UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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~~March 31, 2023


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-34452

__________________________________

Apollo Commercial Real Estate Finance, Inc.

(Exact name of registrant as specified in its charter)

__________________________________


Maryland						27-0467113
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

Apollo Commercial Real Estate Finance, Inc.

c/o Apollo Global Management, Inc.

9 West 57th Street, 42nd Floor,

New York, New York 10019

(Address of principal executive offices) (Zip Code)

(212) 515–3200

(Registrant’s telephone number, including area code)

__________________________________

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


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value	ARI	New York Stock Exchange

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of ~~October 21, 2022,~~April 25, 2023, there were ~~140,595,995~~141,343,177 shares, $0.01 par value ~~$0.01,~~per share, of the registrant’s common stock issued and outstanding.

Table of Contents

See notes to unaudited condensed consolidated financial statements.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands—except share data)


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Assets:	Assets:					Assets:
Cash and cash equivalents	Cash and cash equivalents	$	319,264	$	343,106	Cash and cash equivalents	$	331,533	$	222,030
Commercial mortgage loans, net(1)(3)	Commercial mortgage loans, net(1)(3)	8,013,469		7,012,312		Commercial mortgage loans, net(1)(3)	7,879,205		8,121,109
Subordinate loans and other lending assets, net(2)(3)	Subordinate loans and other lending assets, net(2)(3)	717,837		844,948		Subordinate loans and other lending assets, net(2)(3)	592,863		560,881

Real estate owned, held for investment, net (net of $2,645 accumulated depreciation in 2021)		291,104		151,788
Real estate owned, held for investment, net (net of $7,335 accumulated depreciation in 2023)						Real estate owned, held for investment, net (net of $7,335 accumulated depreciation in 2023)	539,300		302,688

Assets related to real estate owned, held for sale						Assets related to real estate owned, held for sale	—		162,397
Derivative assets, net	Derivative assets, net	249,220		16,788		Derivative assets, net	88,905		128,640
Assets related to real estate owned, held for sale		162,059		—
Other assets	Other assets	71,066		47,753		Other assets	76,423		70,607
Total Assets	Total Assets	$	9,824,019	$	8,416,695	Total Assets	$	9,508,229	$	9,568,352
Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Liabilities:	Liabilities:					Liabilities:
Secured debt arrangements, net (net of deferred financing costs of $13,533 and $9,062 in 2022 and 2021, respectively)		$	5,350,586	$	4,150,268
Senior secured term loans, net (net of deferred financing costs of $10,750 and $12,734 in 2022 and 2021, respectively)		764,899		768,325
Senior secured notes, net (net of deferred financing costs of $5,356 and $5,949 in 2022 and 2021, respectively)		494,644		494,051
Secured debt arrangements, net						Secured debt arrangements, net	$	5,316,853	$	5,296,825
Senior secured term loans, net						Senior secured term loans, net	762,706		763,813
Senior secured notes, net						Senior secured notes, net	495,040		494,844
Convertible senior notes, net						Convertible senior notes, net	222,467		229,361
Accounts payable, accrued expenses and other liabilities(4)	Accounts payable, accrued expenses and other liabilities(4)	378,479		102,609		Accounts payable, accrued expenses and other liabilities(4)	193,457		227,360
Convertible senior notes, net		229,174		569,979
Debt related to real estate owned, held for investment, net (net of deferred financing costs of $4,857 in 2022)		159,978		—
Debt related to real estate owned, held for investment, net						Debt related to real estate owned, held for investment, net	160,611		160,294
Participations sold	Participations sold	22,696		27,064		Participations sold	—		25,130
Payable to related party	Payable to related party	9,762		9,773		Payable to related party	9,534		9,728
Liabilities related to real estate owned, held for sale	Liabilities related to real estate owned, held for sale	6,116		—		Liabilities related to real estate owned, held for sale	—		6,493

Total Liabilities	Total Liabilities	7,416,334		6,122,069		Total Liabilities	7,160,668		7,213,848
Commitments and Contingencies (see Note 17)	Commitments and Contingencies (see Note 17)					Commitments and Contingencies (see Note 17)
Stockholders’ Equity:	Stockholders’ Equity:					Stockholders’ Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, Series B-1, 6,770,393 shares issued and outstanding ($169,260 liquidation preference) in 2022 and 2021 (see Note 16)		68		68
Common stock, $0.01 par value, 450,000,000 shares authorized, 140,595,995 and 139,894,060 shares issued and outstanding in 2022 and 2021, respectively		1,406		1,399
Preferred stock, $0.01 par value, 50,000,000 shares authorized, Series B-1, 6,770,393 shares issued and outstanding ($169,260 liquidation preference) in 2023 and 2022 (see Note 16)						Preferred stock, $0.01 par value, 50,000,000 shares authorized, Series B-1, 6,770,393 shares issued and outstanding ($169,260 liquidation preference) in 2023 and 2022 (see Note 16)	68		68
Common stock, $0.01 par value, 450,000,000 shares authorized, 141,266,039 and 140,595,995 shares issued and outstanding in 2023 and 2022, respectively						Common stock, $0.01 par value, 450,000,000 shares authorized, 141,266,039 and 140,595,995 shares issued and outstanding in 2023 and 2022, respectively	1,413		1,406
Additional paid-in-capital	Additional paid-in-capital	2,712,390		2,721,042		Additional paid-in-capital	2,714,555		2,716,907
Accumulated deficit	Accumulated deficit	(306,179)		(427,883)		Accumulated deficit	(368,475)		(363,877)
Total Stockholders’ Equity	Total Stockholders’ Equity	2,407,685		2,294,626		Total Stockholders’ Equity	2,347,561		2,354,504
Total Liabilities and Stockholders’ Equity	Total Liabilities and Stockholders’ Equity	$	9,824,019	$	8,416,695	Total Liabilities and Stockholders’ Equity	$	9,508,229	$	9,568,352

———————

(1) Includes ~~$7,491,513~~$7,426,992 and ~~$5,957,707~~$7,482,658 pledged as collateral under secured debt arrangements in ~~2022~~2023 and ~~2021,~~2022, respectively.

(2) Includes ~~$187,138~~$194,323 and $0$191,608 pledged as collateral under secured debt arrangements in ~~2022~~2023 and ~~2021,~~2022, respectively.

(3) Net of ~~$140,985~~$163,767 and ~~$178,588~~$159,724 CECL ~~Allowances~~Allowance in ~~2022~~2023 and ~~2021,~~2022, respectively, comprised of ~~$119,000~~$133,500 and ~~$145,000~~$133,500 Specific CECL Allowance and ~~$21,985~~$30,267 and ~~$33,588~~$26,224 General CECL Allowance, respectively.

(4) Includes ~~$2,812~~$4,695 and ~~$3,106~~$4,347 of General CECL Allowance related to unfunded commitments on commercial mortgage loans, subordinate loans and other lending assets, net in ~~2022~~2023 and ~~2021,~~2022, respectively.

See notes to unaudited condensed consolidated financial statements.

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations (Unaudited)

(in thousands—except share and per share data)


		Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
		2022		2021		2022		2021				2023		2022
Net interest income:	Net interest income:										Net interest income:
Interest income from commercial mortgage loans	Interest income from commercial mortgage loans	$	120,821	$	84,304	$	304,631	$	242,107		Interest income from commercial mortgage loans	$	166,147	$	84,424
Interest income from subordinate loans and other lending assets	Interest income from subordinate loans and other lending assets	13,354		18,836		43,719		82,070			Interest income from subordinate loans and other lending assets	9,707		15,835
Interest expense	Interest expense	(72,302)		(42,391)		(173,949)		(117,792)			Interest expense	(104,868)		(45,118)
Net interest income	Net interest income	$	61,873	$	60,749	$	174,401	$	206,385		Net interest income	$	70,986	$	55,141

Revenue from real estate owned operations	Revenue from real estate owned operations	14,428		5,896		42,098		7,270			Revenue from real estate owned operations	16,131		9,040
Total net revenue	Total net revenue	$	76,301	$	66,645	$	216,499	$	213,655		Total net revenue	$	87,117	$	64,181
Operating expenses:	Operating expenses:										Operating expenses:
General and administrative expenses (includes equity-based compensation of $4,518 and $13,734 in 2022 and $4,405 and $13,149 in 2021, respectively)		$	(7,184)	$	(6,561)	$	(21,501)	$	(20,235)
General and administrative expenses (includes equity-based compensation of $4,358 and $4,698 in 2023 and 2022, respectively)											General and administrative expenses (includes equity-based compensation of $4,358 and $4,698 in 2023 and 2022, respectively)	$	(7,015)	$	(7,187)
Management fees to related party	Management fees to related party	(9,719)		(9,583)		(28,705)		(28,387)			Management fees to related party	(9,517)		(9,354)
Operating expenses related to real estate owned	Operating expenses related to real estate owned	(13,308)		(6,914)		(36,094)		(8,908)			Operating expenses related to real estate owned	(14,006)		(9,652)
Depreciation and amortization on real estate owned	Depreciation and amortization on real estate owned	—		(1,096)		(704)		(1,548)			Depreciation and amortization on real estate owned	(3,986)		(704)
Total operating expenses	Total operating expenses	$	(30,211)	$	(24,154)	$	(87,004)	$	(59,078)		Total operating expenses	$	(34,524)	$	(26,897)
Other income	Other income	$	285	$	3,676	$	353	$	3,785		Other income	$	732	$	—
Realized gain (loss) on investments		43,577		—		43,577		(20,000)
Reversal of current expected credit loss allowance, net(1)		55,564		5,766		37,897		36,590
Realized losses and impairments on real estate owned		—		—		—		(550)
Foreign currency translation loss		(92,782)		(24,413)		(210,138)		(27,808)
Gain on foreign currency forward contracts (includes unrealized gains of $108,428 and $221,623 in 2022 and $32,376 and $40,857 in 2021, respectively)		129,252		32,947		257,227		39,653
Unrealized gain (loss) on interest rate hedging instruments		1,044		(75)		10,808		171
Net realized loss on investments											Net realized loss on investments	(4,624)		—
Realized gain on extinguishment of debt											Realized gain on extinguishment of debt	213		—
Increase in current expected credit loss allowance, net											Increase in current expected credit loss allowance, net	(4,390)		(18,611)
Foreign currency translation gain (loss)											Foreign currency translation gain (loss)	18,634		(32,518)
Gain (loss) on foreign currency forward contracts (includes unrealized gains (losses) of $(35,851) and $18,142 in 2023 and 2022, respectively)											Gain (loss) on foreign currency forward contracts (includes unrealized gains (losses) of $(35,851) and $18,142 in 2023 and 2022, respectively)	(14,135)		22,762
Gain (loss) on interest rate hedging instruments (includes unrealized gains (losses) of $(4,813) and $6,321 in 2023 and 2022, respectively)											Gain (loss) on interest rate hedging instruments (includes unrealized gains (losses) of $(4,813) and $6,321 in 2023 and 2022, respectively)	(107)		6,321

Net income	Net income	$	183,030	$	60,392	$	269,219	$	186,418		Net income	$	48,916	$	15,238
Preferred dividends	Preferred dividends	(3,068)		(3,126)		(9,204)		(9,896)			Preferred dividends	(3,068)		(3,068)
Net income available to common stockholders	Net income available to common stockholders	$	179,962	$	57,266	$	260,015	$	176,522		Net income available to common stockholders	$	45,848	$	12,170
Net income per share of common stock:	Net income per share of common stock:										Net income per share of common stock:
Basic	Basic	$	1.27	$	0.40	$	1.83	$	1.24		Basic	$	0.32	$	0.08
Diluted	Diluted	$	1.13	$	0.38	$	1.66	$	1.18		Diluted	$	0.32	$	0.08
Basic weighted-average shares of common stock outstanding	Basic weighted-average shares of common stock outstanding	140,594,987		139,891,777		140,513,957		139,860,882			Basic weighted-average shares of common stock outstanding	141,072,471		140,353,386
Diluted weighted-average shares of common stock outstanding	Diluted weighted-average shares of common stock outstanding	164,350,132		170,884,172		169,252,602		170,836,682			Diluted weighted-average shares of common stock outstanding	155,483,979		140,353,386
Dividend declared per share of common stock	Dividend declared per share of common stock	$	0.35	$	0.35	$	1.05	$	1.05		Dividend declared per share of common stock	$	0.35	$	0.35

~~———————~~

(1) Comprised of $53,000 and $26,000 Specific CECL Reversals and $2,564 and $11,897 of General CECL Reversals for the three and nine months ended September 30, 2022, respectively. Comprised of $0 and $30,000 Specific CECL Reversals and $5,766 and $6,590 of General CECL Reversals for the three and nine months ended September 30, 2021, respectively.

See notes to unaudited condensed consolidated financial statements.

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)

(in thousands—except share and per share data)


		Preferred Stock			Common Stock			Additional Paid-In-Capital		Accumulated Deficit				Total			Preferred Stock			Common Stock			Additional Paid-In-Capital		Accumulated Deficit				Total
		Shares	Par		Shares	Par						Total	Shares				Par	Shares		Par	Additional Paid-In-Capital
Balance at January 1, 2022		6,770,393	$	68	139,894,060	$	1,399	$	2,721,042	$	(427,883)			$	2,294,626
Adoption of ASU 2020-06		—	—		—	—		(15,408)		11,992				(3,416)
Balance at January 1, 2023																Balance at January 1, 2023	6,770,393	$	68	140,595,995			$	1,406	$	2,716,907	$	(363,877)			$	2,354,504
Capital increase (decrease) related to Equity Incentive Plan	Capital increase (decrease) related to Equity Incentive Plan	—	—		647,349	6		(2,280)		—				(2,274)		Capital increase (decrease) related to Equity Incentive Plan	—	—		670,044	7		(2,352)		—				(2,345)

Net income	Net income	—	—		—	—		—		15,238				15,238		Net income	—	—		—	—		—		48,916				48,916
Dividends declared on preferred stock - $0.45 per share	Dividends declared on preferred stock - $0.45 per share	—	—		—	—		—		(3,068)				(3,068)		Dividends declared on preferred stock - $0.45 per share	—	—		—	—		—		(3,068)				(3,068)
Dividends declared on common stock - $0.35 per share	Dividends declared on common stock - $0.35 per share	—	—		—	—		—		(50,088)				(50,088)		Dividends declared on common stock - $0.35 per share	—	—		—	—		—		(50,446)				(50,446)
Balance at March 31, 2022		6,770,393	$	68	140,541,409	$	1,405	$	2,703,354	$	(453,809)			$	2,251,018
Capital increase related to Equity Incentive Plan		—	—		49,434	1		4,518		—				4,519
Net income		—	—		—	—		—		70,951				70,951
Dividends declared on preferred stock - $0.45 per share		—	—		—	—		—		(3,068)				(3,068)
Dividends declared on common stock - $0.35 per share		—	—		—	—		—		(50,108)				(50,108)
Balance at June 30, 2022		6,770,393	$	68	140,590,843	$	1,406	$	2,707,872	$	(436,034)			$	2,273,312
Balance at March 31, 2023																Balance at March 31, 2023	6,770,393	$	68	141,266,039	$	1,413	$	2,714,555	$	(368,475)			$	2,347,561

Capital increase related to Equity Incentive Plan		—	—		5,152	—		4,518		—				4,518

Net income		—	—		—	—		—		183,030				183,030
Dividends declared on preferred stock - $0.45 per share		—	—		—	—		—		(3,068)				(3,068)
Dividends declared on common stock - $0.35 per share		—	—		—	—		—		(50,107)				(50,107)
Balance at September 30, 2022		6,770,393	$	68	140,595,995	$	1,406	$	2,712,390	$	(306,179)			$	2,407,685

Preferred Stock Common Stock Additional
Paid-In-Capital Accumulated
Deficit Total
Shares Par Shares Par
Balance at January 1, 2021 6,770,393 $ 68 139,295,867 $ 1,393 $ 2,707,792 $ (438,724) $ 2,270,529
Capital increase related to Equity Incentive Plan — — 553,008 5 103 — 108
Offering costs — — — — (40) — (40)
Net income — — — — — 58,335 58,335
Dividends declared on preferred stock - $0.50 per share — — — — — (3,385) (3,385)
Dividends declared on common stock - $0.35 per share — — — — — (49,794) (49,794)
Balance at March 31, 2021 6,770,393 $ 68 139,848,875 $ 1,398 $ 2,707,855 $ (433,568) $ 2,275,753
Capital increase related to Equity Incentive Plan — — 35,185 1 4,357 — 4,358
Net income — — — — — 67,691 67,691
Dividends declared on preferred stock - $0.50 per share — — — — — (3,385) (3,385)
Dividends declared on common stock - $0.35 per share — — — — — (49,809) (49,809)
Balance at June 30, 2021 6,770,393 $ 68 139,884,060 $ 1,399 $ 2,712,212 $ (419,071) $ 2,294,608
Capital increase related to Equity Incentive Plan — — 10,000 — 4,405 — 4,405
Retirement of Series B Preferred Stock (6,770,393) (68) — — — — (68)
Issuance of Series B-1 Preferred Stock 6,770,393 68 — — — — 68
Net income — — — — — 60,392 60,392
Dividends declared on preferred stock - $0.50 per share — — — — — (3,126) (3,126)
Dividends declared on common stock - $0.35 per share — — — — — (49,837) (49,837)
Balance at September 30, 2021 6,770,393 $ 68 139,894,060 $ 1,399 $ 2,716,617 $ (411,642) $ 2,306,442


	Preferred Stock			Common Stock			Additional Paid-In-Capital		Accumulated Deficit		Total
	Shares	Par		Shares	Par
Balance at January 1, 2022	6,770,393	$	68	139,894,060	$	1,399	$	2,721,042	$	(427,883)	$	2,294,626
Adoption of ASU 2020-06(1)	—	—		—	—		(15,408)		11,992		(3,416)
Capital increase (decrease) related to Equity Incentive Plan	—	—		647,349	6		(2,280)		—		(2,274)
Net income	—	—		—	—		—		15,238		15,238
Dividends declared on preferred stock - $0.45 per share	—	—		—	—		—		(3,068)		(3,068)
Dividends declared on common stock - $0.35 per share	—	—		—	—		—		(50,088)		(50,088)
Balance at March 31, 2022	6,770,393	$	68	140,541,409	$	1,405	$	2,703,354	$	(453,809)	$	2,251,018

(1) Refer to "Note 10 - Convertible Senior Notes, Net" for detail.

See notes to unaudited condensed consolidated financial statements.

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Statement of Cash Flows (Unaudited)

(in thousands)

For the nine months ended September 30,
2022 2021
Cash flows provided by operating activities:
     Net income $ 269,219 $ 186,418
Adjustments to reconcile net income to net cash provided by operating activities:
     Amortization of discount/premium and PIK (39,828) (61,029)
     Amortization of deferred financing costs 8,582 9,358
     Equity-based compensation 13,734 13,149
     Reversal of current expected credit loss allowance, net (37,897) (36,590)
     Foreign currency loss 199,587 28,155
     Unrealized gain on derivative instruments (232,431) (41,028)
     Depreciation and amortization 704 1,548
     Loss from unconsolidated joint venture — 161
     Realized (gain) loss and impairments on investments and real estate owned (43,577) 20,550
     Changes in operating assets and liabilities:
          Proceeds received from PIK interest 83,731 35,400
          Other assets (24,149) 772
          Accounts payable, accrued expenses and other liabilities 27,454 8,024
          Payable to related party (11) (15)
Net cash provided by operating activities 225,118 164,873
Cash flows used in investing activities:
    New funding of commercial mortgage loans (2,753,609) (1,463,619)
    Add-on funding of commercial mortgage loans (407,063) (226,773)
    Add-on funding of subordinate loans and other lending assets (85,964) (132,302)
    Proceeds received from the repayment and sale of commercial mortgage loans 1,316,431 725,196
    Proceeds received from the repayment of subordinate loans and other lending assets 129,760 236,770
    Origination and exit fees received on commercial mortgage loans, and subordinate loans and other lending assets, net 42,779 21,058
    Proceeds received from the sale of real estate owned, held for sale — 42,356
    Capital expenditures on real estate assets (21,160) (65)
    Cash received from hotel title assumption — 4,148
    Increase in collateral related to derivative contracts, net 255,110 29,450
Net cash used in investing activities (1,523,716) (763,781)
Cash flows provided by financing activities:
     Payment of offering costs — (40)
     Proceeds from secured debt arrangements 2,770,405 1,173,613
     Repayments of secured debt arrangements (1,118,630) (1,126,627)
     Repayments of senior secured term loan principal (6,000) (5,250)
     Repayments of convertible notes (345,000) —
     Proceeds from issuance of senior secured term loan — 297,000
     Proceeds from issuance of senior secured notes — 500,000
     Repayment of debt related to real estate owned — (143,073)
     Proceeds related to financing on real estate owned 164,835 —
     Payment of deferred financing costs (15,333) (14,816)
     Other financing activities (6,972) (4,278)
     Dividends on common stock (150,467) (149,809)
     Dividends on preferred stock (9,204) (9,896)
Net cash provided by financing activities 1,283,634 516,824
Net decrease in cash and cash equivalents, including cash classified within assets related to real estate owned, held for sale (14,964) (82,084)
Less increase in cash classified within assets related to real estate owned, held for sale (5,858) —
Net decrease in cash and cash equivalents (20,822) (82,084)
Cash and cash equivalents, beginning of period 343,106 325,498
Effects of foreign currency translation on cash and cash equivalents (3,020) —
Cash and cash equivalents, end of period $ 319,264 $ 243,414
Supplemental disclosure of cash flow information:
     Interest paid $ 151,348 $ 96,092
Supplemental disclosure of non-cash financing activities:
    Dividend declared, not yet paid $ 53,175 $ 52,398
    Change in participation sold $ (4,368) $ 19,644
    Change in loan proceeds held by servicer $ 5,871 $ 8,732
    Deferred financing costs, not yet paid $ — $ 4,145
    Repayments of PIK on participation sold $ — $ (27,670)
Assumption of real estate $ 270,035 $ 154,300
Assumption of debt related to real estate owned $ — $ (110,073)
Assumption of other assets related to real estate owned $ — $ 1,555
Assumption of accounts payable and other liabilities related to real estate owned $ — $ (4,641)
Transfer of assets to assets related to real estate owned, held for sale $ (156,201) $ —
Transfer of liabilities to liabilities related to real estate owned, held for sale $ 6,116 $ —
Transfer of subordinate loans to real estate owned $ — $ (45,289)
Transfer of subordinate loans to held for sale $ — $ 41,773
Retirement of Series B Preferred Stock $ — $ (169,260)
Issuance of Series B-1 Preferred Stock $ — $ 169,260


	For the three months ended March 31,
	2023		2022
Cash flows provided by operating activities:
Net income	$	48,916	$	15,238
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of discount/premium and payment-in-kind interest	(10,012)		(14,333)
Amortization of deferred financing costs	3,807		2,856
Equity-based compensation	4,358		4,698
Increase in current expected credit loss allowance, net	4,390		18,611
Foreign currency loss (gain)	(1,525)		24,212
Unrealized loss (gain) on foreign currency contracts	35,851		(18,142)
Unrealized loss (gain) on interest rate hedging instruments	4,813		(6,321)
Depreciation and amortization on real estate owned	3,986		704
Realized gain on extinguishment of debt	(213)		—
Net realized loss on investment	4,624		—
Changes in operating assets and liabilities:
Proceeds received from payment-in-kind interest	3,573		20,141
Other assets	1,012		(1,830)
Accounts payable, accrued expenses and other liabilities	6,864		4,245
Payable to related party	(194)		(419)
Net cash provided by operating activities	110,250		49,660
Cash flows used in investing activities:
New funding of commercial mortgage loans	(181,017)		(1,193,945)
Add-on funding of commercial mortgage loans	(76,421)		(116,789)
Increase (decrease) in collateral related to derivative contracts, net	(50,830)		16,370
Add-on funding of subordinate loans and other lending assets	(37,400)		(29,099)
Capital expenditures on real estate assets	(14,131)		(48)
Proceeds received from the repayment and sale of commercial mortgage loans	435,442		637,512
Proceeds received from the repayment of subordinate loans and other lending assets	6,611		90,071
Origination and exit fees received on commercial mortgage loans, and subordinate loans and other lending assets, net	4,290		18,073
Cash received from hotel title assumption	569		—
Net cash provided by (used in) investing activities	87,113		(577,855)
Cash flows provided by financing activities:
Proceeds from secured debt arrangements	173,919		1,012,730
Repayments of secured debt arrangements	(191,681)		(542,213)
Repayments of senior secured term loan principal	(2,000)		(2,000)
Repurchase of convertible notes	(6,877)		—
Payment of deferred financing costs	(5,873)		(3,528)
Payment of withholding tax on RSU delivery	(6,703)		(6,972)
Dividends on common stock	(50,643)		(50,270)
Dividends on preferred stock	(3,068)		(3,068)
Net cash provided by (used in) financing activities	(92,926)		404,679

See notes to unaudited condensed consolidated financial statements.

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Statement of Cash Flows (Continued)

(in thousands)


	For the three months ended March 31,
	2023		2022
Net increase in cash and cash equivalents, including cash classified within assets related to real estate owned, held for sale	104,437		(123,516)
Decrease (increase) in cash classified within assets related to real estate owned, held for sale	5,677		(3,841)
Net increase (decrease) in cash and cash equivalents	110,114		(127,357)
Cash and cash equivalents, beginning of period	222,030		343,106
Effects of foreign currency translation on cash and cash equivalents	(611)		—
Cash and cash equivalents, end of period	$	331,533	$	215,749
Supplemental disclosure of cash flow information:
Interest paid	$	89,983	$	35,185
Supplemental disclosure of non-cash financing activities:
Dividend declared, not yet paid	$	53,514	$	53,156
Change in participation sold	$	(25,130)	$	(788)
Change in loan proceeds held by servicer	$	(2,327)	$	5,097
Assumption of real estate	$	75,000	$	—
Assumption of other assets related to real estate owned	$	2,827	$	—
Assumption of accounts payable, accrued expenses and other liabilities related to real estate owned	$	(3,396)	$	—
Transfer of assets to assets related to real estate owned, held for sale	$	—	$	153,243
Transfer of assets related to real estate owned, held for sale to assets related to real estate owned held for investment, net	$	151,676	$	—
Transfer of assets related to real estate owned, held for sale to other assets	$	4,357	$	—
Transfer of liabilities to liabilities related to real estate owned, held for sale	$	—	$	5,712
Transfer of liabilities related to real estate owned, held for sale to accounts payable, accrued expenses and other liabilities	$	7,163	$	—

See notes to unaudited condensed consolidated financial statements.

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 – Organization

Apollo Commercial Real Estate Finance, Inc. (together with its consolidated subsidiaries, is referred to throughout this report as the "Company," "ARI," "we," "us" and "our") is a corporation that has elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes and primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, and other commercial real estate related debt investments. These asset classes are referred to as our target assets.

We were formed in Maryland on June 29, 2009, commenced operations on September 29, 2009 and are externally managed and advised by ACREFI Management, LLC (the "Manager"), an indirect subsidiary of Apollo Global Management, Inc. (together with its subsidiaries, "Apollo").

We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2009. To maintain our tax qualification as a REIT, we are required to distribute at least 90% of our taxable income, excluding net capital gains, to stockholders and meet certain other asset, income, and ownership tests.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include our accounts and those of our consolidated subsidiaries. All intercompany amounts have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our most significant estimates include current expected credit ~~losses.~~loss ("CECL") allowances. Actual results ~~could~~may differ from ~~those~~ estimates.

These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to

Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto included in our

Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 ("Annual Report"), as filed with the Securities and

Exchange Commission (the "SEC"). In the opinion of management, all adjustments (consisting only of normal recurring

adjustments) necessary to present fairly our financial position, results of operations and cash flows have been included. Our

results of operations for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the results to be expected for

the full year or any other future period.

We currently operate in one reporting segment.

Risks and Uncertainties

During the first quarter of 2020, there was a global outbreak of a novel coronavirus ("COVID-19"), which was declared by the World Health Organization as a pandemic. The ongoing COVID-19 pandemic has adversely impacted global economic activity and has contributed to significant volatility in financial markets. Due to various uncertainties, including the rise of new variants, the severity of such new variants, disparities in vaccination rates and vaccine hesitancy, the ultimate duration of the pandemic, and additional actions that may be taken by governmental authorities, further business risks could arise. Although more normalized activities have resumed and there has been improved global economic activity due to global and domestic vaccination efforts, wethere are ~~not in a position to estimate~~still various uncertainties around the ~~ultimate~~ impact ~~COVID-19~~coronavirus ("COVID-19") and its variants had and will continue to have on our business and the economy as a whole, including longer-term macroeconomic effects on supply chains, inflation and labor shortages. For example, in response to recent inflationary pressure, the U.S. Federal Reserve and other global central banks have raised interest rates in 2022 and 2023 and have indicated ~~likely~~the potential for further interest rate increases. We believe the estimates used in preparing our financial statements and related footnotes are reasonable and supportable based on the best information available to us as of ~~September 30, 2022.~~March 31, 2023. The uncertainty over the ultimate impact of COVID-19 and its variants, supply chain disruptions and labor shortages, rising inflation and increases in interest rates on the global economy generally and our business in particular may materially impact the accuracy of the estimates and assumptions used in the financial statements and related footnotes and, as a result, actual results may vary significantly from estimates.

Recent Accounting Pronouncements

In March 2020, the ~~FASB~~Financial Accounting Standards Board ("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 debt instruments, derivatives, and other contracts that reference London Interbank Offered Rate

("LIBOR") or other reference rates expected to be discontinued as a result of reference rate reform. ~~This guidance is optional and may be elected through~~In December 2022, the FASB issued ASU 2022-06 "Reference Rate Reform (Topic 848): Deferral of Sunset Date of Topic 848 ("ASU 2022-06") which deferred the sunset date to December 31, ~~2022 using a prospective application on all eligible contract modifications.~~2024. We have loan agreements, debt ~~agreements,~~agreements, and an interest rate cap that incorporate LIBOR as a referenced interest rate. It is difficult to predict what effect, if any, the phase-out of LIBOR and the use of alternative benchmarks may have on our business or on the overall

financial ~~markets.~~markets During the fourth quarter of 2021, we adopted optional expedients per ASU 2020-04 for certain of our commercial mortgage loans and debt agreements denominated in British Pound Sterling ("GBP") and Euro ("EUR") with contracts that reference GBP LIBOR and EUR LIBOR, respectively.. As prescribed by the optional expedients within ASU 2020-04, we have accounted for applicable modified contracts that incorporate alternative benchmarks as if they are not substantially different. We will continue to ~~evaluate the possible adoption of any~~apply such expedients or exceptions related to modifications for certain of our commercial mortgage loans and debt agreements ~~denominated in U.S. Dollars.~~

In March 2022, the FASB issued ASU 2022-02 "Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures" ("ASU 2022-02"). The intention of ASU 2022-02 is to simplify the guidance surrounding loan modifications and restructurings and to eliminate the accounting guidance related to troubled debt restructurings ("TDR"). The new guidance deviates from TDR guidance as disclosures are now based on whether a modification or restructuring with a borrower experiencing financial difficulty results in principal forgiveness, an interest rate reduction, other-than-insignificant payment delay or term extension as opposed to simply a concession. The new guidance requires disclosure by class of financing receivables, of the types of modifications, the financial effects of those modifications and the performance of those modified receivables in the trailing twelve months after modification. Accounting for credit losses under ASC 326 "Financial Instruments—Credit Losses", is also updated to allow entities to use any acceptable method to determine credit losses as a result of modification or restructuring with a borrower experiencing financial difficulty. ASU 2022-02 also requires disclosure of gross write-offs recorded in the current period, on a year-to-date basis, by year of origination in the vintage disclosures. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022. Entities are able to early adopt these amendments, including adoption in an interim period, and have the ability to early adopt the TDR enhancements separately from the vintage disclosures. If an entity adopts the amendments in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. During the third quarter of 2022, we have early adopted the TDR enhancements and new vintage disclosure requirements under of ASU 2022-02. Refer to "Note 4 -Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net".reference rate reform.

Note 3 – Fair Value Disclosure

GAAP establishes a hierarchy of valuation techniques based on the observability of the inputs utilized in measuring financial instruments at fair value. Market-based or observable inputs are the preferred source of values, followed by valuation models using management's assumptions in the absence of market-based or observable inputs. The three levels of the hierarchy as noted in ~~ASC~~Accounting Standards Codification ("ASC") 820, "Fair Value Measurements and Disclosures" are described below:

Level I — Quoted prices in active markets for identical assets or liabilities.

Level II — Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.

Level III — Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used.

While we anticipate that our valuation methods are appropriate and consistent with valuation methods used by other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. We use inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced.

The fair values of foreign exchange ("Fx") forwards are determined by comparing the contracted forward exchange rate to the current market exchange rate. The current market exchange rates are determined by using market spot rates, forward rates and interest rate curves for the underlying countries. Our Fx forwards are classified as Level II in the fair value hierarchy.

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 ifwhen 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~~third-party expert's expectation of future interest rates derived from observable market interest rate curves and ~~volatilities.~~volatility. Our interest rate cap is classified as Level II in the fair value hierarchy.

The following table summarizes the levels in the fair value hierarchy into which our assets and liabilities with recurring fair value measurements were categorized as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 ($ in thousands):


		Fair Value as of September 30, 2022								Fair Value as of December 31, 2021									Fair Value as of March 31, 2023								Fair Value as of December 31, 2022
		Level I		Level II		Level III		Total		Level I		Level II		Level III		Total			Level I		Level II		Level III		Total		Level I		Level II		Level III		Total
Recurring fair value measurements:	Recurring fair value measurements:																	Recurring fair value measurements:
Foreign currency forward, net	Foreign currency forward, net	$	—	$	236,963	$	—	$	236,963	$	—	$	15,340	$	—	$	15,340	Foreign currency forward, net	$	—	$	83,649	$	—	$	83,649	$	—	$	119,499	$	—	$	119,499
Interest rate cap asset	Interest rate cap asset	—		12,257		—		12,257		—		1,448		—		1,448		Interest rate cap asset	—		5,256		—		5,256		—		9,141		—		9,141
Total financial instruments	Total financial instruments	$	—	$	249,220	$	—	$	249,220	$	—	$	16,788	$	—	$	16,788	Total financial instruments	$	—	$	88,905	$	—	$	88,905	$	—	$	128,640	$	—	$	128,640

Non-recurring Fair Value Measurements

We are required to record real estate owned, a nonfinancial asset, at fair value on a non-recurring basis in accordance with ASC 820. Under ASC 820, we may utilize the income, market or cost approach (or combination thereof) to determine the fair value of real estate owned. We deem the inputs used in these approaches to be significant unobservable inputs. Therefore, we classify the fair value of real estate owned within Level III of the fair value hierarchy.

On March 31, 2023, we acquired legal title of a hotel property in Atlanta, GA ("Atlanta Hotel") through a deed-in-lieu of foreclosure. At the time of acquisition, we determined the fair value of the net real estate assets to be $75.0 million, using a combination of market and income approach. We utilized a discount rate and capitalization rate of 10.5% and 9.5%, respectively. No impairments have been recorded as of March 31, 2023.

On August 3, 2022, we acquired legal title of a multifamily development property located in downtown Brooklyn, NY

("Brooklyn Development") through a deed-in-lieu of foreclosure. We determined the fair value of the real estate assumed to be $270.1 million, based on the market value of the land at the time of acquisition. No impairments have been recorded as of March 31, 2023 or December 31, 2022.

On May 24, 2021, we acquired legal title to a full-service luxury hotel in Washington D.C. ("D.C. Hotel") through a deed-in-lieu of foreclosure, which is classified as real estate owned on our consolidated balance sheets. We assumed the D.C. Hotel's assets and liabilities, including a $110.0 million mortgage loan. We repaid the mortgage loan at par and hold the property unlevered. At the time of acquisition, we determined the fair value of the real estate assets to be $154.3 million. No impairments have been recorded as of March 31, 2023 or December 31, 2022.

Refer to "Note 5 – ~~Assets and Liabilities Related to~~ Real Estate Owned" for additional ~~disclosure regarding nonrecurring fair value measurements related to real estate owned.~~

discussions.

Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net

Our loan portfolio was comprised of the following at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 ($ in thousands):


Loan Type	Loan Type	September 30, 2022		December 31, 2021		Loan Type	March 31, 2023		December 31, 2022
Commercial mortgage loans, net(1)	Commercial mortgage loans, net(1)	$	8,013,469	$	7,012,312	Commercial mortgage loans, net(1)	$	7,879,205	$	8,121,109
Subordinate loans and other lending assets, net	Subordinate loans and other lending assets, net	717,837		844,948		Subordinate loans and other lending assets, net	592,863		560,881
Carrying value, net	Carrying value, net	$	8,731,306	$	7,857,260	Carrying value, net	$	8,472,068	$	8,681,990

———————

(1)Includes ~~$206.8~~$134.7 million and ~~$97.8~~$138.3 million in ~~2022~~2023 and ~~2021,~~2022, respectively, of contiguous financing structured as subordinate loans.

Our loan portfolio consisted of 99% and 98% floating rate loans, based on amortized cost, as of ~~each of September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022, respectively.

Activity relating to our loan portfolio for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was as follows ($ in thousands):


		Principal Balance		Deferred Fees/Other Items (1)		Specific CECL Allowance		Carrying Value, Net(2)			Principal Balance		Deferred Fees/Other Items (1)		Specific CECL Allowance		Carrying Value, Net
December 31, 2021		$	8,072,377	$	(36,529)	$	(145,000)	$	7,890,848
December 31, 2022										December 31, 2022	$	8,892,767	$	(51,053)	$	(133,500)	$	8,708,214
New funding of loans	New funding of loans	2,753,609		—		—		2,753,609		New funding of loans	181,017		—		—		181,017
Add-on loan fundings~~(3)~~(2)	Add-on loan fundings~~(3)~~(2)	493,027		—		—		493,027		Add-on loan fundings~~(3)~~(2)	113,821		—		—		113,821
Loan repayments and sales	Loan repayments and sales	(1,511,311)		—		—		(1,511,311)		Loan repayments and sales	(491,705)		—		—		(491,705)
Gain (loss) on foreign currency translation	Gain (loss) on foreign currency translation	(675,007)		6,425		—		(668,582)		Gain (loss) on foreign currency translation	65,291		(118)		—		65,173
Specific CECL Allowance, net		—		—		26,000		26,000

Net realized loss on investment										Net realized loss on investment	(5,197)		573		—		(4,624)
Transfer to real estate owned	Transfer to real estate owned	(225,036)		(1,423)		—		(226,459)		Transfer to real estate owned	(75,000)				—		(75,000)
Deferred fees and other items	Deferred fees and other items	—		(42,779)		—		(42,779)		Deferred fees and other items	—		(4,290)		—		(4,290)
PIK interest and amortization of fees		16,149		22,789		—		38,938
September 30, 2022		$	8,923,808	$	(51,517)	$	(119,000)	$	8,753,291
General CECL Allowance(4)								(21,985)
Payment-in-kind interest and amortization of fees										Payment-in-kind interest and amortization of fees	—		9,729		—		9,729
March 31, 2023										March 31, 2023	$	8,680,994	$	(45,159)	$	(133,500)	$	8,502,335
General CECL Allowance(3)										General CECL Allowance(3)							(30,267)
Carrying value, net	Carrying value, net							$	8,731,306	Carrying value, net							$	8,472,068

———————

(1)Other items primarily consist of purchase discounts or premiums, cost recovery interest, exit fees, deferred origination expenses, and the activity of unconsolidated joint ventures.

(2)~~December 31, 2021 carrying value excludes General CECL Allowance of $33.6 million.~~

~~(3)~~Represents fundings committed prior to ~~2022.~~2023.

~~(4)~~(3)$~~2.8~~4.7 million of the General CECL Allowance, as defined in this Form 10-Q, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheet.

The following table details overall statistics for our loan portfolio at the dates indicated ($ in thousands):

September 30, 2022 December 31, 2021
Number of loans 65 67
Principal balance $ 8,923,808 $ 8,072,377
Carrying value, net $ 8,731,306 $ 7,857,260
Unfunded loan commitments(1)
$ 1,127,857 $ 1,357,122
Weighted-average cash coupon(2)
5.8 % 4.5 %
Weighted-average remaining fully-extended term(3)
3.0 years 2.9 years
Weighted-average expected term(4)
1.7 years 2.3 years


	March 31, 2023			December 31, 2022
Number of loans	55			61
Principal balance	$	8,680,994		$	8,892,767
Carrying value, net	$	8,472,068		$	8,681,990
Unfunded loan commitments(1)	$	872,707		$	1,041,654
Weighted-average cash coupon(2)	7.9		%	7.2		%
Weighted-average remaining fully-extended term(3)	2.8 years			2.8 years
Weighted-average expected term(4)	2.1 years			1.7 years

———————

(1)Unfunded loan commitments are funded to finance construction costs, tenant improvements, leasing commissions, or carrying costs. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.

(2)For floating rate loans, based on applicable benchmark rates as of the specified dates. For loans placed on non-accrual ~~or cost recovery~~ the interest rate used in calculating weighted-average cash coupon is 0%.

(3)Assumes all extension options are exercised.

(4)Expected term represents our estimated timing of repayments as of the specified dates. Excludes risk-rated 5 loans.

Property Type

The table below details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):


		September 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
Property Type	Property Type	Carrying Value		% of Portfolio(1)		Carrying Value		% of Portfolio(1)		Property Type	Carrying Value		% of Portfolio(1)		Carrying Value		% of Portfolio(1)
Hotel	Hotel	$	1,983,071	22.7	%	$	1,875,439	23.8	%	Hotel	$	1,988,065	23.4	%	$	2,117,079	24.3	%
Residential										Residential	1,602,078		18.8		1,537,541		17.7
Office	Office	1,750,260		20.0		1,700,779		21.6		Office	1,484,536		17.5		1,671,006		19.2
Residential		1,629,031		18.6		1,434,186		18.2
Retail	Retail	1,318,862		15.1		1,126,332		14.3		Retail	1,389,601		16.3		1,364,752		15.7
Healthcare	Healthcare	603,150		6.9		316,321		4.0		Healthcare	576,639		6.8		575,144		6.6
Mixed Use	Mixed Use	529,200		6.0		269,839		3.4		Mixed Use	569,927		6.7		559,809		6.4
Industrial	Industrial	310,516		3.5		377,068		4.8		Industrial	299,323		3.5		296,860		3.4
Other(2)	Other(2)	629,201		7.2		790,884		9.9		Other(2)	592,166		7.0		586,023		6.7
Total	Total	$	8,753,291	100.0	%	$	7,890,848	100.0	%	Total	$	8,502,335	100.0	%	$	8,708,214	100.0	%
General CECL Allowance(3)	General CECL Allowance(3)	(21,985)				(33,588)				General CECL Allowance(3)	(30,267)				(26,224)
Carrying value, net	Carrying value, net	$	8,731,306			$	7,857,260			Carrying value, net	$	8,472,068			$	8,681,990

(1)Percentage of portfolio calculations are made prior to consideration of General CECL Allowance.

(2)Other property types include parking garages (3.2%), caravan parks (2.4%) and urban predevelopment (1.4%) in 2023, and parking garages (3.1%), caravan parks ~~(2.1%~~(2.3%) and urban predevelopment ~~(2.0%~~(1.3%) in ~~2022, and parking garages (3.3%), caravan parks (2.8%), multifamily development (2.2%), and urban predevelopment (1.6%) in 2021.~~2022.

(3)$~~2.8~~4.7 million and ~~$3.1~~$4.3 million of the General CECL Allowance for ~~2022~~2023 and ~~2021,~~2022, respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance ~~sheet.~~sheets.

Geography

The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):


		September 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
Geographic Location	Geographic Location	Carrying Value		% of Portfolio(1)		Carrying Value		% of Portfolio(1)		Geographic Location	Carrying Value		% of Portfolio(1)		Carrying Value		% of Portfolio(1)
United Kingdom	United Kingdom	$	2,300,384	26.3	%	$	2,297,286	29.1	%	United Kingdom	$	2,421,641	28.5	%	$	2,470,532	28.4	%
New York City	New York City	2,240,469		25.6		2,000,661		25.4		New York City	2,011,244		23.7		2,049,493		23.5
Other Europe(2)	Other Europe(2)	1,402,047		16.0		1,295,870		16.4		Other Europe(2)	1,442,910		17.0		1,542,462		17.7
West										West	605,164		7.1		584,247		6.7

1112


Midwest										Midwest	585,238		6.9		592,756		6.8
Southeast	Southeast	735,912		8.4		708,920		9.0		Southeast	565,306		6.6		642,542		7.4
Midwest		623,233		7.1		689,274		8.7
West		616,594		7.0		356,097		4.5
Other(3)	Other(3)	834,652		9.6		542,740		6.9		Other(3)	870,832		10.2		826,182		9.5
Total	Total	$	8,753,291	100.0	%	$	7,890,848	100.0	%	Total	$	8,502,335	100.0	%	$	8,708,214	100.0	%
General CECL Allowance(4)	General CECL Allowance(4)	(21,985)				(33,588)				General CECL Allowance(4)	(30,267)				(26,224)
Carrying value, net	Carrying value, net	$	8,731,306			$	7,857,260			Carrying value, net	$	8,472,068			$	8,681,990

(1)Percentage of portfolio calculations are made prior to consideration of General CECL Allowance.

(2)Other Europe includes Germany (5.0%), Italy ~~(4.8%~~(4.6%), Spain (4.0%), Sweden (2.9%) and Ireland (0.5%) in 2023 and Italy (5.4%), Germany ~~(4.4%~~(4.9%), Spain ~~(3.5%~~(3.8%), Sweden ~~(2.6%~~(2.8%) and Ireland (0.7%) in ~~2022 and Germany (6.1%), Sweden (3.6%), Spain (3.3%), Italy (2.6%), and Ireland (0.8%) in 2021.~~2022.

(3)Other includes Northeast ~~(5.5%~~(5.6%), Southwest (2.4%), Mid-Atlantic (1.4%) and Other ~~(0.3%~~(0.8%) in ~~2022~~2023 and Northeast (5.5%), Southwest ~~(3.5%~~(2.3%), Mid-Atlantic ~~(1.6%~~(1.4%)~~, Northeast (1.5%),~~ and Other (0.3%) in ~~2021.~~2022.

(4)$~~2.8~~4.7 million and ~~$3.1~~$4.3 million of the General CECL Allowance for ~~2022~~2023 and ~~2021,~~2022, respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance ~~sheet.~~sheets.

Risk Rating

We assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan to value ("LTV") ratio, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. This review is performed quarterly. Based on a 5-point scale, our loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:

1. Very low risk

2. Low risk

3. Moderate/average risk

4. High risk/potential for loss: a loan that has a risk of realizing a principal loss

5. Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss, or an impairment has been recorded

The following tables ~~allocate~~present the carrying value of our loan portfolio ~~based on our~~by year of origination and internal risk ~~ratings~~rating and ~~date~~gross write-offs by year of origination ~~at the dates indicated~~as of March 31, 2023 and December 31, 2022, respectively ($ in thousands):

September 30, 2022
Year Originated
Risk Rating Number of Loans Total % of Portfolio 2022 2021 2020 2019 2018 Prior
1 — $ — — % $ — $ — $ — $ — $ — $ —
2 1 32,000 0.4 % — — — — — 32,000
3 60 8,291,679 94.7 % 2,336,965 2,369,568 643,652 1,691,069 511,360 739,065
4 — — — % — — — — — —
5 4 429,612 4.9 % — — — — — 429,612
Total 65 $ 8,753,291 100.0 % $ 2,336,965 $ 2,369,568 $ 643,652 $ 1,691,069 $ 511,360 $ 1,200,677
General CECL Allowance(1)
(21,985)
Total carrying value, net $ 8,731,306
Weighted Average Risk Rating 3.1


March 31, 2023
						Amortized Cost by Year Originated
Risk Rating	Number of Loans	Total		% of Portfolio		2023		2022		2021		2020		2019		Prior
1	—	$	—	—	%	$	—	$	—	$	—	$	—	$	—	$	—
2	3	195,584		2.3	%	—		—		—		—		129,712		65,872
3	47	8,081,606		95.1	%	172,260		2,606,091		2,383,028		676,366		1,508,600		735,261
4	3	110,762		1.3	%	—		—		—		—		—		110,762
5	2	114,383		1.3	%	—		—		—		—		—		114,383
Total	55	$	8,502,335	100.0	%	$	172,260	$	2,606,091	$	2,383,028	$	676,366	$	1,638,312	$	1,026,279
General CECL Allowance(1)		(30,267)
Total carrying value, net		$	8,472,068

Weighted Average Risk Rating				3.0
Gross write-offs		$	—			$	—	$	—	$	—	$	—	$	—	$	—

December 31, ~~2021~~2022

Amortized Cost by Year Originated

1213


							Year Originated
Risk Rating	Risk Rating	Number of Loans	Total		% of Portfolio		2021		2020		2019		2018		2017		Prior		Risk Rating	Number of Loans	Total		% of Portfolio		2022		2021		2020		2019		2017		Prior
1	1	—	$	—	—	%	$	—	$	—	$	—	$	—	$	—	$	—	1	—	$	—	—	%	$	—	$	—	$	—	$	—	$	—	$	—
2	2	1	32,000		0.4	%	—		—		—		—		—		32,000		2	2	65,943		0.8	%	—		—		—		—		—		65,943
3	3	62	7,372,081		93.5	%	2,622,248		644,404		2,307,948		828,270		389,264		579,947		3	54	8,401,925		96.5	%	2,575,455		2,462,499		687,329		1,637,050		479,769		559,823
4	4	1	81,980		1.0	%	—		—		—		—		81,980		—		4	2	27,451		0.3	%	—		—		—		—		19,951		7,500
5	5	3	404,787		5.1	%	—		—		—		—		177,483		227,304		5	3	212,895		2.4	%	—		—		—		—		—		212,895
Total	Total	67	$	7,890,848	100.0	%	$	2,622,248	$	644,404	$	2,307,948	$	828,270	$	648,727	$	839,251	Total	61	$	8,708,214	100.0	%	$	2,575,455	$	2,462,499	$	687,329	$	1,637,050	$	499,720	$	846,161
General CECL Allowance(1)	General CECL Allowance(1)		(33,588)																General CECL Allowance(1)		(26,224)
Total carrying value, net	Total carrying value, net		$	7,857,260															Total carrying value, net		$	8,681,990

Weighted Average Risk Rating	Weighted Average Risk Rating				3.1														Weighted Average Risk Rating				3.0
Gross write-offs																			Gross write-offs		$	7,000			$	—	$	—	$	—	$	—	$	—	$	7,000

———————

(1)$~~2.8 million and $3.1~~4.7 million of the General CECL Allowance for ~~2022~~both 2023 and ~~2021,~~2022, respectively, is excluded from ~~the tables above~~this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance ~~sheet~~sheets.

CECL

In accordance with ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments", which we refer to as the "CECL ~~Standard",~~Standard," we record allowances for loans and held-to-maturity debt securities that are deducted from the carrying amount of the assets to present the net carrying value of the amounts expected to be collected on the assets. We record loan specific allowances as a practical expedient under the CECL Standard ("Specific CECL Allowance"), which we apply to assets that are collateral dependent and where the borrower or sponsor is experiencing financial difficulty. For the remainder of the portfolio, we record a general allowance ("General CECL Allowance", and together with the Specific CECL Allowance, "CECL Allowances"), ~~in accordance with the CECL Standard~~ on a collective basis by assets with similar risk characteristics. We have elected to use the weighted average remaining maturity ("WARM") method in determining a General CECL Allowance for a majority of our portfolio. In the future, we may use other acceptable methods, such as a probability-of-default/loss-given-default method.

The following schedule illustrates ~~the quarterly~~ changes in CECL Allowances for the ~~nine~~three months ended ~~September 30, 2022 and~~ March 31, 2023~~2021, respectively~~ ($ in thousands):

Specific CECL Allowance(4)
General CECL Allowance Total CECL Allowance
CECL Allowance as % of Amortized Cost(4)
Funded Unfunded Total General Total
December 31, 2021 $ 145,000 $ 33,588 $ 3,106 $ 36,694 $ 181,694 0.49 % 2.26 %
Changes:
Q1 Allowance (Reversals)(1)
30,000 (12,211) 822 (11,389) 18,611
March 31, 2022 $ 175,000 $ 21,377 $ 3,928 $ 25,305 $ 200,305 0.32 % 2.34 %
Changes:
Q2 Allowance (Reversals), net(2)
(3,000) 1,985 71 2,056 (944)
June 30, 2022 $ 172,000 $ 23,362 $ 3,999 $ 27,361 $ 199,361 0.33 % 2.18 %
Changes:
Q3 (Reversals), net(3)
$ (53,000) (1,377) (1,187) (2,564) (55,564)
September 30, 2022 $ 119,000 $ 21,985 $ 2,812 $ 24,797 $ 143,797 0.30 % 1.62 %


		Specific CECL Allowance(1)		General CECL Allowance						Total CECL Allowance		CECL Allowance as % of Amortized Cost(1)
				Funded		Unfunded		Total				General		Total
December 31, 2022		$	133,500	$	26,224	$	4,347	$	30,571	$	164,071	0.36	%	1.86	%
Changes:
	Allowances	—		4,043		348		4,391		$	4,391
March 31, 2023		$	133,500	$	30,267	$	4,695	$	34,962	$	168,462	0.42	%	1.95	%

———————

(1)During the three months ended March 31, 2022, a $30.0 million Specific CECL Allowance was recorded on a subordinate loan secured by an ultra luxury residential property in Manhattan, NY. During the three months ended March 31, 2022, the General CECL Allowance decreased by $11.4 million primarily due to changes in expected loan repayment dates, as well as portfolio seasoning, which was partially offset by new loan originations.

~~(2)~~During the three months ended June 30, 2022, the $3.0 million net reversal of Specific CECL Allowance was comprised of (i) the reversal of $10.0 million of previously recorded allowance on a loan related to a multifamily development in Brooklyn, NY as a result of market rent growth and value created from development activities and (ii) a $7.0 million allowance recorded on a loan secured by a hotel in Atlanta, GA due to slower than expected recovery from COVID-19. General CECL Allowance increased by $2.1 million due to new loan originations and more adverse macroeconomic outlook, which was partially offset by portfolio seasoning.

~~(3)During the three months ended September 30, 2022, the $53.0 million Specific CECL Allowance was reversed on an urban predevelopment first~~

mortgage loan in Miami, FL because the collateral which secures the loan is under contract to be sold in the near term at a higher value than the carrying value of the loan pre-reversal. General CECL Allowance decreased by $2.6 million primarily due to portfolio seasoning and sale of unfunded commitments, which was partially offset by one new loan origination and a more adverse macroeconomic outlook.

~~(4)~~Loans evaluated for Specific CECL Allowance are excluded from General CECL Allowance pool.

Specific CECL Allowance(5)
General CECL Allowance Total CECL Allowance
CECL Allowance as % of Amortized Cost(5)
Funded Unfunded Total General Total
December 31, 2020 $ 175,000 $ 38,102 $ 3,365 $ 41,467 $ 216,467 0.67 % 3.23 %
Changes:
Q1 Allowance (Reversals)(1)
— (1,667) 429 (1,238) (1,238)
March 31, 2021 $ 175,000 $ 36,435 $ 3,794 $ 40,229 $ 215,229 0.62 % 3.06 %
Changes:
Q2 Allowance (Reversals)(2)
(20,000) 1,764 (1,350) 414 (19,586)
Write-offs(3)
(10,000) — — — (10,000)
June 30, 2021 $ 145,000 $ 38,199 $ 2,444 $ 40,643 $ 185,643 0.57 % 2.41 %
Changes:
Q3 Allowance (Reversals)(4)
— (5,515) (251) (5,766) (5,766)
September 30, 2021 $ 145,000 $ 32,684 $ 2,193 $ 34,877 $ 179,877 0.51 % 2.43 %


		Specific CECL Allowance(1)		General CECL Allowance						Total CECL Allowance		CECL Allowance as % of Amortized Cost(1)
				Funded		Unfunded		Total				General		Total
December 31, 2021		$	145,000	$	33,588	$	3,106	$	36,694	$	181,694	0.49	%	2.26	%
Changes:
	Allowances (Reversals)	30,000		(12,211)		822		(11,389)		18,611
March 31, 2022		$	175,000	$	21,377	$	3,928	$	25,305	$	200,305	0.32	%	2.34	%

———————

(1)During the three months ended March 31, 2021, General CECL Allowance decreased by $1.2 million due to portfolio seasoning and accelerated expected loan repayment dates, which was partially offset by new loan originations.

~~(2)~~During the three months ended June 30, 2021, there was a reversal of previously recorded Specific CECL Allowance of $20.0 million on a loan related to a multifamily development in Brooklyn, NY due to improved market outlook. General CECL Allowance increased by $0.4 million due to new loan originations, which was partially offset by portfolio seasoning and an improved macroeconomic outlook.

~~(3)~~$10.0 million of previously recorded Specific CECL Allowance, on a subordinate hotel loan, was written-off in connection with the assumption of the hotels assets and liabilities. Refer to "Note 5 – Assets and Liabilities Related to Real Estate Owned, Held for Sale" for additional information.

~~(4)During the three months ended September 30, 2021, General CECL Allowance decreased by $5.8 million primarily due to portfolio seasoning.~~

~~(5)~~Loans evaluated for Specific CECL Allowance are excluded from General CECL Allowance pool.

For information on General and Specific CECL Allowance changes during the three months ended March 31, 2023 and during the year ended December 31, 2022, see below.

General CECL Allowance

In determining the General CECL Allowance using the WARM method, an annual historical loss rate, adjusted for macroeconomic estimates, is applied to the amortized cost of an asset, or pool of assets, over each subsequent period for the assets' remaining expected life. We considered various factors including (i) historical loss experience in the commercial real estate lending market, (ii) timing of expected repayments and satisfactions, (iii) expected future funding, (iv) capital subordinate to us when we are the senior lender, (v) capital senior to us when we are the subordinate lender, and (vi) our current and future view of the macroeconomic environment for a reasonable and supportable forecast period. The CECL Standard requires the use of significant judgment to arrive at an estimated credit loss. There is significant uncertainty related to future macroeconomic conditions, ~~as the result of COVID-19,~~ including inflation, labor shortages and interest rates.

We derived an annual historical loss rate based on a commercial ~~mortgage backed~~mortgage-backed securities ("CMBS") database with historical losses from 1998 through the ~~third~~first quarter of ~~2022~~2023 provided by a third party, Trepp LLC. We applied various filters to arrive at a CMBS dataset most analogous to our current portfolio from which to determine an appropriate historical loss rate. The annual historical loss rate was further adjusted to reflect our expectations of the macroeconomic environment for a reasonable and supportable forecast period. At the onset of the COVID-19 pandemic, we adopted a shortened four quarter forecast period ~~which~~in response to heightened macroeconomic uncertainty brought by the pandemic. With the effects of the pandemic gradually easing in response to global and domestic vaccination efforts and other public safety measures, we ~~have determined~~reverted to ~~be one year.~~a longer forecast period of six quarters effective December 31, 2022 and further extended to eight quarters effective March 31, 2023. In assessing the macroeconomic environment, we consider macroeconomic factors, including unemployment rate, commercial real estate prices, and market liquidity. We compared the historical data for each metric to historical commercial real estate losses in order to determine the correlation of the data. We used projections, obtained from third-party service providers, of each factor to approximate the impact the macroeconomic outlook may have on our loss rate.

The General CECL Allowance on subordinate loans is calculated by incorporating both the loan balance of the position(s) of the structurally senior third-party lender(s) and the balance of our subordinate loan(s). The subordinate loans, by virtue of being the first loss position, are required to absorb losses prior to the senior position(s) being impacted, resulting in a higher percentage allowance attributable to the subordinate loan. The General CECL Allowance on unfunded loan commitments is time-weighted based on our expected commitment to fund such obligations. The General CECL Allowance on unfunded commitments is recorded as a liability on our condensed consolidated balance ~~sheet~~sheets within accounts payable, accrued expenses and other liabilities.

We have made an accounting policy election to exclude accrued interest receivable ($~~61.5~~65.7 million and ~~$41.2~~$65.4 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively), included in other assets on our condensed consolidated balance

~~sheet,~~ sheets, from the amortized cost basis of the related commercial mortgage loans and subordinate loans and other lending assets in determining the General CECL Allowance, as any uncollectible accrued interest receivable is written off in a timely manner.

Although our secured debt obligations and senior secured term loan financing have a minimum tangible net worth maintenance covenant, the General CECL Allowance has no impact on these covenants as we are permitted to add back the General CECL Allowance for the computation of tangible net worth as defined in the respective agreements.

The following schedule sets forth our General CECL Allowance as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 ($ in thousands):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Commercial mortgage loans, net	Commercial mortgage loans, net	$	18,554	$	22,554	Commercial mortgage loans, net	$	27,570	$	22,848
Subordinate loans and other lending assets, net	Subordinate loans and other lending assets, net	3,431		11,034		Subordinate loans and other lending assets, net	2,697		3,376
Unfunded commitments(1)	Unfunded commitments(1)	2,812		3,106		Unfunded commitments(1)	4,695		4,347
Total General CECL Allowance	Total General CECL Allowance	$	24,797	$	36,694	Total General CECL Allowance	$	34,962	$	30,571

———————

(1)The General CECL Allowance on unfunded commitments is recorded as a liability on our condensed consolidated balance ~~sheet~~sheets within accounts payable, accrued expenses and other liabilities.

Our General CECL Allowance increased by $4.4 million during the quarter ended March 31, 2023. The increase was primarily driven by an increase in our view of the remaining expected term of our loan portfolio, partially offset by the impact of portfolio seasoning and loan repayments and sales.

Specific CECL Allowance

For collateral-dependent loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we have elected to apply a practical expedient in accordance with the CECL Standard in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a Specific CECL Allowance. The Specific CECL Allowance is determined as the difference between the fair value of the underlying collateral and the carrying value of the loan (prior to the Specific CECL Allowance). When the repayment or satisfaction of a loan is dependent on a sale, rather than operations, of the collateral, the fair value is adjusted for the estimated cost to sell the collateral. Collateral-dependent loans evaluated for a Specific CECL Allowance are removed from the General CECL pool. The fair value of the underlying collateral is determined by using method(s) such as discounted cash flow, the market approach, or direct capitalization approach. The key unobservable inputs used to determine the fair value of the underlying collateral may vary depending on the information available to us and market conditions as of the valuation date.

We regularly evaluate the extent and impact of any credit migration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a ~~loan by loan~~loan-by-loan basis. The Specific CECL Allowance is evaluated on a quarterly basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the liquidation value of the underlying collateral. We also evaluate the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the properties. In addition, we consider the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. Such impairment analysis is completed and reviewed by asset management and finance personnel who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants.

The following table summarizes our risk rated 5 loans as of ~~September 30, 2022,~~March 31, 2023, which were analyzed for Specific CECL Allowances ($ in thousands):

Type Property type Location Amortized cost prior to Specific CECL Allowance Specific CECL Allowance Amortized cost Interest recognition status/ as of date Risk rating
Mortgage
Urban Predevelopment(1)
Miami, FL $191,139 $15,000 $176,139 Non-Accrual/ 3/1/2020 5
Retail(2)(3)
Cincinnati, OH 170,661 67,000 103,661 Non-Accrual/ 10/1/2019 5
Hotel(4)
Atlanta, GA 104,832 7,000 97,832 Non-Accrual/ 5/1/2022 5
Mortgage total: $466,632 $89,000 $377,632
Mezzanine
Residential(5)
Manhattan, NY $81,980 $30,000 $51,980 Non-Accrual/ 7/1/2021 5


Type					Type	Property type	Location	Amortized cost prior to Specific CECL Allowance	Specific CECL Allowance	Amortized cost	Interest recognition status/ as of date	Risk rating
Mortgage					Mortgage
						Retail(1)(2)	Cincinnati, OH	$165,903	$67,000	$98,903	Non-Accrual/ 10/1/2019	5
Mortgage total:					Mortgage total:			$165,903	$67,000	$98,903

Mezzanine					Mezzanine
						Residential(3)	Manhattan, NY	$81,980	$66,500	$15,480	Non-Accrual/ 7/1/2021	5
Mezzanine total:	Mezzanine total:	$81,980	$30,000	$51,980	Mezzanine total:			$81,980	$66,500	$15,480

Total:	Total:	$548,612	$119,000	$429,612	Total:			$247,883	$133,500	$114,383

———————

(1)In October 2020, we entered a joint venture with CCOF Design Venture, LLC, which owns the underlying properties that secure our $188.2 million first mortgage loan. The entity in which we own an interest, and which owns the underlying properties, was deemed to be a Variable Interest Entity ("VIE") and we determined that we are not the primary beneficiary of that VIE as we do not have the power to direct the entity's activities. The related profit and loss from the joint venture was immaterial for the three and nine months ended September 30, 2022 and 2021. During the three months ended September 30, 2022, $53.0 million of the previously recorded $68.0 million Specific CECL Allowance was reversed because the collateral which secures the loan is under contract to be sold in the near term. Fair value of the property is based on contracted price net of amounts due to our joint venture partner based on terms of the joint venture agreement. The loan remains on non-accrual and the risk rating remains a 5.

~~(2)~~The fair value of retail collateral was determined by applying a capitalization rate of ~~8.0%~~8.5%.

~~(3)~~(2)In September 2018, we entered a joint venture with Turner Consulting II, LLC ("Turner Consulting"), through an entity which owns the underlying property that secures our loan. Turner Consulting contributed 10% of the venture’s equity and we contributed 90%. The entity was deemed to be a ~~VIE~~Variable Interest Entity (a "VIE") and we determined that we are not the primary beneficiary of that VIE as we do not have the power to direct the entity's activities. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, $0.6~~$0.7 million and ~~$1.2 million, respectively and~~ $0.2 ~~million and $1.0~~ million, respectively, of interest paid was applied towards reducing the carrying value of the loan. The related profit and loss from the joint venture was immaterial for the three March 31, 2023 and ~~nine months ended September 30, 2022 and 2021.~~2022.

~~(4)The fair value of the hotel collateral was determined by applying a capitalization rate of 9.3% and a discount rate of 11.3%.~~

~~(5)~~(3)The fair value of the residential collateral was determined by making certain projections and assumptions with respect to future performance and a discount rate of 10%.

We cease accruing interest on loans if we deem the interest to be uncollectible with any previously accrued uncollected interest on the loan charged to interest income in the same period. The amortized cost basis for loans on non-accrual was $~~661.5~~398.2 million and $~~639.6~~468.0 millionas of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022, respectively. Under certain circumstances, we may apply the cost recovery method under which interest collected on a loan reduces the loan's amortized cost. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, we ~~received $2.1~~received $0.7 million and ~~$2.6~~$0.2 million, respectively, in interest that reduced amortized cost under the cost recovery method. ~~For the three and nine months ended September 30, 2021~~ ~~we received $0.2 million and $1.0 million,~~ ~~respectively, in interest that reduced amortized cost under the cost recovery method.~~

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the amortized cost basis for loans with accrued interest past due 90 or more days was ~~$661.5~~$398.2 million and ~~$757.6~~$581.3 million, respectively. As of ~~September 30,~~March 31, 2023 and December 31, 2022, ~~the amortized cost basis for loans with accrued interest between 30 and 89 days past due was $102.6 million. There~~there were no loans with accrued interest between 30 and 89 days past due, ~~as of December 31, 2021.~~respectively.

During the third quarter of 2022, we refinanced our three mezzanine loans, and originated a commercial mortgage loan as part of an overall ~~recapitalization, which~~recapitalization. All of the loans are secured by an ultra-luxury residential property in Manhattan, NY. These loans have an aggregate amortized cost at ~~September 30, 2022~~March 31, 2023 of $~~825.0~~743.9 million (net of $66.5 million Specific CECL Allowance) (inclusive of $82.5 million of payment- in-kind ~~(“PIK”)~~ interest). As of ~~September 30, 2022,~~March 31, 2023, these loans include (i) a ~~$354.0~~$250.3 million commercial mortgage loan (“Senior Loan”), (ii) a ~~$187.1~~$194.3 million senior mezzanine loan (“Senior Mezzanine Loan”), (iii) a ~~$231.9~~$283.8 million junior mezzanine loan (“Junior Mezzanine A Loan”), and (iv) a ~~$52.0~~$15.5 million junior mezzanine loan (net of a ~~$30.0~~$66.5 million Specific CECL Allowance) (“Junior Mezzanine B Loan” together with the Junior Mezzanine A Loan collectively referred to as “Junior Mezzanine Loan”).

In refinancing the Senior Mezzanine Loan and Junior Mezzanine Loan, we modified the loan terms with the borrower by modifying the interest rates from LIBOR+15.7% to ~~SOFR+~~the Secured Overnight Financing Rate ("SOFR")+9.0% on the Senior Mezzanine Loan, from LIBOR+22.5% to SOFR+15.0% on the Junior Mezzanine A Loan, and from LIBOR+17.5% to SOFR+15.0% on the Junior Mezzanine B Loan. We also extended the term on all three loans from July 2022 to September ~~2024.~~2024, including a one-year extension. Based on our analysis under ASC 310-20 “Receivables – Nonrefundable Fees and Other Costs” (“ASC 310-20”), we have deemed this refinance to be a continuation of our existing loans. We opted to cease accruing interest on the Junior Mezzanine A Loan and Junior Mezzanine B Loan as of July 1, 2021 based on a waterfall sharing arrangement with a subordinate capital provider. We will continue to not accrue interest on the Junior Mezzanine Loan following this refinancing.

In accordance with ASC 326, "Financial Instruments – Credit Losses" and adoption of ASU 2022-02 "Financial Instruments – Credit Losses (Topic 326) – Troubled Debt Restructurings and Vintage Disclosures", we have classified the refinancing of the Senior Mezzanine Loan and Junior Mezzanine Loan as an interest rate reduction and term extension. The aggregate amortized cost of the Senior Mezzanine Loan and Junior Mezzanine Loan as of ~~September 30, 2022~~March 31, 2023 totaled ~~$471.1~~$493.6 million (net of $66.5 million Specific CECL Allowance), or ~~5.4%~~5.8% of our aggregate commercial mortgage loans and subordinate loans and other lending assets by amortized cost. As of March 31, 2022, sales velocity on the underlying property lagged behind the borrower's business plan and management's expectations. Based on this information as of March 31, 2022, we deemed the borrower to be experiencing financial difficulty and accordingly changed the risk rating to a 5 and recorded $30.0 million of Specific CECL Allowance on the Junior Mezzanine B Loan. During the three months ended December 31, 2022, we recorded an additional $36.5 million Specific CECL Allowance on the Junior Mezzanine B Loan, bringing the total loan Specific CECL Allowance to $66.5 million, due to a slower sales pace across the ultra-luxury residential segment at the end of 2022 in response to broader market uncertainty. The modified loan terms as discussed above have been reflected in our calculation of ~~current expected credit losses~~CECL for the quarter ended ~~September 30, 2022.~~March 31, 2023. Refer to "CECL" section above for additional information regarding our calculation of ~~current expected credit loss allowance.~~CECL Allowance. As of each ~~September 30,~~March 31, 2023 and December 31, 2022,, our amortized cost basis in this loan was ~~$52.0~~$15.5 million and its risk rating

remained as a 5.

~~As of the quarter ended September 30, 2022, there were $17.6 million of unfunded commitments related to borrowers experiencing financial difficulty for the entire loan portfolio.~~

In March 2017, we originated a first mortgage secured by a hotel in Atlanta, GA. As of May 1, 2022, due to slower than expected recovery from the COVID-19 pandemic, we deemed the borrower to be experiencing financial difficulty and ceased accruing interest. AsDuring the second quarter of ~~June 30,~~ 2022, we recorded a $7.0 million Specific CECL ~~Allowance and the risk rating was downgraded from a 4 to a 5. During the nine months ended~~ ~~September 30,~~Allowance. Additionally, during 2022,, we modified the loan to provide two short term extensions to the borrower.During the fourth quarter of 2022, the loan went into maturity default, at which time we were in discussions with the sponsor regarding consensual foreclosure. In anticipation of the foreclosure, we wrote off the previously recorded Specific CECL Allowance, and recorded a $7.0 million realized loss on the loan within realized gain (loss) on investments within our December 31, 2022 consolidated statement of operations.

On March 31, 2023, we acquired legal title of the underlying hotel through a deed-in-lieu foreclosure and recognized an additional $4.8 million loss within net realized loss on investments on our condensed consolidated statement of operations. The realized loss represents the difference between the original loan's amortized cost and the fair value of the net real estate assets acquired at the time of foreclosure. Refer to "Note 5 - Real Estate Owned" for additional disclosure.

As of ~~September 30,~~March 31, 2023 and December 31, 2022, ~~our amortized cost basis in~~ the ~~loan was~~re were $~~97.8~~0.5 million and ~~its risk rating remained as a 5.~~$9.5 million, respectively of unfunded commitments related to borrowers experiencing financial difficulty for the entire loan portfolio.

Other Loan and Lending Assets Activity

We recognized ~~PIK~~no payment-in-kind interest ~~of $2.7 million~~for the three months ended March 31, 2023 and ~~$8.3~~$1.2 million for the three ~~and nine~~ months ended ~~September 30, 2022 respectively, and $10.2 million and $40.7 million for the three and nine months ended September 30, 2021, respectively.~~March 31, 2022.

We recognized ~~$0.1 million and $2.5 million in~~no pre-payment penalties and accelerated fees for the three ~~and nine~~ months ended ~~September 30, 2022, respectively. We recognized $0.6~~March 31, 2023 and $2.1 million ~~and $1.2 million in pre-payment penalties and accelerated fees~~ for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31 2022.

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, our portfolio included other lending assets, which are subordinate risk retention interests in securitization vehicles. The underlying mortgages related to our subordinate risk retention ~~interests are~~interest is secured by a portfolio of properties located throughout the United States. Our maximum exposure to loss from the subordinate

risk retention ~~interests~~interest is limited to the book value of such interests. The book value as of ~~September 30,~~both March 31, 2023 and December 31, 2022 was $51.1 million, consisting of one interest with a weighted average maturity of ~~1.7~~1.2 years and ~~$64.6 million as of December 31, 2021 consisting of two interests with weighted average maturity of 4.5 years.~~1.4 years, respectively. We are not obligated to provide, and do not intend to provide financial support to these subordinate risk retention interests. These interests are accounted for as held-to-maturity and recorded at carrying value on our condensed consolidated balance ~~sheet.~~sheets.

~~We recognized $3.7 million of shared appreciation fees for~~During the three ~~and nine~~ months ended September 30, 2021 related to a first mortgage loan secured by a portfolio of multifamily assets located in the United States, which is recorded in other income in the condensed consolidated statement of operations.

~~In November 2020, the borrower under a £309.2~~March 31, 2023, we received £72.2 million ~~commercial mortgage loan~~ ($~~422.7~~88.4 million assuming conversion into U.S. Dollars ("USD")), full repayment of one of our commercial mortgage loans secured by an office property in London, UK, including all default interest accrued to date, which was approximately $0.7 million. In conjunction with the repayment, we ~~owned £247.5~~are no longer recording the previously sold subordinate interest as a secured borrowing on our consolidated balance sheet, which had an amortized cost basis of £20.8 million ($~~338.4~~25.1 million assuming conversion into USD)~~, secured by an urban retail property located~~. Refer to "Note 12 – Participations Sold" for additional detail related to the subordinate interest.

Loan Sales

From time to time, we may enter into sale transactions with other parties. All sale transactions are evaluated in ~~London, United Kingdom, entered into administration triggering an event of default. In~~ accordance with ~~the loan agreement, we were entitled to collect default interest in addition to the contractual interest we had been earning.~~ ASC 860, "Transfers and Servicing" ("ASC 860").

During the first quarter of ~~2022,~~2023, we sold our entire interests in three commercial mortgage ~~loan~~loans secured by various properties in Europe, with aggregate commitments of €205.7 million ($219.0 million assuming conversion into USD, of which €115.0 million or $122.4 million assuming conversion into USD, was ~~fully satisfied and all accrued contractual and default~~funded at the time of sale). Additionally, we sold a partial interest ~~was collected.~~

~~During the three months ended September 30, 2022, we transferred a portion~~ of ~~our unfunded commitment of £293.4~~£15.0 million ($~~327.7~~18.2 million assuming conversion into USD) in a commercial mortgage loan secured by a ~~mixed use~~mixed-use property located in London, ~~United Kingdom~~UK. These sales were made to entities managed by affiliates of the Manager. In addition to transferring the unfunded commitment, we also transferred a proportionate share of the origination fee associated with such unfunded commitment, resulting in a reduction to our amortized cost basis. We evaluated the ~~transfer~~transaction under ASC 860 and determined the ~~transfer~~sale of our entire interests and the sale of the partial interest met the criteria for sale accounting. We recorded noa net gain orof approximately $0.2 million in connection with these sales within net realized loss on ~~the sale.~~

~~During the three months ended September 30, 2022 one~~investments in our March 31, 2023 condensed consolidated statement of our commercial mortgage loans collateralized by an office building located in London, United Kingdom was not repaid upon its contractual maturity, triggering an event of default. To provide the borrower with additional time to refinance the loan, we agreed to a conditional waiver of the event of default, and modified the terms of the loan agreement to include (i) a short term extension and (ii) default interest of 2.0%, which we commenced accruing in addition to our contractual rate. At September 30, 2022, the loan had an amortized cost basis of £91.9 million ($102.6 million assuming conversion into USD), including £20.3 million ($22.7 million assuming conversion into USD) of subordinate participation sold accounted for as secured borrowing. We expect to receive all principal and contractual and default interest accrued to date.operations.

Note 5 – ~~Assets and Liabilities Related to~~ Real Estate Owned

~~Assets and Liabilities Related to~~ Real Estate Owned, Held for ~~Sale~~Investment

In 2017, we originated a subordinate loan junior to a $33.0 million third-party mortgage, secured by a hotel in Anaheim, CA. In December 2020, due to non-performance, we assumed legal title through the execution of a deed-in-lieu of foreclosure. We intended to sell the hotel and, as such, as of the date of the title assumption, we recorded the hotel property on our condensed consolidated balance sheet at its fair market value less costs to sell, net of a realized loss of $2.4 million, that was previously recorded as Specific CECL Allowance.

As of March 31, ~~2021, there was an increase in our expected costs~~2023, assets and liabilities related to ~~sell the property, and therefore, we recorded a $0.6 millionloss during the three months ended March 31, 2021, as realized losses and impairments on~~ real estate owned, held for investment consisted of three properties: the D.C. Hotel, a full-service luxury hotel in ~~our condensed consolidated statement of operations. During~~Washington, D.C., the ~~second quarter of 2021~~Brooklyn Development, a multifamily development property located in downtown Brooklyn, NY, and the ~~property was sold at our cost basis and no additional gain or loss was recorded. The $33.0 million first mortgage was repaid upon the sale of the property.~~Atlanta Hotel, a hotel in Atlanta, GA.

D.C. Hotel

In 2017, we originated a $20.0 million junior mezzanine loan which was subordinate to: (i) a $110.0 million mortgage loan, and (ii) a $24.5 million senior mezzanine loan, secured by ~~a full-service luxury hotel in Washington,~~the D.C. Hotel. During the first quarter of 2020, we recorded a $10.0 million Specific CECL Allowance and placed our junior mezzanine loan on non-accrual status.

On May 24, 2021, we purchased the $24.5 million senior mezzanine loan at par and acquired legal title to the hotel through a deed-in-lieu of foreclosure. We assumed the hotel’s assets and liabilities (including the $110.0 million mortgage loan) and recorded an additional $10.0 million charge reflecting the difference between the fair value of the hotel’s net assets and the carrying amount of the loan. This $10.0 million loss on title assumption plus the previously recorded Specific CECL Allowance of $10.0 million resulted in a $20.0 million realized loss on investments included within realized gain (loss) on investments in our ~~condensed~~2021 consolidated statement of ~~operations during the second quarter of 2021.~~operations.

On May 24, 2021, in accordance with ASC 805, "Business Combinations"("ASC 805"), we allocated the fair value of the hotel’s acquired assets and assumed debt. The non-recurring fair value measurement was classified as Level III within the fair value hierarchy due to the use of significant unobservable inputs. On June 29, 2021, we repaid the $110.0 million mortgage loan against the property. As of March 1, 2022, the hotel assets, comprised of land, building, furniture fixtures, and equipment, and accumulated depreciation (collectively "REO Fixed Assets"), and liabilities met the criteria to be classified as held for sale under ASC Topic 360, "Property, Plant, and Equipment." AsAccordingly, as of March 1, 2022, we ceased recording depreciation on the building and furniture, fixtures, and equipment on the condensed consolidated statement of operations.

~~Below are~~As of March 1, 2023, due to current market conditions, we have curtailed active marketing efforts, and reclassified the ~~hotel's assets~~REO Fixed Assets and liabilities from real estate owned, held for sale to real estate owned, held for investment, net in accordance with ASC Topic 360.

The REO Fixed Assets were reclassified to their carrying value before classifying as ~~of September 30, 2022 on our condensed consolidated balance sheet ($~~held for sale in ~~thousands):~~


	~~September 30, 2022~~
~~Assets:~~
~~Cash~~	$	~~5,858~~
~~Land~~	~~58,742~~
~~Buildings~~	~~86,973~~
~~Furniture, fixtures, and equipment~~	~~8,811~~
~~Accumulated depreciation~~	~~(3,349)~~
~~Other assets~~	~~5,024~~
~~Total Assets~~	$	~~162,059~~
~~Liabilities:~~

~~Accounts payable, accrued expenses and other liabilities~~	~~6,116~~
~~Total Liabilities~~	$	~~6,116~~
~~Net Real Estate Assets~~	$	~~155,943~~

~~For the three and nine months ended September 30,~~March of 2022 and ~~2021, we recorded the operating revenue, expenses and fixed asset depreciation and amortization in our condensed consolidated income statement as shown below ($ in thousands):~~

Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021
Operations related to real estate owned:
Revenue from operations $ 14,428 $ 5,896 $ 42,098 $ 7,270
Operating expenses (13,308) (6,914) (36,094) (8,908)
Depreciation and amortization — (1,096) (704) (1,548)
Net income (loss) from real estate owned $ 1,120 $ (2,114) $ 5,300 $ (3,186)
$4.0 million in depreciation, representing the amount that would have been recorded had the asset remained as held for investment, was recognized. All other assets and liabilities were reclassified to the corresponding line items on the condensed consolidated balance sheet. No realized gain or loss was recorded in connection with this reclassification.

~~Assets~~As of March 31, 2023 and ~~Liabilities Related~~December 31, 2022, the value of net real estate assets related to ~~Real Estate Owned, Held for Investment~~the D.C. Hotel was $154.2 million and $155.9 million, respectively. For the three months ended March 31, 2023 and 2022, we recorded a net loss from operations of $1.9 million and $1.3 million, respectively.

Brooklyn Development

In 2015, we originated a $122.2 million multifamily development commercial mortgage loan secured by an assemblage of properties in downtown Brooklyn, NY. In 2020, the loan went into default and we recorded a $30.0 million Specific CECL Allowance, due to the deterioration of market conditions attributable to COVID-19. As a result of improved market conditions we reversed $20 million of Specific CECL Allowance during the second quarter of 2021. In the second quarter of 2022, we reversed the remaining $10 million Specific CECL Allowance as a result of market rent growth and value created from development activities at the underlying property.

On August 3, 2022, we acquired legal title of the property through a deed-in-lieu of foreclosure and accounted for the asset acquisition in accordance with ASC ~~805, "Business Combinations."~~805. At that time, our amortized cost basis in the commercial mortgage loan was $226.5 million. We recorded the real estate assumed at a fair value of $270.1 million based on the market value of the land. We recognized a realized gain of $43.6 million, recorded within realized gain (loss) on investments on our ~~condensed~~ consolidated statement of operations, which reflects the difference between the fair value of the property and the carrying value of the loan at the time of acquisition. The non-recurring fair value measurement was classified as Level III within the fair value hierarchy due to the use of significant unobservable inputs, including comparable sales of similar properties in the market. Since title acquisition, we have capitalized an additional ~~$21.1~~$46.5 million of construction and financing ~~costs.~~costs, including $13.9 million capitalized during the three months ended March 31, 2023. As of ~~September 30,~~March 31, 2023 and December 31, 2022, our cost basis in the property was ~~$291.1 million.~~$316.6 million and $302.7 million, respectively.

Upon taking title, we concurrently contributed the property to a joint venture with a ~~third party~~third-party real estate developer. The entity was deemed to be a VIE, of which we were determined to be the primary beneficiary.Through our wholly owned subsidiaries, we hold a 100% equity ownership interest in the joint venture and our partner is only entitled to profit upon achievement of certain returns under our joint venture agreement. Concurrently with taking title to the property, we obtained $164.8 million in construction financing on the property. As of March 31, 2023 and December 31, 2022, the carrying value of the construction financing included within debt related to real estate owned, held for investment, net on our condensed consolidated balance sheets was $160.6 million, net of $4.2 million in deferred financing costs and $160.3 million, net of $4.5 million in deferred financing costs, respectively.

The construction financing includes a maximum commitment of $388.4 million, an interest rate of term one-month SOFR+2.55%, and current maturity of August 2026, with an option ~~for us~~ to extend for one year, contingent upon meeting certain conditions. The construction financing agreement contains ~~the following financial covenants: (i)~~covenants requiring our unencumbered liquidity ~~must~~ be greater than $100.0 million and ~~(ii)~~ our net worth ~~must~~ be greater than $600.0 million. Under these covenants, our General CECL Allowance is added back to our net worth calculation. ~~At September 30,~~As of both March 31, 2023 and December 31, 2022, we were in compliance with these covenants.

Atlanta Hotel

In March 2017, we originated a first mortgage secured by the Atlanta Hotel. During the second quarter of 2022, due to slower than expected recovery from the COVID-19 pandemic, we deemed the borrower to be experiencing financial difficulty. Accordingly, we ceased accruing interest on the loan and recorded a $7.0 million Specific CECL Allowance.

During the fourth quarter of 2022, we wrote off the $7.0 million previously recorded Specific CECL Allowance and reduced the principal balance of the loan which was recorded as a realized loss within net realized loss on investments in our December 31, 2022 consolidated statement of operations.

On March 31, 2023, we acquired legal title of the Atlanta Hotel through a deed-in-lieu foreclosure. In accordance with ASC 805, we allocated the fair value of the assumed assets and liabilities on the March 31, 2023 acquisition date as follows:


	March 31, 2023
Assets:
Cash	$	569
Buildings	50,152
Land	16,628
Furniture, fixtures, and equipment	8,220
Other assets	2,827
Total Assets	$	78,396
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	3,396
Total Liabilities	$	3,396
Net Real Estate Assets	$	75,000

We determined the $75.0 million fair value of net real estate assets in accordance with ASC 820, "Fair Value Measurements and Disclosures" utilizing significant unobservable inputs. As such, the fair value of real estate owned is categorized within Level III of the fair value hierarchy set forth by ASC 820. See "Note 3 - Fair Value Disclosure" for discussion of our non-recurring fair value measurements. Additionally, we recognized a realized loss of $4.8 million, recorded within net realized loss on investments on our condensed consolidated statement of operations. The realized loss represents the difference between the original loan's amortized cost and the fair value of the net assets acquired.

We recorded no income or loss from the hotel's operations for the three months ended March 31, 2023.

Note 6 – Other Assets

The following table details the components of our other assets at the dates indicated ($ in thousands):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Interest receivable	Interest receivable	$	61,512	$	41,219	Interest receivable	$	65,738	$	65,383

Loan proceeds held by servicer	Loan proceeds held by servicer	9,050		3,179		Loan proceeds held by servicer	1,044		3,371
Other(1)	Other(1)	504		3,355		Other(1)	9,641		1,853
Total	Total	$	71,066	$	47,753	Total	$	76,423	$	70,607

———————

(1)Includes ~~$3.1~~$9.3 million of other assets from real estate owned ~~at December~~as of March 31, ~~2021.~~2023. Refer to "Note 5 – ~~Assets and Liabilities Related to~~ Real Estate ~~Owned, Held for Sale"~~Owned" for additional information.

Note 7 – Secured Debt Arrangements, Net

We utilize ~~our~~ secured debt arrangements to finance the origination activity in our loan portfolio. Our secured debt arrangements ~~comprise~~are comprised of secured credit facilities, a private securitization, and a ~~private securitization.~~revolving credit facility. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we entered into two new ~~asset-specific~~secured debt arrangements, including a credit ~~facilities~~facility with Banco Santander, S.A., New York Branch and ~~increased borrowing~~a revolving credit facility administered by Bank of America, N.A. ("Revolving Credit Facility") which provided a combined $470.0 million of additional capacity, ~~on three of our existing secured credit facilities.~~and upsized the Atlas Facility, as defined in this Form 10-Q, by $83.3 million.

Our borrowings under secured debt arrangements at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 are detailed in the following table ($ in thousands):
September 30, 2022 December 31, 2021

Maximum Amount of Borrowings(1)
Borrowings Outstanding(1)
Maturity (2)
Maximum Amount of Borrowings(1)
Borrowings Outstanding(1)
Maturity (2)
JPMorgan Facility - USD(3)(4)
$ 1,533,896 $ 1,427,097 September 2026 $ 1,344,283 $ 1,329,923 September 2026
JPMorgan Facility - GBP(3)(4)
66,104 66,104 September 2026 87,497 86,849 September 2026
JPMorgan Facility - EUR(3)(4)
— — N/A 68,220 68,220 September 2026
Deutsche Bank Facility - USD(3)
700,000 432,269 March 2023 700,000 259,073 March 2023
Credit Suisse Facility - USD 633,798 629,026
August 2026(6)(7)
161,609 148,720
February 2025(6)(7)
HSBC Facility - GBP 336,887 336,887 April 2025 — — N/A
HSBC Facility - EUR 255,623 255,623
January 2026(7)
167,756 162,937 July 2022
Goldman Sachs Facility - USD 300,000 148,334
November 2025(5)
300,000 168,231
November 2025(5)
Barclays Facility - USD 200,000 125,592
June 2027(6)
200,000 32,693 March 2024
MUFG Securities Facility - GBP 179,592 179,592
June 2025(6)
— — N/A
Santander Facility - EUR 52,931 48,426 August 2024 — — N/A
Total Secured Credit Facilities 4,258,831 3,648,950 3,029,365 2,256,646
Barclays Private Securitization - GBP, EUR, SEK 1,734,264 1,715,169
January 2026(7)
1,902,684 1,902,684
August 2024(7)
Total Secured Debt Arrangements 5,993,095 5,364,119 4,932,049 4,159,330
Less: deferred financing costs N/A (13,533) N/A (9,062)
Total Secured Debt Arrangements, net(8)(9)(10)
$ 5,993,095 $ 5,350,586 $ 4,932,049 $ 4,150,268


	March 31, 2023					December 31, 2022
	Maximum Amount of Borrowings(1)		Borrowings Outstanding(1)		Maturity (2)	Maximum Amount of Borrowings(1)		Borrowings Outstanding(1)		Maturity (2)
JPMorgan Facility - USD(3)(4)	$	1,483,123	$	1,247,388	September 2026	$	1,532,722	$	1,306,320	September 2026
JPMorgan Facility - GBP(3)(4)	16,877		16,877		September 2026	67,278		67,278		September 2026

Deutsche Bank Facility - USD(3)	700,000		385,818		March 2026	700,000		385,818		March 2026
Atlas Facility - USD(5)	695,339		688,126		March 2027(6)(7)	635,653		632,747		March 2027(6)(7)


HSBC Facility - GBP	372,095		372,095		April 2025	364,423		364,423		April 2025
HSBC Facility - EUR	276,299		276,299		January 2026(7)	272,890		272,890		January 2026
Goldman Sachs Facility - USD	300,000		33,755		November 2025(8)	300,000		70,249		November 2025(8)
Barclays Facility - USD	200,000		111,909		June 2027(6)	200,000		111,909		June 2027
MUFG Securities Facility - GBP	198,355		198,355		June 2025(6)	194,272		194,272		June 2025
Santander Facility - USD	300,000		75,000		February 2025(6)	—		—		N/A
Santander Facility - EUR	58,531		54,202		August 2024	57,807		53,320		August 2024
Total Secured Credit Facilities	4,600,619		3,459,824			4,325,045		3,459,226
Barclays Private Securitization - GBP, EUR, SEK	1,872,779		1,872,779		February 2026(7)	1,850,076		1,850,076		February 2026(7)
Revolving Credit Facility - USD(9)	170,000		—		March 2026	—		—		N/A
Total Secured Debt Arrangements	6,643,398		5,332,603			6,175,121		5,309,302
Less: deferred financing costs	N/A		(15,750)			N/A		(12,477)
Total Secured Debt Arrangements, net(10)(11)(12)	$	6,643,398	$	5,316,853		$	6,175,121	$	5,296,825

———————

(1)As of ~~September 30, 2022, GBP, EUR,~~March 31, 2023, British Pound Sterling("GBP"), Euro ("EUR"), and Swedish Krona ("SEK") borrowings were converted to USD at a rate o~~f 1.12, 0.98,~~of 1.23, 1.08, and ~~0.09, respectively.~~0.10, respectively. As of December 31, ~~2021,~~2022, GBP, EUR and SEK borrowings were converted to USD at a ~~rat~~erate of ~~1.35, 1.14~~1.21, 1.07 and ~~0.11,~~ 0.10, respectively.

(2)Maturity date assumes extensions at our option are exercised with consent of financing providers, where applicable.

(3)The JPMorgan Facility ~~enables~~and Deutsche Bank Facility enable us to elect to receive advances in USD, GBP, or EUR.

(4)The JPMorgan Facility allows for ~~$1.6~~$1.5 billion of maximum borrowings in ~~total.~~total as of March 31, 2023. The JPMorgan Facility was temporarily upsized from $1.5 billion to $1.6 billion during August 2022 and the maximum borrowings decreased to $1.5 billion as of January 2023.

(5)~~Assumes facility enters~~The Atlas Facility was formerly the ~~two-year amortization period subsequent to the November 2023 maturity, which allows~~Credit Suisse Facility. See "—Atlas Facility" below for ~~the refinancing or pay down of assets under the facility.~~additional discussion.

(6)Assumes financings are extended in line with the underlying loans.

(7)Represents weighted average maturity across various financings with the counterparty. See below for additional details.

(8)Assumes facility enters the two-year amortization period subsequent to the November 2023 maturity, which allows for the refinancing or pay down of assets under the facility.

(9)The current stated maturity of the Revolving Credit Facility is March 2026. Borrowings under the Revolving Credit Facility bear interest at a per annum rate equal to the sum of (i) a floating rate index and (ii) a fixed margin. Borrowings under the Revolving Credit Facility are full recourse to certain guarantor wholly-owned subsidiaries of the Company. See "—Revolving Credit Facility" below for additional discussion.

(10)Weighted-average borrowing costs as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were applicable benchmark rates and credit spread adjustments, plus spreads of USD: ~~+2.31%~~+2.35% / GBP: ~~+1.95%~~+1.92% / EUR: ~~+1.55%~~+1.54% / SEK: +1.50% and USD: ~~+2.00%~~+2.28% / GBP: ~~+1.86%~~+2.02% / EUR: ~~+1.42%~~+1.54%/ SEK: +1.50%, respectively.

~~(9)~~(11)Weighted average advance rates based on cost as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were ~~69.5% (65.7%~~69.7% (65.6% (USD) / 74.5% (GBP) / 71.7% (EUR) / 80.5% (SEK)) and 68.8% (63.9% (USD) / 74.0% (GBP) / ~~73.0%~~72.1% (EUR) / ~~80.6% (SEK)) and 69.8% (67.1% (USD) / 72.7% (GBP) / 68.9% (EUR) / 80.7%~~80.5% (SEK)), respectively.

~~(10)~~(12)As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, approximately ~~55%~~58% and ~~50%~~58% of the outstanding balance under these secured borrowings were recourse to us.

Terms of our secured credit facilities are designed to keep each lender's credit exposure generally constant as a percentage of the underlying value of the assets pledged as security to ~~it.~~the facility. If the credit of the underlying collateral value decreases, the amount of leverage to us may be reduced. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the weighted average haircut under our secured debt arrangements was approximately ~~30.5%~~30.3% and ~~30.2%~~31.21%, respectively. Our secured credit facilities do not contain capital markets-based mark-to-market provisions.

Atlas Facility

On February 8, 2023, in connection with the acquisition by certain subsidiaries of Atlas Securitized Products Holdings (“Atlas”), which is a wholly-owned investment of a fund managed by an affiliate of the Manager, of certain warehouse assets and liabilities of the Credit Suisse AG Securitized Products Group ("Credit Suisse AG")(the “Transaction”), the Credit Suisse Facility was acquired by Atlas ("Atlas Facility"). In order to effect the assignment of the Credit Suisse Facility and related agreements, the Company and one of its subsidiaries, similar to the other sellers and guarantors party to the subject agreements in the Transaction, entered into an Omnibus Assignment, Assumption and Amendment Agreement as well as certain related agreements with Credit Suisse AG and Atlas. Refer to "Note 14 - Related Party Transactions" for further discussion regarding the transaction.

Revolving Credit Facility

On March 3, 2023, we entered into the Revolving Credit Facility administered by Bank of America, N.A. Revolving Credit Facility provides up to $170.0 million of borrowings secured by qualifying commercial mortgage loans and real property owned assets. The Revolving Credit Facility has a term of three years, maturing in March 2026. The Revolving Credit Facility enables us to borrow on qualifying commercial mortgage loans for up to two years and real property owned assets for up to six months. As of March 31, 2023 we had no borrowings outstanding on the Revolving Credit Facility. During the three months ended March 31, 2023, we recorded $27.4 thousand in unused fees related to the Revolving Credit Facility.

The guarantees related to the Revolving Credit Facility contain the following financial covenants: (i) our liquidity cannot be less than an amount equal to the greater of 5% of total recourse indebtedness or $30.0 million; (ii) our ratio of total indebtedness to tangible net worth cannot be greater than 4:1; (iii) tangible net worth must be greater than $1.25 billion plus 75% of the net cash proceeds of any equity issuance after March 31, 2017; and (iv) maintain a minimum interest coverage ratio of 1.5:1. We were in compliance with the covenants under the Revolving Credit Facility as of March 31, 2023.

Barclays Private Securitization

We are party to a private securitization with Barclays Bank plc (the "Barclays Private Securitization"). Commercial mortgage loans currently financed under the Barclays Securitization are denominated in GBP, EUR and SEK.

The Barclays Private Securitization does not include daily margining provisions and grants us significant discretion to modify certain terms of the underlying collateral including waiving certain loan-level covenant breaches and deferring or waiving of debt service payments for up to 18 months. The securitization includes loan-to-value based covenants with deleveraging requirements that are based on significant declines in the value of the collateral as determined by an annual third-party (engaged by us) appraisal process tied to the provisions of the underlying loan agreements. We believe this provides us with both cushion and predictability to avoid sudden unexpected outcomes and material repayment requirements.

The table below provides principal balances and the carrying value for commercial mortgage loans pledged to the Barclays Private Securitization as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 ($ in thousands):


		September 30, 2022						March 31, 2023
Local Currency	Local Currency	Count	Outstanding Principal		Carrying Value		Local Currency	Count	Outstanding Principal		Carrying Value
GBP	GBP	7	$	1,398,521	$	1,381,632	GBP	7	$	1,544,534	$	1,525,382
EUR	EUR	5	690,087		685,090		EUR	5	759,708		754,935
SEK	SEK	1	233,280		230,964		SEK	1	248,634		246,170
Total	Total	13	$	2,321,888	$	2,297,686	Total	13	$	2,552,876	$	2,526,487

December 31, 2021
Local Currency Count Outstanding Principal Carrying Value
GBP 7 $ 1,767,063 $ 1,748,367
EUR 2 533,164 528,344
SEK 1 286,822 282,555
Total 10 $ 2,587,049 $ 2,559,266


	December 31, 2022
Local Currency	Count	Outstanding Principal		Carrying Value
GBP	7	$	1,495,616	$	1,475,241
EUR	5	752,531		747,240
SEK	1	248,064		245,714
Total	13	$	2,496,211	$	2,468,195

The table below provides the borrowings outstanding (on an as converted basis) and weighted-average fully-extended maturities by currency for the assets financed under the Barclays Private Securitization as of ~~September 30, 2022~~March 31, 2023 ($ in thousands):


	Borrowings ~~outstanding~~Outstanding(1)		Fully-Extended Maturity(2)
Total/Weighted-Average GBP	$	~~1,046,524~~1,147,379	~~April~~May 2026
Total/Weighted-Average EUR	~~482,021~~526,493		~~July~~June 2025(3)
Total/Weighted-Average SEK	~~186,624~~198,907		May 2026
Total/Weighted-Average Securitization	$	~~1,715,169~~1,872,779	~~January~~February 2026

———————

(1)As of ~~September 30, 2022,~~March 31, 2023, we had ~~£936.9~~£930.0 million, ~~€491.8~~€485.7 million, and kr2.1 billion of borrowings outstanding under the Barclays Private Securitization secured by certain of our commercial mortgage loans.

(2)Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.

(3)The EUR portion of the Barclays Private Securitization has an "evergreen" feature such that the facility continues for one year and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve months' notice.

Borrowings ~~outstanding~~Outstanding(1)

Fully-Extended Maturity~~(1)~~(2)

Total/Weighted-Average GBP

~~1,299,321~~ 1,125,420

~~June 2025~~May 2026

Total/Weighted-Average EUR

~~373,904~~526,204

~~November 2022~~June 2025~~(2)~~(3)

Total/Weighted-Average SEK

~~229,458~~198,452

~~November 2022~~May 2026

Total/Weighted-Average Securitization

~~1,902,683~~1,850,076

~~August 2024~~February 2026

———————

(1)

As of December 31, 2022, we had £931.4 million, €491.6 million, and kr2.1 billion of borrowings outstanding under the Barclays Private Securitization secured by certain of our commercial mortgage loans.

~~(1)~~(2)Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.

~~(2)~~(3)The EUR portion of the Barclays Private Securitization has an "evergreen" feature such that the facility continues for one year and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve months' notice.

The table below provides the assets and liabilities of the Barclays Private Securitization VIE included in our condensed consolidated balance ~~sheet~~sheets ($ in thousands):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Assets:	Assets:					Assets:
Cash	Cash	$	7,375	$	3,456	Cash	$	1,734	$	758
Commercial mortgage loans, net(1)	Commercial mortgage loans, net(1)	2,297,686		2,559,266		Commercial mortgage loans, net(1)	2,526,487		2,468,195
Other Assets	Other Assets	20,590		20,765		Other Assets	30,230		30,992
Total Assets	Total Assets	$	2,325,651	$	2,583,487	Total Assets	$	2,558,451	$	2,499,945
Liabilities:	Liabilities:					Liabilities:
Secured debt arrangements, net (net of deferred financing costs of $2.7 million and $2.0 million in 2022 and 2021, respectively)		$	1,712,454	$	1,900,640
Secured debt arrangements, net (net of deferred financing costs of $2.7 million and $2.3 million in 2023 and 2022, respectively)						Secured debt arrangements, net (net of deferred financing costs of $2.7 million and $2.3 million in 2023 and 2022, respectively)	$	1,870,088	$	1,847,799
Accounts payable, accrued expenses and other liabilities(2)	Accounts payable, accrued expenses and other liabilities(2)	5,379		2,671		Accounts payable, accrued expenses and other liabilities(2)	10,735		8,814
Total Liabilities	Total Liabilities	$	1,717,833	$	1,903,311	Total Liabilities	$	1,880,823	$	1,856,613

———————

(1)Net of the General CECL Allowance of ~~$6.2~~$8.0 million and ~~$11.8~~$8.2 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

(2)Includes General CECL Allowance related to unfunded commitments on commercial mortgage loans, net of ~~$1.3~~$2.9 million and ~~$0.4~~$2.9 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

The table below provides the net income of the Barclays Private Securitization VIE included in our condensed consolidated statement of operations ($ in thousands):

Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021
Net Interest Income:
Interest income from commercial mortgage loans $ 30,518 $ 23,446 $ 86,695 $ 60,482
Interest expense (12,668) (7,014) (32,830) (18,000)
Net interest income $ 17,850 $ 16,432 $ 53,865 $ 42,482
Reversal of (provision for) loan losses, net 889 1,819 4,698 (3,849)
Foreign currency translation gain (loss) (50,237) (15,866) (111,745) (13,976)
Net Income $ (31,498) $ 2,385 $ (53,182) $ 24,657


	Three months ended March 31,
		2023		2022
Net Interest Income:
Interest income from commercial mortgage loans		$	46,977	$	28,714
Interest expense		(23,133)		(9,588)
Net interest income		$	23,844	$	19,126

Decrease (increase) in current expected credit loss allowance, net		199		3,341
Foreign currency translation gain (loss)		10,002		(19,629)
Net Income		$	34,045	$	2,838

At ~~September 30, 2022,~~March 31, 2023, our borrowings had the following remaining maturities ($ in thousands):

Less than
1 year 1 to 3
years 3 to 5
years More than
5 years Total
JPMorgan Facility $ 220,269 $ 671,652 $ 601,280 $ — $ 1,493,201
Deutsche Bank Facility 432,269 — — — 432,269
Credit Suisse Facility — 164,323 464,703 — 629,026
HSBC Facility — 452,042 140,468 — 592,510
Goldman Sachs Facility 112,478 — 35,856 — 148,334
Barclays Facility — — 125,592 — 125,592
MUFG Securities Facility — 179,592 — — 179,592
Santander Facility — 48,426 — — 48,426
Barclays Private Securitization — 553,485 1,161,684 — 1,715,169
Total $ 765,016 $ 2,069,520 $ 2,529,583 $ — $ 5,364,119


	Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total
JPMorgan Facility	$	143,557	$	527,349	$	593,359	$	—	$	1,264,265
Deutsche Bank Facility	88,359		130,892		166,567		—		385,818
Atlas Facility	—		105,008		583,118		—		688,126
HSBC Facility	—		493,056		155,338		—		648,394

2223


Goldman Sachs Facility	—		33,755		—		—		33,755
Barclays Facility	—		—		111,909		—		111,909
MUFG Securities Facility	—		198,355		—		—		198,355
Santander Facility - USD	—		75,000		—		—		75,000
Santander Facility - EUR	—		54,202		—		—		54,202
Barclays Private Securitization	—		716,189		1,156,590		—		1,872,779
Total	$	231,916	$	2,333,806	$	2,766,881	$	—	$	5,332,603

The table above reflects the fully extended maturity date of the facility and assumes facilities with an "evergreen" feature continue to extend through the fully-extended maturity of the underlying asset and assumes underlying loans are extended with consent of financing providers.

The table below summarizes the outstanding balances at ~~September 30, 2022,~~March 31, 2023, as well as the maximum and average month-end balances for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 for our borrowings under secured debt arrangements ($ in thousands).


		As of September 30, 2022				For the nine months ended September 30, 2022					As of March 31, 2023				For the three months ended March 31, 2023
		Balance		Amortized Cost of Collateral		Maximum Month-End Balance		Average Month-End Balance			Balance		Amortized Cost of Collateral		Maximum Month-End Balance		Average Month-End Balance
JPMorgan Facility	JPMorgan Facility	$	1,493,201	$	2,451,227	$	1,584,171	$	1,407,031	JPMorgan Facility	$	1,264,265	$	2,115,700	$	1,324,226	$	1,295,325
Deutsche Bank Facility	Deutsche Bank Facility	432,269		633,026		432,455		403,888		Deutsche Bank Facility	385,818		569,703		385,818		385,818
Goldman Sachs Facility	Goldman Sachs Facility	148,334		240,039		164,607		155,750		Goldman Sachs Facility	33,755		56,173		70,249		58,084
Credit Suisse Facility		629,026		846,123		633,143		511,003
Atlas Facility										Atlas Facility	688,126		939,299		688,126		650,791

HSBC Facility	HSBC Facility	592,510		743,442		660,004		461,138		HSBC Facility	648,394		828,224		648,482		643,014
Barclays Facility	Barclays Facility	125,592		155,459		172,693		97,972		Barclays Facility	111,909		138,652		111,909		111,909

MUFG Securities Facility	MUFG Securities Facility	179,592		240,904		186,860		122,151		MUFG Securities Facility	198,355		267,448		198,355		196,576
Santander Facility		48,426		64,568		52,222		50,080
Santander Facility - USD										Santander Facility - USD	75,000		99,389		75,000		50,000
Santander Facility - EUR										Santander Facility - EUR	54,202		72,270		54,227		53,755
Barclays Private Securitization	Barclays Private Securitization	1,715,169		2,303,863		1,963,837		1,830,053		Barclays Private Securitization	1,872,779		2,534,457		1,879,238		1,860,505
Total	Total	$	5,364,119	$	7,678,651					Total	$	5,332,603	$	7,621,315

The table below summarizes the outstanding balances at December 31, ~~2021,~~2022, as well as the maximum and average month-end balances for the year ended December 31, ~~2021~~2022 for our borrowings under secured debt arrangements ($ in thousands).


		As of December 31, 2021				For the year ended December 31, 2021					As of December 31, 2022				For the year ended December 31, 2022
		Balance		Amortized Cost of Collateral		Maximum Month-End Balance		Average Month-End Balance			Balance		Amortized Cost of Collateral		Maximum Month-End Balance		Average Month-End Balance
JPMorgan Facility	JPMorgan Facility	$	1,484,992	$	2,259,376	$	1,484,992	$	1,219,072	JPMorgan Facility	$	1,373,598	$	2,376,154	$	1,584,171	$	1,411,644
Deutsche Bank Facility	Deutsche Bank Facility	259,073		389,238		520,217		407,428		Deutsche Bank Facility	385,818		565,387		432,455		400,337
Goldman Sachs Facility	Goldman Sachs Facility	168,231		261,848		331,154		228,312		Goldman Sachs Facility	70,249		116,619		164,607		140,599
Credit Suisse Facility		148,720		214,124		369,182		224,351
Atlas Facility										Atlas Facility	632,747		855,119		633,143		541,245
HSBC Facility	HSBC Facility	162,937		211,813		174,717		165,958		HSBC Facility	637,313		813,716		660,004		501,674
Barclays Facility	Barclays Facility	32,693		50,241		35,193		33,526		Barclays Facility	111,909		138,510		172,693		102,664
MUFG Securities Facility										MUFG Securities Facility	194,272		261,319		194,272		156,499
Santander Facility										Santander Facility	53,320		71,093		53,320		50,450
Barclays Private Securitization	Barclays Private Securitization	1,902,684		2,571,067		1,902,684		1,396,411		Barclays Private Securitization	1,850,076		2,476,349		1,963,837		1,828,794
Total	Total	$	4,159,330	$	5,957,707					Total	$	5,309,302	$	7,674,266

Debt Covenants

The guarantees related to our secured debt arrangements contain the following financial covenants: (i) tangible net worth must be greater than $1.25 billion plus 75% of the net cash proceeds of any equity issuance after March 31, 2017; (ii) our ratio of total indebtedness to tangible net worth cannot be greater than 3.75:1; and (iii) our liquidity cannot be less than an amount equal to the greater of 5% of total recourse indebtedness or $30.0 million. Under these covenants, our General CECL Allowance is added back to our tangible net worth calculation. Additionally, in relation to our Revolving Credit Facility, we must maintain a minimum interest coverage ratio of 1.5:1.

We were in compliance with the covenants under each of our secured debt arrangements at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

Note 8 – Senior Secured Term Loans, Net

In May 2019, we entered into a $500.0 million senior secured term loan (the "2026 Term Loan"), which matures in May 2026 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities. The 2026 Term Loan bears interest at LIBOR plus 2.75% and was issued at a price of 99.5%.

In March 2021, we entered into an additional $300.0 million senior secured term loan, with substantially the same terms as the 2026 Term Loan, (the "2028 Term Loan" and, together with the 2026 Term Loan, the "Term Loans"), which matures in March 2028 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities. The 2028 Term Loan bears interest at LIBOR (with a floor of 0.50%) plus 3.50% and was issued at a price of 99.0%.

The Term Loans are amortizing with repayments of 0.25% per quarter of the total committed principal. During ~~both~~ the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we repaid $1.3 million ~~and $3.8 million~~ of principal respectively related to the 2026 Term ~~Loan, respectively.~~Loan. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, we repaid $0.7 million ~~and $2.2 million~~ of principal respectively related to the 2028 Term ~~Loan, respectively. During the three and nine months ended September 30, 2021, we repaid $0.8 million and $1.5 million of principal related to the 2028 Term Loan, respectively.~~Loan.

The following table summarizes the terms of ~~our~~the Term Loans as of ~~September 30, 2022~~March 31, 2023 ($ in thousands):


		Principal Amount		Unamortized Issuance Discount(1)		Deferred Financing Costs(1)		Carrying Value		Spread		Maturity Date		Principal Amount		Unamortized Issuance Discount(1)		Deferred Financing Costs(1)		Carrying Value		Spread		Maturity Date
2026 Term Loan	2026 Term Loan	$	483,750	$	(1,280)	$	(6,635)	$	475,835	2.75	%	5/15/2026	2026 Term Loan	$	481,250	$	(1,101)	$	(3,742)	$	476,407	2.75	%	5/15/2026
2028 Term Loan	2028 Term Loan	295,500		(2,321)		(4,115)		289,064		3.50	%	3/11/2028	2028 Term Loan	294,000		(2,107)		(5,594)		286,299		3.50	%	3/11/2028
Total	Total	$	779,250	$	(3,601)	$	(10,750)	$	764,899				Total	$	775,250	$	(3,208)	$	(9,336)	$	762,706

———————

(1) Unamortized issuance discount and deferred financing costs will be amortized to interest expense over remaining life of respective term loans.

The following table summarizes the terms of ~~our~~the Term Loans as of December 31, ~~2021~~2022 ($ in thousands):


		Principal Amount		Unamortized Issuance Discount(1)		Deferred Financing Costs(1)		Carrying Value		Spread		Maturity Date		Principal Amount		Unamortized Issuance Discount(1)		Deferred Financing Costs(1)		Carrying Value		Spread		Maturity Date
2026 Term Loan	2026 Term Loan	$	487,500	$	(1,548)	$	(7,933)	$	478,019	2.75	%	5/15/2026	2026 Term Loan	$	482,500	$	(1,190)	$	(6,106)	$	475,204	2.75	%	5/15/2026
2028 Term Loan	2028 Term Loan	297,750		(2,643)		(4,801)		290,306		3.50	%	3/11/2028	2028 Term Loan	294,750		(2,214)		(3,927)		288,609		3.50	%	3/11/2028
Total	Total	$	785,250	$	(4,191)	$	(12,734)	$	768,325				Total	$	777,250	$	(3,404)	$	(10,033)	$	763,813

———————

(1) Unamortized issuance discount and deferred financing costs will be amortized to interest expense over remaining life of respective term loans.

Covenants

~~During the fourth quarter of 2021, we modified the~~The financial covenants of the Term Loans ~~which included~~include the ~~following:~~requirements that we maintain: (i) ~~increased our~~a maximum ratio of total recourse debt to tangible net worth ~~from 3:1 to~~of 4:1; and (ii) ~~increased our~~a maximum ratio of total unencumbered assets to total pari-passu indebtedness ~~from 1.25:1 to~~of 2.50:1; and (iii) amended the definition of unencumbered asset to include the carrying value of the residual equity in the entities where we hold assets financed under repurchase obligations. In conjunction with the modifications, we incurred $5.2 million in fees, $3.9 million of which were consent fees paid to borrowers recorded as deferred financing costs and $1.3 million of arrangement fees paid to the Term Loan arranger recorded as general and administrative expenses.

1. We were in compliance with the covenants under the Term Loans at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

Interest Rate Cap

During the second quarter of 2020, we entered into a three-year interest rate cap to cap LIBOR at 0.75%. This effectively limits the maximum all-in coupon on our 2026 Term Loan to 3.50%. In connection with the interest rate cap, we incurred

upfront fees of $1.1 million for the year ended December 31, 2020, which we recorded as a deferred financing cost on our consolidated balance ~~sheet.~~sheets. The deferred financing cost is being amortized over the duration of the interest rate cap with respective amortization recognized as part of interest expense in our condensed consolidated statement of operations.

During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, LIBOR exceeded the cap rate of 0.75%. As such, during the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, we ~~recognized income~~realized a gain from the interest rate cap in the amount of ~~$1.8~~$4.7 million, ~~and $2.0 million, respectively,~~ which is ~~offsetting~~included in gain (loss) on interest ~~expense~~rate hedging instruments in our condensed consolidated statement of operations. ~~There~~The realized gain was ~~no such contra-expense recorded during~~a result of the ~~three and nine months ended September 30, 2021.~~

increase in the current interest rate forward curve, partially offset by the nearing maturity of the cap.

Note 9 – Senior Secured Notes, Net

In June 2021, we issued $500.0 million of 4.625% Senior Secured Notes due 2029 (the "2029 Notes"), for which we received net proceeds of $495.0 million, after deducting initial purchasers' discounts and commissions. The 2029 Notes will mature on June 15, 2029, unless earlier repurchased or redeemed. The 2029 Notes are secured by a first-priority lien, and rank ~~pari passu~~pari-passu in right of payment with all of our existing and future first lien obligations, including indebtedness under the Term Loans. The 2029 Notes were issued at par and contain covenants relating to liens, indebtedness, and investments in non-wholly owned entities. The 2029 Notes had a carrying value of ~~$494.6~~$495.0 million and ~~$494.1~~$494.8 million, net of deferred financing costs of ~~$5.4~~$5.0 million and ~~$5.9~~$5.2 million, as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Covenants

The 2029 Notes include certain covenants including a requirement that we maintain a ratio of total unencumbered assets to total pari-passu indebtedness of at least 1.20:1. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we were in compliance with all covenants.

Note 10 – Convertible Senior Notes, Net

In two separate offerings during 2017, we issued an aggregate principal amount of $345.0 million of 4.75% Convertible Senior Notes due 2022 (the "2022 Notes"), for which we received $337.5 million, after deducting the underwriting discount and offering expenses. During the third quarter of 2022, we repaid the $345.0 million aggregate principal amount of the 2022 Notes in cash at par.

During the fourth quarter of 2018, we issued $230.0 million of 5.375% Convertible Senior Notes due 2023 (the "2023 Notes" and, together with the 2022 Notes, the "Convertible Notes"), for which we received $223.7 million after deducting the underwriting discount and offering expenses. At ~~September 30, 2022,~~March 31, 2023, the 2023 Notes had a carrying value of ~~$229.2~~$222.5 million and an unamortized discount of ~~$0.8~~$0.4 million.

The following table summarizes the terms of the ~~Convertible~~2023 Notes as of ~~September 30, 2022~~March 31, 2023 ($ in thousands):


		Principal Amount		Coupon Rate		Effective Rate (1)		Conversion Rate (2)	Maturity Date	Remaining Period of Amortization		Principal Amount		Coupon Rate		Effective Rate (1)		Conversion Rate (2)	Maturity Date	Remaining Period of Amortization

2023 Notes	2023 Notes	230,000		5.38	%	5.85	%	48.7187	10/15/2023	1.04	2023 Notes	222,910		5.38	%	5.74	%	48.7187	10/15/2023	0.54
Total	Total	$	230,000								Total	$	222,910

The following table summarizes the terms of the ~~Convertible~~2023 Notes as of December 31, ~~2021~~2022 ($ in thousands):


		Principal Amount		Coupon Rate		Effective Rate (1)		Conversion Rate (2)	Maturity Date	Remaining Period of Amortization		Principal Amount		Coupon Rate		Effective Rate (1)		Conversion Rate (2)	Maturity Date	Remaining Period of Amortization
2022 Notes		$	345,000	4.75	%	5.60	%	50.2260	8/23/2022	0.64
2023 Notes	2023 Notes	230,000		5.38	%	6.16	%	48.7187	10/15/2023	1.79	2023 Notes	230,000		5.38	%	5.85	%	48.7187	10/15/2023	0.79
Total	Total	$	575,000								Total	$	230,000

———————

(1)Effective rate includes the effect of the adjustment for the conversion option (See footnote (2) below), the value of which reduced the initial liability and was recorded in additional paid-in-capital. The effective rate as of ~~September 30,~~both March 31, 2023 and December 31, 2022 reflects adoption of ASU 2020-06 "Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in ~~Entity��s~~Entity's Own Equity". ("ASU 2020-06") and early extinguishment of debt.

(2)We have the option to settle any conversions in cash, shares of common stock or a combination thereof. The conversion rate represents the number of shares of common stock issuable per one thousand principal amount of the Convertible Notes converted and includes adjustments relating to cash dividend payments made by us to stockholders that have been deferred and carried-forward in accordance with, and are not yet required to be made

pursuant to, the terms of the applicable supplemental indenture.

We may not redeem the 2023 Notes prior to maturity except in limited circumstances. The closing price of our common stock on September 30, 2022 of $8.30 was less than the per share conversion price of the 2023 Notes.

On January 1, 2022, we adopted ASU 2020-06, ~~"Debt – Debt with Conversion and Other Options (Subtopic 470-20) and~~

~~Derivatives and Hedging – Contracts in Entity’s Own Equity" ("ASU 2020-06"),~~ which no longer require the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. Prior to the adoption of ASU 2020-06, we attributed $15.4 million of the proceeds to the equity component of the Convertible Notes ($11.0 million to the 2022 Notes and $4.4 million to the 2023 Notes), which represented the excess proceeds received over the fair value of the liability component of the Convertible Notes at the date of issuance. The equity component of the Convertible Notes had been reflected within additional paid-in capital on our ~~condensed~~ consolidated balance ~~sheet~~sheets until January 1, 2022 when we adopted ASU 2020-06 through the modified retrospective approach. Upon adoption, we (i) reclassified $12.0 million of previously recorded amortization related to the equity component of the Convertible Notes from retained earnings to additional paid-in-capital and (ii) reclassified the remaining unamortized balance of $3.4 million to additional paid-in-capital, which increased the cost basis of convertible notes and decreased additional paid-in-capital on the consolidated balance sheets.

We may not redeem the 2023 Notes prior to maturity except in limited circumstances. On March 20, 2023, we repurchased $7.1 million aggregate principal amount of the 2023 Notes at a price of 97%. As a result of this transaction, we recorded a gain of $0.2 million within realized gain on extinguishment of debt in our March 31, 2023 condensed consolidated ~~balance sheet.~~statement of operations. The gain represents the difference between the repurchase price and the carrying amount of the 2023 Notes, net of the proportionate amount of unamortized debt issuance costs. The closing price of our common stock on March 31, 2023 of $9.31 was less than the per share conversion price of the 2023 Notes at such time.

The aggregate contractual interest expense was approximately ~~$5.5~~$3.0 million and ~~$19.8~~$7.2 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~as compared to $7.2 million and $21.6 million for the three and nine months ended September 30, 2021,~~ respectively. With respect to the amortization of the discount on the liability component of the Convertible Notes as well as the amortization of deferred financing costs, we reported additional non-cash interest expense of approximately ~~$0.6~~$0.4 million and ~~$2.1~~$0.8 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~as compared to $1.6 million and $4.7 million for the three and nine months ended September 30, 2021,~~ respectively.

Note 11 – Derivatives

We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than USD.

We have entered into a series of forward contracts to sell an amount of foreign currency (GBP, EUR and SEK) for an agreed upon amount of USD at various dates through February 2027. These forward contracts were executed to economically fix the USD amounts of foreign denominated cash flows expected to be received by us related to foreign denominated loan investments.

The agreements with our derivative counterparties require that we post collateral to secure net liability positions. As of both March 31, 2023 and December 31, 2022, we were in a net asset position with all of our derivative counterparties and did not have any collateral posted under these derivative contracts.

The following table summarizes our non-designated Fx forwards and our interest rate cap as of ~~September 30, 2022:~~March 31, 2023:

September 30, 2022

March 31, 2023

Type of Derivatives

Number of Contracts

Aggregate Notional Amount (in thousands)

Notional Currency

Maturity

Weighted-Average Years to Maturity

Type of Derivatives

Number of Contracts

Aggregate Notional Amount (in thousands)

Notional Currency

Maturity

Weighted-Average Years to Maturity

Fx contracts - GBP

130

971,560

GBP

October 2022 - February 2027

1.98

Fx contracts - GBP

118

900,736

GBP

April 2023 - February 2027

1.67

Fx contracts - EUR

127

560,982

EUR

October 2022 - November 2025

1.97

Fx contracts - EUR

105

440,260

EUR

April 2023 - November 2025

1.61

Fx contracts - SEK

744,089

SEK

November 2022 - May 2026

3.15

Fx contracts - SEK

716,316

SEK

May 2023 - May 2026

2.75

Interest rate cap

500,000

USD

June 2023

0.71

Interest rate cap

500,000

USD

June 2023

0.21

The following table summarizes our non-designated Fx forwards and our interest rate cap as of December 31, ~~2021:~~2022:

December 31, 2021

December 31, 2022

Type of Derivatives

Number of Contracts

Aggregate Notional Amount (in thousands)

Notional Currency

Maturity

Weighted-Average Years to Maturity

Type of Derivatives

Number of Contracts

Aggregate Notional Amount (in thousands)

Notional Currency

Maturity

Weighted-Average Years to Maturity

Fx contracts - GBP

125

738,178

GBP

January 2022 - February 2026

2.14

Fx contracts - GBP

124

936,930

GBP

January 2023 - February 2027

1.78

Fx contracts - EUR

508,541

EUR

January 2022 - November 2025

1.88

Fx contracts - EUR

130

576,240

EUR

January 2023 - November 2025

1.78

Fx contracts - SEK

765,138

SEK

February 2022 - May 2026

3.74

Fx contracts - SEK

730,432

SEK

February 2023 - May 2026

2.95

Interest rate cap

500,000

USD

June 2023

1.45

Interest rate cap

500,000

USD

June 2023

0.46

We have not designated any of our derivative instruments as hedges as defined in ASC 815, "Derivatives and Hedging" and, therefore, changes in the fair value of our derivative instruments are recorded directly in earnings. The following table summarizes the amounts recognized on our condensed consolidated statements of operations related to our derivatives for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ ($ in thousands):


			Amount of gain (loss) recognized in income											Amount of gain (loss) recognized in income
			Three months ended September 30,				Nine months ended September 30,						Three months ended March 31,
		Location of Gain (Loss) Recognized in Income	2022		2021		2022		2021			Location of Gain (Loss) Recognized in Income		2023		2022
Forward currency contracts	Forward currency contracts	Unrealized gain on derivative instruments	$	108,428	$	32,376	$	221,623	$	40,857	Forward currency contracts	Unrealized gain (loss) on derivative instruments		$	(35,851)	$	18,142
Forward currency contracts	Forward currency contracts	Realized gain (loss) on derivative instruments	20,824		571		35,604		(1,204)		Forward currency contracts	Realized gain on derivative instruments		21,716		4,620
Total	Total		$	129,252	$	32,947	$	257,227	$	39,653	Total			$	(14,135)	$	22,762

In June 2020, we entered into an interest rate cap for approximately $1.1 million. We use our interest rate cap to manage exposure to variable cash flows on our borrowings under ~~our~~the senior secured term loan by effectively limiting LIBOR from exceeding 0.75%. This effectively limits the maximum all-in coupon on our senior secured term loan to 3.50%. The unrealized gain or loss related to the interest rate cap is recorded net under unrealized gain on interest rate hedging instruments in our ~~condensed~~ consolidated statement of operations. During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, LIBOR exceeded the cap rate of 0.75%. As such, during the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, we ~~recognized income~~realized a gain from the interest rate cap in the amount of ~~$1.8~~$4.7 million, ~~and $2.0 million, respectively,~~ which is ~~offsetting~~included in gain (loss) on interest ~~expense~~rate hedging instruments in our condensed consolidated statement of operations. The realized gain was a result of the increase in the current interest rate forward curve, partially offset by the nearing maturity of the cap. There was no ~~such contra-expense~~realized gain recorded during the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. The following table summarizes the ~~amount~~amounts recognized on our condensed consolidated statements of operations related to our interest rate cap for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ ($ in thousands):


			Amount of gain (loss) recognized in income
			Three months ended September 30,				Nine months ended September 30,					Amount of gain (loss) recognized in income
		Location of Gain Recognized in Income	2022		2021		2022		2021				Three months ended March 31,
												Location of gain (loss) recognized in income	2023		2022
Interest rate cap(1)	Interest rate cap(1)	Unrealized gain (loss) on interest rate hedging instruments	$	1,044	$	(75)	$	10,808	$	171	Interest rate cap(1)	Unrealized gain (loss) on interest rate hedging instruments	$	(4,813)	$	6,321
Interest rate cap(1)											Interest rate cap(1)	Realized gain on interest rate hedging instruments	4,706		—

Total	Total		$	1,044	$	(75)	$	10,808	$	171	Total		$	(107)	$	6,321

———————

(1)With a notional amount of $500.0 million at ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

The following tables summarize the gross asset and liability amounts related to our derivatives at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 ($ in thousands):

September 30, 2022 December 31, 2021
Gross Amount of Recognized Assets Gross Amounts Offset in our Condensed Consolidated Balance Sheet Net Amounts
of Assets
Presented in
our Condensed Consolidated Balance Sheet Gross Amount of Recognized Assets Gross
Amounts
Offset in our Condensed
Consolidated Balance Sheet Net Amounts of Assets Presented in our Condensed Consolidated Balance Sheet
Forward currency contracts $ 270,871 $ (33,908) $ 236,963 $ 28,781 $ (13,441) $ 15,340
Interest rate cap 12,257 — 12,257 1,448 — 1,448
Total derivative assets (liabilities) $ 283,128 $ (33,908) $ 249,220 $ 30,229 $ (13,441) $ 16,788


	March 31, 2023						December 31, 2022
	Gross Amount of Recognized Assets		Gross Amounts Offset in our Condensed Consolidated Balance Sheet		Net Amounts of Assets Presented in our Condensed Consolidated Balance Sheet		Gross Amount of Recognized Assets		Gross Amounts Offset in our Consolidated Balance Sheet		Net Amounts of Assets Presented in our Consolidated Balance Sheet
Forward currency contracts	$	106,825	$	(23,176)	$	83,649	$	143,285	$	(23,786)	$	119,499
Interest rate cap	5,256		—		5,256		9,141		—		9,141
Total derivative assets (liabilities)	$	112,081	$	(23,176)	$	88,905	$	152,426	$	(23,786)	$	128,640

Note 12 – Participations Sold

Participations sold represents the subordinate interests in loans we originated and subsequently partially sold. We account for participations sold as secured borrowings on our condensed consolidated balance sheet with both assets and non-recourse liabilities because the participations do not qualify as a sale under ASC ~~860, "Transfers and Servicing."~~860. The income earned on the participations sold is recorded as interest income and an identical amount is recorded as interest expense in our condensed consolidated statements of operations.

~~In October 2020, we sold a $25.0 million interest, at par, in a mezzanine loan collateralized by a ground-up condominium~~

development in New York City that we originated in December 2017. The participation interest sold accrued payment-in-kind interest, was accounted for as a secured borrowing on our condensed consolidated balance sheet, and was subordinate to our remaining mezzanine loan. The mezzanine loan was repaid at par in June 2021, and therefore, we de-recognized the related participating interest of $27.7 million, which included $2.7 million in payment-in-kind interest.

In December 2020, we sold a £6.7 million ($8.9 million assuming conversion into USD at time of transfer) interest, at par, in a first mortgage loan collateralized by an office building located in London, ~~United Kingdom~~UK that was originated by us in December 2017. In connection with this sale, we transferred our remaining unfunded commitment of £19.1 million ($25.3 million assuming conversion into USD at time of transfer). The participation interest sold iswas subordinate to our ~~remaining £71.6 million ($79.9 million assuming conversion into USD)~~ first mortgage loan and iswas accounted for as a secured borrowing on our ~~condensed~~ consolidated balance sheet.

~~During~~ In January 2023, the ~~nine months ended September 30, 2022, the participation~~first mortgage loan, including participations sold, ~~on commercial mortgage loans balance decreased by $4.4 million due to unrealized loss on foreign currency translation. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans~~was fully satisfied, including all contractual and ~~Other Lending Assets, Net" for further discussion of~~ default interest ~~being~~ accrued ~~on the whole position.~~to date.

The table below details participations sold included in our condensed consolidated balance ~~sheet~~sheets ($ in thousands):

September 30, 2022 December 31, 2021
Participation sold on commercial mortgage loans $ 22,696 $ 27,064
Total participations sold $ 22,696 $ 27,064


	March 31, 2023		December 31, 2022
Participation sold on commercial mortgage loans	$	—	$	25,130

Total participations sold	$	—	$	25,130

Note 13 – Accounts Payable, Accrued Expenses and Other Liabilities

The following table details the components of our accounts payable, accrued expense and other liabilities ($ in thousands):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Collateral held under derivative agreements	Collateral held under derivative agreements	$	276,530	$	21,420	Collateral held under derivative agreements	$	87,790	$	138,620
Accrued dividends payable	Accrued dividends payable	52,666		52,833		Accrued dividends payable	53,006		53,203
Accrued interest payable	Accrued interest payable	30,516		16,166		Accrued interest payable	35,537		23,943
Accounts payable and other liabilities(1)	Accounts payable and other liabilities(1)	15,955		9,084		Accounts payable and other liabilities(1)	12,429		7,247
General CECL Allowance on unfunded commitments(2)	General CECL Allowance on unfunded commitments(2)	2,812		3,106		General CECL Allowance on unfunded commitments(2)	4,695		4,347
Total	Total	$	378,479	$	102,609	Total	$	193,457	$	227,360

———————

(1)Includes ~~$0.8~~$11.7 million and $1.1 million of accounts payable and other liabilities on the balance sheet of the Real Estate Owned, Held for Investment at ~~September 30, 2022~~March 31, 2023 and ~~$7.2 million of accounts payable and other liabilities on the balance sheet of the Real Estate Owned at~~ December 31, ~~2021.~~2022, respectively.

(2)Refer to "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional disclosure related to the General CECL Allowance on unfunded commitments as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Note 14 – Related Party Transactions

Management Agreement

In connection with our initial public offering in September 2009, we entered into a management agreement (the "Management Agreement") with the Manager, which describes the services to be provided by the Manager and its compensation for those services. The Manager is responsible for managing our day-to-day operations, subject to the direction

and oversight of our board of directors.

Pursuant to the terms of the Management Agreement, the Manager is paid a base management fee equal to 1.5% per annum of our stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears.

The term of the Management Agreement was automatically renewed for a successive one-year term on September 29, 2022 and will automatically renew on each anniversary thereafter. The Management Agreement may be terminated upon expiration of the one-year extension term only upon the affirmative vote of at least two-thirds of our independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to ARI or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair

fees by accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of our independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual base management fee during the 24-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. Following a meeting byof our independent directors in ~~February 2022,~~March 2023, which included a discussion of the Manager’s performance and the level of the management fees thereunder, we determined not to seek termination of the Management Agreement.

We incurred approximately ~~$9.7~~$9.5 million and ~~$28.6~~$9.4 million in base management fees under the Management Agreement for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, as compared to $9.6 million and $28.4 million for the three and nine months ended September 30, 2021,~~ respectively.

In addition to the base management fee, we are also responsible for reimbursing the Manager for certain expenses paid by the Manager on our behalf or for certain services provided by the Manager to us. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, we paid expenses totaling ~~$0.9~~$1.2 million and ~~$3.1~~$0.9 million, respectively, related to reimbursements for certain expenses paid by the Manager on our behalf under the Management ~~Agreement as compared to $0.5 million and $1.7 million for the three and nine months ended September 30, 2021, respectively.~~Agreement. Expenses incurred by the Manager and reimbursed by us are reflected in the respective condensed consolidated statement of operations expense category or our condensed consolidated balance ~~sheet~~sheets based on the nature of the item.

Included in payable to related party on our condensed consolidated balance ~~sheet~~sheets at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 is approximately ~~$9.7~~$9.5 million and ~~$9.8~~$9.7 million, respectively, for base management fees incurred but not yet paid under the Management Agreement.

Loans receivable

In June 2015, we originated a $20.0 million mezzanine loan secured by pledges of equity interests in the property recorded as real estate owned - held for sale on our condensed consolidated balance sheet at September 30, 2022. The mezzanine loan was subordinate to (i) a $110.0 million mortgage loan, originated by a third party, and (ii) a $24.5 million senior mezzanine loan, originated by an affiliate of the Manager. On May 24, 2021, we purchased the $24.5 million senior mezzanine loan at par from the affiliate and acquired legal title to the hotel through a deed-in-lieu of foreclosure. Refer to "Note 5 – Assets and Liabilities Related to Real Estate Owned" for additional information.

We own three mezzanine loans ~~including Junior Mezzanine B Loan,~~ and a commercial mortgage that are secured by the same ~~ultra luxury~~ultra-luxury residential property currently under construction in Manhattan, NY. During the third quarter of 2021, a vehicle managed by an affiliate of the ~~Seller~~Manager transferred its Junior Mezzanine B Loan position to the Company and in connection with this transfer, one of the property’s subordinate capital providers paid the ~~Seller~~vehicle a price representing the ~~Seller’s~~ original principal balance on the Junior Mezzanine B Loan position with the ~~Seller~~vehicle agreeing to forego its accrued interest on the Junior Mezzanine B Loan. During the third quarter of 2022, we refinanced our mezzanine loans, and originated a commercial mortgage loan as part of an overall recapitalization. The mezzanine positions held by entities managed by affiliates of the Manager were repaid. Refer to "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional information.

~~In September~~During the third quarter of 2022, we transferred £293.4 million ($327.7 million assuming conversion into USD) of unfunded commitments related to a mixed-use development property located in London, UK to entities managed by affiliates of the Manager.

During the first quarter of 2023, we transferred interests in, (i) three commercial mortgage loans secured by various properties in Europe, with aggregate commitments of €205.7 million (of which €115.0 million was funded at the time of sale), and (ii) a partial interest of £15.0 million in a commercial mortgage loan secured by a mixed-use property located in London, UK. These transfers were made to entities managed by affiliates of the Manager. Refer to "Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional disclosure.

Term Loan

In March 2021, Apollo Global Funding, LLC, an affiliate of the Manager, served as one of the eight arrangers for the issuance of our 2028 Term Loan and received $0.2 million of arrangement fees. In addition, funds managed by an affiliate of the Manager invested in $30.0 million of the 2028 Term Loan.

Senior Secured Notes

In June 2021, Apollo Global Securities, LLC, an affiliate of the Manager, served as one of the eight initial purchasers in the issuance of our 2029 Notes and received $0.4 million of initial purchasers' discounts and commissions.

Italian Direct Lending Structure

In the fourth quarter of 2021, we fo~~rmed~~formed an Italian closed-end alternative investment fund (the "AIF"), managed by

Apollo Investment Management Europe (Luxembourg) S.A R.L, a regulated alternative investment fund manager (the

"AIFM"), an affiliate of the Manager. During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the AIF ~~incurred $11,000 and $57,000~~had a balance of $16.8 thousand in fees payable to the AIFM, which is recorded in payable to related party on our condensed consolidated balance sheet. The fees incurred during the three months ended March 31, 2022 were de minimis.

Atlas Facility

On February 8, 2023, in connection with the acquisition by certain subsidiaries of Atlas, which is a wholly-owned investment of a fund managed by an affiliate of the Manager, the Credit Suisse Facility was acquired by Atlas. In order to effect the assignment of the Credit Suisse Facility and related agreements, the Company and one of its subsidiaries, similar to the other sellers and guarantors party to the subject agreements in the Transaction, entered into an Omnibus Assignment, Assumption and Amendment Agreement as well as certain related agreements with Credit Suisse AG and Atlas. At the time of acquisition, we had $632.3 million of secured debt on the Credit Suisse Facility consisting of four commercial mortgage loans. During the three months ended March 31, 2023, one commercial mortgage loan was added to the Atlas Facility totaling $83 million in secured debt. Refer to "Note 7 – Secured Debt Arrangements, Net" " for additional discussion.

Note 15 – Share-Based Payments

On September 23, 2009, our board of directors approved the Apollo Commercial Real Estate Finance, Inc. 2009 Equity Incentive Plan ("2009 LTIP") and on April 16, 2019, our board of directors approved the Amended and Restated Apollo Commercial Real Estate Finance, Inc. 2019 Equity Incentive Plan ("2019 LTIP," and together with the 2009 LTIP, the "LTIPs"), which amended and restated the 2009 LTIP. Following the approval of the 2019 LTIP by our stockholders at our 2019 annual meeting of stockholders on June 12, 2019, no additional awards have been or will be granted under the 2009 LTIP and all outstanding awards granted under the 2009 LTIP remain in effect in accordance with the terms in the 2009 LTIP.

The 2019 LTIP provides for grants of restricted common stock, restricted stock units ("RSUs") and other equity-based awards up to an aggregate of 7,000,000 shares of our common stock. The LTIPs are administered by the compensation committee of our board of directors (the "Compensation Committee") and all grants under the LTIPs must be approved by the Compensation Committee.

We recognized stock-based compensation expense of ~~$4.5~~$4.4 million and ~~$13.7~~$4.7 million during the three ~~and nine~~ months ended ~~September 30, 2022. We recognized stock-based compensation expense of $4.4 million~~March 31, 2023 and ~~$13.1 million during the three and nine months ended September 30, 2021,~~2022 respectively, related to restricted stock and RSU vesting.

The following table summarizes the grants, vesting and forfeitures of restricted common stock and RSUs during the ~~nine~~three months ended ~~September 30, 2022:~~March 31, 2023:
Type Restricted Stock RSUs Grant Date Fair Value ($ in millions)
Outstanding at December 31, 2021 45,185 2,597,941
Granted 49,434 7,082 $ 0.8
Vested (38,517) (50,130) N/A
Forfeiture — (12,524) N/A
Outstanding at September 30, 2022 56,102 2,542,369


	Type	Restricted Stock	RSUs	Grant Date Fair Value ($ in millions)








Outstanding at December 31, 2022		56,102	2,865,154
	Granted	—	—	N/A
	Vested	—	—	N/A
	Forfeiture	—	—	N/A
Outstanding at March 31, 2023		56,102	2,865,154

Below is a summary of restricted stock and RSU vesting dates as of ~~September 30, 2022~~March 31, 2023:


Vesting Year	Vesting Year	Restricted Stock	RSU	Total Awards	Vesting Year	Restricted Stock	RSUs	Total Awards

2022		—	1,210,327	1,210,327

2023	2023	52,768	886,145	938,913	2023	52,768	1,397,011	1,449,779
2024	2024	3,334	443,536	446,870	2024	3,334	954,415	957,749
2025	2025	—	2,361	2,361	2025	—	513,728	513,728
Total	Total	56,102	2,542,369	2,598,471	Total	56,102	2,865,154	2,921,256

At ~~September 30, 2022,~~March 31, 2023, we had unrecognized compensation expense of approximately ~~$0.4~~$0.1 million and ~~$21.5~~$29.9 million related to the vesting of restricted stock awards and RSUs, respectively, noted in the table above.

RSU Deliveries

During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ we delivered ~~652,501~~670,044 and ~~553,008~~647,349 shares of common stock for ~~1,145,091~~1,233,711 and ~~953,397~~1,136,525 vested RSUs, respectively. We allow RSU participants to settle their tax liabilities with a reduction of their share delivery from the originally granted and vested RSUs. The amount, when agreed to by the participant, results in a cash payment to the Manager related to this tax liability and a corresponding adjustment to additional paid in capital on our condensed consolidated statement of changes in stockholders' equity. The adjustment was ~~$7.0~~$6.7 million and ~~$4.3~~$7.0 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021~~ respectively. The adjustment is a reduction of capital related to our equity incentive plan and is presented net of increases of capital related to our equity incentive plan in our condensed consolidated statement of changes in stockholders' equity.

Note 16 – Stockholders’ Equity

Our authorized capital stock consists of 450,000,000 shares of common stock, $0.01 par value per share and 50,000,000 shares of preferred stock, $0.01 par value per share. As of ~~September 30, 2022, 140,595,995~~March 31, 2023, 141,266,039 shares of common stock were issued and outstanding, and 6,770,393 shares of 7.25% Series B-1 Preferred Stock were issued and outstanding.

The Series B-1 Preferred Stock, with a par value $0.01 per share, have a liquidation preference of $25.00 per share.

Dividends. The following table details our dividend activity:


		Three months ended September 30,		Nine months ended September 30,			Three months ended March 31,
Dividends declared per share of:	Dividends declared per share of:	2022	2021	2022	2021	Dividends declared per share of:		2023	2022
Common Stock	Common Stock	$0.35	$0.35	$1.05	$1.05	Common Stock		$0.35	$0.35
Series B Preferred Stock		N/A	N/A	N/A	1.00

Series B-1 Preferred Stock	Series B-1 Preferred Stock	0.45	0.45	1.35	0.45	Series B-1 Preferred Stock		0.45	0.45

~~On July 15, 2021, we exchanged all 6,770,393 shares outstanding~~

Common Stock Repurchases. There was no common stock repurchase activity during the three months ended March 31, 2023 and 2022. As of March 31, 2023, there was $172.2 million remaining authorized under our 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share ("Series B Preferred Stock"), with a liquidation preference of $25.00 per share, for 6,770,393 shares of 7.25% Series B-1 Preferred Stock, par value $0.01 per share ("Series B-1 Preferred Stock"), with a liquidation preference of $25.00 per share, pursuant to an exchange agreement with the two existing holders of the Series B Preferred Stock.stock repurchase program.

Note 17 – Commitments and Contingencies

Legal Proceedings. From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57thI~~nvestment~~ Investment LLC commenced a now-dismissed action captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No 653251/2018) in New York Supreme Court (the "Apollo Action"). The complaint named as defendants (i) a ~~wholly owned~~wholly-owned subsidiary of the Company ~~("Subsidiary"~~(the "Subsidiary"), (ii) the Company, and (iii) certain funds managed by Apollo, who were co-lenders on a mezzanine loan against the development of a residential condominium building in Manhattan, New York. The plaintiffs alleged that the defendants tortiously interfered with the plaintiffs’ joint venture agreement with the developers of the project, and that the defendants aided and abetted breaches of fiduciary duty by the developers of the project. The plaintiffs alleged the loss of a $70.0 million investment plus punitive damages. The defendants' motion to dismiss was granted on October 23, 2019 and the Court entered judgment dismissing the complaint in its entirety on November 8, 2019. Plaintiffs appealed, the parties fully briefed the appeal, and then Plaintiffs dropped the appeal, and the case remains dismissed.

Plaintiffs amended the complaint in a separate action in 2021, 111 West 57th Investment LLC v. 111W57 Mezz Investor LLC (No. 655031/2017) also in New York Supreme Court (the "April 2021 Action") to name Apollo Global Management, Inc., the Subsidiary, the Company, and certain funds managed by Apollo as defendants. The April 2021 Action concerns overlapping claims and the same condominium development project that the Apollo Action concerned. ~~We believe the claims in this action are without merit, including as barred by the dismissal of the Apollo Action.~~ The defendants filed a motion to dismiss, which ~~currently is pending. Because this action is~~was granted in part and denied in part on December 15, 2022. The Court dismissed the claim against Apollo Global Management, Inc. and the Company. Plaintiff has cross-appealed the dismissal to revive the claim against Apollo Global Management, Inc. The claim against the Apollo entities who were co-lenders on the mezzanine loan, including the Subsidiary, remains in the ~~early stages, no~~case. Apollo will appeal the decision with respect to the remaining claim. No reasonable estimate of possible loss, if any, can be made at this time. The Company believes the claims in this action are without merit.

Loan Commitments. As described in "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" at ~~September 30, 2022,~~March 31, 2023, we had ~~$1.1~~$0.87 billion of unfunded commitments related to our commercial mortgage and subordinate loans. The timings and amounts of fundings are uncertain as these commitments relate to loans for construction costs, capital expenditures, leasing costs, interest and carry costs, among others. As such, the timings and amounts of future

fundings depend on the progress and performance of the underlying assets of our loans. Certain of our lenders are contractually obligated to fund their ratable portion of these loan commitments over time, while other lenders have some degree of discretion over future loan funding obligations. The total unfunded commitment is expected to be funded over the remaining ~~3.7~~3.6 years weighted average tenor of these loans.

COVID-19. ~~The COVID-19 pandemic~~Although more normalized activities have resumed and there has ~~brought forth uncertainty~~been improved global economic activity due to global and ~~disruption to~~domestic vaccination efforts, there are still various uncertainties around the ~~global economy. The magnitude and duration of the COVID-19 pandemic and its~~ impact on our borrowers and their tenants, cash flows and future results of operations could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and its ~~new~~ variants had and will continue to have on our business and the ~~success of actions taken to contain or treat the pandemic,~~economy as a whole, including vaccination and other treatments, disparities in vaccination rates and vaccine hesitancy, and reactions by consumers, companies, governmental entities and capital markets. The ultimate impact of the COVID-19 pandemic, including the continued impact and uncertainty resulting from COVID-19 variants,longer-term macroeconomic effects on supply

~~chain disruptions~~ chains, inflation and labor ~~shortages, rising inflation and increases in interest rates on the global economy could materially disrupt our business operations and impact our financial performance.~~shortages.

As of ~~September 30, 2022,~~March 31, 2023, we have not recorded any contingencies on our condensed consolidated balance ~~sheet~~sheets related to COVID-19. To the extent COVID-19 continues to cause dislocations in the global economy, our financial condition, results of operations, and cash flows may continue to be adversely impacted. Refer to "Note 2 - Summary of Significant Accounting Policies" for further discussion regarding COVID-19.

Note 18 – Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value of our financial instruments not carried at fair value on our condensed consolidated balance ~~sheet~~sheets at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 ($ in thousands):


		September 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value			Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Cash and cash equivalents	Cash and cash equivalents	$	319,264	$	319,264	$	343,106	$	343,106	Cash and cash equivalents	$	331,533	$	331,533	$	222,030	$	222,030
Commercial mortgage loans, net	Commercial mortgage loans, net	8,013,469		7,991,134		7,012,312		6,945,038		Commercial mortgage loans, net	7,879,205		7,818,304		8,121,109		8,083,410
Subordinate loans and other lending assets, net(1)	Subordinate loans and other lending assets, net(1)	717,837		718,524		844,948		725,906		Subordinate loans and other lending assets, net(1)	592,863		590,409		560,881		558,740

Secured debt arrangements, net	Secured debt arrangements, net	(5,350,586)		(5,350,586)		(4,150,268)		(4,150,268)		Secured debt arrangements, net	(5,316,853)		(5,316,853)		(5,296,825)		(5,296,825)
Senior secured term loans, net		(764,899)		(749,917)		(768,325)		(782,995)
Term loans, net										Term loans, net	(762,706)		(671,528)		(763,813)		(731,709)
Senior secured notes, net	Senior secured notes, net	(494,644)		(375,845)		(494,051)		(489,175)		Senior secured notes, net	(495,040)		(346,250)		(494,844)		(400,950)
2022 Notes		—		—		(343,117)		(347,552)
2023 Notes	2023 Notes	(229,175)		(230,000)		(226,862)		(231,150)		2023 Notes	(222,467)		(217,600)		(229,361)		(225,366)
Debt related to real estate owned, held for investment, net										Debt related to real estate owned, held for investment, net	(160,611)		(160,611)		(160,294)		(160,294)
Participations sold	Participations sold	(22,696)		(22,696)		(27,064)		(27,064)		Participations sold	—		—		(25,130)		(25,130)

———————

(1)Includes subordinate risk retention interests in securitization vehicles with an estimated fair value that approximates their carrying value.

To determine estimated fair values of the financial instruments listed above, market rates of interest, which include credit assumptions, are used to discount contractual cash flows. The estimated fair values are not necessarily indicative of the amount we could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. Estimates of fair value for cash and cash equivalents, convertible senior notes, net, ~~secured debt arrangements net~~ and ~~senior secured term loan,~~Term Loans, net are measured using observable Level I inputs as defined in "Note 3 - Fair Value Disclosure." Estimates of fair value for all other financial instruments in the table above are measured using significant estimates, or unobservable Level III inputs as defined in "Note 3 - Fair Value Disclosure."

Note 19 – Net Income per Share

ASC 260, "Earnings per share" requires the use of the two-class method of computing earnings per share for all periods presented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for dividends declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for dividends declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.

The remaining earnings are allocated to common stockholders and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. Each total is then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding shares of common stock and all potential shares of common stock assumed issued if they are dilutive. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of these potential shares of common stock.

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The table below presents the computation of basic and diluted net income per share of common stock for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ ($ in thousands except per share data):


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2022		2021		2022		2021				2023		2022
Basic Earnings	Basic Earnings									Basic Earnings
Net income	Net income	$	183,030	$	60,392	$	269,219	$	186,418	Net income		$	48,916	$	15,238
Less: Preferred dividends	Less: Preferred dividends	(3,068)		(3,126)		(9,204)		(9,896)		Less: Preferred dividends		(3,068)		(3,068)
Net income available to common stockholders	Net income available to common stockholders	$	179,962	$	57,266	$	260,015	$	176,522	Net income available to common stockholders		$	45,848	$	12,170
Less: Dividends on participating securities	Less: Dividends on participating securities	(898)		(874)		(2,698)		(2,570)		Less: Dividends on participating securities		(1,003)		(899)
Basic Earnings	Basic Earnings	$	179,064	$	56,392	$	257,317	$	173,952	Basic Earnings		$	44,845	$	11,271

Diluted Earnings	Diluted Earnings									Diluted Earnings
Basic Earnings	Basic Earnings	$	179,064	$	56,392	$	257,317	$	173,952	Basic Earnings		$	44,845	$	11,271
Add: Dividends on participating securities	Add: Dividends on participating securities	898		874		2,698		2,570		Add: Dividends on participating securities		1,003		—
Add: Interest expense on Convertible Notes	Add: Interest expense on Convertible Notes	5,684		8,277		20,608		24,783		Add: Interest expense on Convertible Notes		3,445		—
Diluted Earnings	Diluted Earnings	$	185,646	$	65,543	$	280,623	$	201,305	Diluted Earnings		$	49,293	$	11,271

Number of Shares:	Number of Shares:									Number of Shares:
Basic weighted-average shares of common stock outstanding	Basic weighted-average shares of common stock outstanding	140,594,987		139,891,777		140,513,957		139,860,882		Basic weighted-average shares of common stock outstanding		141,072,471		140,353,386
Diluted weighted-average shares of common stock outstanding	Diluted weighted-average shares of common stock outstanding	164,350,132		170,884,172		169,252,602		170,836,682		Diluted weighted-average shares of common stock outstanding		155,483,979		140,353,386

Earnings Per Share Attributable to Common Stockholders	Earnings Per Share Attributable to Common Stockholders									Earnings Per Share Attributable to Common Stockholders
Basic	Basic	$	1.27	$	0.40	$	1.83	$	1.24	Basic		$	0.32	$	0.08
Diluted	Diluted	$	1.13	$	0.38	$	1.66	$	1.18	Diluted		$	0.32	$	0.08

The dilutive effect to earnings per share is determined using the "if-converted" method whereby interest expense on the outstanding Convertible Notes is added back to the diluted earnings per share numerator, and all of the potentially dilutive shares are included in the diluted earnings per share denominator. For the three ~~and nine~~ months ended September 30, 2022, 21,187,719 and 26,057,847, weighted-average potentially issuable shares with respect to the Convertible Notes, respectively, were included in the dilutive earnings per share denominator. For the ~~three and nine months ended September 30, 2021~~March 31, 2023, ~~28,533,271~~11,189,949 weighted-average potentially issuable shares with respect to the Convertible Notes were included in the dilutive earnings per share ~~denominator.~~denominator because the effect was dilutive. For the three months ended March 31, 2022, 28,533,271 weighted-average potentially issuable shares with respect to the Convertible Notes were excluded in the dilutive earnings per share denominator because the effect was anti-dilutive. Refer to "Note 10 - Convertible Senior Notes, Net" for further discussion.

For the three ~~and nine~~ months ended ~~September 30, 2022, 2,567,427 and 2,680,798~~March 31, 2023, 3,221,559 weighted-average unvested RSUs ~~respectively,~~ were included in the calculation of diluted net income per share because the effect was dilutive. For the three ~~and nine~~ months ended ~~September 30, 2021, 2,459,124 and 2,442,530~~March 31, 2022, 2,571,417 weighted-average unvested RSUs, ~~respectively,~~ were ~~included~~excluded in the calculation of diluted net income per share because the effect was ~~dilutive.~~anti-dilutive.

Note 20 – Subsequent Events

Subsequent to the quarter ended ~~September 30, 2022,~~March 31, 2023, the following events took place:

Investment ~~activity:~~Activity: We funded approximately ~~$34.6~~$30.5 million for previously closed ~~loans.~~loans and capitalized an additional $4.2 million of construction and financing costs related to our real estate owned, held for investment.

Loan Repayments: We received approximately ~~$112.6~~$29.0 million from loan ~~repayments including the $59.5 million full repayment of a floating rate loan secured by a luxury hotel located in Fort Lauderdale, FL.~~

repayments.

Other Loan Activity: ~~Subsequent to quarter end,~~We received $60.0 million full repayment of one of our ~~risk rated 5 loan collateralized~~commercial mortgage loans secured by a luxury hotel ~~property~~ in ~~Atlanta, GA went into maturity default. We are in discussions with the sponsor regarding consensual foreclosure and expect to reach an agreement by the first quarter of 2023.~~Tucson, AZ.

~~Financing Activity:~~ ~~We amended our Deutsche Bank Facility to allow for an additional one-year extension option that allows us to extend the facility by twelve months, to March 31, 2024.~~

3334

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

FORWARD-LOOKING INFORMATION

We make forward-looking statements herein and will make forward-looking statements in future filings with the ~~Securities and Exchange Commission ("SEC"),~~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,~~pandemic; increasing interest rates and inflation; the severity and duration of the COVID-19 pandemic, including the emergence and spread of COVID-19 variants; actions taken by governmental authorities to contain the COVID-19 pandemic or treat its impact; the efficacy of the vaccines or other remedies and the speed of their distribution and administration; the 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 ~~real estate investment trust ("REIT")~~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. ~~Refer to~~See "Item 1A. Risk Factors" ~~of this Quarterly~~our most recent Annual Report on Form ~~10-Q and our Annual Report.~~10-K. These and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that we file with the SEC, could cause our actual results to differ materially from those included in any forward-looking statements we make. All forward-looking statements speak only as of the date they are made. New risks and uncertainties arise over time and it is not possible to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are a Maryland corporation and have elected to be taxed as a REIT for U.S. federal income tax purposes. We primarily originate, acquire, invest in and manage performing commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments. These asset classes are referred to as our target assets.

We are externally managed and advised by the Manager, an indirect subsidiary of Apollo, a global, high-growth alternative asset manager with assets under management of approximately ~~$515.0~~$547.6 billion as of ~~June 30,~~December 31, 2022.

The Manager is led by an experienced team of senior real estate professionals who have significant expertise in underwriting and structuring commercial real estate financing transactions. We benefit from Apollo’s global infrastructure and operating platform, through which we are able to source, evaluate and manage potential investments in our target assets.

Current Market Conditions

~~During~~Certain external events such as public health issues, including the ~~first quarter of 2020, there was a global outbreak of COVID-19, which was declared by the World Health Organization as a pandemic. The~~ ongoing COVID-19 pandemic, ~~has~~natural disasters and geopolitical events, including the ongoing conflict between Russia, Belarus and Ukraine, have adversely impacted the global ~~economic activity~~economy and ~~has~~have contributed to significant volatility in financial markets. Due to various uncertainties caused by such external events and recent macroeconomic trends, including ~~the rise of new variants, the severity of such new variants, disparities in vaccination~~inflation and rising interest rates, ~~and vaccine hesitancy, the ultimate duration of the pandemic, and additional actions that may be taken by governmental authorities,~~ further business risks could arise. Although more normalized activities have resumed and there has been improved global economic activity due to global and domestic vaccination efforts, we are not in a position to estimate the ultimate impact COVID-19 and its variants will have on our business and the economy as a whole, including longer-term macroeconomic effects on supply chains, inflation and labor shortages. For example, in response to recent inflationary pressure, the U.S. Federal Reserve and other global central banks have raised interest rates in 2022 and have indicated likely further interest rate increases. The effects of COVID-19 and its variants have adversely impacted the value of our assets, business, financial condition, results of operations and cash flows, and our ability to operate successfully. Some of the factors that impacted us to date and may continue to affect us are outlined in Item 1A. "Risk ~~Factors."~~Factors" in our most

recent Annual Report on Form 10-K.

Critical Accounting Policies and Use of Estimates

~~A summary~~Our financial statements are prepared in accordance with GAAP, which requires the use of ~~our~~estimates and assumptions that involve the exercise of judgment and use of assumptions as to future uncertainties. The most critical accounting policies ~~is set forth~~involve decisions and assessments that affect our reported assets and liabilities, as well as reported revenues and expenses. We believe that all of the decisions and assessments upon which these financial statements are based are reasonable based upon information currently available to us. The accounting policies and estimates that we consider to be most critical to an investor’s understanding of our financial results and condition and require complex management judgment are discussed below.

There have been no material changes to our Critical Accounting Policies described in our most recent Annual Report on Form 10-K under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Use of Estimates."

For a complete listing and description of our significant accounting policies, refer to "Note 2 - Summary of Significant Accounting Policies" to our consolidated financial statements of our most recent Annual Report on Form 10-K.

Real Estate Owned (and Related Debt)

~~From time~~In order to ~~time,~~maximize recovery against a defaulted loan, we may ~~obtain~~assume legal title toor physical possession of the underlying collateral ~~from our loans due to non-performance. This acquisition~~through foreclosure or deed in lieu of foreclosure. Foreclosed properties are classified as real estate ~~is accounted for using~~owned and recognized at fair value on our consolidated balance sheets in accordance with the acquisition method under ~~Accounting Standards Codification ("ASC")~~ASC Topic 805, ~~"Business~~“Business Combinations." We recognize and measure identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree, if applicable, based on their relative fair values. Once real estate assets have been recorded at fair value they are evaluated for impairment on a quarterly basis. Please refer to "Note 2 – Summary of Significant Accounting Policies," "Note 3 – Fair Value Disclosure," and "Note 5 – Assets and Liabilities Related to Real Estate Owned” for more information regarding real estate owned and our valuation methodology.

” Real estate assets acquired may include land, building, furniture, fixtures and equipment, ~~("FF&E"),~~ and intangible assets. ~~The~~In accordance ASC 820, "Fair Value Measurements and Disclosures," we may utilize the income, market or cost approach (or combination thereof) to determine fair value.

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

When determining the fair value of real estate assets under the market or sales comparison approach, ~~which compares~~we compare the property to similar properties in the marketplace. Although we exercise significant judgment to identify similar properties, and may also consult independent third-party valuation experts to assist, our assessment of fair value is subject to uncertainty and sensitive to our selection of comparable properties.

~~We estimate~~When determining the fair value ~~of any building and FF&E by~~or real estate assets under the cost approach, ~~which measures~~we measure fair value as the replacement cost of these assets. This approach also requires significant judgment, and our estimate of replacement cost could vary from actual replacements costs.

At times we may classify real estate assets as held for sale in the period in which they meet the criteria under ASC Topic 360, "Property, Plant, and Equipment" as discussed in "Note 2 – Summary of Significant Accounting Policies" to our consolidated financial statements of our most recent Annual Report on Form 10-K. Once a real estate asset is classified as held for sale, depreciation is no longer recorded, and the asset is reported at the lower of its carrying value or fair value less cost to sell. The fair value of real estate assets classified as held for sale is determined using the appropriate methodologies noted in the preceding paragraph and the real estate asset's fair value is subject to uncertainty, as the actual sales price of the real estate asset could differ from those assumed in our valuations.

Once real estate assets have been recorded at fair value, they are evaluated for impairment on a quarterly basis. We consider the following factors when performing our impairment analysis: (i) Management, having the authority to approve the action, commits to a plan to sell the asset; (ii) significant negative industry and economic outlook or trends; (iii) expected material costs necessary to extend the life or operate the real estate asset; and (iv) our 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 to be generated by the real estate asset over the estimated remaining holding period is less than the carrying value of such real estate asset. An impairment charge is recorded equal to the excess of the carrying value of the real estate asset over the fair value. When determining the fair value of a real estate asset for the purpose of assessing impairment, we make certain assumptions including, but not limited to: consideration of projected operating cash flows, intended holding period of the real estate, comparable selling prices and projected cash flows from the eventual disposition of the real estate based upon our estimate of a capitalization rate and discount rate. While we exercise significant judgment in generating our assumptions, the asset’s fair value is subject to uncertainty, as actual operating cash flows and disposition proceeds could differ from those assumed in our valuations. Additionally, the output is sensitive to the assumptions used in calculating any potential impairment.

~~From time~~Please refer to ~~time,~~"Note 3 – Fair Value Disclosure," and "Note 5 – Assets and Liabilities Related to Real Estate Owned” for more information regarding real estate ~~assets are classified~~owned and our valuation methodology as held for sale in the period in which the six criteria under ASC Topic 360, "Property, Plant, and Equipment" are met: (1) we commit to a plan and have the authority to sell the asset; (2) the asset is available for sale in its current condition; (3) we have initiated an active marketing plan to locate a buyer for the asset; (4) the salewell as "Note 2 – Summary of the asset is both probable and expected to qualify for full sales recognition within a period of 12 months; (5) the asset is being actively marketed for sale at a price that is reflective of its current fair value; and (6) we do not anticipate changesSignificant Accounting Policies" to our ~~plans to sell the asset. Once a real estate asset is classified as held for sale, depreciation is no longer recorded, and the asset is reported at the lower~~consolidated financial statements of ~~its carrying value or fair value less cost to sell.~~our most recent Annual Report on Form 10-K.

3536

We determine the fair value of the real estate asset classified as held for sale using valuation methodologies appropriate to what is included within the disposal group, such as the market or sales comparison approach for land and the cost approach for any building and FF&E. Although we exercise significant judgment in generating the assumptions employed in these methodologies, ultimately, the real estate asset’s fair value is subject to uncertainty, as the actual sales price of the real estate asset could differ from those assumed in our valuations. Further, if it is determined that the asset should be reported at its carrying value, the actual sales price of the real estate asset could also differ from this amount.

Current Expected Credit Losses ("CECL")

We measure and record potential expected credit losses related to our loan portfolio in accordance with the CECL Standard. The CECL Standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. ~~The FASB recognizes the WARM method as an acceptable approach for computing current expected credit losses.~~ We have adopted the WARM method to determine ~~the~~a General CECL Allowance for the majority of loans in our portfolio, applied on a collective basis by assets with similar risk characteristics. If we determine that a borrower or sponsor is experiencing financial difficulty, we will record loan-specific allowances (our Specific CECL Allowance)~~. Refer to~~ “Note 2 – Summary of Significant Accounting Policies” to our consolidated financial statements of our most recent annual report on Form 10-K and “Note 4 Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net” for further discussion regarding CECL. in accordance with a practical expedient prescribed by the CECL Standard.

General CECL Allowance

There are ~~various~~a number of significant assumptions required to estimate our General CECL Allowance which include deriving and applying an annual historical loss rate, ~~forecasting and analyzing~~estimating the impacts of current and future macroeconomic conditions and forecasting the timing of expected repayments, satisfactions and future fundings.

We derive an annual historical loss rate based on a CMBS database with historical losses from 1998 through the ~~third~~first quarter of ~~2022~~2023 provided by a third party, Trepp LLC. We apply various filters to arrive at a CMBS dataset most analogous to our current portfolio from which towe determine an appropriate historical loss rate. ~~Selecting these filters requires the use of significant judgment. The~~This historical loss rate, and ultimately the General CECL Allowance we ~~calculated,~~derive, is sensitive to the CMBS dataset ~~that~~ we select.

We adjust our determined annual historical loss rate based on our outlook of the macroeconomic environment, for a reasonable and supportable forecast ~~period—which we have determined~~period. Selection of a forecast period is a matter of judgement and our General CECL Allowance is sensitive to ~~be one year.~~ this input.

We ~~determine~~develop our expectations for the future macroeconomic environment and its potential impact on the performance of loans in our portfolio, by analyzing various market factors, such as unemployment rate, market liquidity and ~~assess the potential impact on our portfolio.~~price indexes relevant to commercial real estate sector. This assessment requires the use of significant judgment in selecting relevant market factors and ~~our expectations of the future macroeconomic environment.~~analyzing their correlation with historical loss rates. The future macroeconomic environment is subject to uncertainty as the actual future macroeconomic environment could vary from our ~~expectations, which will impact our General CECL Allowance.~~expectations.

Additionally, there are assumptions provided to us by the Manager that represent their best estimate as to loan expected ~~loan maturity dates,~~term, future fundings, and timing of loan repayments. These assumptions, although made with the most available information at the time of the estimate, are subjective and actual activity may not follow the estimated schedule. These assumptions impact the future balances that the loss rate will be applied to and as such impact our General CECL Allowance. As we acquire new loans and the Manager monitors loan and sponsor performance, these estimates may change each period. Refer to “Note 2 – Summary of Significant Accounting Policies” and “Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net” for further discussion regarding our General CECL Allowance.

Specific CECL Allowance

When we determine that a borrower or sponsor is experiencing financial difficulty, we evaluate the related loan for loan-specific allowances, under the practical expedient ~~per~~prescribed by the ~~guidance.~~CECL Standard. Determining that a borrower or sponsor is experiencing financial difficulty requires the use of significant judgment and can be based on several factors subject to uncertainty. These factors can include, but are not limited to, whether cash from the borrower's operations are sufficient to cover current and future debt service requirements, the borrower’s ability to potentially refinance the loan, and other circumstances that can affect the borrower’s ability to satisfy their obligations in accordance the terms of the loan. When utilizing the practical expedient for collateral dependent loans, the ~~loan loss provision~~current expected credit losses is determined as the difference between the fair value of the underlying collateral, adjusted for estimated costs to sell when applicable, and the carrying value of the loan (prior to the ~~loan loss provision)~~current expected credit losses), as repayment or satisfaction of a loan is dependent on a sale of the underlying collateral. Collateral-dependent loans evaluated for a Specific CECL Allowance are removed from the General CECL pool.

The fair value of the underlying collateral is determined by using method(s) such as discounted cash flow, the market approach, or direct capitalization approach. These methods require the use of key unobservable inputs, which are inherently uncertain and subjective. Our estimate of fair value is sensitive to both the valuation methodology selected and inputs used. Determining a suitable valuation method and selecting the appropriate key unobservable inputs and assumptions requires significant judgment and consideration of factors specific to the underlying collateral being assessed. Additionally, the key

unobservable inputs and assumptions used may vary depending on the information available to us and market conditions as of the valuation date. As such, the fair value that we derive and use in calculating our Specific CECL Allowance, is subject to uncertainty and any actual losses, if incurred, could differ materially from our ~~provision.~~current expected credit losses. Refer to “Note 2 – Summary of Significant Accounting Policies” and “Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net” for further discussion regarding our Specific CECL Allowance.

Refer to "Note 2 - Summary of Significant Accounting Policies" to our consolidated financial statements of our most recent ~~annual report~~

Annual Report on Form 10-K for the complete listing and description of our significant accounting policies.

Results of Operations

All non-USD denominated assets and liabilities are translated to USD at the exchange rate prevailing at the reporting date and income, expenses, gains, and losses are translated at the prevailing exchange rate on the dates that they were recorded.

Loan Portfolio Overview

The following table sets forth certain information regarding our loan portfolio as of ~~September 30, 2022~~March 31, 2023 ($ in thousands):
Description Carrying Value
Weighted-Average Coupon (1)
Weighted Average All-in Yield (1)(2)
Secured Debt Arrangements (3)
Cost of Funds(4)
Equity at
carrying value(5)
Commercial mortgage loans, net $ 8,013,469 5.7 % 6.5 % $ 5,364,119 4.3 % $ 2,649,350
Subordinate loans and other lending assets, net 717,837 6.5 % 7.1 % — — 717,837
Total/Weighted-Average $ 8,731,306 5.8 % 6.5 % $ 5,364,119 4.3 % $ 3,367,187


Description	Carrying Value		Weighted-Average Coupon (1)		Weighted Average All-in Yield (1)(2)		Secured Debt Arrangements (3)		Cost of Funds(4)		Equity at cost(5)
Commercial mortgage loans, net	$	7,879,205	8.0	%	8.7	%	$	5,332,603	6.3	%	$	2,546,602
Subordinate loans and other lending assets, net	592,863		6.3	%	6.8	%	—		—		592,863

Total/Weighted-Average	$	8,472,068	7.9	%	8.6	%	$	5,332,603	6.3	%	$	3,139,465

———————

(1) Weighted-Average Coupon and Weighted-Average All-in Yield are based on the applicable benchmark rates as of ~~September 30, 2022~~March 31, 2023 on the floating rate loans.

(2) Weighted-Average All-in Yield includes the amortization of deferred origination fees, loan origination costs and accrual of both extension and exit fees. Weighted-Average All-in Yield excludes the benefit of forward points on currency hedges relating to loans denominated in currencies other than USD.

(3) Gross of deferred financing costs of ~~$13.5~~$15.8 million.

(4) Cost of funds includes weighted average spread and applicable benchmark rates as of ~~September 30, 2022~~March 31, 2023 on secured debt arrangements.

(5) Represents loan portfolio at ~~carrying value~~amortized cost less secured debt outstanding.

The following table provides details of our commercial mortgage loan portfolio and subordinate loan and other lending assets portfolio, on a loan-by-loan basis, as of ~~September 30, 2022~~March 31, 2023 ($ in millions):

Commercial Mortgage Loan Portfolio
# Property Type Risk Rating Origination Date Amortized Cost Unfunded Commitment Construction
Loan 3rd Party Subordinate Debt Fully-extended Maturity Location
1 Hotel 3 10/2019 $304 $28 Y 08/2024 Various, Spain
2 Hotel 3 11/2021 186 20 Y 11/2026 Various, UK/Ireland
3 Hotel 3 05/2022 178 25 Y 06/2027 Napa Valley, CA
4 Hotel 3 04/2018 152 — 04/2023 Honolulu, HI
5 Hotel 3 07/2021 146 33 08/2026 Various, US
6 Hotel 3 09/2015 146 — 06/2024 Manhattan, NY
7 Hotel 3 11/2021 123 41 Y 12/2026 St. Thomas, USVI
8 Hotel 3 08/2019 117 — 08/2024 Puglia, Italy
9 Hotel 3 10/2021 99 — 11/2026 New Orleans, LA
10
Hotel(3)(6)
5 03/2017 98 — 10/2022 Atlanta, GA
11 Hotel 3 11/2018 90 — 12/2023 Vail, CO
12 Hotel 3 12/2019 60 — 01/2025 Tucson, AZ
13 Hotel 3 05/2021 59 2 Y 06/2026 Fort Lauderdale, FL
14 Hotel 3 05/2019 52 — 06/2024 Chicago, IL
15 Hotel 3 12/2015 42 — 08/2024 St. Thomas, USVI
16 Hotel 3 10/2021 39 39 10/2026 Lake Como, Italy
17 Hotel 3 02/2018 27 — 11/2024 Pittsburgh, PA
18 Hotel 3 12/2021 21 28 06/2025 Dublin, Ireland
19 Office 3 01/2020 224 66 Y 02/2025 Long Island City, NY
20 Office 3 03/2022 218 47 Y 04/2027 Manhattan, NY
21 Office 3 02/2020 188 — 02/2025 London, UK
22 Office 3 06/2019 183 13 08/2026 Berlin, Germany

23 Office 3 02/2022 144 — 06/2025 Milan, Italy
24 Office 3 02/2022 128 384 Y 02/2027 London, UK
25 Office 3 11/2017 121 — 01/2023 Chicago, IL
26
Office(1)
3 12/2017 103 — Y 10/2022 London, UK
27 Office 3 06/2022 87 — 06/2025 Rome, Italy
28 Office 3 03/2018 86 — Y 07/2023 Chicago, IL
29 Office 3 11/2021 33 38 Y 11/2025 Milan, Italy
30 Retail 3 04/2022 417 34 04/2027 Various, UK
31 Retail 3 10/2021 362 — 10/2026 Various, UK
32 Retail 3 08/2019 249 — Y 09/2025 Manhattan, NY
33 Retail 3 05/2022 155 — 06/2027 Various, US
34
Retail(3)
5 11/2014 104 — 09/2023 Cincinnati, OH
35
Residential(4)
3 08/2022 354 4 09/2024 Manhattan, NY
36 Residential 3 12/2021 195 15 12/2026 Various, UK
37 Residential 3 12/2018 136 43 Y 12/2023 Manhattan, NY
38 Residential 3 12/2021 101 31 01/2027 Manhattan, NY
39 Residential 3 05/2022 89 4 06/2027 Manhattan, NY
40 Residential 3 05/2021 82 — Y 05/2026 Cleveland, OH
41 Residential 3 12/2019 60 7 Y 11/2025 Boston, MA
42 Residential 3 04/2014 59 — 07/2023 Various
43 Residential 3 11/2014 50 — 06/2023 Various, US
44 Residential 3 12/2021 32 — Y 01/2026 Hallandale Beach, FL
45 Healthcare 3 03/2022 372 — 03/2027 Various, MA
46 Healthcare 3 10/2019 180 — 10/2024 Various, UK
47 Mixed Use 3 12/2019 281 88 Y Y 06/2025 London, UK
48 Mixed Use 3 03/2022 134 42 Y 03/2027 Brooklyn, NY
49 Mixed Use 3 06/2022 59 58 Y Y 06/2026 London, UK
50 Mixed Use 3 12/2019 39 — 09/2023 London, UK
51 Parking Garages 3 05/2021 270 5 05/2026 Various, US
52 Industrial 3 03/2021 232 — 05/2026 Various, Sweden
53
Portfolio(2)
3 06/2021 207 20 06/2026 Various, Germany
54 Caravan Parks 3 02/2021 183 — 02/2028 Various, UK
55
Urban Predevelopment(3)
5 01/2016 176 — 09/2023 Miami, FL
General CECL Allowance (19)
Subtotal / Weighted-Average Commercial Mortgage Loans 3.1 $8,013 $1,115 3.1 Years


Subordinate Loan and Other Lending Assets Portfolio
Commercial Mortgage Loan Portfolio											Commercial Mortgage Loan Portfolio
#	#	Property Type	Risk Rating	Origination Date	Amortized Cost	Unfunded Commitment	Construction Loan	3rd Party Subordinate Debt	Fully-extended Maturity	Location	#	Property Type	Risk Rating	Origination Date	Amortized Cost	Unfunded Commitment	Construction Loan	3rd Party Subordinate Debt	Fully-extended Maturity	Location
1	1	Residential(4)	3	05/2020	$232	$—		Y	09/2024	Manhattan, NY	1	Hotel	3	10/2019	$340	$27		Y	08/2024	Various, Spain
2	2	Residential(4)	3	06/2015	187	13		Y	09/2024	Manhattan, NY	2	Hotel	3	11/2021	217	15		Y	11/2026	Various, UK/Ireland
3	3	Residential(3)(4)	5	11/2017	52	—		Y	09/2024	Manhattan, NY	3	Hotel	3	05/2022	179	25		Y	06/2027	Napa Valley, CA
4	4	Office	3	01/2019	100	—			12/2025	Manhattan, NY	4	Hotel	3	11/2021	162	3			12/2026	St. Thomas, USVI
5	5	Office	3	08/2017	8	—			09/2024	Troy, MI	5	Hotel	3	07/2021	160	19			08/2026	Various, US
6	6	Healthcare(5)	3	07/2019	51	—		Y	06/2024	Various, US	6	Hotel	3	09/2015	146				06/2024	Manhattan, NY
7	7	Hotel	3	06/2015	23	—			07/2025	Phoenix, AZ	7	Hotel	3	04/2018	142				04/2024	Honolulu, HI
8	8	Hotel	3	06/2018	20	—			06/2023	Las Vegas, NV	8	Hotel	2	08/2019	130				08/2024	Puglia, Italy
9	9	Industrial	2	05/2013	32	—			05/2023	Various, US	9	Hotel	3	10/2021	100				11/2026	New Orleans, LA
10	10	Mixed Use	3	02/2019	16	—			10/2022	London, UK	10	Hotel	3	06/2022	99				06/2025	Rome, Italy
		General CECL Allowance			(3)
		Subtotal / Weighted-Average Subordinate Loans and Other Lending Assets	3.1		$718	$13			2.0 Years

11											11	Hotel	3	11/2018	90				12/2023	Vail, CO
12											12	Hotel	3	12/2019	60				01/2025	Tucson, AZ
13											13	Hotel	3	05/2019	52				06/2024	Chicago, IL
14											14	Hotel	2	12/2015	42				08/2024	St. Thomas, USVI
15											15	Hotel	3	02/2018	27				11/2024	Pittsburgh, PA
16											16	Office	3	03/2022	230	36		Y	04/2027	Manhattan, NY
17											17	Office	3	06/2019	207	9			08/2026	Berlin, Germany
18											18	Office	3	02/2020	200				02/2025	London, UK
19											19	Office	3	01/2020	192	58		Y	03/2028	Long Island City, NY
20											20	Office	3	02/2022	178	389	Y		02/2027	London, UK
21											21	Office	3	02/2022	159				06/2025	Milan, Italy
22											22	Office	3	11/2022	99				01/2025	Chicago, IL
23											23	Office	4	03/2018	83			Y	07/2023	Chicago, IL
24											24	Retail	3	04/2022	462	37			04/2027	Various, UK
25											25	Retail	3	10/2021	400				10/2026	Various, UK
26											26	Retail	3	08/2019	250			Y	09/2025	Manhattan, NY


27	Retail	3	05/2022	139				06/2027	Various, US
28	Retail(2)	5	11/2014	99				09/2023	Cincinnati, OH
29	Residential(1)	3	08/2022	250				09/2024	Manhattan, NY
30	Residential	3	12/2021	217	16			12/2026	Various, UK
31	Residential	3	03/2023	172				03/2026	Various, US
32	Residential(5)	3	12/2018	136			Y	09/2023	Manhattan, NY
33	Residential	3	05/2022	89	4			06/2027	Manhattan, NY
34	Residential	3	05/2021	82			Y	05/2026	Cleveland, OH
35	Residential	3	12/2021	77	15			01/2027	Manhattan, NY
36	Residential	3	12/2019	56	7		Y	11/2025	Boston, MA
37	Residential	3	12/2021	28			Y	01/2026	Hallandale Beach, FL
38	Mixed Use	3	12/2019	294	97	Y	Y	06/2025	London, UK
39	Mixed Use	3	03/2022	140	36		Y	03/2027	Brooklyn, NY
40	Mixed Use	3	06/2022	93	40	Y	Y	06/2026	London, UK
41	Mixed Use	3	12/2019	43				09/2023	London, UK
42	Healthcare	3	03/2022	369				03/2027	Various, MA
43	Healthcare	3	10/2019	156				10/2024	Various, UK
44	Parking Garages	3	05/2021	270	5			05/2026	Various, US
45	Industrial	3	03/2021	247				05/2026	Various, Sweden
46	Portfolio(3)	3	06/2021	221	22			06/2026	Various, Germany
47	Caravan Parks	3	02/2021	203				02/2028	Various, UK
48	Urban Predevelopment	3	12/2022	119	13			01/2026	Miami, FL
	General CECL Allowance			(27)
	Subtotal / Weighted-Average Commercial Mortgage Loans	3.0		$7,879	$873			2.9 Years

Total / Weighted-Average
Loan Portfolio 3.1 $8,731 $1,128 3.0 Years

Subordinate Loan and Other Lending Assets Portfolio

Property Type

Risk Rating

Origination Date

Amortized Cost

Unfunded Commitment

Construction Loan

3rd Party Subordinate Debt

Fully-extended Maturity

Location

Residential(1)

05/2020

$284

09/2024

Manhattan, NY

Residential(1)

06/2015

194

09/2024

Manhattan, NY

Residential(1)(2)

11/2017

09/2024

Manhattan, NY

Healthcare(4)

07/2019

06/2024

Various, US

Hotel

06/2015

07/2025

Phoenix, AZ

Hotel

06/2018

06/2023

Las Vegas, NV

Office

08/2017

09/2024

Troy, MI

General CECL Allowance

(3)

Subtotal / Weighted-Average Subordinate Loans and Other Lending Assets

3.1

$593

$—

1.4 Years

Total / Weighted-Average
Loan Portfolio

3.0

$8,472

$873

2.8 Years

———————

(1)~~Includes $22.7 million of a subordinate participation sold accounted for as~~Loans are secured ~~borrowing.~~by the same property.

(2)~~Includes portfolio of office, industrial, and retail property types.~~

~~(3)~~Amortized cost for these loans is net of the recorded Specific CECL Allowance.

~~(4)~~(3)~~Loans are secured by the same property.~~Includes portfolio of office, industrial, and retail property types.

~~(5)~~(4)Single Asset, Single Borrower CMBS.

~~(6)~~(5)Loan ~~went into maturity default subsequent~~matured in January 2023. Extension to September 2023 is approved and in the ~~quarter ended September 30, 2022.~~process of execution..

Our average asset and debt balances for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 were ($ in thousands):


	Average month-end balances for the three months ended March 31, 2023
Description	Assets		Related debt
Commercial mortgage loans, net	$	8,106,527	$	5,305,778
Subordinate loans and other lending assets, net	648,667		—

Average month-end balances for the nine months ended September 30, 2022
Description Assets Related debt
Commercial mortgage loans, net $ 7,977,494 $ 5,039,066
Subordinate loans and other lending assets, net 786,893 —
Subordinate loans, held for sale 833 —

Portfolio Management

Due to the impact of COVID-19, including longer-term macroeconomic effects on supply chains, inflation and labor shortages, some of our borrowers have experienced challenges which have prevented the execution of their business plans and in some cases, resulted in temporary closures. As a result, we have worked with borrowers to execute loan modifications which are typically coupled with additional equity contributions from borrowers. Loan modifications to date have included repurposing of reserves, temporary deferrals of interest or principal, and partial deferral of coupon interest as payment-in-kind interest.

Investment Activity

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we committed ~~$3.5 billion~~$181.9 million of capital to loans ($~~2.8 billion~~181.0 million was funded at closing)., including $174.0 million in connection with the refinancing of two floating rate first mortgages. In addition, during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we funded $113.8 million for loans closed prior to 2023 and received ~~$1.5~~$0.5 billion in repayments, ~~and funded $0.5 billion for commitments closed prior to 2022.~~including $139.8 million from loan sales.

Net Income Available to Common Stockholders

For the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ our net income available to common stockholders was ~~$260.0~~$45.8 million, or ~~$1.66~~$0.32 per diluted share of common stock, and ~~$176.5~~$12.2 million, or ~~$1.18~~$0.08 per diluted share of common stock,

respectively.

Operating Results

The following table sets forth information regarding our condensed consolidated results of operations and certain key operating metrics compared to the most recently reported period ($ in thousands):

3940


		Three months ended				Q3'22 vs. Q2'22			Three months ended					Q1'23 vs. Q4'22
		September 30, 2022		June 30, 2022						March 31, 2023			December 31, 2022
Net interest income:	Net interest income:							Net interest income:
Interest income from commercial mortgage loans	Interest income from commercial mortgage loans	$	120,821	$	99,386	$	21,435	Interest income from commercial mortgage loans			$	166,147		$	151,882	$	14,265
Interest income from subordinate loans and other lending assets	Interest income from subordinate loans and other lending assets	13,354		14,530		(1,176)		Interest income from subordinate loans and other lending assets			9,707			11,871		(2,164)
Interest expense	Interest expense	(72,302)		(56,529)		(15,773)		Interest expense			(104,868)			(94,582)		(10,286)
Net interest income	Net interest income	61,873		57,387		4,486		Net interest income			70,986			69,171		1,815
Operations related to real estate owned:	Operations related to real estate owned:							Operations related to real estate owned:
Revenue from real estate owned operations	Revenue from real estate owned operations	14,428		18,630		(4,202)		Revenue from real estate owned operations			16,131			19,964		(3,833)
Operating expenses related to real estate owned	Operating expenses related to real estate owned	(13,308)		(13,134)		(174)		Operating expenses related to real estate owned			(14,006)			(16,274)		2,268

Net income related to real estate owned		1,120		5,496		(4,376)
Depreciation and amortization on real estate owned								Depreciation and amortization on real estate owned			(3,986)			—		(3,986)
Net income (loss) related to real estate owned								Net income (loss) related to real estate owned			(1,861)			3,690		(5,551)
Operating expenses:	Operating expenses:							Operating expenses:
General and administrative expenses	General and administrative expenses	(7,184)		(7,130)		(54)		General and administrative expenses			(7,015)			(8,161)		1,146
Management fees to related party	Management fees to related party	(9,719)		(9,632)		(87)		Management fees to related party			(9,517)			(9,714)		197
Total operating expenses	Total operating expenses	(16,903)		(16,762)		(141)		Total operating expenses			(16,532)			(17,875)		1,343
Other income	Other income	285		68		217		Other income			732			2,142		(1,410)
Realized gain on investments		43,577		—		43,577

Reversal of loan losses - Specific CECL Allowance, net		53,000		3,000		50,000
Reversal of (provision for) loan losses - General CECL Allowance, net		2,564		(2,056)		4,620
Gain on foreign currency forward contracts		129,252		105,213		24,039
Foreign currency translation loss		(92,782)		(84,838)		(7,944)
Gain on interest rate hedging instruments		1,044		3,443		(2,399)
Net realized loss on investments								Net realized loss on investments			(4,624)			(24,894)		20,270
Realized gain on extinguishment of debt								Realized gain on extinguishment of debt			213			—		213
Increase in Specific CECL Allowance, net								Increase in Specific CECL Allowance, net			—			(14,500)		14,500
Increase in General CECL Allowance, net								Increase in General CECL Allowance, net			(4,390)			(5,774)		1,384
Loss on foreign currency forward contracts								Loss on foreign currency forward contracts			(14,135)			(110,246)		96,111
Foreign currency translation gain								Foreign currency translation gain			18,634			93,740		(75,106)
Gain (loss) on interest rate hedging instruments								Gain (loss) on interest rate hedging instruments			(107)			560		(667)
Net income	Net income	$183,030		$70,951		$112,079		Net income			$48,916			$(3,986)		$52,902

Net Interest Income

Net interest income increased by ~~$4.5~~$1.8 million during the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~June 30,~~December 31, 2022. The increase in interest income was primarily attributable to higher average index rates during the three months ended March 31, 2023. This increase was partially offset by a decrease in interest income on our subordinate loans and other lending assets, as we continue to migrate our portfolio to senior loans. Interest expense increased during three months ended March 31, 2023 compared to the three months ended December 31, 2022, due to higher average index rates in the current period: average U.S. LIBOR increased by 1.48%, average U.S. SOFR increased by 1.50%, average Daily SONIA increased by 0.66% from the three months ended June 30, 2022 to the three months ended September 30, 2022. Average EURIBOR increased by 0.49% during three months ended September 30, 2022 above the 0.0% floors taken during the three months ended June 30, 2022. The increase in interest expense was primarily due to (i) higher average index rates in the current period, as noted above, and (ii) an increase in the weighted average balance of our outstanding debt facilities by $135.2 million for the three months ended September 30, 2022, as compared to three months ended June 30, 2022, which was partially offset by a decrease in interest expense related to the payoff of the 2022 Notes.period.

Operations Related to Real Estate ~~Owned~~

~~In 2017,~~For both the three months ended March 31, 2023 and three months ended December 31, 2022, we ~~originated a $20.0 million junior mezzanine loan which was subordinate to: (i) a $110.0 million mortgage loan, and (ii) a $24.5 million senior mezzanine loan, secured by~~recognized net income (loss) from operations related real estate owned on a full-service luxury hotel in Washington D.C. ~~On May 24, 2021,~~Refer to "Note 5 - Real Estate Owned" for further detail.

For the three months ended March 31, 2023 we ~~acquired legal title~~recorded a net loss from operations related to real estate owned of $1.9 million, compared to $3.7 million of net income from operations related to real estate for the three months ended December 31, 2022. The decrease is primarily driven by an increase in depreciation expense and lower revenue from the hotel's operations, partially offset by lower operating expenses in relation to hotel operations. The increase in depreciation expense was attributable to $4.0 million of depreciation expense recorded during three months ended March 31, 2023, in connection with the reclassification of the hotel ~~through a deed-in-lieu of foreclosure and the criteria~~from real estate owned, held for ~~held-for-sale classification~~ in ASC Topic 360, "Property, Plant, and Equipment" were not met. The assets and liabilities related to the hotel were assumed at their estimated fair value at acquisition and presented net of accumulated depreciation and impairment charges. As of March 1, 2022, the related assets and liabilities were transferred to assets and liabilities relatedsale to real estate owned, held for ~~sale, as due to our marketing efforts on~~investment, net. On the ~~property, as well as other developments, it now met~~date of reclassification, March 1, 2023, depreciation expense resumed and we recorded "catch-up" depreciation for the ~~criteria for~~period in which the hotel was held for sale. ~~Results~~Additionally, the lower revenue was primarily attributable to seasonally low hotel occupancy levels during the first three months of ~~operations from~~ the ~~hotel are comprised of~~year, which was partially offset by lesser operating ~~revenue, expenses and real estate asset depreciation. As of March 1, 2022, we ceased recording~~expenses. No depreciation ~~on the building and FF&E on the condensed consolidated statement of operations as the property~~ was ~~transferred to held for sale at such date.~~

~~The hotel operations generated $1.1 million of net income~~recorded during the three months ended ~~September 30,~~December 31, 2022, ~~compared to $5.5 million of net income~~as the hotel was classified as held for sale during the three months ended June 30, 2022. The decrease in net income from hotel operations primarily relates to the decrease in hotel occupancy and events held due to seasonality of hotel operations during the three months ended September 30, 2022 compared to the three months ended June 30, 2022.that time.

Refer to "Note 5 - ~~Assets and Liabilities Related to~~ Real Estate Owned" for ~~more information~~full discussion of the reclassification and operations related to ~~our impairment and realized losses on~~ real estate owned.

4041

Operating Expenses

General and administrative expenses

General and administrative expenses ~~remained generally the same~~decreased by $1.1 million for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~June 30,~~December 31, 2022. The decrease was primarily driven by greater reimbursements paid to the Manager during the three months ended December 31, 2022 and a $0.2 million decrease in non-cash restricted stock and RSU amortization related to shares of stock awarded under the LTIPs during the three months ended March 31, 2023.

Management fees to related party

Management fee expense remained generally the same for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~June 30,~~December 31, 2022.

Other income

Other income ~~remained generally the same for~~decreased by $1.4 million during the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the three months ended ~~June 30, 2022.~~December 31, 2022 primarily due to an increase in bank interest charged on collateral held under our derivative agreements. This was partially offset by an increase of bank interest earned on our cash balances.

~~Realized gain~~Net realized loss on investments

During the three months ended ~~September 30, 2022,~~March 31, 2023, we acquired legal title of the Atlanta Hotel that secured one of our first commercial mortgage loans. We recorded a ~~$43.6~~realized loss of $4.8 million ~~realized gain on investments was recorded~~ in connection with the ~~title acquisition for one~~acquisition. The realized loss was offset by a gain on investments of $0.2 million in connection with the sale of our ~~first mortgage~~entire interest in three commercial loans secured by properties in Europe and a ~~multifamily development~~partial interest in ~~Brooklyn, NY. The gain reflects the difference between the fair value of the~~one commercial loan secured by property located in London, UK. Refer "Note 4 - Commercial Mortgage Loans, Subordinate Loans and ~~the carrying value of the loan at the time of acquisition.~~

~~Refer to "Note 5 -~~Other Lending Assets, ~~and Liabilities Related to Real Estate Owned"~~Net" for ~~more information related to our realized gain on investments.~~

~~Reversals of loan losses - Specific CECL Allowance, net~~

Our Specific CECL Allowance decreased by $53.0 million during the three months ended September 30, 2022. We reversed $53.0 million of previously recorded Specific CECL allowance on an urban predevelopment first mortgage loan in Miami, FL, because the collateral which secures the loan is under contract to be sold in the near term at a higher value than carrying value of the loan pre-reversal.further discussion.

During the three months ended ~~June 30,~~December 31, 2022, we ~~reversed $10.0~~recorded a realized loss of $17.9 million, representing a write-off of a previously recorded ~~allowance~~Specific CECL Allowance on a first mortgage loan secured by an urban predevelopment property in Miami, FL, due to the sale of the underlying property, and $7.0 million realized loss, representing a write-off of a previously recorded Specific CECL Allowance related to a ~~multifamily development~~first mortgage secured by the Atlanta Hotel, as the amount was deemed unrecoverable.

Increase in ~~Brooklyn, NY, due~~Specific CECL Allowance, net

There was no change to ~~market rent growth and value created from development activities,~~our Specific CECL Allowance recorded during the three months ended March 31, 2023. Comparatively, during the three months ended December 31, 2022, we recorded a net increase to our Specific CECL Allowance of $14.5 million, which was primarily driven by a Specific CECL Allowance of $36.5 million recorded in relation to mezzanine loan secured by our interest in an ultra-luxury residential property in Manhattan, NY. This increase was partially offset by i) a net write-off of a $15.0 million previously recorded Specific CECL Allowance on a first mortgage loan secured by an urban predevelopment property in Miami, FL, and ii) a $7.0 million ~~allowance on~~write-off of previously recorded Specific CECL Allowance related to a first mortgage loan secured by ~~a hotel in~~the Atlanta ~~GA resulting from the hotel having a slower than expected recovery from the COVID-19 pandemic.~~Hotel.

Refer ~~to "Note 2 - Summary of Significant Accounting Policies" and~~ "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional information related to our Specific CECL Allowance.

~~Reversal of (provision for) loan losses -~~Increase in General CECL Allowance, net

Our General CECL Allowance ~~decreased~~increased by ~~$2.6~~$4.4 million during the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~the three months ended June 30, 2022 due to portfolio seasoning and sale~~an increase of ~~unfunded commitments, which was partially offset by one new loan origination and a more adverse macroeconomic outlook~~.~~. The General CECL Allowance increased by $2.1~~$5.8 million during the three months ended ~~June 30, 2022 compared to~~December 31, 2022. The increase in General CECL Allowance recorded during the three months ended March 31, 2023 was primarily driven by an increase in our view of the remaining expected term of our loan portfolio based on current macroeconomic outlook, partially offset by the effects of portfolio seasoning and loan repayments and sales.

The $5.8 million increase in General CECL Allowance recorded during the three months ended December 31, 2022 ~~as a result of new loan originations~~was primarily attributable to increased allowances related to our loans secured by office properties and ~~a more adverse~~worsening macroeconomic outlook. The increase was partially offset by the effects of portfolio seasoning.

Foreign currency ~~translation~~gain and loss ~~and gain~~ on derivative instruments

We use forward currency contracts to economically hedge interest and principal ~~payments due~~repayments under our loans denominated in currencies other than USD. ~~When~~Foreign currency gains and losses on ~~foreign currency translation and~~ derivative instruments are evaluated on a combined basis and the net impact for the three months ended ~~September 30, 2022~~March 31, 2023 and ~~June 30,~~three months ended December 31, 2022 was a ~~$36.5~~net gain of $4.5 million and ~~$20.4~~net loss of $16.5 million, ~~gain,~~ respectively.

During the three months ended March 31, 2023, foreign exchange rates continued to rise in relation to USD, albeit at a slower pace compared to the three months ended December 31, 2022. The lesser increase ~~from~~in foreign exchange rates resulted in a decrease in the ~~previous quarter represents a timing difference between the valuation~~loss on ~~the~~our foreign currency forward contracts ~~which are valued using spot rates, forward point estimates,~~ and ~~discount factors, and~~a decrease in the gain related to foreign currency ~~translation calculation which uses only spot rates.~~translation. Additionally, ~~as rates fell significantly~~we recognized higher realized gains on foreign currency forward contracts during the ~~quarter our unrealized gain~~

~~from derivative instruments, including derivative instruments related~~three months ended March 31, 2023 compared to ~~our future expected~~the three months ended December 31, 2022. The higher realized gains were attributable, along with other drivers, to the unwind of interest ~~cash flow, increased. As derivative instruments related to our future expected interest cash flow have no offset~~hedges associated with the sale of three commercial mortgage loans secured by various properties in ~~foreign currency (loss) they are accounting for some of~~Europe during the ~~variance noted above.~~three months ended March 31, 2023 as discussed in "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net."

Gain (loss) on interest rate hedges

In May 2019, we entered into the 2026 Term Loan. During the second quarter of 2020, we entered into a three-year interest rate cap to cap LIBOR at 0.75%. This effectively limits the maximum all-in coupon on the 2026 Term Loan to 3.50%. During the three months ended ~~September 30, 2022~~March 31, 2023 and ~~June 30,~~three months ended December 31, 2022, the interest rate cap had ~~an unrealized~~a net loss of $0.1 million and a net gain of ~~$1.0~~$0.6 million, inclusive of realized gains of $4.7 million and ~~$3.4~~$3.7 million, respectively. The increase in realized gain quarter over quarter is attributable to the increase in the LIBOR rate over the cap strike rate. The increase in unrealized loss quarter over quarter represents the decrease in fair value of the ~~unrealized gain is~~interest rate cap as a result of ~~the~~ nearing ~~maturity of the cap offset by the current interest rate forward curve.~~maturity.

Subsequent Events

Refer to "Note 20 - Subsequent Events" to the accompanying condensed consolidated financial statements for disclosure regarding significant transactions that occurred subsequent to ~~September 30, 2022.~~March 31, 2023.

Contractual Obligations, Liquidity, and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to fund and maintain our assets and operations, repay borrowings, make distributions to our stockholders and other general business needs. We utilize various sources of cash in order to meet our liquidity needs in the next twelve months, which is considered the short-term, and the longer term.

Our current debt obligations consist of $1.5 billion, at face value, of corporate debt ~~at face value~~ and ~~$5.4~~$5.3 billion of asset specific financings. Our corporate debt ~~includes: (i) $779.3~~includes $775.3 million of term loan borrowings, ~~(ii)~~ $500.0 million of senior secured notes, and ~~(iii) $230.0~~$222.9 million of convertible ~~notes.~~notes, which mature in October 2023. Our asset specific financings are generally tied to the underlying loans and we anticipate repayments of ~~$765.0~~$231.9 million of secured debt arrangements in the short term. Specifics about our secured debt arrangements and corporate debt maturities and obligations are discussed below.

In addition to our debt obligations, as of ~~September 30, 2022,~~March 31, 2023, we had ~~$1.1~~$0.9 billion of unfunded loan commitments. We expect that approximately ~~$565.2~~$499.0 million will be funded to existing borrowers in the short term.

We have various sources of liquidity that we are able to use in order to satisfy our short and long term obligations. As of ~~September 30, 2022,~~March 31, 2023 we had ~~$319.3~~$331.5 million of cash on hand. As of ~~September 30, 2022,~~March 31, 2023 we also held approximately ~~$1.1 billion~~$881.0 million of unencumbered assets, consisting of ~~$517.8~~$479.8 million of senior mortgages and ~~$534.1~~$401.2 million of mezzanine loans. Depending on market conditions, we may utilize additional borrowings as a source of cash, which may also include additional secured debt arrangements as well as other borrowings or conduct additional public and private debt and equity offerings.

We maintain policies relating to our use of leverage. ~~Refer to~~See "Leverage Policies" below. In the future, we may seek to raise further equity or debt capital or engage in other forms of borrowings in order to fund future investments or to refinance expiring indebtedness.

We generally intend to hold our assets for investment, although we may sell certain of our investments in order to manage our interest rate risk and liquidity needs, meet other operating objectives and adapt to market conditions.

To maintain our qualification as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain. These distribution requirements limit our ability to retain earnings and replenish or increase capital for operations.

We also have interests in two unconsolidated joint ventures, each of which owns underlying properties that secure one of our first mortgage loans, respectively and are accounted for as off-balance-sheet arrangements. The unconsolidated joint ventures were deemed to be Variable Interest Entities ("VIEs"), of which we are not the primary beneficiary. Accordingly, the VIEs are not consolidated in our condensed consolidated financial statements as of September 30, 2022. Our maximum exposure to loss from these commercial mortgage loans is limited to their carrying value, which as of September 30, 2022 ~~was $227.2 million. Although there is risk of loss we have no contractual obligation to fund any additional capital into the joint ventures.~~

Borrowings Under Various Financing Arrangements

The table below summarizes the outstanding balances and maturities for our various financing arrangements:


		September 30, 2022			December 31, 2021				March 31, 2023			December 31, 2022
		Borrowings Outstanding(1)		Maturity (2)	Borrowings Outstanding(1)		Maturity (2)		Borrowings Outstanding(1)		Maturity (2)	Borrowings Outstanding(1)		Maturity (2)
Secured credit facilities		$	3,648,950	January 2026	$	2,256,646	October 2025
Secured Credit Facilities								Secured Credit Facilities	$	3,459,824	May 2026	$	3,459,226	May 2026
Barclays Private Securitization	Barclays Private Securitization	1,715,169		January 2026	1,902,684		August 2024	Barclays Private Securitization	1,872,779		February 2026	1,850,076		February 2026
Total Secured debt arrangements		$	5,364,119		$	4,159,330
Revolving Credit Facility								Revolving Credit Facility	—		March 2026	—		N/A
Total Secured Debt Arrangements								Total Secured Debt Arrangements	5,332,603			5,309,302
Senior secured term loans	Senior secured term loans	$	779,250	January 2027	$	785,250	January 2027	Senior secured term loans	775,250		January 2027	777,250		January 2027
Senior secured notes	Senior secured notes	500,000		June 2029	500,000		June 2029	Senior secured notes	500,000		June 2029	500,000		June 2029
Convertible senior notes	Convertible senior notes	230,000		October 2023	575,000		February 2023	Convertible senior notes	222,910		October 2023	230,000		October 2023
Total Borrowings		$	6,873,369		$	6,019,580
Total borrowings								Total borrowings	$	6,830,763		$	6,816,552

———————

(1)Borrowings Outstanding represent principal balances as of the respective reporting periods.

(2)Maturity dates represent weighted average maturities based on borrowings outstanding and assumes extensions at our option are exercised with consent of financing providers, where applicable.

Secured Credit Facilities

As of ~~September 30, 2022,~~March 31, 2023, we had entered into secured ~~debt arrangements~~credit facilities with ~~seven~~eight secured credit ~~facilities~~counterparties through wholly-owned subsidiaries. Terms under various master repurchase agreements vary by secured credit facility. During the three months ended March 31, 2023, we entered into a secured credit facility with Banco Santander, S.A., New York Branch. Additionally, during the three months ended March 31, 2023 we increased our borrowing capacity on the Atlas Facility.

On February 8, 2023, in connection with the acquisition by certain subsidiaries of Atlas, which is a wholly-owned investment of a fund managed by an affiliate of the Manager, the Credit Suisse Facility was acquired by Atlas. In order to effect the assignment of the Credit Suisse Facility and related agreements, the Company and one of its subsidiaries, similar to the other sellers and guarantors party to the subject agreements in the Transaction, entered into an Omnibus Assignment, Assumption and Amendment Agreement as well as certain related agreements with Credit Suisse AG and Atlas. Refer to "Note 7 - Secured Debt Arrangements, Net" and "Note 14 - Related Party Transactions" of our Condensed Consolidated Financial Statements for further discussion regarding the transaction.

Revolving Credit Facility

During the first quarter of 2023, we entered into the $170.0 million Revolving Credit Facility administered by Bank of America, N.A. that matures in March 2026.

Refer to "Note 7 - Secured Debt Arrangements, Net" of our Condensed Consolidated Financial Statements for additional disclosure regarding our secured credit facilities.

Barclays Private Securitization

~~In June 2020, through a newly formed entity, we entered into~~We are party to a private securitization with the Barclays ~~Bank plc.~~Private Securitization. Commercial mortgage loans currently financed under the Barclays Securitization are denominated in GBP, EUR, SEK. As of ~~September 30, 2022,~~March 31, 2023, we had ~~£936.9~~£930.0 million, ~~€491.8~~€485.7 million, and kr2.1 billion ($~~1.7~~1.9 billion assuming conversion into USD) of borrowings outstanding under the Barclays Private Securitization secured by certain of our commercial mortgage loans.

Refer to "Note 7 - Secured Debt Arrangements, Net" of our Condensed Consolidated Financial Statements for additional disclosure regarding our Barclays Private Securitization.

~~Senior Secured~~ Term Loans

In May 2019, we entered into the $500.0 million 2026 Term Loan ~~and~~ in March 2021, we entered into the $300.0 million 2028 Term ~~Loan (collectively Term Loans).~~Loan. The outstanding Term Loans principal balance as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was ~~$779.3~~$775.3 million and ~~$785.3~~$777.3 million, respectively.

Refer to ~~“Note~~"Note 8 –- Senior Secured Term Loans, ~~Net”~~Net" of our ~~Condensed~~ Consolidated Financial Statements for additional disclosure regarding our 2026 Term Loan and 2028 Term Loan.”

Senior Secured Notes

In June 2021, we issued $500.0 million of the 4.625% ~~Senior Secured~~2029 Notes, ~~due 2029 (the "2029 Notes"),~~ for which we received net proceeds of $495.0 million, after deducting initial purchasers' discounts and commissions. The 2029 Notes had a carrying value of ~~$494.6~~$495.0 million and ~~$494.1~~$494.8 million, net of deferred financing costs of ~~$5.4~~$5.0 million and ~~$5.9~~$5.2 million, as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Refer to ~~“Note~~"Note 9 –- Senior Secured Notes, ~~Net”~~Net" of our ~~Condensed~~ Consolidated Financial Statements for additional disclosure regarding our 2029 Notes.

Convertible Senior Notes

In two separate offerings during 2017, we issued an aggregate principal amount of $345.0 million of 4.75% Convertible Senior Notes due 2022 (the "2022 Notes"), for which we received $337.5 million, after deducting the underwriting discount and offering expenses. ~~During the third quarter of 2022, we repaid the $345.0 million aggregate principal amount of the 2022 Notes.~~

During the fourth quarter of 2018, we issued $230.0 million of the 5.375% ~~Convertible Senior~~2023 Notes, ~~due 2023,~~ for which we received $223.7 million after deducting the underwriting discount and offering expenses. On March 20, 2023, we repurchased $7.1 million aggregate principal amount of the 2023 Notes at a price of 97%. As a result of this transaction, we recorded a gain of $0.2 million within realized gain on extinguishment of debt in our March 31, 2023 condensed consolidated statement of operations. At ~~September 30, 2022,~~March 31, 2023, the 2023 Notes had a carrying value of ~~$229.2~~$222.5 million and an unamortized discount of ~~$0.8~~$0.4 million.

~~Refer to “Note 10 – Convertible Senior Notes, Net” of our Condensed Consolidated Financial Statements for additional disclosure regarding our Convertible Notes.~~

Debt-to-Equity Ratio

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

September 30, 2022 December 31, 2021
Debt to Equity Ratio(1)
2.8 2.4


	March 31, 2023	December 31, 2022
Debt to Equity Ratio (1)	2.8	2.8

———————

(1)Represents total debt less cash and loan proceeds held by servicer (recorded with Other Assets, ~~refer to~~see "Note 6 - Other Assets" for more information) to total stockholders' equity.

Leverage Policies

We use leverage for the sole purpose of financing our portfolio and not for the purpose of speculating on changes in interest rates. In addition to our secured debt arrangements and senior secured term loan, we access additional sources of borrowings. Our charter and bylaws do not limit the amount of indebtedness we can incur; however, we are subject to and carefully monitor the limits placed on us by our credit providers and those that assign ratings on our company.

At ~~September 30, 2022,~~March 31, 2023, our debt-to-equity ratio was 2.8 and our portfolio was comprised of ~~$8.0~~$7.9 billion of commercial mortgage loans and ~~$717.8 million~~$0.6 billion of subordinate loans and other lending assets. In order to achieve our return on equity, we generally finance our mortgage loans with 2.0 to 3.0 turns of leverage and generally do not finance our subordinate ~~loans and other lending assets~~loan portfolio given built-in inherent structural leverage. Consequently, depending on our portfolio mix, our debt-to-equity ratio may exceed our previously disclosed thresholds.

Investment Guidelines

Our current investment guidelines, approved by our board of directors, are comprised of the following:

•no investment will be made that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes;

•no investment will be made that would cause us to register as an investment company under the 1940 Act;

•investments will be predominantly in our target assets;

•no more than 20% of our net equity (on a consolidated basis) will be invested in any single investment at the time of the investment; in determining compliance with the investment guidelines, the amount of the investment is the net equity in the investment (gross investment less amount of third-party financing) plus the amount of any recourse on the financing secured by the investment; and

•until appropriate investments can be identified, the Manager may invest the proceeds of any offering in interest bearing, short-term investments, including money market accounts and/or funds, that are consistent with our intention to qualify as a REIT.

The board of directors must approve any change in or waiver to these investment guidelines.

Dividends

We intend to continue to make regular quarterly distributions to holders of our common stock. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that we pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our net taxable income. We generally intend over time to pay dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our board of directors. Any distributions we make are at the discretion of our board of directors and depend upon, among other things, our actual results of operations. These results and our ability to pay distributions are affected by various factors, including the net interest and other income from our portfolio, our operating expenses and any other expenditures. If our cash available for distribution is less than our net taxable income, we could be required to sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

As of ~~September 30, 2022,~~March 31, 2023 and December 31, ~~2021~~2022, we had 6,770,393 shares of our 7.25% Series B-1 Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share ("Series B-1 Preferred ~~Stock~~Stock") outstanding. The Series B-1 Preferred Stock pay cumulative cash dividends, which are payable quarterly in equal amounts in arrears on the 15th day of each January, April, July and October: at a rate of 7.25% per annum of the $25.00 per share liquidation preference.

Except under certain limited circumstances, the Series B-1 Preferred Stock is generally not convertible into or exchangeable for any other property or any other of our securities at the election of the holders. On and after July 15, 2026, we may, at our option, redeem the shares at a redemption price of $25.00, plus any accrued unpaid dividends to, but not including, the date of the redemption.

The following table details our dividend activity:

Three months ended

Nine months ended

Three months ended

Dividends declared per share of:

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Dividends declared per share of:

March 31, 2023

March 31, 2022

Common Stock

$0.35

$1.05

Common Stock

$0.35

Series B Preferred Stock

N/A

1.00

Series B-1 Preferred Stock

0.45

1.35

0.45

Series B-1 Preferred Stock

0.45

On July 15, 2021, we exchanged all 6,770,393 shares outstanding of our 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share ("Series B Preferred Stock"), with a liquidation preference of $25.00 per share, for 6,770,393 shares of 7.25% Series B-1 Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share ("Series B-1 Preferred Stock"), with a liquidation preference of $25.00 per share, pursuant to an exchange agreement with the two existing shareholders.———————

Non-GAAP Financial Measures

Distributable Earnings

Distributable Earnings ~~a non-GAAP financial measure,~~ is defined as net income available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity-based compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share settlement to satisfy income tax withholding), (ii) any unrealized gains or losses or other non-cash items (including depreciation and amortization related to real estate owned) included in net income available to common stockholders, (iii) unrealized income from unconsolidated joint ventures, (iv) foreign currency gains (losses), other than (a) realized gains/(losses) related to interest income, and (b) forward point gains/(losses) realized on our foreign currency hedges, (v) the non-cash amortization expense related to the reclassification of a portion of the Convertible Notes to stockholders’ equity in accordance with GAAP, and (vi) provision for loan losses. Distributable Earnings may also be adjusted to exclude certain other non-cash items, as determined by the Manager and approved by a majority of our independent directors.

For the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023, our Distributable Earnings were ~~$95.9~~$69.2 million, or ~~$0.67~~$0.48 per share, ~~and $194.8 million, or $1.36 per share, respectively,~~ as compared to ~~$49.2~~$49.5 million, or $0.35 per share, ~~and $143.6 million, or $1.01 per share, respectively,~~ for the same period in the prior year.

The weighted-average diluted shares outstanding used for Distributable Earnings per weighted-average diluted share has been adjusted from weighted-average diluted shares under GAAP to exclude shares issued from a potential conversion of the Convertible Notes. Consistent with the treatment of other unrealized adjustments to Distributable Earnings, these potentially issuable shares are excluded until a conversion occurs, which we believe is a useful presentation for investors. We believe that excluding shares issued in connection with a potential conversion of the Convertible Notes from our computation of Distributable Earnings per weighted average diluted share is useful to investors for various reasons, including the following: (i) conversion of Convertible Notes to shares requires both the holder of a note to elect to convert the Convertible Note and for us to elect to settle the conversion in the form of ~~shares~~shares; (ii) future conversion decisions by note holders will be based on our stock price in the future, which is presently not determinable; (iii) the exclusion of shares issued in connection with a potential conversion of the Convertible Notes from the computation of Distributable Earnings per weighted-average diluted share is consistent with how we treat other unrealized items in our computation of Distributable Earnings per weighted-average diluted share; and (iv) we believe that when evaluating our operating performance, investors and potential investors consider our Distributable Earnings relative to our actual distributions, which are based on shares outstanding and not shares that might be issued in the future.

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

4546


		Three months ended September 30,		Nine months ended September 30,			Three months ended March 31,
		2022	2021	2022	2021		2023	2022
Weighted-Averages	Weighted-Averages	Shares	Shares	Shares	Shares	Weighted-Averages	Shares	Shares
Diluted shares - GAAP	Diluted shares - GAAP	164,350,132	170,884,172	169,252,602	170,836,682	Diluted shares - GAAP	155,483,979	140,353,386
Potential shares issued under conversion of the Convertible Notes	Potential shares issued under conversion of the Convertible Notes	(21,187,719)	(28,533,271)	(26,057,847)	(28,533,271)	Potential shares issued under conversion of the Convertible Notes	(11,189,949)	—
Unvested RSUs	Unvested RSUs	—	—	—	—	Unvested RSUs	—	2,571,417
Diluted shares - Distributable Earnings	Diluted shares - Distributable Earnings	143,162,413	142,350,901	143,194,755	142,303,411	Diluted shares - Distributable Earnings	144,294,030	142,924,803

As a REIT, U.S. federal income tax law generally requires us to distribute annually at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that we pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our net taxable income. Given these requirements and our belief that dividends are generally one of the principal reasons stockholders invest in a REIT, we generally intend over time to pay dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our board of directors. Distributable Earnings is a key factor considered by the board of directors in setting the dividend and as such we believe Distributable Earnings is useful to investors.

~~As discussed in "Note 5 – Assets and Liabilities Related to Real Estate Owned", during~~During the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023,, we recorded a $43.6 million realized gain on investments reflecting the difference between the fair value of a multifamily development property located in Brooklyn, NY acquired through a deed-in-lieu of foreclosure and the amortized cost of the loan at the time of foreclosure.

~~As discussed in "Note 5 – Assets and Liabilities Related to Real Estate Owned" during the three and nine months ended September 30, 2021, we recorded $20.0 million~~net realized loss on investments ~~reflecting~~consisting of a realized loss related to the ~~difference between the fair value~~acquisition of a hotel ~~acquired~~property through a deed-in-lieu of foreclosure which was partially offset by a realized gain on loan sales. Refer to "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net," and "Note 5 – Real Estate Owned" for further detail. Additionally, during the ~~amortized cost of the loan at the time of foreclosure. Additionally, during the nine~~three months ended ~~September 30, 2021,~~ March 31, 2023, we recorded ~~an impairment~~a gain on extinguishment of ~~$0.6~~debt of $0.2 million onrelated to a partial repurchase of our ~~real estate owned, held~~2023 Notes. See "Note 10 - Convertible Senior Notes, Net" for ~~sale due to increased costs to sell.~~full discussion of this transaction.

We ~~also~~ believe it is useful to our investors to present Distributable Earnings prior to net realized ~~gains (losses)~~losses on investments and ~~impairments~~realized gain on ~~real estate owned and investments~~extinguishment of debt to reflect our operating results because (i) our operating results are primarily comprised of earning interest income on our investments net of borrowing and administrative costs, which comprise our ongoing operations and (ii) it has been a useful factor related to our dividend per share because it is one of the considerations when a dividend is determined. We believe that our investors use Distributable Earnings and Distributable Earnings prior to net realized ~~gains (losses)~~loss on investments and ~~impairments~~realized gain on ~~real estate owned and~~extinguishment of debt, ~~investments,~~ or a comparable supplemental performance measure, to evaluate and compare the performance of our company and our peers.

A significant limitation associated with Distributable Earnings as a measure of our financial performance over any period is that it excludes unrealized gains (losses) from investments. In addition, our presentation of Distributable Earnings may not be comparable to similarly-titled measures of other companies, that use different calculations. As a result, Distributable Earnings should not be considered as a substitute for our GAAP net income as a measure of our financial performance or any measure of our liquidity under GAAP. Distributable Earnings are reduced for realized losses on loans which include losses that management believes are near certain to be realized.

The table below summarizes the reconciliation from net income available to common stockholders to Distributable Earnings and Distributable Earnings prior to net realized ~~gains (losses)~~losses on investments and ~~impairments~~realized gain on ~~real estate owned and investments~~extinguishment of debt ($ in thousands):

4647


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2022		2021		2022		2021				2023		2022
Net income available to common stockholders	Net income available to common stockholders	$	179,962	$	57,266	$	260,015	$	176,522	Net income available to common stockholders		$	45,848	$	12,170
Adjustments:	Adjustments:									Adjustments:
Equity-based compensation expense	Equity-based compensation expense	4,518		4,405		13,734		13,149		Equity-based compensation expense		4,358		4,698
Gain on foreign currency forwards		(129,252)		(32,947)		(257,227)		(39,653)
Foreign currency loss, net		92,782		24,413		210,138		27,808
Loss (gain) on foreign currency forwards										Loss (gain) on foreign currency forwards		14,135		(22,762)
Foreign currency loss (gain), net										Foreign currency loss (gain), net		(18,634)		32,518
Unrealized loss (gain) on interest rate cap	Unrealized loss (gain) on interest rate cap	(1,044)		75		(10,808)		(171)		Unrealized loss (gain) on interest rate cap		4,813		(6,321)
Realized gains (losses) relating to interest income on foreign currency hedges, net		2,908		(219)		8,020		(1,558)
Realized gains relating to interest income on foreign currency hedges, net										Realized gains relating to interest income on foreign currency hedges, net		4,733		3,684
Realized gains relating to forward points on foreign currency hedges, net	Realized gains relating to forward points on foreign currency hedges, net	1,545		63		8,168		75		Realized gains relating to forward points on foreign currency hedges, net		5,602		6,229
Amortization of the convertible senior notes related to equity reclassification		—		824		—		2,436
Depreciation and amortization on real estate owned	Depreciation and amortization on real estate owned	—		1,096		704		1,548		Depreciation and amortization on real estate owned		3,986		704
Reversal of current expected credit loss allowance, net		(55,564)		(5,766)		(37,897)		(36,590)
Realized (gains) losses and impairments on real estate owned and investments		(43,577)		—		(43,577)		20,550
Increase in current expected credit loss allowance, net										Increase in current expected credit loss allowance, net		4,390		18,611
Realized gain on extinguishment of debt										Realized gain on extinguishment of debt		(213)		—
Net realized loss on investments										Net realized loss on investments		4,624		—
Total adjustments:	Total adjustments:	(127,684)		(8,056)		(108,745)		(12,406)		Total adjustments:		27,794		37,361
Distributable Earnings prior to realized gains (losses) and impairments on real estate owned and investments		$	52,278	$	49,210	$	151,270	$	164,116
Distributable Earnings prior to net realized loss on investments and realized gain on extinguishment of debt										Distributable Earnings prior to net realized loss on investments and realized gain on extinguishment of debt		$	73,642	$	49,531

Realized gains (losses) and impairments on real estate owned and investments		$	43,577	$	—	$	43,577	$	(20,550)

Net realized loss on investments										Net realized loss on investments		$	(4,624)	$	—
Realized gain on extinguishment of debt										Realized gain on extinguishment of debt		213
Distributable Earnings	Distributable Earnings	$	95,855	$	49,210	$	194,847	$	143,566	Distributable Earnings		$	69,231	$	49,531
Diluted Distributable Earnings per share prior to realized gains (losses) and impairments on real estate owned and investments		$	0.37	$	0.35	$	1.06	$	1.15
Diluted Distributable Earnings per share prior to net realized loss on investments and realized gain on extinguishment of debt										Diluted Distributable Earnings per share prior to net realized loss on investments and realized gain on extinguishment of debt		$	0.51	$	0.35
Diluted Distributable Earnings per share of common stock	Diluted Distributable Earnings per share of common stock	$	0.67	$	0.35	$	1.36	$	1.01	Diluted Distributable Earnings per share of common stock		$	0.48	$	0.35
Weighted-average diluted shares - Distributable Earnings	Weighted-average diluted shares - Distributable Earnings	143,162,413		142,350,901		143,194,755		142,303,411		Weighted-average diluted shares - Distributable Earnings		144,294,030		142,924,803

Book Value Per Share

The table below calculates our book value per share ($ in thousands, except per share data):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Stockholders' Equity	Stockholders' Equity	$	2,407,685	$	2,294,626	Stockholders' Equity	$	2,347,561	$	2,354,504

Series B-1 Preferred Stock (Liquidation Preference)	Series B-1 Preferred Stock (Liquidation Preference)	(169,260)		(169,260)		Series B-1 Preferred Stock (Liquidation Preference)	$	(169,260)	$	(169,260)
Common Stockholders' Equity	Common Stockholders' Equity	$	2,238,425	$	2,125,366	Common Stockholders' Equity	$	2,178,301	$	2,185,244
Common Stock	Common Stock	140,595,995		139,894,060		Common Stock	141,266,039		140,595,995
Book value per share	Book value per share	$	15.92	$	15.19	Book value per share	$	15.42	$	15.54

The table below shows the changes in our book value per share:


	Book value per share
Book value per share at December 31, ~~2021~~2022	$	~~15.19~~15.54

General CECL Allowance and depreciation and amortization	~~0.28~~0.24
Book value per share at December 31, ~~2021~~2022 prior to General CECL Allowance ~~and depreciation and amortization~~	$	~~15.47~~15.78
Earnings in excess of dividends	~~0.02~~
~~Realized gain on investments~~	~~0.31~~0.16
Net ~~unrealized gain~~realized loss on investments	(0.03)

Net loss on currency and interest rate hedges(1)	~~0.29~~ (0.08)
~~Reversal of Specific CECL Allowance~~Other	~~0.18~~0.01

4748


Vesting and delivery of RSUs	(0.12)
~~Adoption of ASU 2020-06~~	~~(0.02)~~
~~Other~~	~~(0.01)~~
Book value per share at ~~September 30, 2022~~March 31, 2023 prior to General CECL Allowance and depreciation and amortization	$	~~16.12~~15.72
General CECL Allowance and depreciation and amortization	~~(0.20)~~(0.30)
Book value per share at ~~September 30, 2022~~March 31, 2023	$	~~15.92~~15.42

(1)Includes net unrealized loss on forward currency contracts and interest hedges, and realized gain on forward currency contracts related to principal outside impact of forward points.

We believe that presenting book value per share with sub-totals prior to the CECL Allowances and depreciation and amortization is useful for investors for various reasons, including, among other things, analyzing our compliance with financial covenants related to tangible net worth and debt-to-equity under our secured debt arrangements and senior secured term loan, which permit us to add the General CECL Allowance to our GAAP stockholders' equity. Given that our lenders consider book value per share prior to the General CECL Allowance as an important metric related to our debt covenants, we believe disclosing book value per share prior to the General CECL Allowance is important to investors such that they have the same visibility. We further believe that presenting book value before depreciation and amortization is useful to investors since it is a non-cash expense included in net income and is not representative of our core business and ongoing operations.

4849

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We seek to manage our risks related to the credit quality of our assets, interest rates, liquidity, prepayment speeds, and market value, while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns through ownership of our capital stock. While risks are inherent in any business enterprise, we seek to quantify and justify risks in light of available returns and to maintain capital levels consistent with the risks we undertake.

Credit Risk

One of our strategic focuses is acquiring assets that we believe to be of high credit quality. We believe this strategy will generally keep our credit losses and financing costs low. However, we are subject to varying degrees of credit risk in connection with our other target assets. We seek to mitigate this risk by seeking to acquire high quality assets, at appropriate prices given anticipated and unanticipated losses, and by deploying a value-driven approach to underwriting and diligence, consistent with the Manager’s historical investment strategy, with a focus on current cash flows and potential risks to cash flow. The Manager seeks to enhance its due diligence and underwriting efforts by accessing the Manager’s knowledge base and industry contacts. Nevertheless, unanticipated credit losses could occur, which could adversely impact our operating results.

Interest Rate Risk

Interest rates are highly sensitive to many factors, including fiscal and monetary policies, and domestic and international economic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk in connection with our target assets and our related financing obligations.

To the extent consistent with maintaining our REIT qualification, we seek to manage risk exposure to protect our portfolio of financial assets against the effects of major interest rate changes. We generally seek to manage this risk by:

•attempting to structure our financing agreements to have a range of different maturities, terms, amortizations and interest rate adjustment periods;

•using hedging instruments and interest rate swaps, when we deem appropriate; and

•to the extent available and appropriate, using securitization financing to better match the maturity of our financing with the duration of our assets.

The following table estimates the hypothetical impact on our net interest income for the twelve-month period following ~~September 30, 2022,~~March 31, 2023, assuming an immediate increase or decrease of 50 basis points in the applicable interest rate benchmark by currency ($ in thousands, except per share data):


				50 basis point increase				50 basis point decrease							50 basis point increase				50 basis point decrease
Currency	Currency	Net floating rate assets subject to interest rate sensitivity		Increase to net interest income (1)(2)		Increase to net interest income (per share) (1)(2)		Decrease to net interest income (1)(2)		Decrease to net interest income (per share) (1)(2)		Currency	Net floating rate assets subject to interest rate sensitivity		Increase to net interest income (1)(2)		Increase to net interest income (per share) (1)(2)		Decrease to net interest income (1)(2)		Decrease to net interest income (per share) (1)(2)
USD												USD	$	910,327	$	4,767	$	0.03	$	(4,746)	$	(0.03)
GBP	GBP	$	663,050	$	3,315	$	0.02	$	(3,315)	$	(0.02)	GBP	702,427		3,512		0.02		(3,512)		(0.02)
USD		698,037		6,255		0.04		(6,255)		(0.04)
EUR	EUR	390,668		1,953		0.01		(1,953)		(0.01)		EUR	49,727		249		—		(249)		—
SEK	SEK	46,656		233		—		(233)		—		SEK	342,507		1,713		0.01		(1,713)		(0.01)
Total:	Total:	$	1,798,411	$	11,756	$	0.07	$	(11,756)	$	(0.07)	Total:	$	2,004,988	$	10,241	$	0.06	$	(10,220)	$	(0.06)

———————

(1)Any such hypothetical impact on interest rates on our variable rate borrowings does not consider the effect of any change in overall economic activity that could occur in a rising or falling interest rate environment. Further, in the event of a change in interest rates of that magnitude, we may take actions to further mitigate our exposure to such a change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, this analysis assumes no changes in our financial structure.

(2)Certain of our floating rate loans are subject to index floors.

Prepayment Risk

Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, causing the return on an asset to be less than expected. In certain cases, we adapt to prepayment risk by stating prepayment penalties in loan agreements.

Market Risk

Commercial mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but

not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; retroactive changes to building or similar codes; pandemics; natural disasters and other acts of god. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans or loans, as the case may be, which could also cause us to suffer losses. Market volatility has been particularly heightened due to the COVID-19 pandemic. COVID-19 and its variants have disrupted economic activities and could have a continued significant adverse effect on economic and market conditions including rising inflation, increases in interest rates, limited lending from financial institutions, depressed asset values, and limited market liquidity.

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our financial statements are prepared in accordance with GAAP and distributions are determined by our board of directors consistent with our obligation to distribute to our stockholders at least 90% of our REIT taxable income, excluding net capital gains and determined without regard to the dividends paid deduction, on an annual basis in order to maintain our REIT qualification. In each case, our activities and balance ~~sheet~~sheets are measured with reference to historical cost and/or fair market value without considering inflation.

Currency Risk

Some of our loans and secured debt arrangements are denominated in a foreign currency and subject to risks related to fluctuations in currency rates. We seek to mitigate this exposure through foreign currency forward contracts, which match the net principal and interest of our foreign currency loans and secured debt arrangements.

5051

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) required by paragraph (b) of Rule 13a-15 or Rule 15d-15, have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to ~~ARI~~our company that would potentially be subject to disclosure under the Exchange Act, and the rules and regulations promulgated thereunder.

During the ~~period~~three months ended ~~September 30, 2022,~~March 31, 2023, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within ~~ARI~~our company to disclose material information otherwise required to be set forth in our periodic reports.

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. Refer to "Note 17 - Commitments and Contingencies" for further detail regarding legal proceedings.

Item 1A. Risk Factors

For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed in "Item 1A. Risk Factors" in our Annual ~~Report.~~Report on Form 10-K.

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

Not Applicable.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits and Financial Statement Schedules.


3.1						Articles of Amendment and Restatement of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 3.1 of the Registrant’s Form S-11, as amended (Registration No. 333-160533).

3.2						By-laws of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 3.3 of the Registrant’s Form S-4 (Registration No. 333-210632).

3.3						Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.'s 7.25% Series B-1 Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.1 of the Registrant's Form 8-K filed on July 20, 2021 (File No.: 001-34452).


4.1						Specimen Stock Certificate of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 4.1 of the Registrant’s Form S-11, as amended (Registration No. 333-160533).

4.2

Indenture, dated as of March 17, 2014, between the Registrant and Wells Fargo Bank, National Association, as Trustee, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on March 21, 2014 (File No.: 001-34452).

4.3

Second Supplemental Indenture, dated as of August 21, 2017, between the Registrant and Wells Fargo Bank, National Association, as Trustee (including the form of 4.75% Convertible Senior Note due 2022), incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on August 21, 2017 (File No.: 001-34452).

4.4

Third Supplemental Indenture, dated as of October 5, 2018 between the Registrant and Wells Fargo Bank, National Association, as Trustee (including the form of 5.375% Convertible Senior Note due 2023), incorporated by reference to Exhibit 4.2 of the Registrant's Form 8-K filed on October 5, 2018 (File No.: 001-34452).

4.5

Indenture dated as of June 29, 2021, by and among Apollo Commercial Real Estate Finance, Inc., as issuer, ACREFI Operating, LLC, ARM Operating, LLC and ACREFI Mortgage Lending, LLC, as guarantors, Wells Fargo Bank, National Association, as trustee and notes collateral agent (including the form of Apollo Commercial Real Estate Finance, Inc.’s 4.625% Senior Secured Notes due 2029), incorporated by reference to Exhibit 4.1 of the Registrant's Form 8-K filed on July 6, 2021 (File No.: 001-34452).

31.1*

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley Act of 2002.

101.INS*

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Inline XBRL Taxonomy Extension Schema

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*			Filed herewith.

5253

SIGNATURES

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

Apollo Commercial Real Estate Finance, Inc.

~~October 24, 2022~~April 26, 2023

By:

/s/ Stuart A. Rothstein

Stuart A. Rothstein

President and Chief Executive Officer (Principal Executive Officer)

~~October 24, 2022~~April 26, 2023

By:

/s/ Anastasia Mironova

Anastasia Mironova

Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer)

5354


									Page
			Part I - Financial Information
			Item 1. Financial Statements						4
			Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations						3235
			Item 3. Quantitative and Qualitative Disclosures About Market Risk						4650
			Item 4. Controls and Procedures.						4852

			Part II - Other Information
			Item 1. Legal Proceedings.						4852
			Item 1A. Risk Factors						4852
			Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						4852
			Item 3. Defaults Upon Senior Securities						4852
			Item 4. Mine Safety Disclosures.						4852
			Item 5. Other Information						4852
			Item 6. Exhibits						4852


	For the nine months ended September 30,
	2022		2021
Cash flows provided by operating activities:
Net income	$	269,219	$	186,418
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of discount/premium and PIK	(39,828)		(61,029)
Amortization of deferred financing costs	8,582		9,358
Equity-based compensation	13,734		13,149
Reversal of current expected credit loss allowance, net	(37,897)		(36,590)
Foreign currency loss	199,587		28,155
Unrealized gain on derivative instruments	(232,431)		(41,028)
Depreciation and amortization	704		1,548
Loss from unconsolidated joint venture	—		161
Realized (gain) loss and impairments on investments and real estate owned	(43,577)		20,550
Changes in operating assets and liabilities:
Proceeds received from PIK interest	83,731		35,400
Other assets	(24,149)		772
Accounts payable, accrued expenses and other liabilities	27,454		8,024
Payable to related party	(11)		(15)
Net cash provided by operating activities	225,118		164,873
Cash flows used in investing activities:
New funding of commercial mortgage loans	(2,753,609)		(1,463,619)
Add-on funding of commercial mortgage loans	(407,063)		(226,773)

Add-on funding of subordinate loans and other lending assets	(85,964)		(132,302)
Proceeds received from the repayment and sale of commercial mortgage loans	1,316,431		725,196
Proceeds received from the repayment of subordinate loans and other lending assets	129,760		236,770
Origination and exit fees received on commercial mortgage loans, and subordinate loans and other lending assets, net	42,779		21,058
Proceeds received from the sale of real estate owned, held for sale	—		42,356
Capital expenditures on real estate assets	(21,160)		(65)
Cash received from hotel title assumption	—		4,148
Increase in collateral related to derivative contracts, net	255,110		29,450
Net cash used in investing activities	(1,523,716)		(763,781)
Cash flows provided by financing activities:


Payment of offering costs	—		(40)


Proceeds from secured debt arrangements	2,770,405		1,173,613
Repayments of secured debt arrangements	(1,118,630)		(1,126,627)
Repayments of senior secured term loan principal	(6,000)		(5,250)
Repayments of convertible notes	(345,000)		—
Proceeds from issuance of senior secured term loan	—		297,000

Proceeds from issuance of senior secured notes	—		500,000

Repayment of debt related to real estate owned	—		(143,073)
Proceeds related to financing on real estate owned	164,835		—
Payment of deferred financing costs	(15,333)		(14,816)


Other financing activities	(6,972)		(4,278)
Dividends on common stock	(150,467)		(149,809)
Dividends on preferred stock	(9,204)		(9,896)
Net cash provided by financing activities	1,283,634		516,824
Net decrease in cash and cash equivalents, including cash classified within assets related to real estate owned, held for sale	(14,964)		(82,084)
Less increase in cash classified within assets related to real estate owned, held for sale	(5,858)		—
Net decrease in cash and cash equivalents	(20,822)		(82,084)
Cash and cash equivalents, beginning of period	343,106		325,498
Effects of foreign currency translation on cash and cash equivalents	(3,020)		—
Cash and cash equivalents, end of period	$	319,264	$	243,414
Supplemental disclosure of cash flow information:
Interest paid	$	151,348	$	96,092
Supplemental disclosure of non-cash financing activities:

Dividend declared, not yet paid	$	53,175	$	52,398

Change in participation sold	$	(4,368)	$	19,644

Change in loan proceeds held by servicer	$	5,871	$	8,732
Deferred financing costs, not yet paid	$	—	$	4,145
Repayments of PIK on participation sold	$	—	$	(27,670)

Assumption of real estate	$	270,035	$	154,300
Assumption of debt related to real estate owned	$	—	$	(110,073)
Assumption of other assets related to real estate owned	$	—	$	1,555
Assumption of accounts payable and other liabilities related to real estate owned	$	—	$	(4,641)
Transfer of assets to assets related to real estate owned, held for sale	$	(156,201)	$	—
Transfer of liabilities to liabilities related to real estate owned, held for sale	$	6,116	$	—
Transfer of subordinate loans to real estate owned	$	—	$	(45,289)
Transfer of subordinate loans to held for sale	$	—	$	41,773
Retirement of Series B Preferred Stock	$	—	$	(169,260)
Issuance of Series B-1 Preferred Stock	$	—	$	169,260


		Specific CECL Allowance(4)		General CECL Allowance						Total CECL Allowance		CECL Allowance as % of Amortized Cost(4)
				Funded		Unfunded		Total				General		Total
December 31, 2021		$	145,000	$	33,588	$	3,106	$	36,694	$	181,694	0.49	%	2.26	%
Changes:
	Q1 Allowance (Reversals)(1)	30,000		(12,211)		822		(11,389)		18,611
March 31, 2022		$	175,000	$	21,377	$	3,928	$	25,305	$	200,305	0.32	%	2.34	%
Changes:
	Q2 Allowance (Reversals), net(2)	(3,000)		1,985		71		2,056		(944)

June 30, 2022		$	172,000	$	23,362	$	3,999	$	27,361	$	199,361	0.33	%	2.18	%
Changes:
	Q3 (Reversals), net(3)	$	(53,000)	(1,377)		(1,187)		(2,564)		(55,564)
September 30, 2022		$	119,000	$	21,985	$	2,812	$	24,797	$	143,797	0.30	%	1.62	%


		Specific CECL Allowance(5)		General CECL Allowance						Total CECL Allowance		CECL Allowance as % of Amortized Cost(5)
				Funded		Unfunded		Total				General		Total
December 31, 2020		$	175,000	$	38,102	$	3,365	$	41,467	$	216,467	0.67	%	3.23	%
Changes:
	Q1 Allowance (Reversals)(1)	—		(1,667)		429		(1,238)		(1,238)
March 31, 2021		$	175,000	$	36,435	$	3,794	$	40,229	$	215,229	0.62	%	3.06	%
Changes:
	Q2 Allowance (Reversals)(2)	(20,000)		1,764		(1,350)		414		(19,586)
	Write-offs(3)	(10,000)		—		—		—		(10,000)
June 30, 2021		$	145,000	$	38,199	$	2,444	$	40,643	$	185,643	0.57	%	2.41	%
Changes:
	Q3 Allowance (Reversals)(4)	—		(5,515)		(251)		(5,766)		(5,766)

September 30, 2021		$	145,000	$	32,684	$	2,193	$	34,877	$	179,877	0.51	%	2.43	%


			Total / Weighted-Average Loan Portfolio			3.1						$8,731			$1,128									3.0 Years


	September 30, 2022	December 31, 2021
Debt to Equity Ratio(1)	2.8	2.4