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New words:
agent, Anastasia, announced, ARM, bankruptcy, bid, care, Certificate, Certification, Chapter, Cleveland, compliant, decline, defense, document, dollar, duly, embedded, evolve, Fargo, fourteen, Healthcare, herewith, Inline, instance, Interactive, Label, Linkbase, member, MI, Mironova, moved, multiple, Page, President, publicly, reached, restructured, Rothstein, Schema, Secretary, Specimen, Steward, Stuart, Supplementary, suspended, Taxonomy, thereunto, trading, Treasurer, Troy, trustee, undersigned, withheld, XBRL
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Group, inclusive, interbank, judgement, numerator, offered, reducing, reform, response, Securitized, warehouse
Financial report summary
?Competition
StaffingRisks
- We operate in a competitive market for investment opportunities and future competition may limit our ability to acquire desirable target assets or dispose of our target assets and could also affect the pricing of these securities.
- Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, a misappropriation of funds, and/or damage to our business relationships, all of which could negatively impact our financial results.
- We cannot assure our stockholders of our ability to pay dividends in the future.
- We cannot predict the unintended consequences and market distortions that may stem from far-ranging governmental intervention in the economic and financial system or from regulatory reform of the oversight of financial markets.
- The Manager may be unable to operate us within the parameters that allow the Manager to be exempt from regulation as a
- commodity pool operator, which would subject us to additional regulation and compliance requirements, and could materially adversely affect our business and financial condition.
- Climate change and regulatory and other efforts to reduce potential climate change impacts and the increased focus on ESG issues could adversely affect our business.
- Certain provisions of Maryland law could inhibit changes in control.
- Loss of our exclusion from registration under the 1940 Act would adversely affect us.
- Securities eligible for future sale may have adverse effects on the market price of our common stock.
- Our authorized but unissued shares of common and preferred stock may prevent a change in control.
- Certain provisions in the indentures governing the 2029 Notes could delay or prevent an otherwise beneficial takeover or takeover attempt of us.
- Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit stockholders' recourse in the event of actions not in stockholders' best interests.
- Our charter contains provisions that make removal of our directors difficult, which could make it difficult for stockholders to effect changes to our management.
- Ownership limitations may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their shares.
- Future litigation or administrative proceedings could have a material and adverse effect on our business, financial condition and results of operations.
- Our access to sources of financing may be limited and thus our ability to potentially enhance our returns may be adversely affected.
- We leverage certain of our target assets, which may adversely affect our return on our assets and may reduce cash available for distribution.
- We may increase the amount of leverage we use in our financing strategy, which would subject us to greater risk of loss.
- Credit facilities and secured debt arrangements that we may use to finance our assets may require us to provide additional collateral or pay down debt.
- Our existing secured debt arrangements impose restrictive covenants.
- Should we choose to employ non-recourse long-term securitizations in the future, such structures may expose us to risks which could result in losses to us.
- An increase in our borrowing costs relative to the interest we receive on our leveraged assets may adversely affect our profitability and our cash available for distribution to our stockholders.
- Interest rate fluctuations could reduce the income on our assets and could increase our financing costs, which may adversely affect our earnings and our cash available for distribution to our stockholders.
- Our rights under our secured debt arrangements may be subject to the effects of the bankruptcy laws in the event of the bankruptcy or insolvency of us or our lenders under the secured debt arrangements, which may allow our lenders to repudiate our secured debt arrangements.
- We may enter into hedging transactions that could expose us to contingent liabilities in the future and adversely impact our financial condition.
- We cannot assure stockholders that we will be successful in consummating additional opportunities we identify which would likely materially affect our business, financial condition, liquidity and results of operations.
- We may not achieve our weighted-average all-in yield on our assets, which may lead to future returns that may be significantly lower than anticipated.
- We may be subject to lender liability claims.
- Any credit ratings assigned to our assets will be subject to ongoing evaluations and revisions and we cannot assure stockholders that those ratings will not be downgraded.
- Acquisitions of preferred equity involve a greater risk of loss than traditional debt transactions.
- The lack of liquidity of our assets may adversely affect our business, including our ability to value and sell our assets.
- Allowances for loan losses are difficult to estimate.
- Our assets may be concentrated and are subject to risk of default.
- The commercial mortgage loans and other commercial real estate-related loans we acquire are subject to delinquency, foreclosure and loss, any or all of which could result in losses to us.
- B Notes and mezzanine loans we acquire may be subject to losses. The B Notes we acquire may be subject to additional risks relating to the privately negotiated structure and terms of the transaction, which may result in losses to us.
- Our commercial real estate corporate debt assets and loans and debt securities of commercial real estate operating or finance companies will be subject to the specific risks relating to the particular company and to the general risks of investing in real estate-related loans and securities, which may result in significant losses.
- A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could impair our assets and harm our operations.
- Recent macroeconomic trends, including inflation and higher interest rates, may adversely affect our business, financial condition and results of operations.
- Our real estate assets are subject to risks particular to real property. These risks may have resulted and may continue to result in a reduction or elimination of return from a loan secured by a particular property.
- Certain of our loans are denominated in currencies other than USD or are secured by assets located outside of the United States which subject us to the uncertainty of foreign laws and markets, geopolitical issues, and foreign currency risks.
- We maintain cash balances in our bank accounts that exceed the Federal Deposit Insurance Corporation insurance limitation.
- Assets that we acquire with co-investors could be materially and adversely affected by our lack of sole decision-making authority, our reliance on our co-investors' financial condition and disputes between us and our co-investors.
- There are various conflicts of interest in our relationship with Apollo which could result in decisions that are not in the best interests of our stockholders.
- The Manager’s and Apollo’s liability is limited under the Management Agreement, and we have agreed to indemnify the Manager against certain liabilities. As a result, we could experience poor performance or losses for which the Manager would not be liable.
- The termination of the Management Agreement may be difficult and costly, which may adversely affect our inclination to end our relationship with the Manager.
- We do not own the Apollo name but may use it pursuant to a license agreement with Apollo. Use of the name by other parties or the termination of our license agreement may harm our business.
- The manner of determining the base management fee may not provide sufficient incentive to the Manager to maximize risk-adjusted returns on our investment portfolio since it is based on our stockholders’ equity (as defined in the Management Agreement) and not on other measures of performance.
- The Manager manages our portfolio pursuant to very broad investment guidelines and our board of directors does not approve each decision made by the Manager, which may result in us undertaking riskier transactions.
- Possession of material, non-public information could prevent us from undertaking advantageous transactions; Apollo could decide to establish information barriers.
- We are dependent on the Manager and its key personnel for our success and upon their access to Apollo’s investment professionals and partners. We may not find a suitable replacement for the Manager if the Management Agreement is terminated, or if key personnel leave the employment of the Manager or Apollo or otherwise become unavailable to us.
- We do not have a policy that expressly prohibits our directors, officers, security holders or affiliates from engaging for their own account in business activities of the types conducted by us. The ability of the Manager and its officers and employees to engage in other business activities may reduce the time the Manager spends managing our business.
- Our business may be adversely affected if our reputation, the reputation of the Manager or Apollo, or the reputation of
- counterparties with whom we associate is harmed.
- Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code, and our failure to qualify as a REIT or remain qualified as a REIT would subject us to U.S. federal income tax and applicable state and local taxes, which would reduce the amount of cash available for distribution to our stockholders.
- Complying with REIT requirements may force us to liquidate or forego otherwise attractive investments, to incur debt, or could otherwise adversely affect our ability to execute our business plan.
- Even if we qualify as a REIT, we may face tax liabilities that reduce our cash flow.
- The failure of mortgage loans subject to a secured debt arrangement to qualify as a real estate asset would adversely affect our ability to qualify as a REIT.
- The failure of a loan, including a mezzanine loan or modified loan, to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.
- We may fail to qualify as a REIT or become subject to a penalty tax if the IRS successfully challenges our treatment of our mezzanine loans and certain preferred equity investments as debt for U.S. federal income tax purposes.
- We may be required to report taxable income for certain investments in excess of the economic income we ultimately realize from them.
- The "taxable mortgage pool" rules may increase the taxes that we or our stockholders may incur, and may limit the manner in which we effect future securitizations.
- Although our use of TRSs may be able to partially mitigate the impact of meeting the requirements necessary to maintain our qualification as a REIT, our ownership of and relationship with our TRSs is limited and a failure to comply with the limits would jeopardize our REIT qualification and may result in the application of a 100% excise tax.
- Complying with REIT requirements may limit our ability to hedge effectively.
- The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing mortgage loans, that would be treated as sales for U.S. federal income tax purposes.
- We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of shares of our common stock.
- Our qualification as a REIT and exemption from U.S. federal income tax with respect to certain assets may be dependent on the accuracy of legal opinions or advice rendered or given or statements by the issuers of assets that we acquire, and the inaccuracy of any such opinions, advice or statements may adversely affect our REIT qualification and result in significant corporate-level tax.
Management Discussion
- Other income, net increased by $2.1 million during the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to an increase in bank interest earned on our cash balances and money market funds as a result of a higher interest rate environment.
- During the year ended December 31, 2023, we recorded a $86.6 million net realized loss on investments, compared to the year ended December 31, 2022, in which we recorded a $18.7 million net realized gain. The $86.6 million net realized loss recorded during 2023 was primarily comprised of (i) a $4.8 million realized loss related to the acquisition of the Atlanta Hotel through a deed-in-lieu of foreclosure and (ii) a $82.0 million realized loss representing a write-off of previously recorded Specific CECL Allowance on one of our subordinate loans secured by an ultra-luxury residential property in Manhattan, NY. These losses were partially offset by a $0.2 million gain on investments recorded in connection with the sale of our entire interest in three commercial loans secured by properties in Europe and a partial interest in one commercial loan secured by property located in London, United Kingdom.
- The net realized gain of $18.7 million during the year ended December 31, 2022 was primarily driven by a $43.6 million realized gain recorded in connection with the title acquisition for one of our first mortgage loans secured by a multifamily development in Brooklyn, NY. Refer to "Note 5 - Real Estate Owned" for more information. This realized gain was partially offset by a (i) $17.9 million realized loss, representing a write-off of a previously recorded Specific CECL Allowance on a first mortgage loan secured by an urban predevelopment property due to the sale of the underlying property, and (ii) a $7.0 million realized loss, representing a write-off of a previously recorded Specific CECL Allowance related to a first mortgage secured by the Atlanta Hotel, which went into maturity default during 2022. Refer to "Note 4 - Commercial Mortgage Loans Subordinate Loans and Other Lending Assets, Net" for more information.