quarter of 2022, we recorded a principal charge-off of $11.5 million against a loan made to the personal estate of a former borrower. Prior to the charge-off, the loan had an unpaid principal balance $15.0 million and a specific CECL reserve of $6.0 million, resulting in a carrying value of $9.0 million. Following the charge-off, the loan carrying value was $3.5 million, which represents estimated collection. The loan is on non-accrual status and is in maturity default.

During three months ended September 30, 2022, we recorded a provision of $2.4 million in the allowance for credit losses, bringing our total reserve to $75.0 million as of September 30, 2022.

In December 2021, we received a partial principal repayment of $81.7 million on a senior loan with an outstanding principal balance of $95.0 million, and a maturity date of May 31, 2021, and recorded a principal charge-off of $1.8 million. Following the repayment, the maturity date of the loan was extended to January 1, 2023. As of September 30, 2022, the loan had an unpaid principal balance of $2.8 million and a specific CECL reserve of $38,000. Subsequent to September 30, 2022 this loan was repaid in full.

Portfolio Financing

Our portfolio financing arrangements include repurchase facilities, asset-specific financing structures, mortgages on real estate owned and Secured Term Loan borrowings.

The following table summarizes our loan portfolio financing ($ in thousands):


	September 30, 2022
	Capacity		Borrowing Outstanding		Weighted Average Spread(1)
Repurchase agreements	$	4,700,000	$	3,781,687		+ 2.16%
Repurchase agreements - Side Car		271,171		212,033		+ 4.51%
Loan participations sold		264,252		264,252		+ 3.77%
Notes payable		383,898		127,764		+ 3.09%
Secured Term Loan		756,997		756,997		+ 4.50%
Debt related to real estate owned		290,000		290,000		+ 2.78%
Total / weighted average	$	6,666,318	$	5,432,733		+ 2.71%

(1)

Weighted average spread over the applicable benchmark is based on unpaid principal balance. One-month LIBOR as of September 30, 2022 was 3.14%. One-month term SOFR as of September 30, 2022 was 3.04%. Fixed rate loans are presented as a spread over the relevant floating benchmark rates.

Repurchase Agreements

We finance certain of our loans using secured revolving repurchase facilities. As of September 30, 2022, aggregate borrowings outstanding under our secured revolving repurchase facilities totaled $4.0 billion, with a weighted average coupon of one-month LIBOR or one-month term SOFR plus 2.29% per annum. All weighted averages are based on unpaid principal balance. As of September 30, 2022, outstanding borrowings under these facilities had a weighted average term to fully extended maturity (assuming we exercise all extension options and our counterparty agrees to such extension options) of 3.7 years.

Each of the secured revolving repurchase facilities contains “margin maintenance” provisions, which are designed to allow the lender to require additional collateral to secure borrowings against assets that are determined to have experienced a diminution in value. Since inception through September 30, 2022, we have not received any margin calls under any of our repurchase facilities.

Loan Participations Sold

We finance certain investments via the sale of a participation in loans receivable that we own, and we present the loan participation sold as a liability on our consolidated balance sheet when such arrangement does not qualify as a sale under GAAP. In instances where we have multiple loan participations with the same lender, the financings are generally not cross-collateralized. Each of our loan participations sold is generally term-matched to its corresponding loan collateral. As of September 30, 2022, three of our loans were financed with loan participations sold.

Notes Payable

We finance certain investments on a match-term, non-recourse basis with such financings collateralized by our loans receivable, which we refer to as notes payable. Each of our notes payable is generally term-matched to its corresponding loan collateral. As of September 30, 2022, four of our loans were financed with notes payable.

Secured Term Loan

We have a secured term loan of $757.0 million which we originally entered into on August 9, 2019. Our secured term loan is presented net of any original issue discount and transaction expenses which are deferred and recognized as a component of interest expense over the life of the loan using the effective interest method.

On December 2, 2021, we entered into a modification of our secured term loan which reduced the interest rate to the greater of (i) one-month term SOFR plus a 0.10% credit spread adjustment and (ii) 0.50%, plus a credit spread of 4.50%. The secured term loan matures on August 9, 2026. As of September 30, 2022, our secured term loan has an unpaid principal balance of $757.0 million and a carrying value of $737.5 million.

Debt Related to Real Estate Owned

On February 8, 2021 we assumed a $300.0 million securitized senior mortgage in connection with a Uniform Commercial Code foreclosure on a portfolio of seven limited service hotels located in New York, New York. In June 2021, we modified the securitized senior mortgage, which resulted in an extension of the contractual maturity date to February 9, 2024, a principal repayment of $10.0 million, and the payment of $7.6 million of fees and modification costs, among other items. The securitized senior mortgage is non-recourse to us. Our debt related to real estate owned as of September 30, 2022 has an outstanding principal balance of $290.0 million, a carrying value of $289.3 million and a stated rate of one-month LIBOR plus 2.78%, subject to a one-month LIBOR floor of 0.75%. See Derivatives below for further detail of our interest rate cap.

Derivatives

The interest rate cap effectively limits the maximum interest rate of our debt related to real estate owned to 5.78%. Increases or decreases in the fair value of our interest rate cap are recorded as an unrealized gain or loss on interest rate cap on our consolidated statements of operations and the fair value is recorded in other assets on our consolidated balance sheets.

Acquisition Facility

As of September 30, 2022, we were in compliance with all financial covenants under our financing.

Non-Consolidated Senior Interests Sold and Non-Consolidated Senior Interests Held by Third Parties

In certain instances, we use structural leverage through the non-recourse syndication of a match-term senior loan interest to a third party which qualifies for sale accounting under GAAP, or through the acquisition of a subordinate loan for which a non-recourse senior interest is retained by a third party. In such instances, the senior loan is not included on our consolidated balance sheet.

The following table summarizes our non-consolidated senior interests and related retained subordinate interests as of September 30, 2022 ($ in thousands):


Non-Consolidated Senior Interests	Loan Count		Loan Commitment		Unpaid Principal Balance		Carrying Value		Spread(1)	Term to Fully Extended Maturity (in years)(2)(3)
Floating rate non-consolidated senior loans		2	$	111,000	$	107,014	N/A		L + 5.05%		0.9
Retained floating rate subordinate loans		2		61,500		59,481		59,603	L + 11.57%		0.8
Fixed rate non-consolidated senior loans		2	$	861,073	$	859,660	N/A		3.47%		4.1
Retained fixed rate subordinate loans		2		125,927		125,927		125,647	8.49%		4.2

(1)

Non-consolidated senior interests are indexed to one-month LIBOR, which was 3.14% at September 30, 2022. Weighted average is based on unpaid principal balance.

(2)

Weighted average is based on unpaid principal balance.

(3)

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

Floating and Fixed Rate Portfolio

Our business model seeks to minimize our exposure to changing interest rates by originating floating rate loans and as much as possible, match-funding the duration of our financing of such loans and using the same benchmark indices, typically one-month LIBOR or one-month term SOFR. As of September 30, 2022, 97.8% of our loans based on unpaid principal balance were floating rate and the majority of our floating rate loans were financed with liabilities that require interest payments based on floating rates also determined by reference to one-month LIBOR or one-month term SOFR plus a spread, which resulted in approximately $1.8 billion of net floating rate exposure.

The following table details our net floating rate exposure as of September 30, 2022 ($ in thousands):


	Net Floating Rate Exposure(1)
Floating rate assets	$	7,215,529
Floating rate liabilities		(5,412,733	)
Net floating rate exposure	$	1,802,796

(1)

Our floating rate loans and related liabilities are all indexed to one-month LIBOR or one-month term SOFR. One-month LIBOR as of September 30, 2022 was 3.14%. One-month term SOFR as of September 30, 2022 was 3.04%.

LIBOR and certain other floating rate benchmark indices to which our floating rate loans and other loan agreements are tied to, are the subject of recent national, international and regulatory guidance and proposals for reform. On March 5, 2021, the Financial Conduct Authority of the United Kingdom, or the FCA, which regulates. LIBOR’s administrator, ICE Benchmark Administration Limited, or IBA, announced that all LIBOR tenors relevant to us will cease to be published or will no longer be representative after June 30, 2023 (and that all other LIBOR tenors will cease to be published or will no longer be representative either after December 31, 2021, or after June 30, 2023). The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated using short-term repurchase agreements backed by Treasury securities, as its preferred alternative rate for USD LIBOR.

Our agreements generally allow for a new interest rate index to be used if LIBOR is no longer available. We have begun and expect to continue to utilize alternative rates referenced in our agreements or negotiate a replacement reference rate for LIBOR.

We have an interest rate cap with a notional amount of $290.0 million and a maturity date of February 15, 2024 on our debt related to real estate owned. The interest rate cap effectively limits the maximum interest rate of our debt related to real estate owned to 5.78%. We have not employed other interest rate derivatives (interest rate swaps, caps, collars or swaptions) to hedge our loan portfolio’s cash flow or fair value exposure to increases in interest rates, but we may do so in the future.

Results of Operations – Three Months Ended September 30, 2022 and June 30, 2022

As previously disclosed, beginning with our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, and for all subsequent reporting periods, we have elected to present results of operations by comparing to the immediately preceding period, as well as the same year to date period in the prior year. Given the dynamic nature of our business and the sensitivity to the real estate and capital markets, we believe providing analysis of results of operations by comparing to the immediately preceding period is more meaningful to our stockholders in assessing the overall performance of our current business.

Operating Results

The following table sets forth information regarding our consolidated results of operations for the three months ended September 30, 2022, and June 30, 2022 ($ in thousands, except per share data):


	Three Months Ended
	September 30, 2022			June 30, 2022			$ Change			% Change
Revenue
Interest and related income	$	126,520		$	98,993		$	27,527			28	%
Less: interest and related expense		67,985			46,871			21,114			45	%
Net interest income		58,535			52,122			6,413			12	%
Revenue from real estate owned		17,882			17,118			764			4	%
Total revenue		76,417			69,240			7,177			10	%
Expenses
Management fees - affiliate		9,944			9,843			101			1	%
General and administrative expenses		4,819			4,748			71			1	%
Stock-based compensation expense		3,426			604			2,822			467	%
Operating expenses on real estate owned		11,366			10,536			830			8	%
Interest expense from debt related to real estate owned		3,903			2,719			1,184			44	%
Depreciation on real estate owned		2,064			1,998			66			3	%
Total expenses		35,522			30,448			5,074			17	%
Realized gain on sale of loan		-			30,090			(30,090	)		-100	%
Unrealized gain on interest rate cap		2,776			2,837			(61	)		-2	%
Income from equity method investment		929			-			929			100	%
(Provision) reversal of current expected credit loss reserve		(2,352	)		(8,530	)		6,178			-72	%
Net income	$	42,248		$	63,189		$	(20,941	)		-33	%
Net income (loss) attributable to non-controlling interests	$	177		$	(45	)	$	222			-493	%
Net income attributable to common stock	$	42,071		$	63,234		$	(21,163	)		-33	%
Net income per share of common stock - basic and diluted	$	0.30		$	0.45		$	(0.15	)		-33	%

Comparison of the three months ended September 30, 2022 and June 30, 2022

Revenue

Revenue increased $7.2 million during the three months ended September 30, 2022, compared to the three months ended June 30, 2022. The increase is primarily due to an increase in net interest income of $6.4 million for the comparative period, which was driven by an increase in interest income earned of $27.5 million primarily as a result of reference rate increases, interest income earned on new originations and follow on fundings, and accelerated OID recognized during the third quarter of 2022, offset in part by an increase in interest expense of $21.1 million primarily as a result of reference rate increases and interest expense owed on new financings during the third quarter of 2022. Additionally, the increase in revenue was driven by an increase in revenue from real estate owned of $0.8 million due to higher occupancy during the third quarter of 2022.

Expenses

Expenses are primarily comprised of base management fees payable to our Manager, general and administrative expenses, stock-based compensation expense, operating expenses from real estate owned, interest expense from debt related to real estate owned, and depreciation on real estate owned. Expenses increased by $5.1 million during the three months ended September 30, 2022 as compared to the three months ended June 30, 2022, primarily due to:

(i) an increase in stock based compensation expense of $2.8 million due to a full quarter of stock-based compensation expense incurred on restricted stock units granted in June of 2022;

(ii) an increase in interest expense from debt related to real estate owned of $1.2 million due to reference rate increases during the third quarter of 2022;

(iii) an increase in operating expenses from real estate owned of $0.8 million, due to increased variable operating expenses in connection with the higher occupancy levels.

Realized gain on sale of loan

During the three months ended June 30, 2022, we realized a gain on the sale of a loan of $30.1 million. No loans were sold during the three months ended September 30, 2022.

Unrealized gain on interest rate cap

Unrealized gain on interest rate cap was $0.06 million lower during the comparative period. The fair value of the interest rate cap generally continues to increase as interest rates increase, offset in part by the impact of shorter duration of the cap remaining.

Income from equity method investment

During the three months ended September 30, 2022, we recognized income from our equity method investment of $0.9 million as a result of us accounting for our investment in CMTG/TT as an equity method investment commencing in the third quarter of 2022. We did not hold any equity method investments during the three months ended June 30, 2022.

(Provision) reversal of current expected credit loss reserve

The provision for current expected credit loss reserves was $6.2 million lower than the provision for current expected credit loss reserves during the comparative period, due to a specific CECL reserve of $11.5 million on one loan which was charged-off during the three months ended June 30, 2022. Additional reserves of $2.4 million incurred during the three months ended September 30, 2022 relate primarily to the increase in the size of the portfolio and worsening economic conditions.

Results of Operations – Nine Months Ended September 30, 2022, and September 30, 2021

The following table sets forth information regarding our consolidated results of operations for nine months ended September 30, 2022 and 2021 ($ in thousands, except per share data):


	Nine Months Ended
	September 30, 2022			September 30, 2021			$ Change			% Change
Revenue
Interest and related income	$	316,207		$	314,326		$	1,881			1	%
Less: interest and related expense		154,436			138,187			16,249			12	%
Net interest income		161,771			176,139			(14,368	)		-8	%
Revenue from real estate owned		41,813			15,620			26,193			168	%
Total revenue		203,584			191,759			11,825			6	%
Expenses
Management fees - affiliate		29,594			29,152			442			2	%
General and administrative expenses		13,910			5,393			8,517			158	%
Stock-based compensation		4,030			(376	)		4,406			1172	%
Operating expenses from real estate owned		29,682			16,739			12,943			77	%
Interest expense on debt related to real estate owned		9,206			13,001			(3,795	)		-29	%
Depreciation on real estate owned		6,002			5,173			829			16	%
Total expenses		92,424			69,082			23,342			34	%
Realized gain on sale of loan		30,090			-			30,090			100	%
Unrealized gain on interest rate cap		5,613			-			5,613			100	%
Gain on foreclosure of real estate owned		-			1,430			(1,430	)		-100	%
Income from equity method investment		929			-			929			100	%
Other income		-			5,855			(5,855	)		-100	%
(Provision) reversal of current expected credit loss reserve		(12,984	)		17,413			(30,397	)		-175	%
Income before income taxes		134,808			147,375			(12,567	)		-9	%
Income tax benefit		-			6,025			(6,025	)		-100	%
Net income	$	134,808		$	153,400		$	(18,592	)		-12	%
Net income (loss) attributable to non-controlling interests	$	91		$	(118	)	$	209			177	%
Net income attributable to preferred stock	$	-		$	12		$	(12	)		-100	%
Net income attributable to common stock	$	134,717		$	153,506		$	(18,789	)		-12	%
Net income per share of common stock - basic and diluted	$	0.95		$	1.15		$	(0.20	)		-17	%

Comparison of the nine months ended September 30, 2022 and September 30, 2021

Revenue

Revenue increased $11.8 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase is primarily due to an increase in revenue from real estate owned of $26.2 million due to improved travel and demand at the hotel portfolio for the comparative period. The increase was partially offset by a decrease in net interest income of $14.4 million for the comparative period, which was driven by an increase in interest expense of $16.3 million, as a result of reference rate increases and increased borrowing levels, offset in part by a increase in interest income of $1.9 million, as a result of reference rate increases and accelerated OID recognized over the nine months ended September 30, 2022.

Expenses

Expenses are primarily comprised of base management fees payable to our Manager, general and administrative expenses, stock based compensation expense, operating expenses from real estate owned, interest expense from debt related to real estate owned, and depreciation on real estate owned. Expenses increased by $23.3 million, during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, primarily due to:

(i) an increase in operating expenses from real estate owned of $12.9 million during the comparative period, due to increased variable operating expenses in connection with higher occupancy levels at the hotel portfolio during the comparative period;

(ii) an increase in general and administrative expenses of $8.5 million during the comparative period, due primarily to an increase in general operating expenses incurred in connection with becoming a public company as of November 3, 2021;

(iii) an increase in stock based compensation of $4.4 million during the comparative period, due to restricted stock units granted during the second quarter of 2022;

(iv) offset by a decrease in interest expense on debt related to real estate owned of $3.8 million primarily as a result of additional interest expense on debt related to real estate owned incurred in connection with the modification of debt during the nine months ended September 30, 2021, offset in part by the reference rate increases and the debt related to real estate owned being outstanding for longer during the nine months ended September 30, 2022.

Realized gain on sale of loan

During the nine months ended September 30, 2022, we realized a gain on the sale of a loan of $30.1 million. There were no loans sold during the nine months ended September 30, 2021.

Unrealized gain on interest rate cap

Unrealized gain on interest rate cap was $5.6 million higher during the comparative period due to the recognition of a $5.6 million increase in the fair value of the interest rate cap during the nine months ended September 30, 2022 as a result of rising interest rates.

Gain on foreclosure of real estate owned

During the nine months ended September 30, 2021, we recognized a gain of $1.4 million on the foreclosure of a portfolio of seven limited-service hotel properties located in New York, New York. This gain was based upon the estimated fair value of the hotel properties of $414.0 million as determined by a third-party appraisal, and our assumption of working capital and debt related to real estate owned, relative to our basis in the investment at the time of foreclosure. The fair value was determined using discount rates ranging from 8.50% to 8.75% and a terminal capitalization rate of 6.00% on projected net operating profits on the hotels.

Income from equity method investment

During the nine months ended September 30, 2022, we recognized income from equity method investment of $0.9 million as a result of us accounting for our investment in CMTG/TT as an equity method investment during the third quarter of 2022. We did not hold any equity method investments during the three months ended June 30, 2022.

Other income

During the nine months ended September 30, 2021, 292,731 fully-vested time-based RSU awards were forfeited prior to their delivery pursuant to the terms of the RSU award documents, resulting in us reversing previously recognized compensation expense associated with these RSU awards.

(Provision) reversal of current expected credit loss reserve

During the nine months ended September 30, 2022, we recorded a provision of current expected credit loss reserves of $13.0 million compared to a reversal of current expected credit loss reserves of $17.4 million during the nine months ended September 30, 2021. The provision is primarily attributable to an increase in size of the portfolio and changes in macroeconomic conditions during the comparative period.

Income tax benefit

Income tax benefit was $6.0 million lower during the comparative period. The change in the comparative periods is due to the recognition of a full valuation allowance of our deferred tax asset during the nine months ended September 30, 2022.

Liquidity and Capital Resources

Capitalization

We have capitalized our business to date primarily through the issuance of shares of our common stock and borrowings under our secured financings and our Secured Term Loan. As of September 30, 2022, we had 138,970,498 shares of our common stock outstanding, representing $2.5 billion of stockholders’ equity and we also had $5.4 billion of outstanding borrowings under our secured financings, our Secured Term Loan, our debt related to real estate owned, and our acquisition facility. As of September 30, 2022, our secured financings consisted of six secured revolving repurchase facilities for loan investments with capacity of $5.0 billion and an outstanding balance of $4.0 billion, seven asset-specific financings for loan investments with capacity $648.2 million and an outstanding

balance of $392.0 million and an acquisition facility with a capacity of $150.0 million and no outstanding balance. As of September 30, 2022, our Secured Term Loan had an outstanding balance of $757.0 million and our debt related to real estate owned had an outstanding balance of $290.0 million.

Net Debt-to-Equity Ratio and Total Leverage Ratio

Net Debt-to-Equity Ratio and Total Leverage Ratio are non-GAAP measures that we use to evaluate our financial leverage, which in the case of our Total Leverage Ratio, makes certain adjustments that we believe provide a more conservative measure of our financial condition.

Net Debt-to-Equity Ratio is calculated as the ratio of asset specific debt (repurchase agreements, loan participations sold, net, notes payable, net, and debt related to real estate owned, net) and secured term loan, less cash and cash equivalents to total equity.

Total Leverage Ratio is similar to Net Debt-to-Equity Ratio, however it includes non-consolidated senior interests sold and non-consolidated senior interests held by third parties. Non-consolidated senior interests sold and non-consolidated senior interests held by third parties, as applicable, are secured by the same collateral as our loan and are structurally senior in repayment priority relative to our loan. We believe the inclusion of non-consolidated senior interests sold and non-consolidated senior interests held by third parties provides a meaningful measure of our financial leverage.

The following table presents our Net Debt-to-Equity and Total Leverage Ratios as of September 30, 2022 and December 31, 2021 ($ in thousands):


	September 30, 2022			December 31, 2021
Asset specific debt	$	4,670,475		$	3,995,061
Secured term loan, net		737,516			739,762
Total debt		5,407,991			4,734,823
Less: cash and cash equivalents		(225,556	)		(310,194	)
Net Debt	$	5,182,435		$	4,424,629
Total Stockholders’ Equity	$	2,535,185		$	2,604,267
Net Debt-to-Equity Ratio	2.0x			1.7x
Non-consolidated senior loans		966,674			1,063,939
Total Leverage	$	6,149,109		$	5,488,568
Total Leverage Ratio	2.4x			2.1x

Sources of Liquidity

Our primary sources of liquidity include cash and cash equivalents, interest income from our loans, loan repayments, available borrowings under our secured revolving repurchase facilities and identified borrowing capacity related to our notes payable and loan participations sold, borrowings under our Secured Term Loan, and proceeds from the issuance of our common stock. The following table sets forth, as of September 30, 2022 and December 31, 2021, our sources of available liquidity ($ in thousands):


	September 30, 2022		December 31, 2021
Cash and cash equivalents	$	225,556	$	310,194
Loan principal payments held by servicer(1)		4,198		67,100
Approved and undrawn credit capacity		276,818		19,283
Total sources of liquidity	$	506,572	$	396,577

(1)

Represents loan principal payments held in lockboxes or by our third-party loan servicer as of the balance sheet date which were remitted to us during the subsequent remittance cycle, net of the related secured debt balance.

We have $535.0 million unpaid principal balance of unencumbered loans at September 30, 2022. Such commitments are subject to pledging additional collateral that is subsequently approved by our financing counterparty.

Liquidity Needs

In addition to our ongoing loan origination and acquisition activity, our primary liquidity needs include future fundings to our borrowers on our unfunded loan commitments, interest and principal payments on outstanding borrowings under our financings, operating expenses and dividend payments to our stockholders necessary to satisfy REIT dividend requirements. Additionally, our financing, repurchase and term loan agreements require us to maintain minimum levels of liquidity in order to satisfy certain financial covenants. We currently maintain, and seek to maintain, excess cash and liquidity to comply with minimum liquidity requirements under our financings, and if necessary, to reduce borrowings under our secured financings, including our repurchase agreements.

As of September 30, 2022, we had aggregate unfunded loan commitments of $1.8 billion which comprise funding for capital expenditures and construction, leasing costs, and interest and carry costs, and their funding will vary depending on the progress of capital projects, leasing, and cash flows at the properties securing our loans. Therefore, the exact timing and amounts of such future loan fundings are uncertain and will depend on the current and future performance of the underlying collateral assets. We expect to fund our loan commitments over the remaining maximum term of the related loans, which have a weighted-average future funding period of 4.2 years.

Contractual Obligations and Commitments

Our contractual obligations and commitments as of September 30, 2022 were as follows ($ in thousands):


	Payment Timing
	Total Obligations		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Unfunded loan commitments(1)	$	1,769,535	$	897,745	$	790,643	$	81,147	$	-
Secured financings, term loan agreement, and debt related to real estate owned— principal and interest(2)		6,399,839		514,251		1,768,560		3,867,734		249,294
Total	$	8,169,374	$	1,411,996	$	2,559,203	$	3,948,881	$	249,294

(1)

The allocation of our unfunded loan commitments is based on the earlier of our expected funding date and the commitment expiration date.

(2)

The allocation of our secured financings and term loan agreement is based on the earlier of the fully extended maturity date of each individual borrowing or the maximum maturity date under the respective agreement, and assumes two loans with aggregate borrowings outstanding of $75.2 million that are in maturity default have an extended maturity date in 2023

(3)

Amounts include the related future interest payment obligations, which are estimated by assuming the amounts outstanding under our secured financing agreements and one-month LIBOR or one-month term SOFR in effect as of September 30, 2022 will remain constant into the future. This is only an estimate, as actual amounts borrowed and rates will vary over time. Our floating rate loans and related liabilities are indexed to one-month LIBOR or one-month term SOFR. Totals exclude non-consolidated senior interests.

We are required to pay our Manager, in cash, a base management fee and incentive fees (to the extent earned) on a quarterly basis in arrears. The tables above do not include the amounts payable to our Manager under the Management Agreement as they are not fixed and determinable.

As a REIT, we generally must distribute substantially all of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, to stockholders in the form of dividends to comply with certain of the provisions of the Internal Revenue Code. To the extent that we satisfy this distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal income tax on our undistributed REIT taxable income. Our REIT taxable income does not necessarily equal our net income as calculated in accordance with GAAP or our Distributable Earnings as described previously.

Loan Maturities

The following table summarizes the future scheduled repayments of principal based on fully extended maturity dates for the loan portfolio as of September 30, 2022 ($ in thousands):


Year	Unpaid Principal Balance(1)		Loan Commitment(1)
2022	$	—	$	—
2023		575,817		578,554
2024		974,684		1,017,009
2025		1,044,673		1,179,220
2026		1,847,763		2,447,957
Thereafter		2,731,519		3,721,251
Total	$	7,174,456	$	8,943,991

(1)

Excludes the principal balance for loans which are in maturity default.

Cash Flows

The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash for the nine months ended September 30, 2022 and 2021, respectively ($ in thousands):


	September 30, 2022			September 30, 2021
Net cash flows provided by operating activities	$	91,004		$	144,538
Net cash flows (used in) investing activities		(650,877	)		(302,488	)
Net cash flows provided by financing activities		488,403			(13,192	)
Net decrease in cash and cash equivalents and restricted cash	$	(71,470	)	$	(171,142	)

We experienced a net decrease in cash and cash equivalents and restricted cash of $71.5 million during the nine months ended September 30, 2022, compared to a net decrease of $171.1 million during the nine months ended September 30, 2021.

During the nine months ended September 30, 2022, we made initial fundings of $2.0 billion of new loans and $444.6 million of advances on existing loans and made repayments on financings arrangements of $1.3 billion. We received $1.9 billion of proceeds from borrowings under our financing arrangements, received $1.6 billion from loan repayments and received $132.2 million of sales proceeds.

Income Taxes

We have elected and believe we have qualified to be taxed as a REIT for U.S. federal income tax purposes, commencing with our initial taxable year ended December 31, 2015. We generally must distribute annually at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain, to maintain our REIT status. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay (or are treated as paying) out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. Our real estate owned is held in a TRS. Our TRS is not consolidated for U.S. federal income tax purposes and is taxed separately as a corporation. For financial reporting purposes, a provision or benefit for current and deferred taxes is established for the portion of earnings or expense recognized by us with respect to our TRS.

Our qualification as a REIT also depends on our ability to meet various other requirements imposed by the Internal Revenue Code, which relate to organizational structure, diversity of stock ownership and certain restrictions with regard to the nature of our assets and the sources of our income. Even if we qualify as a REIT, we may be subject to certain U.S. federal income and excise taxes and state and local taxes on our income and assets. If we fail to maintain our qualification as a REIT for any taxable year, we may be subject to material penalties as well as federal, state and local income tax on our REIT taxable income at regular corporate rates and we would not be able to qualify as a REIT for the subsequent four full taxable years. As of September 30, 2022, we were in compliance with all REIT requirements.

Refer to Note 13 to our consolidated financial statements for additional information about our income taxes.

Off-Balance Sheet Arrangements

As of September 30, 2022, we had no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires our Manager to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. We believe that all of the decisions and estimates are reasonable, based upon the information available to us. We believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Refer to Note 2 to our consolidated financial statements for a description of our significant accounting policies.

Current Expected Credit Losses (“CECL”)

The CECL reserve required under ASU 2016-13 “Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments (Topic 326)” (“ASU 2016-13”), reflects our current estimate of potential credit losses related to our loan portfolio. The initial CECL allowance recorded on January 1, 2021 is reflected as a direct charge to retained earnings on our consolidated statements of changes in redeemable common stock and stockholders’ equity.

For our loan portfolio, we perform a quantitative assessment of the impact of CECL using the Weighted Average Remaining Maturity, or WARM, method. The application of the WARM method to estimate a general CECL reserve requires judgment, including the appropriate historical loan loss reference data, the expected timing and amount of future loan fundings and repayments, the current credit quality of our portfolio, and our expectations of performance and market conditions over the relevant time period. In certain circumstances we may determine that a loan is no longer suited for the model-based approach due to its unique risk characteristics, or because the repayment of the loan’s principal is collateral-dependent. We may instead elect to employ different methods to estimate loan losses that also conform to ASU 2016-13 and related guidance. If the recovery of that loan’s principal balance is entirely collateral-dependent, we may assess such an asset individually and elect to apply a practical expedient in accordance with ASU 2016-13.

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

To estimate an annual historical loss rate, we obtained historical loss rate data for loans most comparable to our loan portfolio from a commercial mortgage backed securities database licensed by a third party, which contains historical loss rates from January 1, 1999 through September 30, 2022. When evaluating the current and future macroeconomic environment, we consider the aforementioned macroeconomic factors. Historical data for each metric is compared to historical commercial real estate loan losses in order to determine the strongest correlation of the data. We use projections of each macroeconomic factor, obtained from a third party, to approximate the impact the macroeconomic outlook may have on our loss rate. Additionally, we assess the obligation to extend credit through our unfunded loan commitments over each loan’s contractual period, which is considered in the estimate of the general CECL reserve. This component of the general CECL reserve will similarly impact our consolidated net income. For both the funded and unfunded portions of our loans, we consider our internal risk rating of each loan as the primary credit quality indicator underlying our assessment.

Real estate owned, net

We may assume legal title or physical possession of the underlying collateral of a defaulted loan through foreclosure. Foreclosed real estate owned, net is initially recorded at estimated fair value and is presented net of accumulated depreciation and impairment charges and the assets and liabilities are presented separately when legal title or physical possession is assumed. If the fair value of the real estate is lower than the carrying value of the loan, the difference, along with any previously recorded Specific CECL Allowances, are recorded as a realized loss on investments in the consolidated statement of operations. Conversely, if the fair value of the real estate

is greater than the carrying value of the loan, the difference, along with any previously recorded Specific CECL Allowances, are recorded as a realized gain on investments in the consolidated statement of operations.

Acquisition of real estate is accounted for using the acquisition method under Accounting Standards Codification ("ASC") Topic 805, "Business Combinations." We recognize and measure identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree, if applicable, based on their relative fair values. If applicable, we recognize and measure intangible assets and expense acquisition-related costs in the periods in which the costs are incurred and the services are received.

Real estate assets that are acquired for investment are assumed at their estimated fair value at acquisition and presented net of accumulated depreciation and impairment charges, if any. Upon acquisition, we allocate the value of acquired real estate assets based on the fair value of the acquired land, building, furniture, fixtures and equipment, and intangible assets, if applicable. Real estate assets are depreciated using the straight-line method over estimated useful lives of up to 40 years for buildings and up to 8 years for furniture, fixtures and equipment. Renovations and/or replacements that improve or extend the life of the real estate asset are capitalized and depreciated over their estimated useful lives. The cost of ordinary repairs and maintenance are expensed as incurred.

Real estate assets are evaluated for indicators of impairment on a quarterly basis. Factors that we may consider in its impairment analysis include, among others: (1) significant underperformance relative to historical or anticipated operating results; (2) significant negative industry or economic trends; (3) costs necessary to extend the life or improve the real estate asset; (4) significant increase in competition; and (5) ability to hold and dispose of the real estate asset in the ordinary course of business. A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows expected to be generated by the real estate asset over the estimated remaining holding period is less than the carrying amount of such real estate asset. Cash flows include operating cash flows and anticipated capital proceeds generated by the real estate asset. An impairment charge is recorded equal to the excess of the carrying value of the real estate asset over the fair value.

When determining the fair value of a real estate asset, we make certain assumptions including, but not limited to, consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon our estimate of a capitalization rate and discount rate.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

Rising interest rates will generally increase our net interest income, while declining interest rates will generally decrease our net interest income. Rising interest rates will not result in an increase of net interest income to the extent that borrowers are already bearing interest at a contractual rate with a floor in excess of the benchmark rate. Our net interest income may decrease in such circumstances due to an increase in the interest expense of our borrowings, absent a corresponding increase of interest income, until such time as benchmark rates exceed the applicable rate floors.

During 2022, the Federal Reserve began a campaign to combat inflation by increasing interest rates. In the first nine months of 2022, the Federal Reserve approved a cumulative 3.0% rate increase. In November 2022, the Federal Reserve raised rates another 0.75% and signaled further increases in coming quarters. Higher interest rates imposed by the Federal Reserve may increase our interest expense and may impact the ability of our borrowers to servicer our debt.

The following table illustrates the impact on our interest income and interest expense for the twelve-month period following September 30, 2022, assuming a decrease in LIBOR or SOFR of 50, an increase in LIBOR or SOFR of 50, 100 and 150 basis points in the applicable interest rate benchmark (based on one-month LIBOR of 3.14% and one-month term SOFR of 3.04% as of September 30, 2022 ($ in thousands):


			Decrease			Increase
Assets (Liabilities) Subject to Interest Rate Sensitivity		Change in	50 Basis Points			50 Basis Points		100 Basis Points		150 Basis Points
$	1,802,796	Net interest income	$	(9,093	)	$	10,129	$	20,258	$	30,387
		Net interest income per share	$	(0.06	)	$	0.07	$	0.14	$	0.22

LIBOR Transition

On March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”), which regulates LIBOR, announced (the “FCA Announcement”) that all relevant LIBOR tenors will cease to be published or will no longer be representative after June 30, 2023. The FCA Announcement coincides with the March 5, 2021 announcement of LIBOR’s administrator, the ICE Benchmark Administration Limited (the “IBA”), indicating that, as a result of not having access to input data necessary to calculate relevant LIBOR tenors on a representative basis after June 30, 2023, the IBA would have to cease publication of such LIBOR tenors immediately after the last publication on June 30, 2023. Further, on March 15, 2022, the Consolidated Appropriations Act of 2022, which includes the Adjustable Interest Rate (LIBOR) Act, was signed into law in the United States. This legislation establishes a uniform benchmark replacement process for financial contracts maturing after June 30, 2023 that do not contain clearly defined or practicable fallback provisions. The legislation also creates a safe harbor that shields lenders from litigation if they choose to utilize a replacement rate recommended by the Board of Governors of the Federal Reserve.

The United States Federal Reserve has also advised banks to cease entering into new contracts that use USD LIBOR as a reference rate. The Federal Reserve, in conjunction with the Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR. There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities. If our LIBOR-based borrowings are converted to SOFR, the differences between LIBOR and SOFR, could result in higher interest costs for us, which could have a material adverse effect on our operating results. Although SOFR is the ARRC’s recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in other ways that would result in higher interest costs for us. We cannot predict the effect of the decision not to sustain LIBOR, or the potential transition to SOFR or another alternative reference rate as LIBOR’s replacement.

Regardless, there can be no assurances as to what additional alternative base rates may be and whether such base rate will be more or less favorable than LIBOR and any other unforeseen impacts of the discontinuation of LIBOR. We are actively assessing and

monitoring the risks associated with the planned discontinuation or unavailability of certain reference rates, including LIBOR, and the transition to alternative reference rates, but can provide no assurances regarding the impact of the discontinuation of LIBOR

Credit Risk

Our loans and other investments are also subject to credit risk, including the risk of default. By its very nature, our investment strategy emphasizes prudent risk management and capital preservation by primarily originating senior loans utilizing underwriting techniques resulting in relatively conservative loan-to-value ratio levels to insulate us from loan losses absent a significant diminution in collateral value. In addition, we seek to manage credit risk through performance of extensive due diligence on our collateral, borrower and guarantors, as applicable, that evaluates, among other things, title, environmental and physical condition of collateral, comparable sales and leasing analysis of similar collateral, the quality of and alternative uses for the real estate collateral being underwritten, submarket trends, our borrower’s track record and the reasonableness of the borrower’s projections prior to originating a loan. Subsequent to loan origination, we also manage credit risk through proactive investment monitoring and, whenever possible, limiting our own leverage to partial recourse or non-recourse, match-funding financing. Notwithstanding these efforts, there can be no assurance that we will be able to avoid losses in all circumstances. The performance and value of our loans and investments depend upon the borrower’s ability to improve and operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, our Sponsor’s asset management team monitors the performance of our loan portfolio and our Sponsor’s asset management and origination teams maintain regular contact with borrowers, co-lenders and local market experts to monitor the performance of the underlying loan collateral, anticipate borrower, property and market issues and, to the extent necessary or appropriate, enforce our rights as the lender.

In addition, we are exposed to the risks generally associated with the CRE market, including variances in occupancy rates, capitalization rates, absorption rates and other macroeconomic factors beyond our control. We seek to manage these risks through our underwriting, loan structuring, financing structuring and asset management processes.

In the event that we are forced to foreclose, our broader Sponsor platform includes professionals experienced in CRE development, ownership, property management and asset management which enables us to execute the workout of a troubled loan and protect investors’ capital in a way that we believe many non-traditional lenders cannot.

Prepayment Risk

Prepayment risk is the risk that principal will be repaid prior to initial maturity, which may require us to identify new investment opportunities to deploy such capital at a similar rate of return in order to avoid an overall reduction in our net interest income. We may structure our loans with spread maintenance, minimum multiples and make-whole provisions to protect against early repayment. Typically, investments are structured with the equivalent of 12 to 24 months’ spread maintenance or a minimum level of income that an investment must return. In general, an increase in prepayment rates accelerates the accretion of deferred income, including origination fees and exit fees, which increases interest income earned on the asset during the period of repayment. Conversely, if capital that is repaid is not subsequently redeployed into investment opportunities generating a similar return, future periods may experience reduced net interest income.

Extension Risk

Loans are expected to be repaid at maturity, unless the borrower repays early or meets contractual conditions to qualify for a maturity extension. We expect that the economic and market disruptions caused by the COVID-19 pandemic may lead to a decrease in prepayment rates and an increase in the number of our borrowers who exercise extension options or seek extensions outside of their existing agreements if certain conditions to exercising such extension options have not been achieved. This could have a negative impact on our results of operations and cash flows. However, in the case of a loan maturity extension, we are often entitled to extension fees, principal paydowns and/or spread increases. Our Manager computes the projected weighted average life of our assets based on the initial and fully extended scheduled maturity dates of loans in our portfolio. Higher interest rates imposed by the Federal Reserve may lead to an increase in the number of our borrowers who exercise extension options, which could extend beyond the term of certain secured financing agreements we use to finance our loan investments. This could have a negative impact on our results of operations, and in some situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses.

Capital Markets Risks

We are exposed to risks related to the equity and debt capital markets and our related ability to raise capital through the issuance of our common stock or other debt and equity instruments. As a REIT, we are required to distribute a significant portion of our REIT taxable income annually, which constrains our ability to retain and accumulate operating earnings and therefore requires us to utilize debt or equity capital to finance the growth of our business. We seek to mitigate these risks by monitoring the debt and equity capital

markets, the maturity profile of our in-place loan portfolio related to secured financings, and future loan funding requirements to inform our decisions on the amount, timing and terms of capital we raise.

Each of the secured revolving repurchase facilities involves “margin maintenance” provisions, which are designed to allow the repurchase lender to maintain a certain margin of credit enhancement against the loan assets which serve as collateral. The lender’s margin amount is typically based on a percentage of the market value of the loan asset and/or mortgaged property collateral. However, certain of our repurchase facilities permit valuation adjustments solely as a result of collateral-specific credit events, while other repurchase facilities contain provisions also allowing our lenders to make margin calls or require additional collateral upon the occurrence of adverse changes in the markets or interest rate or spread fluctuations, subject to minimum thresholds, among other factors. As of September 30, 2022, we have not received any margin calls under any of our repurchase facilities.

Counterparty Risk

The nature of our business requires us to hold cash and cash equivalents and obtain financing from various financial institutions. This exposes us to the risk that these financial institutions may not fulfill their obligations to us under these various contractual arrangements. We mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with high credit-quality institutions.

The nature of our loans and other investments also exposes us to the risk that our loan counterparties are unable to execute their business plans, and as a result do not make required interest and principal payments on scheduled due dates, as well as the impact of our borrowers’ tenants not making scheduled rent payments when contractually due. We seek to manage this risk through a comprehensive credit analysis prior to making an investment and rigorous monitoring of our borrowers’ progress in executing their business plans as well as market conditions that may affect the underlying collateral, through our asset management process. Each loan is structured with various lender protections that are designed to prevent bad acts / fraudulent behavior by borrowers, as well as require borrowers to adhere to their stated business plans while the loan is outstanding. Such protections include, without limitation: cash management accounts, “bad boy” carveout guarantees, completion guarantees, guarantor minimum net worth and liquidity requirements, approval rights over major decisions, and performance tests throughout the loan term.

Our relationships with our repurchase agreement providers subject us to counterparty risks in the event a counterparty is unable to fund its undrawn credit capacity, particularly in the event of a counterparty’s bankruptcy. We seek to manage this risk by diversifying our financing sources across counterparties and financing types, and monitoring our counterparties’ financial condition and liquidity.

Currency Risk

To date, we have made no loans and hold no assets or liabilities denominated or payable in foreign currencies, although we may do so in the future.

We may in the future hold assets denominated or payable in foreign currencies, which would expose us to foreign currency risk. As a result, a change in foreign currency exchange rates may have a positive or an adverse impact on the valuation of our assets, as well as our income and dividends. Any such changes in foreign currency exchange rates may impact the measurement of such assets or income for the purposes of our REIT tests and may affect the amounts available for payment of dividends to our stockholders.

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

Real Estate Risk

The market values of loans secured directly or indirectly by CRE assets are subject to volatility and may be adversely affected by a number of factors, including, but not limited to, the impacts of the COVID-19 pandemic discussed above, national, regional, local and foreign economic conditions (which may be adversely affected by industry slowdowns and other factors); regional or local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes and regulatory requirements. In addition, decreases in property values reduce the value of the loan collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses. We seek to manage these risks through our underwriting, loan structuring, financing structuring and asset management processes.

Financing Risk

We finance our business through a variety of means, including the syndication of non-consolidated senior interests, notes payable, borrowings under our repurchase facilities, the syndication of pari passu portions of our loans, the syndication of senior participations in our originated senior loans, and our secured term loan. Over time, as market conditions change, we may use other forms of financing in addition to these methods of financing. Weakness or volatility in the debt capital markets, the CRE and mortgage markets, changes in regulatory requirements, and the economy generally, in particular as a result of the current COVID-19 pandemic, could adversely affect one or more of our lenders or potential lenders and could cause one or more of our lenders or potential lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing or otherwise offer unattractive terms for that financing. In addition, we may seek to finance our business through the issuance of our common stock or other equity or equity-related instruments, though there is no assurance that such financing will be available on a timely basis with attractive terms, or at all.

Item 4. Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed with the SEC 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.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act of 1934) during the three months ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As of September 30, 2022 an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2022.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of September 30, 2022, we were not involved in any material legal proceedings.

Item 1A. Risk Factors.

For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in the Prospectus. There have been no material changes to our principal risks that we believe are material to our business, results of operations, and financial condition from the risk factors disclosed in our Annual Report file on Form 10-K, which is accessible on the SEC’s website at www.sec.gov.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Facility Agreement

The information included in this Item 5 with respect to the Facility Agreement (as defined below) is provided in lieu of filing such information on a Current Report on Form 8-K under Item 1.01. Entry into a Material Definitive Agreement and Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

On November 4, 2022 (the “Closing Date”), CMTG JPM Term Holdco LLC (“Junior Participant”) and CMTG JPM Term Funding LLC (“Seller”), each wholly-owned subsidiaries of the Company, entered into a Master Participation and Administration Agreement (the “Facility Agreement”) with JPMorgan Chase Bank, N.A., as senior participant (“Senior Participant”). The Facility Agreement establishes a secured, term financing facility (the “Facility”) that will be used to fund certain investments and has a maximum amount of $1.0 billion. As of the Closing Date, the Senior Participant had committed $400.0 million towards three assets against which approximately $255.0 million was advanced at Closing. The addition of incremental assets to the Facility requires the consent of the Senior Participant. The Facility is non-mark to market and matures five years after the date of the last asset financed thereunder. Advances made by the Senior Participant under the Facility Agreement accrue interest at a per annum pricing rate equal to one-month SOFR, plus a specified spread set forth in the transaction documents related to each asset financed.

In connection with the Facility Agreement, the Company provided two guaranties: (i) a Guaranty of equity obligations (the “Equity Guaranty”) under which the Company guarantees the obligations of Seller to Senior Participant under the Facility Agreement up to the lesser of (A) the outstanding principal balance of the Facility and (B) the Junior Participant’s future funding obligations on the underlying loans, net of the Senior Participant’s future funding obligations with respect to such loans under the Facility and (ii) a Guarantee Agreement (the “Recourse Guaranty”, and, together with the Equity Guaranty, the “Guaranties”) which provides for full recourse for certain “bad boy” actions by the Company in connection with the Facility. The Facility Agreement and the Guaranties contain customary affirmative and negative covenants for transactions and facilities of this type, including but not limited to quarterly reporting requirements, compliance with certain financial covenants, and limitations on the incurrence of additional secured indebtedness.

The foregoing description is qualified in its entirety by reference to the Facility Agreement, a copy of which is included as Exhibit 10.2 hereto and is incorporated herein by reference

Share Repurchase Program

The information included in this Item 5 with respect to the the share repurchase program described below is provided in lieu of filing such information on a Current Report on Form 8-K under Item 8.01. Other Events.

On November 8, 2022 our Board of Directors authorized a share repurchase program that authorizes the repurchase of up to $100.0 million shares of our common stock. Under the share repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions, accelerated share repurchase programs, or otherwise.

Item 6. Exhibits.


Exhibit Number		Description

3.1		Articles of Amendment and Restatement of Claros Mortgage Trust, Inc. (incorporated by referenced to Exhibit 3.1 to the Current Report on Form 8-K, dated November 5, 2021, filed by the Company, Commission File No. 001-40993)

3.2		Amended and Restated Bylaws of Claros Mortgage Trust, Inc. (incorporated by referenced to Exhibit 3.2 to the Current Report on Form 8-K, dated November 5, 2021, filed by the Company, Commission File No. 001-40993)

10.1		Amended and Restated Management Agreement of Claros Mortgage Trust, Inc. and Claros REIT Management LP, dated August 2, 2022 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q, dated August 2, 2022, filed by the Company, Commission File No. 001-40993)

10.2*		Master Participation and Administration Agreement, dated as of November 4, 2022, by and among JPMorgan Chase Bank, National Association, CMTG JPM Term Holdco LLC, CMTG JPM Term Funding LLC and Situs Asset Management LLC

31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


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*		Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Claros Mortgage Trust, Inc.

Date: November 9, 2022	By:	/s/ Richard J. Mack
		Richard J. Mack
		Chief Executive Officer (Principal Executive Officer)

Date: November 9, 2022	By:	/s/ Jai Agarwal
		Jai Agarwal
		Chief Financial Officer (Principal Financial and Accounting Officer)