UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

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

1934.

For the quarterly period ended September 30, 2017.

2023

OR

☐

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

For the transition period from ________ to

________

Commission file number 001-38156

trtx-20220630_g1.jpg
TPG RE Finance Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland

36-4796967

Maryland

36-4796967
(State or other jurisdiction of


incorporation or organization)

(I.R.S. Employer


Identification No.)

888 Seventh Avenue, 35th35th Floor

New York, New York 10106

(Address of principal executive offices)(Zip (Zip Code)

(212) 601-7400

601-4700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareTRTXNew York Stock Exchange
6.25% Series C Cumulative Redeemable Preferred Stock, par value $0.001 per shareTRTX PRCNew 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 ☐

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). YES ☒  NO ☐

Yes x No o

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 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

☐

x

Accelerated Filer

☐

o

Non-accelerated Filer

☒

o

(Do not check if a smaller reporting company)

Smaller Reporting Company

☐

o

Emerging Growth Company

☐

o

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. ☐

o

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

. Yes o No x

As of November 3, 2017,October 27, 2023, there were 59,618,30277,734,786 shares of the registrant’s common stock, $0.001 par value per share, and 1,213,026 sharesoutstanding.

Table of the registrant’s Class A common stock, $0.001 par value per share, outstanding.

Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements 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”), which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believe,” “expect,” “potential,” “continue,” “may,” “should,” “seek,” “approximately,” “predict,” “intend,” “will,” “plan,” “estimate,” “anticipate,” the negative version of these words, other comparable words or other statements that do not relate strictly to historical or factual matters. By their nature, forward-looking statements speak only as of the date they are made, are not statements of historical fact or guarantees of future performance and are subject to risks, uncertainties, assumptions or changes in circumstances that are difficult to predict or quantify. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will occur or be achieved, and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-Q. Such risks, uncertainties and other important factors include, among others, the risks, uncertainties and factors set forth under the heading “Risk Factors” in our prospectus dated July 19, 2017,Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on JulyFebruary 21, 2017 pursuant to Rule 424(b)(4) under the Securities Act (the “Prospectus”),2023, as such risk factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Such risks, uncertainties and uncertaintiesother factors include, but are not limited to, the following:

•the general political, economic, regulatory, competitive and competitiveother conditions in the markets in which we invest;

•the level and volatility of prevailing interest rates and credit spreads;

•adverse changes in the real estate and real estate capital markets;

•general volatility of the securities markets in which we participate;

•changes in our business, investment strategies or target assets;

•difficulty in obtaining financing or raising capital;

•an inability to borrow incremental amounts or an obligation to repay amounts under our financing arrangements;

•reductions in the yield on our investments and increases in the cost of our financing;

•events giving rise to increases in our current expected credit loss reserve;

•adverse legislative or regulatory developments, including with respect to tax laws, securities laws and the laws governing financing and lending institutions;

•acts of God such as hurricanes, floods, earthquakes, wildfires, mudslides, volcanic eruptions, and other natural disasters, acts of war and/or terrorism and other events that may cause unanticipated and uninsured performance declines and/or losses to us or the owners and operators of the real estate securing our investments;

•global economic trends and economic conditions, including heightened inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, stress to the commercial banking systems of the U.S. and Western Europe, labor shortages, currency fluctuations and challenges in global supply chains;

•the failure of any banks with which we and/or our borrowers have a commercial relationship could adversely affect, among other things, our borrower's ability to access deposits or obtaining financing on favorable terms or at all;

•higher interest rates imposed by the Federal Reserve may lead to a decrease in prepayment speeds and an increase in the number of borrowers who exercise extension options, which could extend beyond the term of certain secured financing agreements we use to finance our loan investments;
•reduced demand for office space, including as a result of the COVID-19 pandemic and/or hybrid work schedules which allow work from remote locations other than the employer's office premises;
•changes in the availability of attractive loan and other investment opportunities, whether they are due to competition, regulation or otherwise;
•deterioration in the performance of properties securing our investments that may cause deterioration in the performance of our investments, adversely impact certain of our financing arrangements and our liquidity, and potentially expose us to principal losses to us; 

on our investments;

•defaults by borrowers in paying debt service or principal on outstanding indebtedness;

•the adequacy of collateral securing our investments and declines in the fair value of our investments;


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•adverse developments in the availability of desirable investment opportunities; 

opportunities, whether due to competition, regulation or otherwise;
•difficulty or delays in redeploying the proceeds from repayments of our existing investments;

•increased competition from entities engaged in mortgage lending and/or investing in our target assets;

•difficulty in successfully managing our growth, including integrating new assets into our existing systems;

•the cost of operating our platform, including, but not limited to, the cost of operating a real estate investment platform and the cost of operating as a publicly traded company;

•the availability of qualified personnel and our relationship with TPG RE Finance Trust Management, L.P. (our “Manager”);

our Manager;

•conflicts with TPG and its affiliates, including our Manager, or the personnel of TPG Global, LLC and its affiliates (“TPG”) providing services to us, including our officers, and certain funds managed by TPG;

•our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes and our ability to maintain our exemption or exclusion from registration under the Investment Company Act of 1940, as amended (the “Investment Company Act”); and

•authoritative U.S. generally accepted accounting principles (or “GAAP”) or policy changes from such standard-setting bodies such as the Financial Accounting Standards Board (“FASB”), the SEC,Securities and Exchange Commission (“SEC”), the Internal Revenue Service (the “IRS”(“IRS”), the New York Stock Exchange (the “NYSE)(“NYSE”) and other authorities that we are subject to, as well as their counterparts in any foreign jurisdictions where we might do business.

There may be other risks, uncertainties or factors that may cause our actual results to differ materially from the forward-looking statements, including risks, uncertainties, and factors disclosed under the sectionssection entitled “Risk Factors” in our Prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q. You should evaluate all forward-looking statements made in this Form 10-Q in the context of these risks, uncertainties and uncertainties.

other factors.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. All forward-looking statements in this Form 10-Q apply only as of the date made and are expressly qualified in their entirety by the cautionary statements included in this Form 10-Q and in other filings we make with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances, except as required by law.

Except

In this quarterly report, except where the context requires otherwise, the terms “Company,otherwise:
•“Company,” “we,” “us,” and “our” refer to TPG RE Finance Trust, Inc., a Maryland corporation and, where applicable, its subsidiaries; the term “Manager”subsidiaries.
•“Manager” refers to our external manager, TPG RE Finance Trust Management, L.P., a Delaware limited partnership; and the term “TPG”partnership.
•“TPG” refers to TPG Inc., a Delaware corporation (previously TPG Global, LLC, a Delaware limited liability company,company), and its affiliates.

•“TPG Fund” refers to any partnership or other pooled investment vehicle, separate account, fund-of-one or any similar arrangement or investment program sponsored, advised or managed (including on a subadvisory basis) by TPG, whether currently in existence or subsequently established (in each case, including any related alternative investment vehicle, parallel or feeder investment vehicle, co-investment vehicle and any entity formed in connection therewith, including any entity formed for investments by TPG and its affiliates in any such vehicle, whether invested as a limited partner or through general partner investments).

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Table of Contents
Part I. FinancialFinancial Information

Item 1. Financial Statements

TPG RE Finance Trust, Inc.

Consolidated Balance Sheets (Unaudited)

(dollars in thousands, except share data)
September 30, 2023December 31, 2022
Assets(1)
Cash and cash equivalents$302,262 $254,050 
Restricted cash83 265 
Accounts receivable24 666 
Collateralized loan obligation proceeds held at trustee237,521 297,168 
Accounts receivable from servicer/trustee5,327 163,648 
Accrued interest and fees receivable35,297 41,742 
Loans held for investment3,952,102 4,978,674 
Allowance for credit losses(213,258)(197,272)
Loans held for investment, net (includes $1,354,430 and $1,538,859, respectively, pledged as collateral under secured financing agreements)3,738,844 4,781,402 
Real estate owned111,960 — 
Other assets26,005 6,197 
Total assets$4,457,323 $5,545,138 
Liabilities and stockholders’ equity(1)
Liabilities
Accrued interest payable$10,105 $11,080 
Accrued expenses and other liabilities(2)
38,854 25,132 
Collateralized loan obligations, net1,973,911 2,452,212 
Secured financing agreements, net1,027,618 1,147,288 
Asset-specific financings, net213,397 561,017 
Mortgage loan payable, net30,514 — 
Payable to affiliates5,545 5,984 
Deferred revenue1,003 1,459 
Dividends payable18,921 18,970 
Total liabilities3,319,868 4,223,142 
Commitments and contingencies - see Note 14
Permanent equity
Series A preferred stock ($0.001 par value per share; 100,000,000 and 100,000,000 shares authorized; 125 and 125 shares issued and outstanding, respectively) ($125 aggregate liquidation preference)— — 
Series C preferred stock ($0.001 par value per share; 8,050,000 shares authorized; 8,050,000 and 8,050,000 shares issued and outstanding, respectively) ($201,250 aggregate liquidation preference)8 8 
Common stock ($0.001 par value per share; 302,500,000 and 302,500,000 shares authorized, respectively; 77,734,786 and 77,410,282 shares issued and outstanding, respectively)77 77 
Additional paid-in-capital1,721,708 1,716,938 
Accumulated deficit(584,338)(395,027)
Total stockholders' equity1,137,455 1,321,996 
Total permanent equity1,137,455 1,321,996 
Total liabilities and stockholders' equity$4,457,323 $5,545,138 
________________________
(1)The Company’s consolidated Total Assets and Total Liabilities as of September 30, 2023 include assets and liabilities of variable interest entities (“VIEs”) of $2.6 billion and $2.0 billion, respectively. The Company’s consolidated Total Assets and Total Liabilities as of December 31, 2022 include assets and liabilities of VIEs of $3.3 billion and $2.5 billion, respectively. These assets can be used only to satisfy obligations of the VIEs, and creditors of the VIEs have recourse only to these assets, and not to TPG RE Finance Trust, Inc. See Note 5 to the Consolidated Financial Statements for details.
(2)Includes $23.4 million and $17.3 million of reserve for expected losses for unfunded loan commitments as of September 30, 2023 and December 31, 2022, respectively.
See accompanying notes to the Consolidated Financial Statements
1
Table of Contents
TPG RE Finance Trust, Inc.
Consolidated Statements of Income (Loss)
and Comprehensive Income (Loss) (Unaudited)
(dollars in thousands, except share and per share data)

 

 

September 30,

2017

 

 

December 31,

2016

 

ASSETS(1)

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

64,801

 

 

$

103,126

 

Restricted Cash

 

 

499

 

 

 

849

 

Accounts Receivable

 

 

141

 

 

 

644

 

Accounts Receivable from Servicer/Trustee

 

 

51,076

 

 

 

34,743

 

Accrued Interest Receivable

 

 

13,764

 

 

 

14,023

 

Loans Held for Investment (includes $2,313,036 and $1,397,610 pledged as collateral

   under repurchase agreements)

 

 

2,824,713

 

 

 

2,449,990

 

Investment in Commercial Mortgage-Backed Securities, Available-for-Sale (includes

   $48,029 and $51,305 pledged as collateral under repurchase agreements)

 

 

86,182

 

 

 

61,504

 

Other Assets, Net

 

 

1,506

 

 

 

704

 

Total Assets

 

$

3,042,682

 

 

$

2,665,583

 

LIABILITIES AND STOCKHOLDERS’ EQUITY(1)

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Accrued Interest Payable

 

$

3,733

 

 

$

2,907

 

Accrued Expenses

 

 

8,091

 

 

 

6,555

 

Collateralized Loan Obligation (net of deferred financing costs of $0 and $2,541)

 

 

—

 

 

 

540,780

 

Repurchase and Senior Secured Agreements (net of deferred financing costs of $8,753

   and $8,159)

 

 

1,531,345

 

 

 

1,013,370

 

Notes Payable (net of deferred financing costs of $2,917 and $2,883)

 

 

261,875

 

 

 

108,499

 

Payable to Affiliates

 

 

9,148

 

 

 

3,955

 

Deferred Revenue

 

 

557

 

 

 

482

 

Dividends Payable

 

 

20,135

 

 

 

18,346

 

Total Liabilities

 

 

1,834,884

 

 

 

1,694,894

 

Commitments and Contingencies—See Note 14

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Preferred Stock ($0.001 par value; 100,000,000 and 125 shares authorized;

   125 and 125 shares issued and outstanding, respectively)

 

 

—

 

 

 

—

 

Common Stock ($0.001 par value; 300,000,000 and 95,500,000 shares authorized;

   59,791,742 and 47,251,165 shares issued and outstanding, respectively)

 

 

60

 

 

 

39

 

Class A Common Stock ($0.001 par value; 2,500,000 and 2,500,000 shares authorized;

   1,213,026 and 1,194,863 shares issued and outstanding, respectively)

 

 

1

 

 

 

1

 

Additional Paid-in-Capital

 

 

1,216,725

 

 

 

979,467

 

Accumulated Deficit

 

 

(8,968

)

 

 

(10,068

)

Accumulated Other Comprehensive (Loss) Income

 

 

(20

)

 

 

1,250

 

Total Stockholders' Equity(2)

 

 

1,207,798

 

 

 

970,689

 

Total Liabilities and Stockholders' Equity

 

$

3,042,682

 

 

$

2,665,583

 

(1)

At September 30, 2017 there were no VIE assets or liabilities recorded in the Company’s Total Assets and Total Liabilities. The Company’s consolidated Total Assets and Total Liabilities at December 31, 2016 include VIE assets and liabilities of $743.5 million and $542.8 million, respectively. These assets can be used only to satisfy obligations of the VIE, and creditors of the VIE have recourse only to these assets, and not to TPG RE Finance Trust, Inc. See Note 5 to the Consolidated Financial Statements for details.

(2)

Shares issued and shares outstanding reflect the impact of the common stock and Class A common stock dividend which was paid upon completion of the Company’s initial public offering on July 25, 2017 to holders of record as of July 3, 2017. See Note 12 to the Consolidated Financial Statements for details.

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Interest income and interest expense
Interest income$90,046 $75,497 $278,488 $202,535 
Interest expense(70,497)(45,072)(211,057)(95,581)
Net interest income19,549 30,425 67,431 106,954 
Other revenue
Other income, net5,439 1,362 13,918 2,009 
Revenue from real estate owned operations2,028 — 3,556 — 
Total other revenue7,467 1,362 17,474 2,009 
Other expenses
Professional fees1,257 1,074 4,159 3,370 
General and administrative718 1,197 2,875 3,315 
Stock compensation expense1,153 932 4,770 3,526 
Servicing and asset management fees648 494 801 1,481 
Management fee5,545 5,906 17,513 17,471 
Incentive management fee— — — 5,183 
Expenses from real estate owned operations3,098 — 4,946 — 
Total other expenses12,419 9,603 35,064 34,346 
Gain on sale of real estate owned, net— — — 13,291 
Credit loss expense, net(75,805)(136,666)(172,658)(183,840)
(Loss) income before income taxes(61,208)(114,482)(122,817)(95,932)
Income tax expense, net(5)(125)(194)(328)
Net (loss) income$(61,213)$(114,607)$(123,011)$(96,260)
Preferred stock dividends and participating securities' share in earnings(3,423)(3,307)(10,526)(10,026)
Net (loss) income attributable to common stockholders - see Note 11$(64,636)$(117,914)$(133,537)$(106,286)
(Loss) earnings per common share, basic$(0.83)$(1.52)$(1.72)$(1.38)
(Loss) earnings per common share, diluted$(0.83)$(1.52)$(1.72)$(1.38)
Weighted average number of common shares outstanding
Basic:77,730,715 77,403,487 77,520,736 77,259,382 
Diluted:77,730,715 77,403,487 77,520,736 77,259,382 
Other comprehensive (loss) income
Net (loss) income$(61,213)$(114,607)$(123,011)$(96,260)
Comprehensive net (loss) income$(61,213)$(114,607)$(123,011)$(96,260)

See accompanying notes to the Consolidated Financial Statements


2

Table of Contents
TPG RE Finance Trust, Inc.

Consolidated Statements of Income

and Comprehensive Income

Changes in Equity (Unaudited)

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

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

$

46,734

 

 

$

40,419

 

 

$

146,411

 

 

$

112,551

 

Interest Expense

 

 

(19,150

)

 

 

(16,937

)

 

 

(56,585

)

 

 

(44,943

)

Net Interest Income

 

 

27,584

 

 

 

23,482

 

 

 

89,826

 

 

 

67,608

 

OTHER REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income, net

 

 

669

 

 

 

15

 

 

 

1,036

 

 

 

326

 

Total Other Revenue

 

 

669

 

 

 

15

 

 

 

1,036

 

 

 

326

 

OTHER EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional Fees

 

 

1,256

 

 

 

1,133

 

 

 

2,448

 

 

 

2,359

 

General and Administrative

 

 

1,003

 

 

 

387

 

 

 

2,192

 

 

 

1,833

 

Servicing and Asset Management Fees

 

 

720

 

 

 

1,232

 

 

 

3,061

 

 

 

2,742

 

Management Fee

 

 

4,133

 

 

 

2,244

 

 

 

9,489

 

 

 

6,377

 

Collateral Management Fee

 

 

23

 

 

 

207

 

 

 

225

 

 

 

700

 

Incentive Management Fee

 

 

327

 

 

 

716

 

 

 

3,713

 

 

 

2,790

 

Total Other Expenses

 

 

7,462

 

 

 

5,919

 

 

 

21,128

 

 

 

16,801

 

Income Before Income Taxes

 

 

20,791

 

 

 

17,578

 

 

 

69,734

 

 

 

51,133

 

Income Taxes

 

 

—

 

 

 

(136

)

 

 

(140

)

 

 

(326

)

Net Income

 

$

20,791

 

 

$

17,442

 

 

$

69,594

 

 

$

50,807

 

Preferred Stock Dividends

 

 

(4

)

 

 

(3

)

 

 

(12

)

 

 

(11

)

Net Income Attributable to Common Stockholders

 

$

20,787

 

 

$

17,439

 

 

$

69,582

 

 

$

50,796

 

Basic Earnings per Common Share(1)

 

$

0.35

 

 

$

0.43

 

 

$

1.34

 

 

$

1.30

 

Diluted Earnings per Common Share(1)

 

$

0.35

 

 

$

0.43

 

 

$

1.34

 

 

$

1.30

 

Weighted Average Number of Common Shares Outstanding(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

58,685,979

 

 

 

40,946,029

 

 

 

51,969,733

 

 

 

39,096,974

 

Diluted:

 

 

58,685,979

 

 

 

40,946,029

 

 

 

51,969,733

 

 

 

39,096,974

 

Dividends Declared per Common Share(1)

 

$

0.33

 

 

$

0.41

 

 

$

1.02

 

 

$

1.18

 

OTHER COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

20,791

 

 

$

17,442

 

 

$

69,594

 

 

$

50,807

 

Unrealized (Loss) Gain on Commercial Mortgage-Backed Securities

 

 

(2,558

)

 

 

1,542

 

 

 

(1,270

)

 

 

2,579

 

Comprehensive Net Income

 

$

18,233

 

 

$

18,984

 

 

$

68,324

 

 

$

53,386

 

Permanent equity
Series A Preferred StockSeries C Preferred StockCommon Stock
SharesPar valueSharesPar valueSharesPar valueAdditional
paid-in-capital		Accumulated
deficit		Total
stockholders'
equity
January 1, 2023125 $— 8,050,000 $8 77,410,282 $77 $1,716,938 $(395,027)$1,321,996 
Issuance of common stock— — — — 3,724 — — — — 
Amortization of stock compensation expense— — — — — — 1,804 — 1,804 
Net income— — — — — — — 7,375 7,375 
Dividends on preferred stock— — — — — — — (3,148)(3,148)
Dividends on common stock (dividends declared per share of $0.24)— — — — — — — (18,970)(18,970)
March 31, 2023125 $— 8,050,000 $8 77,414,006 $77 $1,718,742 $(409,770)$1,309,057 
Issuance of common stock— — — — 316,572 — — — — 
Amortization of stock compensation expense— — — — — — 1,813 — 1,813 
Net loss— — — — — — — (69,173)(69,173)
Dividends on preferred stock— — — — — — — (3,148)(3,148)
Dividends on common stock (dividends declared per share of $0.24)— — — — — — — (18,969)(18,969)
June 30, 2023125 $— 8,050,000 $8 77,730,578 $77 $1,720,555 $(501,060)$1,219,580 
Issuance of common stock— — — — 4,208 — — — — 
Amortization of stock compensation expense— — — — — — 1,153 — 1,153 
Net loss— — — — — — — (61,213)(61,213)
Dividends on preferred stock— — — — — — — (3,148)(3,148)
Dividends on common stock (dividends declared per share of $0.24)— — — — — — — (18,917)(18,917)
September 30, 2023125 $— 8,050,000 $8 77,734,786 $77 $1,721,708 $(584,338)$1,137,455 

(1)

Share and per share data reflect the impact of the common stock and Class A common stock dividend which was paid upon completion of the Company’s initial public offering on July 25, 2017 to holders of record as of July 3, 2017. See Note 12 to the Consolidated Financial Statements for details.

TPG RE Finance Trust, Inc.

Consolidated Statements of
Changes in Equity (Unaudited)
(dollars in thousands, except share and per share data)
Permanent equity
Series A Preferred StockSeries C Preferred StockCommon Stock
SharesPar valueSharesPar valueSharesPar valueAdditional
paid-in-capital		Accumulated
deficit		Total
stockholders'
equity
January 1, 2022125 $— 8,050,000 $8 77,183,892 $77 $1,711,886 $(247,265)$1,464,706 
Issuance of common stock— — — — 1,953 — — — — 
Amortization of stock compensation expense— — — — — — 1,266 — 1,266 
Net income— — — — — — — 23,781 23,781 
Dividends on preferred stock— — — — — — — (3,148)(3,148)
Dividends on common stock (dividends declared per share of $0.24)— — — — — — — (18,697)(18,697)
March 31, 2022125 $— 8,050,000 $8 77,185,845 $77 $1,713,152 $(245,329)$1,467,908 
Issuance of common stock— — — — 217,536 — — — — 
Amortization of stock compensation expense— — — — — — 1,328 — 1,328 
Net loss— — — — — — — (5,434)(5,434)
Dividends on preferred stock— — — — — — — (3,148)(3,148)
Dividends on common stock (dividends declared per share of $0.24)— — — — — — — (18,726)(18,726)
June 30, 2022125 $— 8,050,000 $8 77,403,381 $77 $1,714,480 $(272,637)$1,441,928 
Issuance of common stock— — — — 3,239 — — — — 
Amortization of stock compensation expense— — — — — — 932 — 932 
Net loss— — — — — — — (114,607)(114,607)
Dividends on preferred stock— — — — — — — (3,148)(3,148)
Dividends on common stock (dividends declared per share of $0.24)— — — — — — — (18,711)(18,711)
September 30, 2022125 $— 8,050,000 $8 77,406,620 $77 $1,715,412 $(409,103)$1,306,394 
See accompanying notes to the Consolidated Financial Statements


3

Table of Contents
TPG RE Finance Trust, Inc.

Consolidated Statements of

Changes Cash Flows (Unaudited)

(dollars in Equity (Unaudited)

(In thousands, except share data)

thousands)

 

 

Preferred Stock

 

 

Common Stock

 

 

 

 

Class A Common

Stock

 

 

Additional

 

 

 

 

 

 

Accumulated

Other

 

 

 

 

 

 

 

Shares

 

 

Par

Value

 

 

Shares

 

 

Par

Value

 

 

 

 

Shares

 

 

Par

Value

 

 

Paid-

in-Capital

 

 

Accumulated

Deficit

 

 

Comprehensive

(Loss) Income

 

 

Total

Equity

 

Balance at December 31, 2015

 

 

125

 

 

$

—

 

 

 

28,309,783

 

 

$

29

 

 

 

 

 

783,158

 

 

$

1

 

 

$

729,477

 

 

$

(13,157

)

 

$

—

 

 

$

716,350

 

Issuance of Class A Common Stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

74,401

 

 

 

—

 

 

 

1,832

 

 

 

—

 

 

 

—

 

 

 

1,832

 

Issuance of Common Stock

 

 

—

 

 

 

—

 

 

 

3,987,337

 

 

 

4

 

 

 

 

 

—

 

 

 

—

 

 

 

98,164

 

 

 

—

 

 

 

—

 

 

 

98,168

 

Net Income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

50,807

 

 

 

—

 

 

 

50,807

 

Other Comprehensive Income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

—

 

 

 

—

 

 

 

2,579

 

 

 

2,579

 

Dividends on Preferred Stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(11

)

 

 

—

 

 

 

(11

)

Dividends on Common Stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(47,292

)

 

 

—

 

 

 

(47,292

)

Dividends on Class A Common Stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,224

)

 

 

—

 

 

 

(1,224

)

Balance at September 30, 2016

 

 

125

 

 

$

-

 

 

 

32,297,120

 

 

$

33

 

 

 

 

 

857,559

 

 

$

1

 

 

$

829,473

 

 

$

(10,877

)

 

$

2,579

 

 

$

821,209

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2016

 

 

125

 

 

$

—

 

 

 

38,260,053

 

 

$

39

 

 

 

 

 

967,500

 

 

$

1

 

 

$

979,467

 

 

$

(10,068

)

 

$

1,250

 

 

$

970,689

 

Issuance of Class A Common Stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

14,711

 

 

 

—

 

 

 

365

 

 

 

—

 

 

 

—

 

 

 

365

 

Issuance of Common Stock

 

 

—

 

 

 

—

 

 

 

12,642,166

 

 

 

12

 

 

 

 

 

—

 

 

 

—

 

 

 

257,622

 

 

 

—

 

 

 

—

 

 

 

257,634

 

Common Stock and Class A Common Stock Dividend

 

 

—

 

 

 

—

 

 

 

9,224,268

 

 

 

9

 

 

 

 

 

230,815

 

 

 

—

 

 

 

(9

)

 

 

—

 

 

 

—

 

 

 

—

 

Retired Common Stock

 

 

—

 

 

 

—

 

 

 

(334,745

)

 

 

—

 

 

 

 

 

—

 

 

 

—

 

 

 

(7

)

 

 

(6,551

)

 

 

—

 

 

 

(6,558

)

Initial Public Offering Transaction Costs

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

—

 

 

 

—

 

 

 

(20,713

)

 

 

—

 

 

 

—

 

 

 

(20,713

)

Net Income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

69,594

 

 

 

—

 

 

 

69,594

 

Other Comprehensive (Loss)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,270

)

 

 

(1,270

)

Dividends on Preferred Stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(12

)

 

 

—

 

 

 

(12

)

Dividends on Common Stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(60,566

)

 

 

—

 

 

 

(60,566

)

Dividends on Class A Common Stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,365

)

 

 

—

 

 

 

(1,365

)

Balance at September 30, 2017

 

 

125

 

 

$

—

 

 

 

59,791,742

 

 

$

60

 

 

 

 

 

1,213,026

 

 

$

1

 

 

$

1,216,725

 

 

$

(8,968

)

 

$

(20

)

 

$

1,207,798

 

Nine Months Ended September 30,
20232022
Cash flows from operating activities:
Net (loss)$(123,011)$(96,260)
Adjustment to reconcile net income to net cash flows from operating activities:
Amortization and accretion of premiums, discounts and loan origination fees, net(9,738)(5,266)
Amortization of deferred financing costs10,876 10,637 
Depreciation and amortization2,358 — 
Amortization of above and below-market leases(328)— 
Decrease of accrued capitalized interest542 613 
(Gain) loss on sale of real estate owned, net— (13,291)
Stock compensation expense4,770 3,526 
Increase of allowance for credit losses, net (see Note 3)172,658 183,840 
Cash flows due to changes in operating assets and liabilities:
Accounts receivable642 (312)
Accrued interest and fees receivable7,588 (9,091)
Accrued expenses and other liabilities4,080 1,435 
Accrued interest payable(975)4,964 
Payable to affiliates(439)297 
Deferred revenue(456)287 
Other assets(11,664)1,161 
Net cash provided by operating activities56,903 82,540 
Cash flows from investing activities:
Origination and acquisition of loans held for investment(146,716)(1,461,931)
Advances on loans held for investment(105,904)(105,905)
Principal repayments of loans held for investment1,018,819 877,082 
Capital expenditures related to real estate owned(2,337)— 
Sale of real estate owned— 73,913 
Sales of loans held for investment218,672 — 
Net cash provided by (used in) investing activities982,534 (616,841)
Cash flows from financing activities:
Payments on collateralized loan obligations(481,626)(995,494)
Proceeds from collateralized loan obligations— 907,031 
Payments on secured financing agreements(569,468)(1,025,464)
Proceeds from secured financing agreements447,786 1,147,466 
Payments on asset-specific financing arrangements(361,138)— 
Proceeds from asset-specific financing arrangements10,094 564,232 
Proceeds from mortgage loan payable31,200 — 
Payment of deferred financing costs(1,902)(16,908)
Dividends paid on common stock(56,909)(61,579)
Dividends paid on preferred stock(9,444)(9,444)
Net cash (used in) provided by financing activities(991,407)509,840 
Net change in cash, cash equivalents, and restricted cash48,030 (24,461)
Cash, cash equivalents and restricted cash at beginning of period254,315 261,039 
Cash, cash equivalents and restricted cash at end of period$302,345 $236,578 
Supplemental disclosure of cash flow information:
Interest paid$203,615 $80,071 
Taxes paid$835 $784 
Supplemental disclosure of non-cash investing and financing activities:
Collateralized loan obligation proceeds held at trustee$237,521 $286,417 
Dividends declared, not paid$18,921 $18,711 
Principal repayments of loans held for investment held by servicer/trustee, net$5,000 $11,988 
Conversion to real estate owned of loans held for investment - REO$109,791 $— 
Conversion to real estate owned of loans held for investment - Other assets$9,954 $— 
Conversion to real estate owned of loans held for investment - Other liabilities$2,642 $— 
Accrued deferred financing costs$896 $393 
Accrued capital expenditures related to real estate owned$428 $— 
See accompanying notes to the Consolidated Financial Statements


4

Table of Contents
TPG RE Finance Trust, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

 

Nine Months Ended

September 30,

 

 

 

2017

 

 

2016

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Net Income

 

$

69,594

 

 

$

50,807

 

Adjustment to Reconcile Net Income to Net Cash Provided by (Used in)

   Operating Activities:

 

 

 

 

 

 

 

 

Amortization and Accretion of Premiums, Discounts and Loan Origination Fees, Net

 

 

(15,867

)

 

 

(5,327

)

Amortization of Deferred Financing Costs

 

 

9,160

 

 

 

6,843

 

Capitalized Accrued Interest

 

 

1,865

 

 

 

13,098

 

Gain on Sales of Loans Held for Investment and Commercial Mortgage-Backed Securities, net

 

 

(185

)

 

 

—

 

Cash Flows Due to Changes in Operating Assets and Liabilities:

 

 

 

 

 

 

 

 

Accounts Receivable

 

 

503

 

 

 

2,699

 

Accrued Interest Receivable

 

 

(776

)

 

 

(3,792

)

Accrued Expenses

 

 

(2,454

)

 

 

787

 

Accrued Interest Payable

 

 

826

 

 

 

1,062

 

Payable to Affiliates

 

 

5,193

 

 

 

1,650

 

Deferred Fee Income / Gain

 

 

75

 

 

 

—

 

Other Assets

 

 

(694

)

 

 

—

 

Net Cash Provided by (Used in) Operating Activities

 

 

67,240

 

 

 

67,827

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Restricted Cash

 

 

350

 

 

 

(644

)

Origination of Loans Held for Investment

 

 

(1,149,911

)

 

 

(333,885

)

Purchase of Loans Held for Investment

 

 

—

 

 

 

(339,118

)

Advances on Loans Held for Investment

 

 

(226,187

)

 

 

(234,397

)

Principal Advances Held by Servicer/Trustee

 

 

496

 

 

 

3,021

 

Principal Repayments of Loans Held for Investment

 

 

975,258

 

 

 

362,314

 

Proceeds from Sales of Loans Held for Investment

 

 

65,054

 

 

 

—

 

Purchase of Commercial Mortgage-Backed Securities

 

 

(96,294

)

 

 

(49,549

)

Principal Repayments of Mortgage-Backed Securities

 

 

29,802

 

 

 

1,166

 

Purchases of Fixed Assets

 

 

(108

)

 

 

—

 

Net Cash Provided by (Used in) Investing Activities

 

 

(401,540

)

 

 

(591,092

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Payments on Collateralized Loan Obligation

 

 

(559,574

)

 

 

(269,561

)

Proceeds from Collateralized Loan Obligation

 

 

16,254

 

 

 

68,827

 

Payments on Secured Financing Agreements

 

 

(621,552

)

 

 

(282,044

)

Proceeds from Secured Financing Agreements

 

 

1,293,530

 

 

 

907,573

 

Payment of Deferred Financing Costs

 

 

(6,207

)

 

 

(5,776

)

Capital Calls Received in Advance

 

 

—

 

 

 

34,732

 

Proceeds from Issuance of Common Stock

 

 

243,654

 

 

 

98,168

 

Payment to Retire Common Stock

 

 

(6,000

)

 

 

—

 

Proceeds from Issuance of Class A Common Stock

 

 

365

 

 

 

1,832

 

Payment of Initial Public Offering Transaction Costs

 

 

(4,341

)

 

 

—

 

Dividends Paid on Common Stock

 

 

(58,743

)

 

 

(54,680

)

Dividends Paid on Class A Common Stock

 

 

(1,403

)

 

 

(1,463

)

Dividends Paid on Preferred Stock

 

 

(8

)

 

 

(7

)

Net Cash Provided by (Used in) Financing Activities

 

 

295,975

 

 

 

497,601

 

Net Change in Cash and Cash Equivalents

 

 

(38,325

)

 

 

(25,664

)

Cash and Cash Equivalents at Beginning of Period

 

 

103,126

 

 

 

104,936

 

Cash and Cash Equivalents at End of Period

 

$

64,801

 

 

$

79,272

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

 

Interest Paid

 

$

46,600

 

 

$

36,391

 

Taxes Paid

 

 

141

 

 

 

326

 

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

 

 

 

 

 

 

 

 

Principal Repayments of Loans Held for Investment by Servicer/Trustee, Net

 

$

51,076

 

 

$

131,118

 

Dividends Declared, not paid

 

 

20,135

 

 

 

16,978

 

Accrued Initial Public Offering Transaction Costs

 

 

2,391

 

 

 

—

 

Accrued Deferred Financing Costs

 

 

2,290

 

 

 

2,748

 

Unrealized Gain on Commercial Mortgage-Backed Securities, Available-for-Sale

 

 

1,270

 

 

 

2,579

 

Accrued Common Stock Retirement Costs

 

 

559

 

 

 

—

 

See accompanying notes to the Consolidated Financial Statements


TPG RE Finance Trust, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

(1) Business and Organization

TPG RE Finance Trust, Inc., together (together with its consolidated subsidiaries, (“we”, “us”,“we,” “us,” “our”, or the “Company”), is a Maryland company incorporated on October 24, 2014 and commenced operations on December 18, 2014 (“Inception”). We are organized as a holding company and conduct ourconducts its operations primarily through our variousTPG RE Finance Trust Holdco, LLC (“Holdco”), a Delaware limited liability company that is wholly owned by the Company, and Holdco’s direct and indirect subsidiaries. We conduct ourThe Company conducts its operations as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. WeThe Company is generally will not be subject to U.S. federal income taxes on ourits REIT taxable income to the extent that weit annually distributedistributes all of our netits REIT taxable income to stockholders and maintain ourmaintains its qualification as a REIT. WeThe Company also operate ouroperates its business in a manner that permits usit to maintain an exclusion from registration under the Investment Company Act of 1940, as amended.

The Company’s principal business activity is to directly originate and acquire a diversified portfolio of commercial real estate related assets,credit investments, consisting primarily consisting of first mortgage loans and senior participation interests in first mortgage loans secured by institutional-quality properties in primary and select secondary markets in the United States, and commercial mortgage-backed securities (“CMBS”). As of September 30, 2017 and December 31, 2016, the Company conducted substantially all of its operations through a limited liability company, TPG RE Finance Trust Holdco, LLC (“Holdco”), and the Company’s other wholly-owned subsidiaries.

States.

(2) Summary of Significant Accounting Policies

Basis of Presentation

The interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The interim consolidated financial statements include the Company’sCompany's accounts, a consolidated variable interest entityentities for which the Company wasis the primary beneficiary, through August 23, 2017, and its wholly-owned subsidiaries (see Note 5 for details).subsidiaries. All intercompany transactions and balances have been eliminated.

The Company believes it has made all necessary adjustments, consisting of only normal recurring items, so that the consolidated financial statements are presented fairly and that estimates made in preparing the consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These interim consolidated financial statements should be read in conjunction with the Company’s Form 10-K filed with the SEC on February 21, 2023.

Use of Estimates

The preparation of the interim consolidated financial statements in conformity with GAAP requires estimates of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from management’s estimates, and such differences could be material. Significant estimates made in the interim consolidated financial statements include, but are not limited to: impairment;to, the adequacy of provisionsour allowance for loan losses;credit losses and the valuation inputs related thereto and the valuation of financial instruments.

Actual amounts and values as of the balance sheet dates may be materially different from the amounts and values reported due to the inherent uncertainty in the estimation process and the limited availability of observable pricing inputs due to the nature of transitional mortgage loans. Also, future amounts and values could differ materially from those estimates due to changes in values and circumstances after the balance sheet date and the limited availability of observable prices.

Principles of Consolidation

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810—Consolidation (“ASC 810”) provides guidance on the identification of a VIE (a variable interest entity (“VIE”), for which control is achieved through means other than voting rights)rights, and the determination of which business enterprise, if any, should consolidate the VIE. An entity is considered a VIE if any of the following applies: (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest; (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The Company consolidates VIEs in which itthe Company is considered to be the primary beneficiary. The primary beneficiary is defined as the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance; and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE.

At each reporting date, the Company reconsiders its primary beneficiary conclusionconclusions for all its VIEs to determine if its obligation to absorb losses of, or its rights to receive benefits from, the VIE could potentially be more than insignificant, and will consolidate or not consolidate accordingly.

in accordance with GAAP. See Note 5 for details.

5

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Revenue Recognition

Interest income on loans is accrued using the interest method based on the contractual terms of the loan, adjusted for expected or realized credit impairment,losses, if any. The objective of the interest method is to arrive at periodic interest income, including recognition of fees and costs, at a constant effective yield. Premiums, discounts, origination fees and exitorigination fees are amortized or accreted into interest income over the lives of the loans using the interest method, or on a straight linestraight-line basis when it approximates the interest method. Extension and modification fees are amortizedaccreted into interest income on a straight-line basis, when it approximates the interest method, over the related extension periodor modification period. Exit fees are accreted into interest income on a straight-line basis, when it approximates the interest method, over the lives of the loans to which they relate using a straight line basis, which approximates the interest method, when the extension feeunless they can be waived by the Company or a co-lender in connection with theira loan refinancing, or if timely collection of the loan.principal and interest is doubtful. Prepayment penalties from borrowers are recognized as interest income when received. Certain of the Company’s loan investments have in the past, and may in the future, provide for additional interest based on the borrower’s operating cash flow or appreciation in the value of the underlying collateral. Such amounts are considered contingent interest and are reflected as interest income only upon certainty of collection.

The Certain of the Company’s loan investments have in the past, and may in the future, provide for the accrual of interest (in part, or in whole) instead of its current payment in cash, with the accrued interest (“PIK interest”) added to the unpaid principal balance of the loan. Such PIK interest is recognized currently as interest income unless the Company considers a loan to be non-performing and placesconcludes eventual collection is unlikely, in which case the PIK interest is written off.

All interest accrued but not received for loans placed on non-accrual status is subtracted from interest income at suchthe time as: (1) management determines the borrower is incapable of, or has ceased efforts toward, curing the cause of a default; (2) the loan becomes 90 days delinquent; or (3) the loan has a maturity default. Whileis placed on non-accrual status, basedstatus. Based on the Company’s judgment as to the collectability of principal, loans area loan on non-accrual status is either accounted for on a cash basis, where interest income is recognized only upon receipt of cash for principal and interest payments, or on a cost-recovery basis, where all cash receipts reduce athe loan’s carrying value, and interest income is only recorded when such carrying value has been fully recovered.

Loans Held for Investment

Loans that the Company has the intent and ability to hold for the foreseeable future, or until maturity or payoff,repayment, are reported at their outstanding principal balances net of anycumulative write-offs, interest applied to principal (for loans accounted for using the cost-recovery method), unamortized premiums, discounts, loan origination fees and an allowance for loan losses.costs. Loan origination fees and direct loan origination costs are deferred and recognized in interest income over the estimated life of the loans using the interest method, or on a straight linestraight-line basis when it approximates the interest method, adjusted for actual prepayments.

Interest accrued but not yet collected is separately reported as accrued interest and fees receivable on the Company’s consolidated balance sheets.

Non-Accrual Loans
Loans are placed on non-accrual status when the full and timely collection of principal or interest is doubtful, generally when: management determines that the borrower is incapable of, or has ceased efforts toward, curing the cause of a default; the loan becomes 90 days or more past due for principal or interest; or the loan experiences a maturity default. The Company evaluatesconsiders an account past due when an obligor fails to pay substantially all (defined as 90%) of the scheduled contractual payments by the due date. In each case, the period of delinquency is based on the number of days payments are contractually past due. A loan classified asmay be returned to accrual status if all delinquent principal and interest payments are brought current, and collectability of the remaining principal and interest payments in accordance with the loan agreement is reasonably assured. Loans that in the judgment of the Company’s external manager, TPG RE Finance Trust Management, L.P., a Delaware limited partnership (the “Manager”), are adequately secured and in the process of collection are maintained on accrual status, even if they are 90 days or more past due.
Loans Held for Sale
The Company may change its intent, or its assessment of its ability, to hold for the foreseeable future loans held for investment based on changes in the real estate market, capital markets, or when a shift occurs in the Company's approach to loan portfolio construction. Once a determination is made to sell a loan, receivableor the Company determines it no longer has the intent and ability to hold a loan held for investment for impairment on a quarterly basis. Impairment occurs when it is deemed probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan. Ifforeseeable future, the loan is consideredtransferred to be impaired,loans held for sale. In accordance with GAAP, loans classified as held for sale are recorded at the lower of cost or fair value, net of estimated selling costs, and the loan is excluded from the determination of the current expected credit loss ("CECL") reserve.
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Credit Losses
Allowance for Credit Losses for Loans Held for Investment
The Company accounts for its allowance for credit losses on loans held for investment using the Current Expected Credit Loss model of ASC Topic 326, Financial Instruments-Credit Losses (“ASC 326”). Periodic changes to the CECL reserve are recognized through net income on the Company’s consolidated statements of income and comprehensive income. The allowance for credit losses measured under the CECL accounting framework represents an estimate of current expected losses for the Company’s existing portfolio of loans held for investment, and is presented as a valuation reserve on the Company’s consolidated balance sheets. Expected credit losses related to non-cancelable unfunded loan commitments are accounted for as separate liabilities included in accrued expenses and other liabilities on the consolidated balance sheets. The allowance for credit losses for loans held for investment, as reported in the Company’s consolidated balance sheets, is adjusted by a credit loss (expense) benefit, which is reported in earnings in the consolidated statements of income and comprehensive income and reduced by the write-off of loan amounts, net of recoveries and additions related to purchased credit-deteriorated (“PCD”) assets, if relevant. The Company has elected to not measure an allowance is recordedfor credit losses on accrued interest receivables related to reduce the carrying valueall of the loanits loans held for investment because it writes off uncollectible accrued interest receivable in a timely manner pursuant to the present value of the expected future cash flows discounted at the loan’s contractual effective rate, or the fair value of the collateral, less estimated costs to sell, if recovery of the Company’s investment is expected solely from the sale of the collateral. As part of the quarterly impairment review, we evaluate the risk of each loanits non-accrual policy, described above.
The Company considers key credit quality indicators in underwriting loans and assign a risk rating based on a variety of factors, grouped as follows to include (without limitation): (i) loan andestimating credit structure, including the as-is loan-to-value (“LTV”) and structural features; (ii) quality and stability of real estate value and operating cash flow, including debt yield, property type, dynamics of the geographic, property-type and local market, physical condition, stability of cash flow, leasing velocity and quality and diversity of tenancy; (iii) performance against underwritten business plan; and (iv) quality, experience and financial condition of sponsor, borrower and guarantor(s). Based on a 5-point scale, our loans are rated “1” through “5,” from least risk to greatest risk, respectively, which ratings are defined as follows:

1-

Outperform—Exceeds performance metrics (for example, technical milestones, occupancy, rents, net operating income) included in original or current credit underwriting and business plan;

2-

Meets or Exceeds Expectations—Collateral performance meets or exceeds substantially all performance metrics included in original or current underwriting / business plan;

3-

Satisfactory—Collateral performance meets or is on track to meet underwriting; business plan is met or can reasonably be achieved;

4-

Underperformance—Collateral performance falls short of original underwriting, and material differences exist from business plan; technical milestones have been missed; defaults may exist, or may soon occur absent material improvement; and

5-

Risk of Impairment/Default—Collateral performance is significantly worse than underwriting; major variance from business plan; loan covenants or technical milestones have been breached; timely exit from loan via sale or refinancing is questionable.

Since Inception, the Company has not recorded asset-specific loan loss reserves, nor has it recognized any impairments on its loan portfolio. Our determination of asset-specific loan loss reserves, should any such reserves be necessary, relies on material estimates regarding the fair value of any loan collateral. Such losses, could be caused by various factors, including but not limited to: the capitalization of borrowers and sponsors; the expertise of the borrowers and sponsors in a particular real estate sector and geographic market; collateral type; geographic region; use and occupancy of the property; property market value; loan-to-value (“LTV”) ratio; loan amount and lien position; debt service coverage ratio; the Company’s risk rating for the same and similar loans; and prior experience with the borrower and sponsor. This information is used to unanticipated adverseassess the financial and operating capability, experience and profitability of the sponsor/borrower. Ultimate repayment of the Company’s loans is sensitive to interest rate changes, general economic conditions, liquidity, LTV ratio, existence of a liquid investment sales market for commercial properties, and availability of replacement short-term or long-term financing. The loans in the economy or events adversely affecting specific assets, borrowers, industries in which our borrowers operate or markets in which our borrowers or their propertiesCompany’s commercial mortgage loan portfolio are located. Significant judgment is required when evaluating loanssecured by collateral of the following property types: office; life science; multifamily; hotel; industrial; mixed-use; land for impairment.

industrial and office use; and self storage.

The Company’s loans are typically collateralized by real estate, or in the case of mezzanine loans, by a partnership interest or similar equity interest in anthe entity that owns the real estate. As a result,estate securing the Company's first mortgage loan. The Company regularly evaluates on a loan-by-loan basis, typically no less frequently than quarterly, the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property, as well asand the financial and operating capability of the borrower/sponsor. The Company also evaluates the financial wherewithalstrength of any loan guarantors, if any, and the borrower’s competency in managing and operating the property or properties. In addition, the Company considers the overall economic environment, real estate sector, and geographic sub-market in which the borrower operates. Such impairment analyses are completed and reviewed by asset management personnel and evaluated by senior management, who utilize various data sources, including, to the extent available (i) periodic financial data such as property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections, (iii) sales and financing comparables, (iv) current availability of, and credit spreads for, refinancing and (v) other market data.

Commercial Mortgage-Backed Securities

Quarterly, the Company evaluates the risk of all loans and assigns a risk rating based on a variety of factors, grouped as follows: (i) loan and credit structure, including the as-is LTV; (ii) quality and stability of real estate value and operating cash flow, including debt yield, property type, dynamics of the geography, local market, physical condition, stability of cash flow, leasing velocity and quality and diversity of tenancy; (iii) performance against underwritten business plan; (iv) the frequency and materiality of loan modifications or waivers occasioned by unfavorable variances between the underwritten business plan and actual performance; (v) changes in the capital markets that may impact the repayment of the loan via a refinancing or sale of the loan collateral; and (vi) quality, experience and financial condition of sponsor, borrower and guarantor(s). Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from least risk to greatest risk, respectively:
1 -Very Low Risk
2 -Low Risk
3 -Medium Risk
4 -High Risk/Potential for Loss—A loan that has a high risk of realizing a principal loss; and
5 -Default/Loss Likely—A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss.
The Company invests in CMBS for cash management and investment purposes.generally assigns a risk rating of “3” to all loan investments upon origination or acquisition, except when specific circumstances warrant an exception. During the three months ended March 31, 2023, the Company simplified its risk rating definitions. The Company designates as available-for-salere-evaluated its CMBS investmentsrisk ratings based on the datesimplified definitions and concluded that there was no impact to prior period risk ratings.
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The Company’s CECL reserve also reflects estimates of the investment. CMBScurrent and future economic conditions that impact the performance of the commercial real estate assets securing the Company’s loans. These estimates include unemployment rates, inflation rates, interest rates, price indices for commercial property, current and expected future availability of liquidity in the commercial property debt and equity capital markets, and other macroeconomic factors that may influence the likelihood and magnitude of potential credit losses for the Company’s loans during their anticipated term. The Company licenses certain macroeconomic financial forecasts to inform its view of the potential future impact that broader economic conditions may have on its loan portfolio’s performance. Selection of the economic forecast or forecasts used, in conjunction with loan level inputs, to determine the CECL reserve requires significant judgment about future events that, while based on the information available to the Company as of the balance sheet date, are ultimately unknowable with certainty. The actual economic conditions impacting the Company’s portfolio could vary significantly from the estimates the Company made for the periods presented.
The key inputs to the Company's estimation of its allowance for credit losses as of September 30, 2023 were impacted by dislocations in the capital markets, declining property values, increased interest rates, uncertain inflationary trends, a heightened risk of recession, distress in the banking sector, and geopolitical conflicts. Inherent uncertainty in the estimation process and the limited availability of observable pricing inputs due to the nature of transitional mortgage loans also constrain the Company's ability to estimate key inputs utilized to calculate its allowance for credit losses. Key inputs to the estimate include, but are not classified as held-to-maturitylimited to: LTV; debt service coverage ratio; current and whichfuture operating cash flow and performance of collateral properties; the financial strength and liquidity of borrowers and sponsors; capitalization rates and discount rates used to value commercial real estate properties; and market liquidity based on market indices or observable transactions involving the sale or financing of commercial properties. Estimates made by the Company does not holdare subject to change. Actual results could differ from management’s estimates, and such differences could be material.
Credit Loss Measurement
The amount of allowance for credit losses is influenced by the purposesize of selling in the near-term, but may dispose of prior to maturity, are also designated as available-for-sale and are carried at fair value. The Company’s recognition of interest income from its CMBS, including its amortization of premium and discount, follows the Company’s revenue recognition policy.loan portfolio, loan quality and duration, collateral operating performance, risk rating, delinquency status, historic loss experience and other characteristics influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. The Company usesemploys two methods to estimate credit losses in its loan portfolio: (1) a specific identification method when determiningmodel-based approach; and (2) an individually-assessed approach for loans considered to be "collateral-dependent" since the costrepayment of security soldthe loan is expected to be provided substantially through the operation or sale of the underlying collateral, and the borrower is experiencing financial difficulty or foreclosure is probable.
Once the expected credit loss amount reclassified out of accumulated other comprehensive income into earnings. Unrealizedis determined, an allowance for credit losses on securities that, in the judgment of management, are other than temporary are charged against earnings as ais established. A loan will be written off through credit loss (expense) benefit, net in the consolidated statements of income. Significantincome and comprehensive income when it is deemed non-recoverable or upon a realization event. This is generally at the time the loan is settled, transferred or exchanged. Non-recoverability may also be concluded by the Company if, in its determination, it is nearly certain that all amounts due will not be collected. This loss is equal to the difference between the cash received, or expected to be received, and the carrying value of the asset. Factors considered by the Company in determining whether the expected credit loss is not recoverable include whether the Company determines that the loan is uncollectible, which means repayment is deemed to be delayed beyond a reasonable time, a loss becomes evident due to a borrower’s lack of assets and liquidity, or a borrower’s sponsor is unwilling or unable to support the loan.
Allowance for Credit Losses for Loans Held for Investment – Model-Based Approach
The Company uses a model-based approach used to measure the expected lifetime allowance for credit losses related to loans which are not individually-assessed. The model-based approach considers the underlying loan level cash flows and relevant historical market loan loss data. The Company licenses from Trepp, LLC historical loss information, incorporating loan performance data for over 120,000 commercial real estate loans dating back to 1998, and an analytical model to compute statistical credit loss factors (i.e., probability-of-default, loss severity, and loss-given-default). These credit loss factors are utilized by the Company together with loan specific inputs such as property-level operating performance information, delinquency status, indicators of credit quality, and other credit trends and risk characteristics. Additionally, the Company considers relevant loan and borrower specific qualitative factors, incorporates its expectations about the impact of current macroeconomic and local market conditions and reasonable and supportable operating forecasts on expected future credit losses in deriving its estimate. For the period beyond which the Company is able to make reasonable and supportable forecasts, the Company reverts to unadjusted historical loan loss information.

The Company may use other acceptable alternative approaches depending on, among other factors, the type of loan, underlying collateral and availability of relevant historical market loan loss data.
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Allowance for Credit Losses for Loans Held for Investment – Individually-Assessed Approach
In instances where the Company concludes a loan repayment is entirely dependent on the operation or sale of the underlying collateral and the borrower is experiencing financial difficulty or foreclosure is probable, the Company individually assesses the allowance for credit loss for the underlying loan. The amount of expected credit loss is determined using broadly accepted and standard real estate valuation inputs are Level IItechniques (most commonly, a discounted cash flow model and real estate sales comparables), and considers substantially the same credit factors as utilized in the model-based method. In instances where the Company determines foreclosure of the underlying collateral is probable, the expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value hierarchyof the underlying collateral as described under “Fair Value Measurements”.

Portfolio Financing Arrangements

of the measurement date. The fair value of the underlying collateral is adjusted for the estimated costs to sell if repayment or satisfaction of a loan is dependent on the sale (rather than the operation) of the underlying collateral in instances where foreclosure is not probable.

Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. Evaluations of the loan portfolio in future periods, given the prevailing forecasts and credit loss factors, may result in significant changes to the Company's allowance for credit losses and credit loss expense.
Unfunded Loan Commitments
The Company’s first mortgage loans often contain provisions for future funding of a pre-determined portion of capital and other costs incurred by the borrower in executing its business plan. These deferred fundings are conditioned upon the borrower’s execution of its business plan with respect to the underlying collateral property securing the loan. These deferred fundings are typically for base building work, tenant improvement costs and leasing commissions, interest reserves, and occasionally to fund forecasted operating deficits during lease-up. These deferred funding commitments may be for specific periods, often require satisfaction by the borrower of conditions precedent, and may contain termination clauses at the option of the borrower or, more rarely, at the Company’s option. The total amount of unfunded commitments does not necessarily represent actual amounts that may be funded in cash in the future, since commitments may expire without being drawn, may be cancelled if certain conditions are not satisfied by the borrower, or borrowers may elect not to borrow some or all of the unused commitment. The Company finances certain ofdoes not recognize these unfunded loan commitments in its consolidated financial statements.
The Company applies its expected credit loss estimates to all future funding commitments that cannot be contractually terminated at the Company’s option. The Company maintains a separate allowance for expected credit losses from unfunded loan commitments, which is included in accrued expenses and CMBS investments using secured revolving repurchase agreements, asset-specific financing arrangements (notes payableother liabilities on the consolidated balance sheets)sheets. The Company estimates the amount of expected losses by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by the Company and applies the loss factors used in the allowance for credit loss methodology described above to the results of the usage calculation to estimate the liability for credit losses related to unfunded commitments for each loan.
Real Estate Owned
Real estate acquired through a foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned (“REO”) and held for investment on the Company’s consolidated balance sheet until a pending sales transaction meets the criteria of ASC 360-10-45-9 after which the real estate is considered to be held for sale, or is sold. The Company's basis in REO is equal to the fair value of the collateral's net assets. The estimated fair value of REO is determined using generally accepted valuation techniques, including a discounted cash flow model and inputs that include the highest and best use for each asset, estimated future values based on extensive discussions with local brokers, investors and other market participants, the estimated holding period for the asset, and capitalization and discount rates that reflect estimated investor return requirements for the risks associated with the expected use of each asset. If the estimated fair value of REO is lower than the carrying value of the related loan upon its conversion to REO, the difference, along with any previously recorded specific CECL reserve, is recorded through credit loss (expense) benefit in the consolidated statements of income and comprehensive income. Upon acquisition, the Company allocates the fair value of REO to assets and liabilities acquired, as applicable.
As of September 30, 2023, REO depreciable assets, are depreciated using the straight-line method over estimated useful lives as follows:
DescriptionDepreciable Life
Building22 years
Building improvements6 years
Lease intangiblesOver lease term
Renovations and/or replacements that improve or extend the life of the REO are capitalized and depreciated over their estimated useful lives. The cost of ordinary repairs and maintenance are expensed as incurred. The Company capitalizes costs directly related to the pre-development, development or improvement of its REO, referred to as capital projects. Costs associated with the Company's capital projects are capitalized as incurred. Costs considered for capitalization include, but are not limited to, construction costs, interest (if applicable), real estate taxes, insurance and utilities, if appropriate. The Company capitalizes indirect costs such as personnel, office,
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and administrative expenses that are directly related to its development project based on an estimate of the time spent on the construction and development activities. These costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress and such costs are incremental and identifiable to a seniorspecific activity to get the asset ready for its intended use. The Company determines when the capitalization period begins and ends through communication with project and other managers responsible for the tracking and oversight of individual projects. In the event that the activities to ready the asset for its intended use are suspended, the capitalization period will cease until such activities are resumed.
REO is initially measured at fair value and is thereafter subject to an ongoing impairment analysis. Subsequent to an REO acquisition, events or circumstances may occur that result in a material and sustained decrease in the cash flows generated, or expected to be generated, from the property. REO is evaluated for recoverability when impairment indicators are identified. Any impairment loss and gains or losses on sale are included in the consolidated statements of income and comprehensive income. Revenue and expenses from REO operations are included in the consolidated statements of income and comprehensive income within Revenue from real estate owned operations and Expenses from real estate owned operations, as applicable.
Investment Portfolio Financing Arrangements
The Company finances its portfolio of loans, or participation interests therein, and REO using secured financing agreements, including secured credit facility,agreements, secured revolving credit facilities, asset-specific financing arrangements, mortgage loans payable, and prior to August 23, 2017, its private collateralized loan obligation (“CLO”).obligations. The related borrowings are recorded as separate liabilities on the Company’s consolidated balance sheets. Interest income earned on the investments and interest expense incurred on the related borrowings are reported separately on the Company’s consolidated statements of income and comprehensive income.

In certain instances, the Company creates structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third party. For all such syndications the Company has completed through September 30, 2017,2023, the Company has transferred, on a non-recourse basis, 100% of the senior mortgage loan that the Company originated on a non-recourse basis to a third-party lender, and has retained as a loan investment a separate mezzanine loan investment secured by a pledge of the equity in the mortgage borrower. With respect to the senior mortgage loanloans transferred, the Company retains: no control over the mortgage loan; no economic interest in the mortgage loan; and no recourse to the purchaser or the borrower. Consequently, based on these circumstances and because the Company does not have any continuing involvement with the transferred senior mortgage loan, these syndications are accounted for as sales under GAAP and are removed from the Company’s consolidated financial statements at the time of transfer. The Company’s consolidated balance sheets only include the separate mezzanine loan remaining after the transfer and nottransfer.
For more information regarding the non-consolidated senior loan interest sold or co-originated that the Company transferred.

Company’s investment portfolio financing arrangements, see Note 6.

Fair Value Measurements

The Company follows ASC 820-10, Fair Value Measurements and Disclosures (“ (“ASC 820-10”), for its holdings of financial instruments. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements. ASC 820-10 determines fair value to be the price that would be received for a financial instrument in a current sale, which assumes an orderly transaction between market participants on the measurement date. The Company determines the estimated fair value of financial assets and liabilities using the three-tier fair value hierarchy established by GAAP, which prioritizes the inputs used in measuring fair value. GAAP establishes market-based or observable inputs as the preferred source of values followed by valuation models using management assumptions in the absence of market inputs. The financial instruments recorded at fair value on a recurring basis in the Company’s consolidated financial statements are cash, and cash equivalents, and restricted cash and available-for-sale CMBS investments.cash. The three levels of inputs that may be used to measure fair value are as follows:

Level I—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.


Level II—Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level III—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

For certain financial instruments, the various inputs thatused by management uses to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for such financial instrument is based on the lowest level of input that is significant to the fair value measurement.
The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. The Company may use valuation techniques consistent with the market and income approaches to measure the fair value of its assets and liabilities. The market approach uses third-party valuations and information obtained from market transactions involving identical or similar assets or liabilities. The income approach uses projections of the future economic benefits of an instrument to determine its fair value, such as in the discounted cash flow methodology. The inputs or
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methodology used for valuing financial instruments are not necessarily an indication of the risk associated with investing in these financial instruments. Transfers between levels of the fair value hierarchy are assumed to occur at the end of the reporting period.

The following methods and assumptions are used by our Manager to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
•Cash and cash equivalents: the carrying amount of cash and cash equivalents approximates fair value.
•Loans held for investment, net: using a discounted cash flow methodology employing a discount rate for loans of comparable credit quality, structure, and LTV based upon appraisal information and current estimates of the value of collateral property performed by the Manager, and credit spreads for loans of comparable risk (as determined by the Manager based on the factors previously described) as corroborated by inquiry of other market participants.
•Loans held for sale: estimated fair market value based on sale comparables as corroborated by inquiry of other market participants or independent market data providers.
•Secured revolving credit facilities, asset-specific financings, and mortgage loan payable: based on the rate at which a similar secured revolving credit facility, asset-specific financing, or mortgage loan payable would currently be priced, as corroborated by inquiry of other market participants.
•CRE Collateralized Loan Obligations, net: indications of value from dealers active in trading similar or substantially similar securities, observable quotes from market data services, reported prices and spreads for recent new issues, and Manager estimates of the credit spread at which similar bonds would be issued, or traded, in the new issue and secondary markets.
•Other assets and liabilities subject to fair value measurement, including receivables, payables and accrued liabilities have carrying values that approximate fair value due to their short-term nature.
As discussed above, market-based or observable inputs are generally the preferred source of values for purposes of measuring the fair value of the Company’s assets under GAAP. The commercial property investment sales and commercial mortgage loan markets have experienced uneven liquidity due to global macroeconomic conditions, including heightened inflation, slower growth or recession, changes to fiscal and monetary policy, increased interest rates, currency fluctuations, labor shortages and distress in the banking sector, which has made it more difficult to rely on market-based inputs in connection with the valuation of the Company’s assets under GAAP. Key valuation inputs include, but are not limited to, future operating cash flow and performance of collateral properties, the financial strength and liquidity of borrowers and sponsors, credit spreads for secured real estate borrowings, capitalization rates and discount rates used to value commercial real estate properties, and observable transactions involving the sale or financing of commercial properties.
Income Taxes

The Company qualifies and has elected to be taxed as a REIT for U.S. federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), commencing with its initial taxable year ended December 31, 2014. To the extent that it annually distributes at least 90% of its REIT taxable income to stockholders and complies with various other requirements as a REIT, the Company generally will not be subject to U.S. federal income taxes on its distributed REIT taxable income. In 2017, the Internal Revenue Service issued a revenue procedure permitting “publicly offered” REITs to make elective stock dividends (i.e., dividends paid in a mixture of stock and cash), with at least 20% of the total distribution being paid in cash, to satisfy their REIT distribution requirements. Pursuant to this revenue procedure, the Company may elect to make future distributions of its taxable income in a mixture of stock and cash. If the Company fails to continue to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal and state income taxes at regular corporate rates (including any applicable alternative minimum tax) beginning with the year in which it fails to qualify and may be precluded from being able to elect to be treated as a REIT for the Company’s four subsequent taxable years. Even though the Company currently qualifies for taxation as a REIT, the Company may be subject to certain U.S. federal, state, local and foreign taxes on the Company’s income and property and to U.S. federal income and excise taxes on the Company’s undistributed REIT taxable income.

In certain instances, the Company may generate excess inclusion income (“EII”) within the Sub-REIT structure it established for the purpose of issuing collateralized loan obligations (“CRE CLOs”). EII has in the past occurred in certain of the Company’s CRE CLOs due to sharp declines in LIBOR or compounded SOFR since the issuance of a CRE CLO’s liabilities, loans contributed to the CRE CLOs with interest rate floors materially higher than the current applicable benchmark rates, and liabilities whose benchmark rates are unfloored. EII, which is treated as unrelated business taxable income (“UBTI”), is an obligation of the Company and is allocated only to a taxable REIT subsidiary (“TRS”) and not to its common stockholders.
Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the periods in which those temporary differences are
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expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period in which the enactment date occurs. Under ASC Topic 740, Income Taxes (“ASC 740”), a valuation allowance is established when management believes it is more likely than not that a deferred tax asset will not be realized. Currently, the Company has no taxable temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
The Company intends to continue to operate in a manner consistent with, and to continue to meet the requirements to be treated as, a REIT for tax purposes and to distribute all of its REIT taxable income. Accordingly, the Company does not expect to pay corporate level taxes.

Earnings per Common Share

The Company utilizescalculates basic earnings per share using the two-class method. The two-class method when assessingis an allocation formula that determines earnings per share for each share of common stock and participating securities according to calculatedividends declared and participation rights in undistributed earnings. Under this method, all earnings per(distributed and undistributed) are allocated to common share.shares and participating securities based on their respective rights to receive dividends. Basic and diluted earnings per common share is computedcalculated by dividing net income attributableearnings allocated to common stockholders (i.e., holders of common stock and Class A common stock), dividedshareholders by the weighted-average number of common shares (both common stock and Class A common stock) outstanding during the period. The preferences, rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption
Diluted earnings per share is computed under the more dilutive of the Class Atreasury stock method or the two-class method. The computation of diluted earnings per share is based on the weighted average number of participating securities outstanding plus the incremental shares that would be outstanding assuming exercise of warrants to purchase common stock are identical to the common stock, except (1) the Class A common stock is not a “margin security” as defined(the “Warrants”, see Note 12) issued in Regulation U of the Board of Governors of the U.S. Federal Reserve System (and rulings and interpretations thereunder) and may not be listed on a national securities exchange or a national market system and (2) each share of Class A common stock is convertible at any time or from time to time, at the option of the holder, for one fully paid and non-assessable share of common stock. The Class A common stock votes together with the common stock as a single class. Shares of Class A common stock have been issued to, and are owned by, certain individuals or entities affiliatedconnection with the Company’s external manager, TPG RE Finance Trust Management, L.P., a Delaware limited partnershipno-longer-outstanding Series B Cumulative Redeemable Preferred Stock (the “Manager”“Series B Preferred Stock”), which are exercisable on a net-share settlement basis. The number of incremental shares is calculated utilizing the treasury stock method.
The Company accounts for unvested stock-based compensation awards that contain non-forfeitable dividend rights or dividend equivalents (whether paid or unpaid) as participating securities, which are included in the computation of earnings per share pursuant to the two-class method. The Company excludes participating securities and Warrants from the sale or conversioncalculation of diluted weighted average shares outstanding in periods of net losses since their effect would be anti-dilutive.
Stock-based Compensation
Stock-based compensation consists of awards issued by the Company to certain employees of affiliates of the Manager and certain members of the Company’s Board of Directors. The stock-based compensation awards to certain employees of affiliates of the Manager generally vest in installments over a fixed period. Deferred stock units granted to the Company’s Board of Directors prior to December 2021 fully vested on the grant date and accrued, and will continue to accrue, common stock by investors of such shares of Class Adividends that are paid-in kind through additional deferred stock units on a quarterly basis. Deferred stock units granted in December 2021 and subsequent periods will fully vest on the grant date and will continue to accrue and be paid cash common stock dividends on a quarterly basis. Stock-based compensation expense is subject to certain restrictions. Diluted earnings per common share is calculated by including the effect of dilutive securities. The Company currently does not have any outstanding participating securities.

Loan Origination Fees

Loan origination fees are reflectedrecognized in loans held for investmentnet income on the consolidated balance sheets and include fees charged to borrowers. These fees are amortized into interest incomea straight-line basis over the lifeapplicable award’s vesting period. Forfeitures of the related loans held.

stock-based compensation awards are recognized as they occur.

Deferred Financing Costs

Deferred financing costs are reflected net of the liabilities to which they relate, currently collateralized loan obligation andobligations, secured financing agreements, which include secured credit agreements and a secured revolving credit facility, and asset-specific financing arrangements on the Company’s consolidated balance sheets. These costs are amortized in interest expense using the interest method, or on a straight linestraight-line basis whichwhen it approximates the interest method, as follows: (i) for secured financing agreements other than CRE CLOs, the initial term of the financing agreement, or in the case of costs directly associated with the loan, over the life of the related obligations.

financing agreement or the loan, whichever is shorter; and (ii) for CRE CLOs, over the estimated life of the liabilities issued based on the underlying loans’ initial maturity dates, considering the expected repayment behavior of the loans collateralizing the notes and the impact of any reinvestment periods, as of the closing date.

Cash and Cash Equivalents

Cash and cash equivalents include cash held in banks or invested in money market funds with original maturities of less than 90 days. The Company deposits its cash and cash equivalents with high credit quality institutions to minimize credit risk exposure. The Company maintains cash accounts at several financial institutions, which are insured up to a maximum of $250,000 per account as of September 30, 20172023 and December 31, 2016.2022. The balances in these accounts may exceed the insured limits.

Pursuant to financial covenants applicable to Holdco, which is the guarantor of the Company’s recourse indebtedness, the Company is required to maintain minimum cash equal to the greater of (i) $15 million or (ii) the product of 5% and the aggregate recourse indebtedness of the Company. As of September 30, 2023 and December 31, 2022, the Company held as part of its total cash balances $15.6 million and $22.4 million to comply with this covenant, respectively.
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Restricted Cash

Restricted cash primarily represents deposit proceeds fromdeposits paid by potential borrowers whichto cover certain costs incurred by the Company in connection with loan originations. These deposits may be returned to borrowers, after deducting eligible transaction costs paid by the Company for the benefit of the borrowers, upon the closing of a loan transaction.

transaction, or if a loan transaction does not close and deposit proceeds remain. As of September 30, 2023, $0.1 million of restricted cash was combined with cash and cash equivalents of $302.3 million in the consolidated statement of cash flows. As of December 31, 2022, $0.3 million of restricted cash was combined with cash and cash equivalents of $254.1 million in the consolidated statement of cash flows.

Collateralized Loan Obligation Proceeds Held at Trustee
Collateralized Loan Obligation Proceeds Held at Trustee represent cash held by the Company’s collateralized loan obligations pending reinvestment in eligible collateral. See Note 5 for additional details.
Accounts Receivable from Servicer/Trustee
Accounts receivable from Servicer/Trustee represents cash proceeds from loan activities that have not been remitted to the Company based on established servicing and borrowing procedures. Such amounts are generally held by the Servicer/Trustee for less than 30 days before being remitted to the Company.
Stockholders’ Equity
Total Stockholders’ Equity may include preferred stock, common stock, and derivative instruments indexed to the Company's common stock such as warrants or other embedded options within financing arrangements that may be classified as temporary or permanent equity. Common shares generally represent a basic ownership interest in an entity and a residual corporate interest in liquidation, bearing the ultimate risk of loss and receiving the benefit of success. Common shares are usually perpetual in nature with voting rights and dividend rights. Preferred shares are usually characterized by the life of the instrument (i.e., perpetual or redeemable) and the ability of a holder to convert the equity instrument into cash, common shares, or a combination thereof. The terms of preferred shares can vary significantly, including but not limited to, an equity instrument’s dividend rate, term (e.g., existence of a stated redemption date), conversion features, voting rights, and liquidation preferences. Derivative instruments indexed to the Company's common stock such as warrants or other embedded options within financing arrangements are generally classified based on which party controls the contract settlement mechanism and the nature of the settlement terms that may require, or allow, the Company to make a cash payment, issue common shares, or a combination thereof to satisfy its obligation of the underlying contract.
Temporary Equity
Equity instruments that are redeemable for cash or other assets are classified as temporary equity if the instrument is redeemable, at the option of the holder, at a fixed or determinable price on a fixed or determinable date or upon the occurrence of an event that is not solely within the control of the issuer.
Redeemable equity instruments are initially carried at the relative fair value of the equity instrument at the issuance date, which is subsequently adjusted at each balance sheet date if the instrument is currently redeemable or probable of becoming redeemable. The Series B Preferred Stock issued in connection with the Investment Agreement described in Note 12 were classified as temporary equity in the accompanying financial statements.
Permanent Equity
The Company has preferred stock, common stock, and Warrants issued in connection with the Series B Preferred Stock transaction that are outstanding and classified as permanent equity. The Warrants are exercisable on a net-settlement basis and expire on May 28, 2025. None of the Warrants have been exercised as of September 30, 2023. The Company’s common stock is perpetual with voting rights and dividend rights. On June 14, 2021, the Company issued 8,050,000 shares of Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”) that is classified as permanent equity. The outstanding shares of Series C Preferred Stock have a 6.25% dividend rate and may be redeemed by the Company at its option on and after June 14, 2026. The Series C Preferred Stock issuance and Warrants related to the Series B Preferred Stock are described in Note 12.
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Recently Issued Accounting Pronouncements

In November 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) (“ASU 2016-18”). The amendments in ASU 2016-18 require an entity to reconcile and explain the period-over-period change in total cash, cash equivalents and restricted cash within its statements of cash flows. ASU 2016-18 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments in ASU 2016-18 using a full retrospective approach. The Company does not expect the adoption of ASU 2016-18 to have a material impact on its consolidated statements of cash flows as the Company does not have material restricted cash activity.

In June 2016,March 2020, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses2020-04, Reference Rate Reform (Topic 326)848): MeasurementFacilitation of Credit Lossesthe Effects of Reference Rate Reform on Financial Instruments (“Reporting ("ASU 2016-13”2020-04"). ASU 2016-13 significantly changes how entities will measure credit losses2020-04 provides optional expedients and exceptions to GAAP requirements for most financial assetsmodifications to debt agreements, leases, derivatives, and other contracts, related to the market transition from LIBOR, and certain other instrumentsfloating rate benchmark indices, or collectively, IBORs, to alternative reference rates. ASU 2020-04 generally considers contract modifications related to reference rate reform to be an event that aredoes not measuredrequire contract remeasurement at fair value through net income. ASU 2016-13 will replace the “incurred loss” model under existingmodification date nor a reassessment of a previous accounting determination. In January 2021, the FASB clarified the scope of that guidance with an “expected loss” modelthe issuance of ASU 2021-01, “Reference Rate Reform: Scope.” This ASU provides optional guidance for instruments measured at amortized cost,a limited period to ease the burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. This would apply to companies meeting certain criteria that have contracts, hedging relationships and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 and isother transactions that reference LIBOR or another reference rate expected to be adopted through a cumulative-effect adjustment to retained earnings asdiscontinued because of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the impact ASU 2016-13 will have on its consolidated financial statements.

reference rate reform. In May 2014,December 2022, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers2022-06, “Reference Rate Reform (Topic 606) (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In August 2015, the FASB issued an update (“ASU 2015-14”) to Topic 606, 848) - Deferral of the EffectiveSunset Date of Topic 848”, which defers the adoptionexpiration of ASU 2014-09ASC 848 from December 31, 2022, to interimDecember 31, 2024. This standard is effective for the Company immediately and annual reporting periodsgenerally may be elected over time through December 31, 2024.

The Company has successfully completed the transition of its loans held for investment and its liabilities from LIBOR to Term SOFR, an alternative rate endorsed by the Alternative Reference Rates Committee of the Federal Reserve System. The Company elected to apply the temporary optional expedients and determined that the contractual modifications made in fiscal years that begin after December 15, 2018. In March 2016,connection with the FASB issued an update (“ASU 2016-08”)transition referred to Topic 606, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance on principal versus agent considerations in the new revenue recognition standard pursuant to ASU 2014-09. In April 2016,immediately preceding sentence did not require contract remeasurement at the FASB issued an update (“ASU 2016-10”) to Topic 606, Identifying Performance Obligations and Licensing, which clarifies guidance related to identifying performance obligations and licensing implementation guidance contained in ASU 2014-09. In May 2016, the FASB issued an update (“ASU 2016-12”) to Topic 606, Narrow-Scope Improvements and Practical Expedients, which amends certain aspectsrespective modification dates.
14
Table of the new revenue recognition standard pursuant to ASU 2014-09. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Early adoption is not permitted, except that we may adopt under the original provisions of ASU 2014-09 prior to the issuance of ASU 2015-14. The Company anticipates adopting this update in the quarter ended March 31, 2018, and continues the process of evaluating the impact of Topic 606 on its consolidated financial statements.

Contents

(3) Loans Held for Investment

and the Allowance for Credit Losses

The Company currently originates and acquires first mortgage and mezzanine loans secured by commercial properties. The Company considers these loans to comprise a single portfolio of mortgage loans, and the Company has developed its systematic methodology to determine the allowance for credit losses based on a single portfolio. For purposes of certain disclosures herein, the Company disaggregates this portfolio segment into the following classes of finance receivables: senior loans; and subordinated and mezzanine loans. These loans can potentially subject the Company to concentrations of credit risk, as measured by various metrics, including, thewithout limitation: property type collateralizing the loan; loan category; loan size,size; loans to a single sponsorsponsor; and loans in a single geographic area, among others.area. The Company’s loans held for investment are accounted for at amortized cost.

Interest accrued but not yet collected is separately reported within accrued interest and fees receivable on the Company’s consolidated balance sheets. Amounts within that caption relating to loans held for investment were $23.2 million and $26.4 million as of September 30, 2023 and December 31, 2022, respectively.

During the nine months ended September 30, 2017,2023, the Company’s subsidiariesCompany originated or acquired 15three mortgage loans with a total commitment of approximately $1.5 billion,$167.4 million, an initial unpaid principal balance of $1.1 billion,$148.4 million, and unfunded commitments at closing of $229.7$19.0 million. To fund these originations,Additionally, the Company employed financing methods that included repurchasereceived nine full loan repayments of $641.6 million, and secured financings, notes payable,partial principal payments including accrued PIK interest payments and the non-recourse syndicationcost-recovery proceeds of senior$162.3 million across fourteen loans, for total loan interests to third parties that were recognized as sales. Total commitments related to non-recourse senior loan interest syndications forrepayments of $803.9 million during the nine months ended September 30, 20172023. The Company also received proceeds of $221.8 million from the sale of three of its loans with an aggregate unpaid principal balance of $352.9 million, and converted to REO two loans with an unpaid principal balance of $132.1 million.
The following table details overall statistics for the Company’s loans held for investment portfolio (dollars in thousands):
September 30, 2023December 31, 2022
Balance sheet portfolio
Total loan exposure(1)
Balance sheet portfolio
Total loan exposure(1)
Number of loans59597070
Floating rate loans100.0 %100.0 %100.0 %100.0 %
Total loan commitment$4,223,672$4,223,672$5,429,146$5,429,146
Unpaid principal balance(2)
$3,970,164$3,970,164$5,004,798$5,004,798
Unfunded loan commitments(3)
$247,568$247,568$426,061$426,061
Amortized cost$3,952,102$3,952,102$4,978,674$4,978,674
Weighted average credit spread3.7 %3.7 %3.4 %3.4 %
Weighted average all-in yield(4)
9.3 %9.3 %8.1 %8.1 %
Weighted average term to extended maturity (in years)(5)
2.62.62.82.8
_______________________
(1)In certain instances, the Company creates structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third-party. In either case, the senior mortgage loan (i.e., the non-consolidated senior interest) is not included on the Company’s balance sheet. When the Company creates structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third-party, the Company retains on its balance sheet a mezzanine loan. Total loan exposure encompasses the entire loan portfolio the Company originated, acquired and financed. The Company had no non-consolidated senior interests as of September 30, 2023 and December 31, 2022.
(2)Unpaid principal balance includes PIK interest of $1.2 million and $1.7 million as of September 30, 2023 and December 31, 2022, respectively.
(3)Unfunded loan commitments may be funded over the term of each loan, subject in certain cases to an expiration date or a force-funding date, primarily to finance property improvements or lease-related expenditures by the Company’s borrowers and to finance operating deficits during renovation and lease-up.
(4)As of September 30, 2023, all of the Company's loans were $91.5 million.

indexed to Term SOFR. In addition to credit spread, all-in yield includes the amortization of deferred origination fees, purchase price premium and discount if any, and accrual of both extension and exit fees. All-in yield for the total portfolio assumes Term SOFR as of September 30, 2023 for weighted average calculations.

(5)Extended maturity assumes all extension options are exercised by the borrower; provided, however, that the Company’s loans may be repaid prior to such date. As of September 30, 2023, based on the unpaid principal balance of the Company’s total loan exposure, 11.2% of the Company’s loans were subject to yield maintenance or other prepayment restrictions and 88.8% were open to repayment by the borrower without penalty.
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The following tables present an overview of the loanCompany’s loans held for investment portfolio as of September 30, 2017by loan seniority (dollars in thousands):
September 30, 2023
Loans held for investment, netOutstanding principalUnamortized premium (discount) and
loan origination fees, net		Amortized cost
Senior loans(1)
$3,970,164 $(18,062)$3,952,102 
Total$3,970,164 $(18,062)$3,952,102 
Allowance for credit losses(213,258)
Loans held for investment, net$3,738,844 
December 31, 2022
Loans held for investment, netOutstanding principalUnamortized premium (discount) and
loan origination fees, net		Amortized cost
Senior loans(1)
$5,004,798 $(26,124)$4,978,674 
Total$5,004,798 $(26,124)$4,978,674 
Allowance for credit losses(197,272)
Loans held for investment, net$4,781,402 
________________________________
(1)Senior loans may include contiguous mezzanine loans and December 31, 2016 (inpari passu participations in senior mortgage loans.
The following table presents the Company’s loans held for investment portfolio activity (dollars in thousands):

 

 

September 30, 2017

 

Loans Receivable

 

Outstanding

Principal

 

 

Unamortized Premium

(Discount), Loan

Origination Fees, net

 

 

Carrying

Amount

 

Senior loans

 

$

2,778,553

 

 

$

(20,622

)

 

$

2,757,931

 

Subordinated and mezzanine loans

 

 

67,135

 

 

 

(353

)

 

 

66,782

 

Subtotal before allowance

 

 

2,845,688

 

 

 

(20,975

)

 

 

2,824,713

 

Allowance for loan losses

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

2,845,688

 

 

$

(20,975

)

 

$

2,824,713

 

Carrying value
Balance as of January 1, 2023$4,781,402 
Additions during the period:
Loans originated and acquired146,716 
Additional fundings105,904 
Amortization of origination fees and discounts9,738 
Deductions during the period:
Collection of principal(790,415)
Collection of accrued PIK interest(542)
Collection of interest applied to reduce principal under the cost-recovery method(12,976)
Realized loss on loan sales and REO conversions(150,615)
Loan sales(202,294)
Loan extinguishment upon conversion to REO(132,088)
Increase of allowance for credit losses(15,986)
Balance as of September 30, 2023$3,738,844 

 

 

December 31, 2016

 

Loans Receivable

 

Outstanding

Principal

 

 

Unamortized Premium

(Discount), Loan

Origination Fees, net

 

 

Carrying

Amount

 

Senior loans

 

$

2,429,632

 

 

$

(20,931

)

 

$

2,408,701

 

Subordinated and mezzanine loans

 

 

41,446

 

 

 

(157

)

 

 

41,289

 

Subtotal before allowance

 

 

2,471,078

 

 

 

(21,088

)

 

 

2,449,990

 

Allowance for loan losses

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

2,471,078

 

 

$

(21,088

)

 

$

2,449,990

 

ForDuring the ninethree months ended September 30, 2017,2023, the Company sold one mixed-use loan portfolio activity was as follows (in thousands):

with an unpaid principal balance of $129.2 million for $95.0 million, resulting in a loss on sale of $35.0 million, including transaction costs of $0.8 million, and one office loan with an unpaid principal balance of $152.4 million for $79.0 million, resulting in a loss on sale of $74.4 million, including transaction costs of $0.9 million. Such losses are included within Credit loss expense, net on the Company's consolidated statements of income and comprehensive income.

Balance at December 31, 2016

 

$

2,449,990

 

Loans originated

 

 

1,149,911

 

Additional fundings

 

 

228,217

 

Amortization of discount and origination fees

 

 

15,607

 

Deductions during the period:

 

 

 

 

Collection of principal

 

 

(1,016,246

)

Amortization of premium

 

 

(2,766

)

Balance at September 30, 2017

 

$

2,824,713

 

AtDuring the three months ended June 30, 2023, the Company sold one office loan with an unpaid principal balance of $71.3 million for $47.8 million, resulting in a loss on sale of $24.1 million, including transaction costs of $0.6 million. During the three months ended September 30, 20172023, the Company recorded additional transaction costs of $0.8 million, which increased the loss on sale to $24.9 million. Such losses are included within Credit loss expense, net on the Company's consolidated statements of income and comprehensive income.

As of September 30, 2023 and December 31, 2016,2022, there was $0.1$6.2 million and $2.9$7.9 million, respectively, of unamortized premiumloan fees included in loans held for investment, net in the consolidated balance sheets. As of September 30, 2023 and $2.8December 31, 2022, there was $11.9 million and $12.5$18.2 million, respectively, of unamortized discountdiscounts included in loans held for investment at amortized cost on the consolidated balance sheets.


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Loan Risk Ratings
The Company evaluates all of its loans to assign risk ratings on a quarterly basis on a 5-point scale. As described in Note 2, the Company’s loans are rated “1” through “5,” from least risk to greatest risk, respectively. The Company generally assigns a risk rating of “3” to all loan investments upon origination or acquisition, except when specific circumstances warrant an exception.
The following tables present the Company's loans held for investment portfolio on an amortized cost basis by origination year, grouped by risk rating (dollars in thousands):
September 30, 2023
Amortized cost by origination year
20232022202120202019PriorTotal
Senior loans by internal risk ratings:
1$— $— $— $— $— $— $— 
2— — 79,552 — 99,000 — 178,552 
3147,873 1,063,481 1,281,037 100,022 457,372 86,026 3,135,811 
4— — 79,685 — 40,415 137,612 257,712 
5— 118,388 — — 261,639 — 380,027 
Total senior loans$147,873 $1,181,869 $1,440,274 $100,022 $858,426 $223,638 $3,952,102 
Senior loans:
Current-period realized loss on loan sales and REO conversions$— $(7,348)$— $(24,923)$(34,954)$(83,390)$(150,615)
Total current-period realized loss on loan sales and REO conversions$— $(7,348)$— $(24,923)$(34,954)$(83,390)$(150,615)
December 31, 2022
Amortized cost by origination year
2022 2021 2020 2019 2018 Prior Total
Senior loans by internal risk ratings:
1$— $— $— $— $— $— $— 
222,732 216,960 — 272,185 — — 511,877 
3907,161 1,609,556 98,874 505,377 110,356 — 3,231,324 
476,938 79,023 119,172 320,793 342,869 51,542 990,337 
5— — 71,269 118,135 55,732 — 245,136 
Total senior loans$1,006,831 $1,905,539 $289,315 $1,216,490 $508,957 $51,542 $4,978,674 
Senior loans:
Current-period realized loan loss$— $— $— $— $(4,400)$— $(4,400)
Total current-period realized loan loss$— $— $— $— $(4,400)$— $(4,400)
Loans acquired are presented in the preceding table in the column corresponding to the year of origination, not acquisition.
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Table of Contents
The table below summarizes the carrying values andCompany’s portfolio of loans held for investment on an amortized cost basis, by the results of the Company’sits internal risk rating review process performed (dollars in thousands):
Risk ratingSeptember 30, 2023December 31, 2022
1$— $— 
2178,552 511,878 
33,135,811 3,231,324 
4257,712 990,337 
5380,027 245,135 
Total$3,952,102 $4,978,674 
Allowance for credit losses(213,258)(197,272)
Carrying value$3,738,844 $4,781,402 
Weighted average risk rating(1)
3.2 3.2 

(1)Weighted average risk rating calculated based on the amortized cost balance at period end.
The weighted average risk rating of the Company’s loans held for investment portfolio was 3.2 as of September 30, 2017 and2023, unchanged from December 31, 20162022.
Allowance for Credit Losses
The Company’s allowance for credit losses developed pursuant to ASC 326 reflects its current estimate of potential credit losses related to its loans held for investment portfolio as of September 30, 2023. As part of its allowance for credit losses, the Company maintains a separate allowance for credit losses related to unfunded loan commitments which is included in accrued expenses and other liabilities on the consolidated balance sheets. See Note 2 for additional details regarding the Company's accounting policies and estimation of its allowance for credit losses.
The following tables present activity in the allowance for credit losses for loans by finance receivable class (dollars in thousands):

 

 

Carrying Value

 

Rating

 

September 30, 2017

 

 

December 31, 2016

 

1

 

$

—

 

 

$

261,261

 

2

 

 

1,073,455

 

 

 

745,340

 

3

 

 

1,695,009

 

 

 

1,205,994

 

4

 

 

56,249

 

 

 

237,395

 

5

 

 

—

 

 

 

—

 

Totals

 

$

2,824,713

 

 

$

2,449,990

 

Weighted Average Risk Rating(1)

 

 

2.6

 

 

 

2.6

 

For the Three Months Ended September 30, 2023
Senior loansSubordinated and
mezzanine loans		Total
Allowance for credit losses for loans held for investment:
Beginning balance at July 1, 2023$250,244 $— $250,244 
Allowance for (reversal of) credit losses, net80,475 — 80,475 
Realized loss on loan sales and REO conversions(117,461)— (117,461)
Subtotal213,258 — 213,258 
Allowance for credit losses on unfunded loan commitments:
Beginning balance at July 1, 202328,041 — 28,041 
Allowance for (reversal of) credit losses, net(4,670)— (4,670)
Subtotal23,371 — 23,371 
Total allowance for credit losses$236,629 $— $236,629 

(1)

Weighted Average Risk Rating calculated based on unpaid principal balance at period end.

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Table of Contents
For the Three Months Ended September 30, 2022
Senior loansSubordinated and
mezzanine loans		Total
Allowance for credit losses for loans held for investment:
Beginning balance at July 1, 2022$83,485 $671 $84,156 
Allowance for (reversal of) credit losses, net131,462 (671)130,791 
Realized loan loss(4,400)— (4,400)
Subtotal210,547 — 210,547 
Allowance for credit losses on unfunded loan commitments:
Beginning balance at July 1, 20229,227 — 9,227 
Allowance for credit losses, net5,875 — 5,875 
Subtotal15,102 — 15,102 
Total allowance for credit losses$225,649 $— $225,649 
For the Nine Months Ended September 30, 2023
Senior loansSubordinated and
mezzanine loans		Total
Allowance for credit losses for loans held for investment:
Beginning balance at January 1, 2023$197,272 $— $197,272 
Allowance for credit losses, net166,601 — 166,601 
Realized loss on loan sales and REO conversions(150,615)— (150,615)
Subtotal213,258 — 213,258 
Allowance for credit losses on unfunded loan commitments:
Beginning balance at January 1, 202317,314 — 17,314 
Allowance for credit losses, net6,057 — 6,057 
Subtotal23,371 — 23,371 
Total allowance for credit losses$236,629 $— $236,629 
For the Nine Months Ended September 30, 2022
Senior loansSubordinated and
mezzanine loans		Total
Allowance for credit losses for loans held for investment:
Beginning balance at January 1, 2022$41,193 $806 $41,999 
Allowance for (reversal of) credit losses, net173,754 (806)172,948 
Realized loan loss(4,400)— (4,400)
Subtotal210,547 — 210,547 
Allowance for credit losses on unfunded loan commitments:
Beginning balance at January 1, 20224,210 — 4,210 
Allowance for (reversal of) credit losses, net10,892 — 10,892 
Subtotal15,102 — 15,102 
Total allowance for credit losses$225,649 $— $225,649 
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The following table presents the allowance for credit losses for loans held for investment (dollars in thousands):
September 30, 2023
General reserveSpecific reserveTotal reserve
Allowance for credit losses:
Loans held for investment$59,360 $153,898 $213,258 
Unfunded loan commitments1,976 21,395 23,371 
Total allowance for credit losses$61,336 $175,293 $236,629 
Total unpaid principal balance$3,581,260 $388,904 $3,970,164 
December 31, 2022
General reserveSpecific reserveTotal reserve
Allowance for credit losses:
Loans held for investment$119,190 $78,082 $197,272 
Unfunded loan commitments10,927 6,387 17,314 
Total allowance for credit losses$130,117 $84,469 $214,586 
Total unpaid principal balance$4,759,663 $245,135 $5,004,798 
The Company’s allowance for credit losses is influenced by the size and maturity dates of its loans, loan quality, credit indicators including risk ratings, delinquency status, historical loss experience and other conditions influencing loss expectations, such as property valuation and reasonable and supportable forecasts of economic conditions.
During the three months ended September 30, 2023, the Company recorded a decrease of $41.7 million to its allowance for credit losses. The decrease to the Company's allowance for credit losses was due primarily to (1) a decrease of $92.8 million resulting from loan sales and an REO conversion and (2) a decrease of $0.2 million resulting from full loan repayments, partially offset by (1) an increase of $31.5 million related to individually assessed loans as a result of continuing deterioration in office and local market fundamentals and (2) an increase of $19.9 million related to macroeconomic assumptions employed in determining the general CECL reserve and continued deterioration of the office sector.
During the nine months ended September 30, 2017, two2023, the Company recorded an increase of $22.0 million to its allowance for credit losses, increasing its CECL reserve to $236.6 million as of September 30, 2023. For the nine months ended September 30, 2023, the increase to the Company's allowance for credit losses was due primarily to (1) an increase of $79.1 million related to individually assessed loans were movedresulting from local market fundamentals and deterioration in the office sector, (2) an increase of $72.3 million related to macroeconomic assumptions employed in determining the general CECL reserve and the deterioration of local market fundamentals in the office sector, and (3) an increase of $0.8 million resulting from the Company’s category four risk rating, one into its category two risk ratingCompany's loan origination activity during 2023, partially offset by (1) a decrease of $126.0 million resulting from loan sales and REO conversions and (2) a decrease of $4.3 million resulting from full loan repayments.
As of September 30, 2023, five first mortgage loans satisfied the other into its category three risk rating, as a result of improved operating performanceCECL framework's criteria for individual assessment. The total amortized cost of the underlyingindividually assessed loans as of September 30, 2023 and December 31, 2022, was $380.0 million and $385.2 million, respectively. Accordingly, the Company utilized the estimated fair value of the loan collateral.collateral to estimate a total allowance for credit losses of $175.3 million as of September 30, 2023. The Company’s fair market value estimates were determined primarily using discounted cash flow models and Level 3 inputs, which include estimates of property-specific cash flows over a specific holding period, a discount rate range of 9.0% – 14.0%, and terminal capitalization rates ranging between 7.8% – 9.5%. These inputs are based on the location, type and nature of the property, current sales and lease comparables, anticipated real estate and capital market conditions, and management’s knowledge, experience and judgment. Additionally, the Company movedmay use broker-prepared estimates of fair values based on discounted cash flows and sales comparables to corroborate the estimated value of a loan's collateral. As of September 30, 2023, four of the five loans with an amortized cost of $318.1 million were on non-accrual status, of which four loans thatwith an aggregate amortized cost of $318.1 million are on cost-recovery due to a significant risk of principal loss. During the three and nine months ended September 30, 2023, $4.6 million and $7.1 million of contractual interest payments were classifiedreceived and applied as a reduction to the loans' amortized cost under the cost-recovery method of accounting. The fifth loan, which had an amortized cost of $61.9 million, was not on non-accrual status because the borrower was not in default of the loan agreement and all amounts of interest due were collected by the Company.
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During the three months ended September 30, 2022, the Company recorded an increase of $132.3 million to its category three risk ratingallowance for credit losses. The increase to category four, resulting fromthe Company's allowance for credit losses was due to weakening credit indicators, inflationary expectations, reduced liquidity in the capital markets, increased capitalization rates for properties, especially office, an uncertain macroeconomic outlook, and new loan investments offset by eight loan repayments in-full and nine partial repayments. The uncertain macroeconomic outlook is caused by surging inflationary pressures, rising short term interest rates, continuing supply chain disruptions, widening credit spreads in the fixed income markets, a material decline in collateral performance. U.S. stock market indices, and unsettled geopolitical conditions. These factors, and slowing business plan execution for certain of our loans, contributed to the increase in the Company’s allowance for credit losses during the three months ended September 30, 2022.
During the nine months ended September 30, 2017, two loans classified in its category four risk rating and three loans classified in its category one risk rating as of December 31, 2016 were repaid during the ordinary course of business. The weighted average risk rating at both September 30, 2017 and December 31, 2016 was 2.6.

At September 30, 2017 and December 31, 2016, there were no loans on non-accrual status or that were impaired; thus,2022, the Company did not record a reserverecorded an increase of $179.4 million, increasing its allowance for loan loss.

See Note 15 for details about the Company’s mortgage loan originations subsequentcredit losses to September 30, 2017.

(4) Commercial Mortgage-Backed Securities

At each$225.6 million as of September 30, 2017 and December 31, 2016,2022. For the Company had five CMBS designated as available-for-sale. During the threenine months ended September 30, 2017,2022, the Company's estimate of expected credit losses was impacted by loan originations and repayments of $1,461.9 million and $1,171.1 million, respectively, an increase to four from one in the number of loans bearing a risk rating of "5", and recessionary macroeconomic assumptions employed in determining the model-based general CECL reserve.

As of September 30, 2023, the Company sold a CMBS investment for net proceedshad four first mortgage loans with an amortized cost of $43.8$318.1 million recognizing in Other income, net a gain on salenon-accrual status. As of $0.3 million. Detailed information regardingDecember 31, 2022, the Company had two first mortgage loans with an amortized cost of $190.4 million on non-accrual status. In accordance with the Company’s available-for-sale CMBS is as followsrevenue recognition and allowance for credit losses accounting policies, the Company suspended its accrual of interest income when each loan was placed on non-accrual status. As of September 30, 2023 and December 31, 2022, none of the Company's performing loans (full accrual status) had accrued interest income receivable 90 days or more past due.
The following table presents an aging analysis for the Company’s portfolio of loans held for investment, by class of loans on amortized cost basis (dollars in thousands):

 

 

September 30, 2017

 

 

 

 

 

 

 

Unamortized

 

 

Gross

 

 

Estimated

 

 

 

Face

 

 

Premium

 

 

Unrealized

 

 

Fair

 

 

 

Amount

 

 

(Discount)

 

 

Loss

 

 

Value

 

Investments, at Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial mortgage-backed securities

 

$

85,866

 

 

$

336

 

 

$

(20

)

 

$

86,182

 

Days Outstanding as of September 30, 2023
CurrentDays: 30-59Days: 60-89 Days: 90 or moreTotal loans past dueTotal loans
Loans receivable:
Senior loans$3,833,714 $— $— $118,388 $118,388 $3,952,102 
Total$3,833,714 $— $— $118,388 $118,388 $3,952,102 

 

 

December 31, 2016

 

 

 

Face

Amount

 

 

Unamortized

Premium

(Discount)

 

 

Gross

Unrealized

Gain

 

 

Estimated

Fair

Value

 

Investments, at Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial mortgage-backed securities

 

$

62,927

 

 

$

(2,673

)

 

$

1,250

 

 

$

61,504

 

 Days Outstanding as of December 31, 2022
Current Days: 30-59Days: 60-89Days: 90 or moreTotal loans past dueTotal loans
Loans receivable:
Senior loans$4,541,692 $365,713 $— $71,269 $436,982 $4,978,674 
Total$4,541,692 $365,713 $— $71,269 $436,982 $4,978,674 

See Note 2 of the consolidated financial statements for details of the Company's revenue recognition and allowance for credit losses accounting policies.
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Loan Modifications
The CMBS fair valuesCompany may amend or modify a loan depending on the loan’s specific facts and circumstances. These loan modifications typically include additional time for the borrower to refinance or sell the collateral property, adjustment or waiver of performance tests that are considered Level II fair value measurements withinprerequisite to the fair value hierarchyextension of ASC 820-10. The CMBS fair values are based upon market, broker, counterparty a loan maturity, modification of terms of interest rate cap agreements, and/or pricing services quotations, which provide valuation estimates based upon reasonable market order indications. These fair value quotations are subjectdeferral of scheduled principal payments. In exchange for a modification, the Company often receives a partial repayment of principal, a short-term accrual of PIK interest for a portion of interest due, a cash infusion to significant variability based on market conditions, such asreplenish interest rates, credit spreads and market liquidity.


The amortized cost and estimated fair valueor capital improvement reserves, termination of all or a portion of the remaining unfunded loan commitment, additional call protection, and/or an increase in the loan coupon. For the nine months ended September 30, 2023, none of the Company’s available-for-sale CMBS by contractual maturity are shownloan modifications resulted in significant modifications.

As of September 30, 2023, the total amount of accrued PIK interest in the following table (dollars in thousands):

 

 

September 30, 2017

 

 

 

Amortized

Cost

 

 

Estimated

Fair Value

 

Expected Maturity Date

 

 

 

 

 

 

 

 

After one, within five years

 

$

36,700

 

 

$

36,872

 

After five, within ten years

 

 

49,509

 

 

 

49,310

 

Total investment in commercial mortgage-backed securities, at fair value

 

$

86,209

 

 

$

86,182

 

 

 

December 31, 2016

 

 

 

Amortized

Cost

 

 

Estimated

Fair Value

 

Expected Maturity Date

 

 

 

 

 

 

 

 

After one, within five years

 

$

58,962

 

 

$

60,242

 

After five, within ten years

 

 

1,292

 

 

 

1,262

 

Total investment in commercial mortgage-backed securities, at fair value

 

$

60,254

 

 

$

61,504

 

Company's loans held for investment portfolio was $1.2 million related to one first mortgage loan. No other than temporary impairments were recognized through incomeaccrued PIK interest was recorded and deferred during the nine months ended September 30, 20172023.

The following table presents the accrued PIK interest activity for the Company’s loans held for investment portfolio (dollars in thousands):
September 30, 2023
Balance as of January 1, 2023$1,714 
Repayments of accrued PIK interest(542)
Balance as of March 31, 2023$1,172 
Accrued PIK interest— 
Repayments of accrued PIK interest— 
Write-off of accrued PIK interest— 
Balance as of June 30, 2023$1,172 
Accrued PIK interest— 
Repayments of accrued PIK interest— 
Write-off of accrued PIK interest— 
Balance as of September 30, 2023$1,172 
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(4) Real Estate Owned
As of September 30, 2023, assets and liabilities related to REO consisted of two properties: an office property in Houston, TX and a multifamily property under development in Los Angeles, CA.
In 2022, the Company originated a $97.0 million senior loan secured by a multifamily property under development in Los Angeles, CA. As of June 30, 2023, the loan had a risk rating of "4" and was on non-accrual status, with an amortized cost and carrying value of $77.1 million and $71.1 million, respectively. On August 17, 2023, the Company acquired the property via foreclosure. Such acquisition was accounted for as an asset acquisition.
The Company allocated the fair value of the assumed assets and liabilities on the acquisition date as follows (dollars in thousands):
Fair Value Allocation
Land and land improvements$24,012 
Construction in progress47,091 
Total$71,103 
The Company’s fair market value estimate was determined primarily using discounted cash flow models and Level 3 inputs, which include estimates of property-specific cash flows over a specific holding period, a discount rate of 7.3%, and a terminal capitalization rate of 5.0%. These inputs are based on the location, type and nature of the property, costs-to-complete, expected time required to lease and stabilize the property, current sales and lease comparables, anticipated real estate and capital market conditions, and management’s knowledge, experience, and judgment.
In 2018, the Company originated a $55.7 million senior loan secured by an office property in Houston, TX. As of March 31, 2023, the loan had a risk rating of "5", was on non-accrual status and accounted for under cost-recovery, with an amortized cost and carrying value of $55.0 million and $46.0 million, respectively. On April 28, 2023, the Company acquired the property via a deed-in-lieu of foreclosure. Such acquisition was accounted for as an asset acquisition.
The Company allocated the fair value of the assumed assets and liabilities on the acquisition date as follows (dollars in thousands):
Fair Value Allocation
Building and building improvements$31,096 
Land and land improvements7,592 
In-place lease intangibles9,378 
Above-market lease intangibles576 
Below-market lease intangibles(2,642)
Total$46,000 
The Company’s fair market value estimate was determined primarily using discounted cash flow models and Level 3 inputs, which include estimates of property-specific cash flows over a specific holding period, a discount rate of 9.5%, and a terminal capitalization rate of 8.5%. These inputs are based on the location, type and nature of the property, current sales and lease comparables, anticipated real estate and capital market conditions, and management’s knowledge, experience, and judgment.
During June 2023, the Company obtained from a third party a $31.2 million first mortgage loan secured by the office property, which is classified as Mortgage loan payable, net on the Company's consolidated balance sheets. See Note 6 for details of the Mortgage loan payable.
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The following table presents the REO assets and liabilities (dollars in thousands):
September 30, 2023
Assets
Cash$537 
Real estate owned - Building and building improvements31,096 
Real estate owned - Land and land improvements31,604 
Real estate owned - Construction in progress47,346 
Real estate owned - Tenant improvements2,510 
Real estate owned112,556 
Accumulated depreciation(596)
Real estate owned, net111,960 
In-place lease intangibles, net(1)
7,616 
Above-market lease intangibles, net(1)
526 
Other assets, net(1)
11,583 
Total assets$132,222 
Liabilities
Mortgage loan payable, net(2)
$30,514 
Below-market leases intangibles, net(3)
2,264 
Other liabilities(3)
2,579 
Total liabilities$35,357 

(1)Included within Other assets within the Company's consolidated balance sheet. Other assets, net includes $11.2 million of cash proceeds from the Company's mortgage loan payable escrowed for tenant improvements and leasing costs, and other working capital balances as of September 30, 2023.
(2)During the three and nine months ended September 30, 2023, the Company incurred interest expense of $0.7 million and $0.8 million, respectively, which is included within Interest expense on the Company's consolidated statements of income and comprehensive income.
(3)Included within Accrued expenses and other liabilities within the Company's consolidated balance sheet.
The Company acquired certain legacy tenant leases upon the acquisition of REO. These leases entitle the Company to receive contractual rent payments during the lease periods and tenant reimbursements for certain property operating expenses, including common area costs, insurance, utilities and real estate taxes. The Company elected the practical expedient to not separate the lease and non-lease components of the rent payments and accounts for these leases as operating leases.
The following table presents the REO operations and related income (loss) (dollars in thousands):
Three Months EndedNine Months Ended
September 30, 2023September 30, 2023
Rental income
Minimum lease payments$1,761 $2,911 
Variable lease payments267 644 
Total rental income2,028 3,555 
Other operating income— 1 
Revenue from real estate owned operations2,028 3,556 
Rental property operating expenses(1)
1,704 2,588 
Depreciation and amortization(2)
1,394 2,358 
Expenses from real estate owned operations3,098 4,946 
Net loss from REO$(1,070)$(1,390)

(1)Excludes $0.7 million and $0.8 million of interest expense incurred during the three and nine months ended September 30, 2023, respectively, which is included within Interest expense on the Company's consolidated statements of income and comprehensive income.
(2)During the three and nine months ended September 30, 2023, the Company incurred $0.4 million and $0.6 million, respectively, of depreciation expense.
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Real estate related capital expenditures
Construction in progress was $47.3 million as of September 30, 2023.
For the nine months ended September 30, 2023, the Company's capital expenditures were $2.3 million, as shown on the Company's consolidated statements of cash flows. Substantially all of the Company's investing activity related to capital expenditures for its REO assets.
The following table presents the gross carrying amount and accumulated amortization of lease intangibles (dollars in thousands):
September 30, 2023
Intangible assets:
In-place lease intangibles$9,378 
Above-market lease intangibles576 
Total intangible assets9,954 
Accumulated amortization:
In-place lease intangibles(1,762)
Above-market lease intangibles(50)
Total accumulated amortization(1,812)
Intangible assets, net$8,142 
Intangible liabilities:
Below-market lease intangibles$2,642 
Total intangible liabilities2,642 
Accumulated amortization:
Below-market lease intangibles(378)
Total accumulated amortization(378)
Intangible liabilities, net$2,264 
The following table presents the estimated future amortization of the Company's intangibles for each of the next five years (dollars in thousands):
YearIn-place lease intangiblesAbove-market lease intangiblesBelow-market lease intangibles
2023 (remaining)$799 $30 $(227)
20242,448 120 (842)
20251,392 84 (338)
2026798 69 (237)
2027481 38 (187)
2028431 33 (179)
The weighted-average amortization period for the acquired in-place lease intangibles, above-market lease intangibles and below-market lease intangibles acquired during the nine months ended September 30, 2023, were 5.1 years, 7.2 years, and 4.6 years, respectively.
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Future Minimum Lease Payments
Minimum rental amounts due under tenant leases are generally subject either to scheduled fixed increases or yearadjustments. The following table presents approximate future minimum rental income under noncancellable operating leases, excluding variable lease revenue of tenant reimbursements, to be received over the next five years and thereafter as of September 30, 2023 (dollars in thousands):
YearFuture Minimum Rents
2023 (remaining)$1,477 
20244,187 
20254,676 
20263,833 
20273,398 
20283,156 
Thereafter15,209 
Total$35,936 
The weighted average minimum term of the non-cancellable leases was approximately nine years as of September 30, 2023.
In December 2020, the Company acquired two largely undeveloped commercially-zoned land parcels on the Las Vegas Strip comprising 27 acres (the “Las Vegas land”) pursuant to a negotiated deed-in-lieu of foreclosure. The Company's cost basis in the Las Vegas land was $99.2 million, equal to the estimated fair value of the collateral at the date of acquisition, net of estimated selling costs.
During the three months ended December 31, 2016.

2021, the Company sold a 17 acre parcel of the Las Vegas land and retained the remaining 10 acre parcel of Las Vegas land at its estimated fair value at the time of acquisition, net of estimated selling costs, of $60.6 million. On April 4, 2022, the Company sold the remaining 10 acre parcel of Las Vegas land for net cash proceeds of $73.9 million and recognized a gain on sale of real estate owned, net, of $13.3 million on the consolidated statements of income and comprehensive income. The Las Vegas land parcels were sold for gains during the years ended December 31, 2022 and 2021. For the nine months ended September 30, 2022, operating revenues from Las Vegas land were sufficient to cover the operating expenses and were immaterial to the financial results of the Company.


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(5) Variable Interest Entities and Collateralized Loan Obligation

On December 18, 2014,Obligations

Subsidiaries of the Company entered into ahave financed certain of the Company’s loans held for investment portfolio through the issuance of collateralized loan obligation throughobligations.
On February 16, 2022, TPG RE Finance Trust CLO Issuer, L.P.Sub-REIT (“Sub-REIT”), a wholly-owned subsidiary of the Company, issued a collateralized loan obligation (“CLO Issuer”TRTX 2022-FL5” or “FL5”) and on December 29, 2014,. TRTX 2022-FL5 permits the Company, acquired from German American Capital Corporation (“GACC”) a portfolio of 75%during the 24 months after closing, to contribute eligible new loans or participation interests in certain loans secured primarily by first mortgages on commercial properties,to TRTX 2022-FL5 in exchange for cash, which provides additional liquidity to the Company to originate new loan investments as underlying loans repay. The Company utilized the reinvestment feature during the nine months ended September 30, 2023, but did not utilize the reinvestment feature during the three months ended September 30, 2023. The Company utilized the reinvestment feature during the three and nine months ended September 30, 2022. In connection with a face valueTRTX 2022-FL5, the Company incurred $6.5 million of approximately $2.4 billion. To partially fund the investment, on December 18, 2014, the CLO Issuerdeferred financing costs, including issuance, legal, and accounting related costs.
On March 31, 2021, Sub-REIT issued a Class A Note secured bycollateralized loan obligation (“TRTX 2021-FL4” or “FL4”). TRTX 2021-FL4 permits the Company’s 75%Company, during the 24 months after closing, to contribute eligible new loans or participation interests in loans to TRTX 2021-FL4 in exchange for cash, which provides additional liquidity to the portfolioCompany to originate new loan investments as underlying loans repay. The reinvestment period for TRTX 2021-FL4 ended on March 11, 2023. In accordance with the TRTX 2021-FL4 indenture, prior to the end of loans acquired.the reinvestment period on March 11, 2023, the Company committed to contribute certain loan assets and completed the contribution process by mid-May 2023. The Company evaluatedutilized the reinvestment feature during the nine months ended September 30, 2023, but did not utilize the reinvestment feature during the three months ended September 30, 2023. During the three and nine months ended September 30, 2022, the Company utilized the reinvestment feature in accordanceTRTX 2021-FL4. In connection with ASC 810,TRTX 2021-FL4, the Company incurred $8.3 million of deferred financing costs, including issuance, legal, and accounting related costs.
On October 25, 2019, Sub-REIT issued a collateralized loan obligation (“TRTX 2019-FL3” or “FL3”). TRTX 2019-FL3 permits the Company, during the 24 months after closing, to contribute eligible new loans or participation interests in loans to TRTX 2019-FL3 in exchange for cash, which provides additional liquidity to the Company to originate new loan investments as underlying loans repay. The reinvestment period for TRTX 2019-FL3 ended on October 11, 2021. In connection with TRTX 2019-FL3, the Company incurred $7.8 million of deferred financing costs, including issuance, legal, and accounting related costs.
On November 29, 2018, Sub-REIT issued a collateralized loan obligation (“TRTX 2018-FL2” or “FL2”). TRTX 2018-FL2 permitted the Company, during the 24 months after closing, to contribute eligible new loans or participation interests in loans to TRTX 2018-FL2 in exchange for cash, which provides additional liquidity to the Company to originate new loan investments as underlying loans repay. The reinvestment period for TRTX 2018-FL2 ended on December 11, 2020. In connection with TRTX 2018-FL2, the Company incurred $8.7 million of deferred financing costs, including issuance, legal, and accounting related costs.
On February 17, 2022, the Company redeemed TRTX 2018-FL2, which at its redemption had $600.0 million of investment-grade bonds outstanding. The 17 loans or participation interests therein with an aggregate unpaid principal balance of $805.7 million held by the trust were refinanced in part by the issuance of TRTX 2022-FL5 and in part with the expansion of an existing secured credit agreement. In connection with the redemption of TRTX 2018-FL2, the Company exercised an option under an existing secured credit agreement to increase the commitment amount by $250.0 million, pledge additional collateral with an aggregate unpaid principal balance of $463.8 million and borrow an additional $359.1 million.
The Company evaluated the key attributes of the issuers of the CRE CLOs ("CRE CLO IssuerIssuers"), which are wholly-owned subsidiaries of the Company, to determine if it was a VIEthey were VIEs and, if so, whether the Company was the primary beneficiary of their operating activities and therefore consolidate the CRE CLOs. The Company concluded that the CRE CLO Issuer’s operating activities. This analysis resulted inIssuers are VIEs and the Company concluding that the CLO Issuer was a VIE, that the Company wasis the primary beneficiary and thatbecause it would consolidate the entity.

The CLO Issuer invested in real estate-related loans which were substantially financed by the issuance of debt securities. The  Manager was named collateral manager (“CLO Collateral Manager”) for all of the CLO Issuer’s collateral assets. The CLO Collateral Manager was responsible for the activities that most significantly impacted the performance of the underlying assets, including but not limited to monitoring, managing and disposing of collateral assets and managing the CLO Issuer’s compliance with provisions of the CLO indenture. The Company’s involvement with the CLO Issuer primarily affected its financial performance and operating cash flows through amounts recorded to interest income, interest expense and provision for loan losses.

The Company consolidated the CLO Issuer because ultimately it hadhas the ability to control the activities that most significantly impacted the economic performancesignificant activities of the entity through its contractual rights withCRE CLO Issuers, the affiliated CLO Collateral Manager. The CLO Collateral Manager had a contractual dutyobligation to the CLO Issuer, which in turn benefited the Company as the owner of 100% of the equity in the CLO Issuer. Additionally, the Company had exposure to the CLO Issuer’sabsorb losses to the extent of its equity interestsinvestments, and also had rightsthe right to waterfall payments in excess of required payments to the CLO Issuer’s Class A Note holder which would bothreceive benefits that could potentially be significant to the CLO Issuer. At each reporting date,these entities. Accordingly, as of September 30, 2023 and December 31, 2022 the Company reconsidered its primary beneficiary conclusionconsolidated the CRE CLO Issuers.

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The following table outlines the total assets and liabilities within the Sub-REIT (dollars in thousands):
September 30, 2023December 31, 2022
Assets
Cash and cash equivalents$43,741 $28,011 
Collateralized loan obligation proceeds held at trustee(1)
237,521 297,168 
Accounts receivable from servicer/trustee(2)
4,481 156,633 
Accrued interest receivable479 5,584 
Loans held for investment, net(3)
2,361,703 2,779,978 
Total assets$2,647,925 $3,267,374 
Liabilities
Accrued interest payable$6,096 $6,106 
Accrued expenses514 761 
Collateralized loan obligations, net(4)
1,973,911 2,452,212 
Payable to affiliates3,180 8,175 
Total liabilities$1,983,701 $2,467,254 

(1)Includes $237.5 million of cash available to determine if its obligationacquire eligible assets related to absorb lossesTRTX 2022-FL5 as of or its rightsSeptember 30, 2023. Includes $72.5 million and $224.7 million of cash available to receive benefits from,acquire eligible assets related to TRTX 2022-FL5 and TRTX 2021-FL4, respectively, as of December 31, 2022.
(2)Includes $1.8 million and $2.4 million of cash proceeds related to loan repayments related to TRTX 2021-FL4 and TRTX 2019-FL3, respectively, held by the CLO Issuer could potentially be more than insignificant and if it should consolidateCompany's loan servicer as of September 30, 2023, which were remitted to the CLO Issuer.

On August 16, 2017,Company during the outstandingsubsequent remittance cycle. Includes $155.2 million of cash proceeds related to loan repayments related to TRTX 2019-FL3 held by the Company's loan servicer as of December 31, 2022, which were remitted to the Company during the subsequent remittance cycle.

(3)Includes three loans held for investment with an unpaid principal balance of $3.6 million and $2.9 million as of September 30, 2023 and December 31, 2022, respectively.
(4)Net of $5.6 million and $9.0 million of unamortized deferred financing costs as of September 30, 2023 and December 31, 2022, respectively.
As of September 30, 2023 and December 31, 2022, assets held by these VIEs are restricted and are only available to settle obligations of the Class A Note issuedrelated VIE. The liabilities of these VIEs are non-recourse to the Company and can only be satisfied from the then-current assets of the related VIE.
28
Table of Contents
The following tables detail the loan collateral and borrowings under the Company's CRE CLOs (dollars in thousands):
September 30, 2023
CRE CLOsCountBenchmark interest rateOutstanding principal balance
Carrying value(1)
Wtd. avg. spread(2)
Wtd. avg. maturity(3)
TRTX 2019-FL3
Collateral loan investments7
Term SOFR(4)
$379,418$280,4003.48 %1.7
Financing provided1
Term SOFR(4)
188,407188,4072.30 %11.0
TRTX 2021-FL4
Collateral loan investments18
Term SOFR(5)
1,096,6051,017,4683.53 %2.6
Financing provided1
Term SOFR(5)
884,105881,9031.79 %14.4
TRTX 2022-FL5
Collateral loan investments15
Term SOFR(6)
1,075,0001,060,2533.62 %3.1
Financing provided1
Term SOFR(6)
907,031903,6012.02 %15.4
Total
Collateral loan investments(7)
40Term SOFR$2,551,023$2,358,1213.55 %2.6 years
Financing provided(8)
3Term SOFR$1,979,543$1,973,9111.94 %14.5 years

(1)Includes loan amounts held in the Company's CRE CLOs and excludes other loans held for investment, net of $3.6 million held within the Sub-REIT.
(2)Weighted average spread excludes the amortization of loan fees and deferred financing costs.
(3)Loan term represents weighted-average final maturity, assuming extension options are exercised by the borrower. Repayments of CRE CLO Issuernotes are dependent on timing of related loan repayments post-reinvestment period. The term of the CRE CLO notes represents the rated final distribution date.
(4)On October 1, 2021, the benchmark index interest rate for borrowings under TRTX 2019-FL3 was approximately $118.0 million. converted from Compounded SOFR to Term SOFR by the designated transaction representative under the FL3 indenture. The Company exercised its right to convert the mortgage assets' benchmark interest rate from LIBOR to Term SOFR to eliminate the difference between benchmark rates used for the assets and liabilities of the CRE CLO. As of September 30, 2023, the TRTX 2019-FL3 mortgage assets are indexed to Term SOFR.
(5)On August 16, 2017,May 15, 2023, the CLO Issuer soldbenchmark index interest rate for borrowings under TRTX 2021-FL4 was converted from LIBOR to GACC two firstTerm SOFR by the designated transaction representative under the FL4 indenture. The Company exercised its right to convert the mortgage assets' benchmark interest rate from LIBOR to Term SOFR to eliminate the difference between benchmark rates used for the assets and liabilities of the CRE CLO.
(6)The Company had the ability to convert the interest rate benchmark from Compounded SOFR to Term SOFR once 50% of the underlying mortgage loans were converted to Term SOFR. On September 12, 2023, the benchmark interest rate for borrowings under TRTX 2022-FL5 was converted from Compounded SOFR to Term SOFR by the designated transaction representative under the FL5 indenture. As of September 30, 2023, all of the TRTX 2022-FL5 mortgage assets are indexed to Term SOFR.
(7)Collateral loan participation interests with aninvestment assets of FL3, FL4 and FL5 represent 9.6%, 27.6% and 27.1% of the aggregate unpaid principal balance of $12.8 million that collateralized the Class A Note in part and recognized in Other income, net a $0.2 million loss on sale. The sales price of the two first mortgageCompany's loans was approximately par value. These loans were sold because they were determined to no longer be consistent with the Company’s currentheld for investment strategy.


On August 18, 2017, one of the Company’s wholly-owned subsidiaries purchased from the CLO Issuer seven first mortgage loan participation interests with an aggregate unpaid principal balance of $138.5 million that collateralized the remainder of the Class A Note issued by the CLO Issuer. The first mortgage loan participation interests were sold by the CLO Issuer for approximately par value. On August 23, 2017, proceeds from both transactions were used in combination with approximately $3.0 million of Company cash to retire all amounts outstanding under the Class A Note issued by the CLO Issuer, which totaled $118.0 million. The collateralized loan obligation was subsequently terminated.

The Company’s total assets and total liabilities at December 31, 2016 included the following VIE assets and liabilities (dollars in thousands):

 

 

December 31, 2016

 

ASSETS

 

 

 

 

Cash and Cash Equivalents

 

$

2,133

 

Accounts Receivable

 

 

479

 

Accounts Receivable from Servicer/Trustee

 

 

23,009

 

Accrued Interest Receivable

 

 

5,714

 

Loans Held for Investment

 

 

712,158

 

Total Assets

 

$

743,493

 

LIABILITIES

 

 

 

 

Accrued Interest Payable

 

$

885

 

Accrued Expenses

 

 

32

 

Collateralized Loan Obligation

 

 

540,780

 

Payable to Affiliates

 

 

933

 

Deferred Revenue

 

 

198

 

Total Liabilities

 

$

542,828

 

Assets held by the CLO Issuer were restricted and could only be used to settle obligations of the entity. The liabilities of the CLO Issuer were non-recourse to the Company and could only be satisfied from the CLO Issuer’s asset pool. From inception of the CLO through its dissolution, the Company did not provide, and was not required to provide, financial support to the CLO Issuer through a liquidity arrangement or otherwise.

The following table outlines borrowings and the corresponding collateral under the Company’s consolidated CLO Issuerportfolio as of December 31, 2016 (dollars in thousands):

September 30, 2023.

As of December 31, 2016

 

Debt

 

 

Collateral (loans)

 

Face Value

 

 

Carrying Value

 

 

Outstanding Principal

 

 

Carrying Value

 

$

543,320

 

 

$

540,780

 

 

$

712,420

 

 

$

712,158

 

The Company incurred approximately $13.2 million of issuance costs which were amortized on an effective yield basis over the shorter of the remaining life of the loans that collateralized the Class A Note, or the Class A Note. As a result of retiring all amounts outstanding under the Class A Note, the Company recognized an additional $0.9 million of issuance costs during(8)During the three months ended September 30, 2017. As2023, the Company recognized interest expense of September 30, 2017$38.3 million, which includes $1.2 million of deferred financing cost amortization and December 31, 2016,is reflected within the Company’s unamortized issuance costs were $0.0 millionCompany's consolidated statements of income and $2.5 million, respectively.

Interest on the Class A Note was payable monthly, beginning on December 18, 2014, and forcomprehensive income. During the nine months ended September 30, 2017 and 2016,2023, the Company recognized interest expense (excluding amortizationof $115.1 million, which includes $3.6 million of deferred financing costs) of $9.3 millioncost amortization and $21.8 million, respectively, is included inreflected within the Company’sCompany's consolidated statements of income and comprehensive income.


29
Table of Contents
December 31, 2022
CRE CLOsCountBenchmark interest rateOutstanding principal balanceCarrying value
Wtd. avg. spread(1)
Wtd. avg. maturity(2)
TRTX 2019-FL3
Collateral loan investments10LIBOR$707,456$508,5073.16 %1.4
Financing provided1
Term SOFR(4)
516,639516,6391.72 %11.8
TRTX 2021-FL4
Collateral loan investments23
LIBOR(5)
1,250,0001,210,5503.08 %2.7
Financing provided1LIBOR1,037,5001,033,2641.60 %15.2
TRTX 2022-FL5
Collateral loan investments18
LIBOR(6)
1,075,0001,058,0043.31 %3.4
Financing provided1Compounded SOFR907,031902,3092.02 %16.1
Total
Collateral loan investments(7)
51LIBOR$3,032,456$2,777,0613.19 %2.7 years
Financing provided(8)
3Term SOFR/LIBOR/Compounded SOFR$2,461,170$2,452,2121.78 %14.8 years

(1)Includes loan amounts held in the Company's CRE CLOs and excludes other loans held for investment, net of $2.9 million held within the Sub-REIT.
(2)Weighted average spread excludes the amortization of loan fees and deferred financing costs.
(3)Loan term represents weighted-average final maturity, assuming extension options are exercised by the borrower. Repayments of CRE CLO notes are dependent on timing of related loan repayments post-reinvestment period. The term of the CRE CLO notes represents the rated final distribution date.
(4)On October 1, 2021, the benchmark index interest rate for borrowings under TRTX 2019-FL3 was converted from Compounded SOFR to Term SOFR by the designated transaction representative under the FL3 indenture. The Company has the right to convert the mortgage assets' benchmark interest rate from LIBOR to Term SOFR to eliminate the difference between benchmark rates used for the assets and liabilities of the CRE CLO.
(5)As of December 31, 2022, the TRTX 2021-FL4 mortgage assets are indexed to LIBOR, with the exception of four participation interests totaling $118.9 million which are indexed to Term SOFR. The Company has the right to convert the mortgage assets' benchmark interest rate from LIBOR to Term SOFR to eliminate the difference between benchmark rates used for the assets and liabilities of the CRE CLO.
(6)As of December 31, 2022, the TRTX 2022-FL5 mortgage assets are indexed to LIBOR, with the exception of two participation interests totaling $178.5 million which are indexed to Term SOFR. The Company has the right to convert the mortgage assets benchmark interest rate from LIBOR to Term SOFR. This conversion will initiate the transition of the liabilities to Term SOFR once 50% of the underlying mortgage loans are converted to Term SOFR to eliminate the difference between benchmark rates used for the assets and liabilities of the CRE CLO.
(7)Collateral loan investment assets of FL3, FL4, and FL5 represent 14.1%, 25.0%, and 21.5% of the aggregate unpaid principal balance of the Company's loans held for investment portfolio as of December 31, 2022.
(8)During the three months ended September 30, 2022, the Company recognized interest expense.

expense of $26.4 million, which includes $1.9 million of deferred financing cost amortization and is reflected within the Company's consolidated statements of income and comprehensive income. During the nine months ended September 30, 2022, the Company recognized interest expense of $58.8 million, which includes $6.0 million of deferred financing cost amortization and is reflected within the Company's consolidated statements of income and comprehensive income.

30
Table of Contents
(6) Notes Payable, Repurchase Agreements, Senior Investment Portfolio Financing
The Company finances its portfolio of loans, or participation interests therein, and REO using secured financing agreements, including secured credit agreements, secured revolving credit facilities, asset-specific financing arrangements, and collateralized loan obligations.
The following table summarizes the Company's investment portfolio financing (dollars in thousands):
Outstanding principal balance
September 30, 2023December 31, 2022
Collateralized loan obligations(1)
$1,979,543 $2,461,170 
Secured credit agreements1,003,062 1,108,386 
Asset-specific financing arrangements214,330 565,376 
Secured revolving credit facility27,923 44,279 
Mortgage loan payable31,200 — 
Total$3,256,058 $4,179,211 
________________________________
(1)See Note 5 for additional information regarding the Company's collateralized loan obligations.
Secured Credit Facility and Subscription Secured Facility

AtAgreements

As of September 30, 20172023 and December 31, 2016,2022, the Company had notes payable and repurchasesecured credit agreements forused to finance certain of the Company’s originated loans. In addition, at December 31, 2016, the Company had a subscription secured credit facility outstanding, which facility was terminated in July 2017. On September 29, 2017, the Company entered into a new senior secured credit facility agreement with Bank of America.loan investments. These financing agreementsarrangements bear interest at a raterates equal to LIBORTerm SOFR plus a credit spread determinednegotiated between the Company and each lender, often a separate credit spread for each pledge of collateral, which is primarily bybased on property type and advance rate and property type, oragainst the unpaid principal balance of the pledged loan. These borrowing arrangements contain defined mark-to-market provisions that permit our lenders to issue margin calls to the Company only in the caseevent that the collateral properties underlying the Company’s loans pledged to the Company’s lenders experience a non-temporary decline in value (“credit marks”) due to reasons other than capital markets events that result in changing credit spreads for similar borrowing obligations. In connection with one of these borrowing arrangements, the subscription secured facility before it was terminated,lender is also permitted to issue margin calls to the creditworthiness of the irrevocable investor commitments that secured the facility. The agreements contain covenants that include certain financial requirements, including maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio, current ratio and limitations on capital expenditures, indebtedness, distributions, transactions with affiliates and maintenance of positive net income as definedCompany in the agreements.

event the lender determines capital markets events have caused credit spreads to change for similar borrowing obligations (“spread marks”). Furthermore, in connection with one of these borrowing arrangements, the lender has the right to re-margin the secured credit agreement based solely on appraised loan-to-values.

The following table presents certain information regarding the Company’s notes payable, repurchase agreements, senior secured credit facility, and subscription secured facility as of September 30, 2017 and December 31, 2016, respectively.agreements. Except as otherwise noted, all other agreements are held on a non-recourse basis. Amounts included are shownpartial (25%) recourse basis (dollars in thousands:

thousands):
September 30, 2023
Secured credit agreements(1)
Initial
maturity date		Extended
maturity date		Index
rate		Weighted average
credit spread		Weighted average interest rateCommitment
amount		Maximum
current availability		Balance
outstanding		Principal balance
of collateral		Amortized cost
of collateral
Goldman Sachs(2)
08/19/2408/19/24Term SOFR2.4 %7.7 %$500,000 $181,825 $318,175 $427,078 $426,777 
Wells Fargo04/18/2504/18/25Term SOFR1.9 %7.2 %500,000 94,129 405,871 528,093 526,083 
Barclays08/13/2508/13/26Term SOFR2.0 %7.3 %500,000 367,374 132,626 180,154 179,775 
Morgan Stanley(3)
05/04/2405/04/24Term SOFR2.3 %7.6 %500,000 446,200 53,800 82,573 82,573 
JP Morgan(4)
10/30/2310/30/25Term SOFR1.7 %7.1 %400,000 343,275 56,725 80,314 80,314 
Bank of America(5)
06/06/2606/06/26Term SOFR1.8 %7.1 %200,000 164,135 35,865 49,849 49,849 
Institutional Lender 1(6)
10/30/2310/30/25Term SOFR— %— %249,546 249,546 — — — 
Totals$2,849,546 $1,846,484 $1,003,062 $1,348,061 $1,345,371 

As of September 30, 2017

 

Notes Payable

 

Maturity

Date

 

Index Rate

 

Weighted Average Spread

 

 

Interest

Rate

 

 

Commitment

Amount

 

 

Maximum

Current

Availability

 

 

Balance

Outstanding

 

 

Principal

Balance of

Collateral

 

Bank of the Ozarks

 

8/23/2019

 

1 Month Libor

 

 

4.5

%

 

 

5.7

%

 

$

92,400

 

 

$

56,175

 

 

$

36,225

 

 

$

51,750

 

Bank of the Ozarks

 

8/31/2018

 

1 Month Libor

 

 

4.0

 

 

 

5.2

 

 

 

68,600

 

 

 

17,824

 

 

 

50,776

 

 

 

72,537

 

Deutsche Bank

 

9/25/2019

 

1 Month Libor

 

 

3.5

 

 

 

4.7

 

 

 

64,779

 

 

 

19,027

 

 

 

45,752

 

 

 

76,253

 

Deutsche Bank

 

6/29/2018

 

1 Month Libor

 

 

3.3

 

 

 

4.5

 

 

 

49,644

 

 

 

21,021

 

 

 

28,623

 

 

 

44,035

 

Bank of the Ozarks

 

5/22/2018

 

1 Month Libor

 

 

4.8

 

 

 

6.0

 

 

 

48,750

 

 

 

20,376

 

 

 

28,374

 

 

 

43,653

 

Deutsche Bank

 

12/9/2018

 

1 Month Libor

 

 

3.7

 

 

 

4.9

 

 

 

42,543

 

 

 

1

 

 

 

42,542

 

 

 

60,775

 

BMO Harris Bank(1)

 

4/9/2020

 

1 Month Libor

 

 

2.7

 

 

 

3.9

 

 

 

32,500

 

 

 

—

 

 

 

32,500

 

 

 

45,000

 

Subtotal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

399,216

 

 

 

134,424

 

 

 

264,792

 

 

 

394,003

 

(1)Borrowings under secured credit agreements with a 25% recourse guarantee from Holdco. Each secured credit agreement contains defined mark-to-market provisions that permit the lenders to issue margin calls based on credit marks. Under the JP Morgan secured credit agreement, the Company is also subject to spread marks.
(2)On August 18, 2023, the Company executed an extension of the secured credit agreement's maturity to August 19, 2024.
(3)On March 17, 2023, the Company executed an extension of the secured credit agreement's maturity that is effective May 4, 2023 with a one year term maturing on May 4, 2024.
(4)On October 26, 2023, the Company executed an extension of the secured credit agreement's initial maturity to December 29, 2023.
(5)On March 20, 2023, the Company executed a short term extension of the secured credit agreement's maturity to May 30, 2023, and on May 25, 2023 executed a further short-term extension to June 6, 2023. On June 6, 2023, the secured credit agreement's initial and extended maturity was extended to June 6, 2026.
(6)Under this arrangement, the lender has the right to re-margin the secured credit agreement based solely on appraised loan-to-values. The Company opted not to exercise its option to extend this facility. Accordingly, this facility terminated by its terms on October 30, 2023.

31
Table of Contents
December 31, 2022
Secured credit agreements(1)
Initial
maturity date		Extended
maturity date		Index
rate		Weighted average
credit spread		Weighted average
interest rate		Commitment
amount		Maximum
current availability		Balance
outstanding		Principal balance
of collateral		Amortized cost
of collateral
Goldman Sachs(2)
08/19/2308/19/241 Month BR2.2 %6.6 %$500,000 $114,662 $385,338 $595,576 $595,136 
Wells Fargo(3)
04/18/2504/18/251 Month BR1.6 %6.0 %500,000 77,998 422,002 544,557 541,134 
Barclays(4)
08/13/2508/13/261 Month BR1.6 %5.9 %500,000 403,074 96,926 129,049 128,489 
Morgan Stanley(5)
05/04/2305/04/231 Month BR2.3 %6.7 %500,000 444,421 55,579 79,103 79,103 
JP Morgan10/30/2310/30/251 Month BR1.6 %6.0 %400,000 287,324 112,676 159,601 159,596 
Bank of America(6)
03/31/2303/31/231 Month BR1.8 %6.1 %200,000 164,135 35,865 47,820 47,820 
Institutional Lender 1(7)
10/30/2310/30/251 Month BR— %— %249,546 249,546 — 1,542 1,542 
Totals$2,849,546 $1,741,160 $1,108,386 $1,557,248 $1,552,820 

Repurchase Agreements

 

Maturity

Date

 

Index Rate

 

Weighted Average Spread

 

 

Interest

Rate

 

 

Commitment

Amount

 

 

Maximum

Current

Availability

 

 

Balance

Outstanding

 

 

Principal

Balance of

Collateral

 

Goldman Sachs(1)

 

8/19/2018

 

1 Month Libor

 

 

2.2

%

 

 

3.4

%

 

$

750,000

 

 

$

202,428

 

 

$

547,572

 

 

$

841,002

 

Wells Fargo(1)

 

5/25/2019

 

1 Month Libor

 

 

2.1

 

 

 

3.4

 

 

 

750,000

 

 

 

356,512

 

 

 

393,488

 

 

 

682,221

 

JP Morgan(1)

 

8/20/2018

 

1 Month Libor

 

 

2.5

 

 

 

3.7

 

 

 

417,250

 

 

 

155,382

 

 

 

261,868

 

 

 

380,621

 

Morgan Stanley(1)

 

5/3/2019

 

1 Month Libor

 

 

2.4

 

 

 

3.6

 

 

 

400,000

 

 

 

127,268

 

 

 

272,732

 

 

 

397,592

 

US Bank(1)

 

10/6/2019

 

1 Month Libor

 

 

2.3

 

 

 

3.5

 

 

 

150,000

 

 

 

129,000

 

 

 

21,000

 

 

 

30,000

 

Goldman Sachs (CMBS)(2)

 

10/30/2017

 

1 Month Libor

 

 

1.8

 

 

 

3.0

 

 

 

100,000

 

 

 

64,422

 

 

 

35,578

 

 

 

39,533

 

Royal Bank of Canada (CMBS)(2)

 

12/20/2017

 

1 Month Libor

 

 

1.0

 

 

 

2.2

 

 

 

100,000

 

 

 

92,140

 

 

 

7,860

 

 

 

8,418

 

Subtotal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,667,250

 

 

 

1,127,152

 

 

 

1,540,098

 

 

 

2,379,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Secured Credit Facility

 

Maturity

Date

 

Index Rate

 

Weighted Average Spread

 

 

Interest

Rate

 

 

Commitment

Amount

 

 

Maximum

Current

Availability

 

 

Balance

Outstanding

 

 

Principal

Balance of

Collateral

 

Bank of America(1)

 

9/29/2020

 

1 Month Libor

 

N/A

 

 

N/A

 

 

$

250,000

 

 

$

250,000

 

 

 

—

 

 

 

—

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

$

3,316,466

 

 

$

1,511,576

 

 

$

1,804,890

 

 

$

2,773,390

 

(1)

Borrowings under repurchase agreements, senior secured credit facility, and one note payable with a guarantee for 25% recourse.

(1)Borrowings under secured credit agreements with a 25% recourse guarantee from Holdco. Each secured credit agreement contains defined mark-to-market provisions that permit the lenders to issue margin calls based on credit marks. Under the JP Morgan secured credit agreement, the Company is also subject to spread marks. Index rate is the underlying benchmark interest rate ("BR"), currently LIBOR or Term SOFR, for the Company's borrowings on each secured credit agreement.

(2)

Borrowings under repurchase agreements with a guarantee for 100% recourse. Maturity Date represents the sooner of the next maturity date of the CMBS repurchase agreement, or roll over date for the applicable underlying trade confirmation, subsequent to September 30, 2017.

(2)On August 19, 2022 the secured credit agreement's initial maturity was extended to August 19, 2023.

As of December 31, 2016

 

Notes Payable

 

Maturity

Date

 

Index Rate

 

Weighted Average Spread

 

 

Interest

Rate

 

 

Commitment

Amount

 

 

Maximum

Current

Availability

 

 

Balance

Outstanding

 

 

Principal

Balance of

Collateral

 

Bank of the Ozarks

 

8/23/2019

 

1 Month Libor

 

 

4.5

%

 

 

5.1

%

 

$

92,400

 

 

$

72,544

 

 

$

19,856

 

 

$

28,366

 

Deutsche Bank

 

9/25/2019

 

1 Month Libor

 

 

3.5

 

 

 

4.1

 

 

 

64,779

 

 

 

30,207

 

 

 

34,572

 

 

 

57,620

 

Deutsche Bank

 

12/9/2018

 

1 Month Libor

 

3.3

 

 

3.9

 

 

 

49,644

 

 

 

29,293

 

 

 

20,351

 

 

 

31,309

 

Deutsche Bank

 

9/29/2018

 

1 Month Libor

 

 

3.7

 

 

 

4.3

 

 

 

42,543

 

 

 

5,940

 

 

 

36,603

 

 

 

52,303

 

Subtotal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

249,366

 

 

 

137,984

 

 

 

111,382

 

 

 

169,598

 

Repurchase Agreements

 

Maturity

Date

 

Index Rate

 

Weighted Average Spread

 

 

Interest

Rate

 

 

Commitment

Amount

 

 

Maximum

Current

Availability

 

 

Balance

Outstanding

 

 

Principal

Balance of

Collateral

 

Goldman Sachs(1)

 

8/19/2017

 

1 Month Libor

 

 

2.2

%

 

 

2.9

%

 

$

500,000

 

 

$

249,110

 

 

$

250,890

 

 

$

363,146

 

Wells Fargo(1)

 

5/25/2019

 

1 Month Libor

 

 

2.2

 

 

 

3.0

 

 

 

500,000

 

 

 

179,729

 

 

 

320,271

 

 

 

461,618

 

JP Morgan(1)

 

8/20/2018

 

1 Month Libor

 

 

2.7

 

 

 

3.4

 

 

 

313,750

 

 

 

25,001

 

 

 

288,749

 

 

 

414,269

 

Morgan Stanley(1)

 

5/3/2019

 

1 Month Libor

 

 

2.5

 

 

 

3.2

 

 

 

250,000

 

 

 

124,036

 

 

 

125,964

 

 

 

175,884

 

Goldman Sachs (CMBS)(2)

 

8/19/2017

 

1 Month Libor

 

 

2.0

 

 

 

2.6

 

 

 

100,000

 

 

 

73,195

 

 

 

26,805

 

 

 

43,500

 

Royal Bank of Canada (CMBS)(2)

 

2/9/2021

 

1 Month Libor

 

 

1.0

 

 

 

1.6

 

 

 

100,000

 

 

 

91,150

 

 

 

8,850

 

 

 

9,347

 

Subtotal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,763,750

 

 

 

742,221

 

 

 

1,021,529

 

 

 

1,467,764

 

Subscription Secured Facility

 

Maturity

Date

 

Index Rate

 

Weighted Average Spread

 

 

Interest

Rate

 

 

Commitment

Amount

 

 

Maximum

Current

Availability

 

 

Balance

Outstanding

 

 

Principal

Balance of

Collateral

 

Lloyds Bank

 

1/6/2018

 

1 Month Libor

 

 

1.8

%

 

 

2.5

%

 

$

250,000

 

 

$

109,142

 

 

 

—

 

 

 

—

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,263,116

 

 

$

989,347

 

 

$

1,132,911

 

 

$

1,637,362

 

(1)

Borrowings under repurchase agreements with a guarantee for 25% recourse.

(3)On February 9, 2022 the secured credit agreement's initial maturity was extended to April 18, 2025.

(2)

Borrowings under repurchase agreements with a guarantee for 100% recourse.

(4)On April 11, 2022 the secured credit agreement's initial maturity was extended to August 13, 2025 and the Company reduced the total commitment to $500.0 million from $750.0 million. The secured credit agreement includes a $250.0 million accordion feature subject to the lender's approval.

Notes Payable

(5)On April 29, 2022 the secured credit agreement's maturity was extended to May 4, 2023.
(6)On September 14, 2022, the secured credit agreement's initial and extended maturity was extended to March 31, 2023.
(7)Under this arrangement, the lender has the right to re-margin the secured credit agreement based solely on appraised loan-to-values.
Secured Credit Agreement Terms
As of September 30, 20172023 and December 31, 2016,2022, the Company had seven and four note-on-note financingsix secured credit agreements respectively, to finance certain of its lendingloan investing activities. These loans allow for additional advances up to a specified capCredit spreads vary depending upon the collateral type, advance rate and are secured by seven and four loans held for investment, respectively. The Company’s note-on-note agreements have the following guarantees:

(1)

Deutsche Bank and Bank of the Ozarks: Holdco has provided funding guarantees under which Holdco guarantees the funding obligations of the special purpose lending entity in limited circumstances. In addition, under the Deutsche Bank and Bank of the Ozarks asset-specific financings, Holdco has delivered limited non-recourse carve-out guarantees in favor of the lenders as additional credit support for the financings. These guarantees trigger recourse to Holdco as a result of certain “bad boy” defaults for actual losses incurred by such party, or the entire outstanding obligations of the financing borrower, depending on the nature of the “bad boy” default in question; and

(2)

BMO Harris: Holdco has delivered a payment guarantee in favor of the lender as additional credit support for the financing. The liability of Holdco under this guarantee is generally capped at 25% of the outstanding obligations of the special purpose subsidiary which is the primary obligor under the financing. In addition, Holdco has delivered a non-recourse carveout guarantee, which can trigger recourse to Holdco as a result of certain “bad boy” defaults for losses incurred by BMO Harris or the entire outstanding obligations of the financing borrower, depending on the nature of the “bad boy” default in question.


All loans at September 30, 2017 are guaranteed by Holdco, and the agreements include guarantor covenants regarding liquid assets and net worth requirements. The Company believes it is in compliance with all covenantsother factors. Assets pledged as of September 30, 20172023 and December 31, 2016. One2022 consisted of these loans at September 30, 2017 is 25% recourse to Holdco.

Repurchase Agreements

The Company frequently utilizes repurchase agreements to finance the direct origination or acquisition of commercial real estate36 and 45 mortgage loans, and CMBS.or participation interests therein, respectively. Under these repurchasefive of the six secured credit agreements, the Company transfers all of its rights, title and interest in the loans or CMBS to the repurchasesecured credit agreement counterparty in exchange for cash, and simultaneously agrees to reacquire the asset at a future date for an amount equal to the cash exchanged plus an interest factor. The repurchase counterpartysecured credit agreement lender collects all principal and interest on related loans or CMBS and remits to the Company only the net amount after collectingthe lender collects its interest and other fees.

During For the nine months ended September 30, 2017sixth secured credit agreement, which until June 6, 2023 was a mortgage warehouse facility, the lender received a security interest (pledge) in the loans financed under the arrangement. Effective June 6, 2023, this credit facility was extended for three years and converted from a mortgage warehouse facility to a secured credit facility similar to the year ended December 31, 2016, the Company entered into one and two additional repurchaseCompany's five other secured credit facilities. The secured credit agreements respectively,used to finance its lending activities. Credit spreads vary depending on property type and advance rate. Assets pledged are mortgage loans collateralized by commercial properties. These facilitiesloan investments are 25% recourse to Holdco.

On July 21, 2017,

Under each of the Company’s secured credit agreements, the Company closed an amendmentis required to post margin for changes in conditions to specific loans that serve as collateral for those secured credit agreements. The lender’s margin amount is in all but one instance limited to collateral-specific credit marks based on non-temporary declines in the value of the properties securing the underlying loan collateral. Market value determinations and redeterminations may be made by the repurchase lender in its existing secured revolving repurchase facility with Morgan Stanley Bank, N.A. to increase the maximum facility amount to $400 million from $250 million. Additionally, the Company has the right to further upsize the facility to $500 million from $400 million upon at least five days’ notice,sole discretion subject to customary conditions. The facility was also amended to provide for an extended maturity in May 2020 and can be extended by the Company for additional successive one year periods, subject to approval by the lender. As was the case priorcertain specified parameters. These considerations only include credit-based factors unrelated to the amendment,capital markets. In only one instance do the numberconsiderations include changes in observable credit spreads for such liabilities.
32
Table of extension options is not limited by the terms of this facility.

On August 18, 2017, and in connection with the repayment of the Class A Note and the termination of the collateralized loan obligation, the Company closed an amendment to its existing secured revolving repurchase facility with JPMorgan Chase Bank, N.A. to increase the maximum facility amount by $103.5 million, to $417.3 million, and to include as pledged collateral under the facility the seven first mortgage loan participation interests purchased from the CLO Issuer by one of our wholly-owned subsidiaries on August 18, 2017. With respect only to the upsize amount, amounts borrowed may not be repaid and reborrowed. All other material terms of the credit facility remain unchanged.

At September 30, 2017 and December 31, 2016, the Company had two securities repurchase agreements to finance its CMBS investing activities. Credit spreads vary depending upon the CMBS and advance rate. Assets pledged at September 30, 2017 and December 31, 2016 consisted of three and three mortgage-backed securities, respectively. These facilities are 100% recourse to Holdco. The agreements include various covenants covering net worth, liquidity, recourse limitations, and debt coverage. The Company believes it is in compliance with all covenants as of September 30, 2017 and December 31, 2016.

Contents

The following table summarizes certain characteristics of the Company’s repurchasesecured credit agreements secured by commercial mortgage loans, all of which are considered long-term borrowings, and compriseloan investments, including counterparty concentration risks at September 30, 2017 (in(dollars in thousands):

 

 

September 30, 2017

 

 

 

UPB of

Collateral

 

 

Carrying

Value of

Collateral(1)

 

 

Amounts

Payable under

Repurchase

Agreements(2)

 

 

Net

Counterparty

Exposure(3)

 

 

Percent of

Stockholders

Equity

 

 

Days to

Extended

Maturity

 

Goldman Sachs Bank

 

$

841,002

 

 

$

836,913

 

 

$

548,306

 

 

$

288,607

 

 

 

23.9

%

 

 

688

 

Wells Fargo Bank

 

 

682,221

 

 

 

678,256

 

 

 

394,007

 

 

 

284,249

 

 

 

23.5

 

 

 

1,333

 

Morgan Stanley Bank(4)

 

 

397,592

 

 

 

396,370

 

 

 

273,144

 

 

 

123,226

 

 

 

10.2

 

 

N/A

 

JP Morgan Chase Bank

 

 

380,621

 

 

 

381,178

 

 

 

262,403

 

 

 

118,775

 

 

 

9.8

 

 

 

1,055

 

US Bank

 

 

30,000

 

 

 

29,514

 

 

 

21,058

 

 

 

8,456

 

 

 

0.7

 

 

 

1,467

 

Subtotal / Weighted Average

 

 

2,331,436

 

 

 

2,322,231

 

 

 

1,498,918

 

 

 

823,313

 

 

 

 

 

 

 

987

 

(1)

Amounts shown in the table include interest receivable of $9.2 million and are net of premium, discount and origination fees of $18.4 million.

(2)

Amounts shown in the table include interest payable of $2.3 million and do not reflect unamortized deferred financing fees of $8.7 million.

September 30, 2023
Secured credit agreementsCommitment
amount		UPB of
collateral
Amortized cost
of collateral(1)
Amount
payable(2)
Net counterparty exposure(3)
Percent of
stockholders' equity		Days to
extended maturity
Goldman Sachs Bank$500,000 $427,078 $429,283 $318,816 $110,467 9.7 %324
Wells Fargo500,000 528,093 531,009 406,914 124,095 10.9 %566
Barclays500,000 180,154 180,469 133,071 47,398 4.2 %1048
Morgan Stanley Bank500,000 82,573 83,343 54,035 29,308 2.6 %217
JP Morgan Chase Bank649,546 80,314 83,388 57,417 25,971 2.3 %761
Bank of America200,000 49,849 50,121 35,904 14,217 1.2 %980
Total / weighted average$2,849,546 $1,348,061 $1,357,613 $1,006,157 $351,456 560

_______________________

(3)

Represents the net carrying value of the commercial real estate assets sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest.

(1)Loan amounts include interest receivable of $12.2 million and are net of premium, discount and origination fees of $2.7 million.

(4)

The Morgan Stanley Bank credit facility is excluded from the Days to Extended Maturity calculation because it does not have a contractual maturity date.

(2)Loan amounts include interest payable of $3.1 million and do not reflect unamortized deferred financing fees of $2.1 million.

(3)Loan amounts represent the net carrying value of the commercial real estate loans sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest.
The following table summarizes certain characteristics of the Company’s repurchasesecured credit agreements secured by CMBS, all of which are considered short-term borrowings, and comprisemortgage loan investments, including counterparty concentration risks at September 30, 2017 (in(dollars in thousands):

 

 

September 30, 2017

 

 

 

UPB of

Collateral

 

 

Carrying

Value of

Collateral(1)

 

 

Amounts

Payable under

Repurchase

Agreements(2)

 

 

Net

Counterparty

Exposure(3)

 

 

Percent of

Stockholders

Equity

 

 

Days to

Extended

Maturity(4)

 

Goldman Sachs Bank

 

$

39,533

 

 

$

39,398

 

 

$

35,767

 

 

$

3,631

 

 

 

0.3

%

 

 

30

 

Royal Bank of Canada

 

 

8,418

 

 

 

8,721

 

 

 

7,903

 

 

 

818

 

 

 

0.1

 

 

 

81

 

Subtotal / Weighted Average

 

 

47,951

 

 

 

48,119

 

 

 

43,670

 

 

 

4,449

 

 

 

 

 

 

 

39

 

Total / Weighted Average - Loans and CMBS

 

$

2,379,387

 

 

$

2,370,350

 

 

$

1,542,588

 

 

$

827,762

 

 

 

 

 

 

 

955

 

(1)

Amounts shown in the table include interest receivable of $0.1 million and are net of premium, discount, and unrealized gains of $0.1 million.

(2)

Amounts shown in the table include interest payable of $0.2 million and do not reflect unamortized deferred financing fees of $0.1 million.

 December 31, 2022
Secured credit agreementsCommitment
amount		UPB of
collateral
Amortized cost
of collateral(1)
Amount
payable(2)
Net counterparty exposure(3)
Percent of
stockholders' equity		Days to
extended maturity
Goldman Sachs Bank$500,000 $595,576 $596,838 $386,124 $210,714 15.9 %597
Wells Fargo500,000 544,557 544,824 422,870 121,954 9.2 %839
Barclays500,000 129,049 128,900 97,215 31,685 2.4 %1321
Morgan Stanley Bank500,000 79,103 79,935 55,798 24,137 1.8 %124
JP Morgan Chase Bank649,546 161,143 162,328 113,197 49,131 3.7 %1034
Bank of America200,000 47,820 48,272 35,882 12,390 0.9 %90
Total / weighted average$2,849,546 $1,557,248 $1,561,097 $1,111,086 $450,011  757

(3)

Represents_______________________

(1)Loan amounts include interest receivable of $8.3 million and are net of premium, discount and origination fees of $4.4 million.
(2)Loan amounts include interest payable of $2.7 million and do not reflect unamortized deferred financing fees of $2.8 million.
(3)Loan amounts represent the net carrying value of available-for-sale securities sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest.

(4)

Represents the sooner of the next maturity date of the CMBS repurchase agreement, or roll over date for the applicable underlying trade confirmation, subsequent to September 30, 2017.

The following table summarizes certain characteristics of the Company’s repurchase agreements secured by commercial mortgagereal estate loans all of which are considered long-term borrowings, and comprise counterparty concentration risks, at December 31, 2016 (in thousands):

 

 

December 31, 2016

 

 

 

UPB of

Collateral

 

 

Carrying

Value of

Collateral(1)

 

 

Amounts

Payable under

Repurchase

Agreements(2)

 

 

Net

Counterparty

Exposure(3)

 

 

Percent of

Stockholders

Equity

 

 

Days to

Extended

Maturity

 

Wells Fargo Bank

 

$

461,618

 

 

$

450,338

 

 

$

320,175

 

 

$

130,163

 

 

 

13

%

 

 

1,606

 

JP Morgan Chase Bank

 

 

414,269

 

 

 

414,461

 

 

 

289,206

 

 

 

125,255

 

 

 

13

 

 

 

1,328

 

Goldman Sachs Bank

 

 

363,146

 

 

 

361,964

 

 

 

251,366

 

 

 

110,598

 

 

 

11

 

 

 

961

 

Morgan Stanley Bank(4)

 

 

175,884

 

 

 

175,178

 

 

 

126,152

 

 

 

49,026

 

 

 

5

 

 

N/A

 

Subtotal / Weighted Average

 

 

1,414,917

 

 

 

1,401,941

 

 

 

986,899

 

 

 

415,042

 

 

 

 

 

 

 

3,895

 

(1)

Amounts shown in the table include interest receivable of $0.004 million and are net of premium, discount and origination fees of $0.02 million.

(2)

Amounts shown in the table include interest payable of $0.001 million and do not reflect unamortized deferred financing fees of $0.01 million.

(3)

Represents the net carrying value of the commercial real estate assets sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest.

(4)

The Morgan Stanley Bank credit facility is excluded from the Days to Extended Maturity calculation because it does not have a contractual maturity date.


The following table summarizes certain characteristics of the Company’s repurchase agreements secured by CMBS, all of which are considered short-term borrowings, and comprise counterparty concentration risks, at December 31, 2016 (in thousands):

 

 

December 31, 2016

 

 

 

UPB of

Collateral

 

 

Carrying

Value of

Collateral(1)

 

 

Amounts

Payable under

Repurchase

Agreements(2)

 

 

Net

Counterparty

Exposure(3)

 

 

Percent of

Stockholders

Equity

 

 

Days to

Extended

Maturity

 

Goldman Sachs Bank

 

$

43,500

 

 

$

41,403

 

 

$

26,832

 

 

$

14,571

 

 

 

2

%

 

 

1,502

 

Royal Bank of Canada

 

 

9,347

 

 

 

9,932

 

 

 

8,856

 

 

 

1,076

 

 

 

—

 

 

 

1,507

 

Subtotal / Weighted Average

 

 

52,847

 

 

 

51,335

 

 

 

35,688

 

 

 

15,647

 

 

 

 

 

 

 

3,009

 

Total / Weighted Average - Loans and CMBS

 

$

1,467,764

 

 

$

1,453,276

 

 

$

1,022,587

 

 

$

430,689

 

 

 

 

 

 

 

1,331

 

(1)

Amounts shown in the table include interest receivable of $0.03 million and are net of premium, discount, and unrealized gains of $2.7 million.

liability, including accrued interest.

(2)

Amounts shown in the table include interest payable of $0.03 million and do not reflect unamortized deferred financing fees of $0.01 million.

(3)

Represents the net carrying value of available-for-sale securities sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest.

Senior Secured Revolving Credit Facility

On September 29, 2017,February 22, 2022, the Company entered intoclosed a senior secured credit facility agreement with Bank of America that has a maximum facility amount $250$250.0 million which may increase from time to time, up to $500 million, at the request of the Company and agreement by the lender. The current extended maturity of this facility is September 2022.

Subscription Secured Facility

On January 6, 2016, the Company entered into a subscription secured revolving credit facility with a commitmentsyndicate of $250 million. Borrowing ability is limited5 lenders. During the fourth quarter of 2022, an additional lender was added to the lesserfacility, increasing the borrowing capacity to $290.0 million. This facility has an initial term of $2503 years, an interest rate of Term SOFR plus 2.00% that is payable monthly in arrears, and an unused fee of 15 or 20 basis points, depending upon whether utilization exceeds 50.0%. During the three months ended September 30, 2023 and 2022, the weighted average unused fee was 20 and 16 basis points, respectively. During the nine months ended September 30, 2023 and 2022, the weighted average unused fee was 20 and 19 basis points, respectively. The facility generally provides the Company with interim financing of eligible loans for up to 180 days at an initial advance rate of 75.0%, which declines to 65.0%, 45.0%, and 0.0% after 90, 135, and 180 days from initial borrowing, respectively, depending on the likely source of refinancing. This facility is 100% recourse to Holdco. For the quarters ending September 30, 2023 and December 31, 2023, the Company received an Interest Coverage ratio covenant waiver and in doing so, the facility's advance rate declined by five points for each advance rate described above. See additional information on the Interest Coverage ratio covenant waiver in Financial Covenant Compliance.

As of September 30, 2023, the Company pledged one loan investment with a collateral principal balance of $37.2 million and 66.67%outstanding Term SOFR-based borrowings of unfunded commitments from included investors as defined$27.9 million. As of December 31, 2022, the Company pledged one loan investment with an aggregate collateral principal balance of $59.8 million and outstanding Term SOFR-based borrowings of $44.3 million.
33
Table of Contents
Asset-Specific Financing Arrangements
As of September 30, 2023, the Company had one asset-specific financing arrangement with Axos Bank secured by a mortgage loan. The arrangement provides non-mark-to-market financing, a term of up to 2 years, and is 15% recourse to Holdco.
On June 30, 2022, the Company closed a $200.0 million loan financing facility with BMO Harris Bank ("BMO Facility"). The facility provides asset-specific financing on a non-mark-to-market, matched term basis. This facility is 25% recourse to Holdco. The advance rate and borrowing rate are determined separately for each loan financed under the facility.
On September 1, 2022, the Company closed a $397.9 million asset-specific financing arrangement with an Institutional Lender ("Institutional Lender 2"). The arrangement is non-mark-to-market, matched term, and non-recourse. The advance rate and borrowing rate are uniform for all loans financed under the arrangement.
On November 17, 2022, the Company closed a $23.3 million asset-specific financing arrangement with Customers Bank. The arrangement is non-mark-to-market, matched term, and non-recourse.
The following table details the Company's asset-specific financing arrangements (dollars in thousands):
September 30, 2023
FinancingCollateral
Asset-specific financingCountCommitment amountOutstanding principal balance
Carrying
value(1)
Wtd. avg.
spread(2)
Wtd. avg.
term(3)
CountOutstanding principal balanceAmortized CostWtd. avg.
term
Axos Bank1$22,315 $22,315 $22,027 4.7 %0.71$34,297 $34,125 0.7
BMO Facility1200,000 29,110 28,843 2.0 %3.9136,525 36,235 3.9
Institutional Lender 21141,526 141,526 141,526 3.5 %1.12197,264 186,017 1.1
Customers Bank123,250 21,379 21,001 2.5 %3.9128,799 28,601 3.9
Total / weighted average$387,091 $214,330 $213,397 3.3 %1.7 years$296,885 $284,978 1.7 years
_______________________
(1)Net of $0.9 million unamortized deferred financing costs.
(2)Collateral loan assets and related financings are indexed to Term SOFR.
(3)Term under Axos Bank is based on the agreement.extended maturity date for the specific arrangement. Borrowings under the BMO Facility, the Institutional Lender 2 arrangement and Customers Bank are term-matched to the corresponding collateral loan asset. The credit facilityweighted-average term assumes all extension options of the collateral loan assets are exercised by the borrower.
The following table details the Company's asset-specific financing arrangements (dollars in thousands):
December 31, 2022
FinancingCollateral
Asset-specific financingCountCommitment amountOutstanding principal balance
Carrying
value(1)
Wtd. avg.
spread(2)
Wtd. avg.
term(3)
CountOutstanding principal balanceAmortized CostWtd. avg.
term
Axos Bank2$105,152 $105,152 $104,504 4.4 %1.32$198,603 $198,246 1.2
BMO Facility1200,000 47,545 46,985 1.8 %4.5259,431 58,717 4.5
Institutional Lender 21397,928 392,070 389,442 3.5 %2.45513,181 494,965 2.4
Customers Bank123,250 20,609 20,086 2.5 %2.4128,505 28,232 2.4
Total / weighted average$726,330 $565,376 $561,017 3.5 %2.4 years$799,720 $780,160 2.3 years
_______________________
(1)Net of $4.4 million unamortized deferred financing costs.
(2)Collateral loan assets are indexed to either LIBOR or Term SOFR and related financings are indexed to Term SOFR under Axos Bank, the BMO Facility and Customers Bank. Under the Institutional Lender 2 arrangement, collateral loan assets are indexed to LIBOR and the financing provided is twoindexed to Term SOFR.
(3)Term under Axos Bank is based on the extended maturity date for the specific arrangement. Borrowings under the BMO Facility, the Institutional Lender 2 arrangement and Customers Bank are term-matched to the corresponding collateral loan asset. The weighted-average term assumes all extension options of the collateral loan assets are exercised by the borrower.


34
Table of Contents
Mortgage Loan Payable
The Company, through a wholly-owned special purpose subsidiary, is the borrower under a $31.2 million, non-recourse mortgage loan secured by a deed of trust against an REO asset. The first mortgage loan was provided by an institutional lender, has an interest-only term of five years with a one year extension optionand bears interest at a rate of LIBOR plus 1.75%7.7%. In connectionAs of September 30, 2023, the carrying value of the loan was $30.5 million.
Financial Covenant Compliance
Our financial covenants and guarantees for outstanding borrowings related to our secured financing agreements require Holdco to maintain compliance with the completionfollowing financial covenants (among others):
Financial CovenantCurrent
Cash LiquidityMinimum cash liquidity of no less than the greater of: $15.0 million; and 5.0% of Holdco’s recourse indebtedness
Tangible Net Worth$1.0 billion, plus 75% of all subsequent equity issuances (net of discounts, commissions, expense), minus 75% of the redeemed or repurchased preferred or redeemable equity or stock
Debt-to-EquityDebt-to-Equity ratio not to exceed 4.25 to 1.0
Interest CoverageMinimum interest coverage ratio of no less than 1.4 to 1.0, effective June 30, 2023. Previously, 1.5 to 1.0.
The financial covenants and guarantees for outstanding borrowings related to the Company’s initial public offeringsecured credit agreements and secured revolving credit facility require Holdco to maintain compliance with certain financial covenants. The uncertain long-term impact of global macroeconomic conditions, including heightened inflation, slower growth or recession, changes to fiscal and monetary policy, increased interest rates, currency fluctuations, labor shortages and distress in July 2017,the banking sector, on the commercial real estate markets and global capital markets may make it more difficult to meet or satisfy these covenants, and there can be no assurance that the Company cancelledwill remain in compliance with these covenants in the unfunded commitmentsfuture.
Financial Covenant Compliance
The Company was in compliance with all financial covenants for its secured credit agreements and terminated this facility.

secured revolving credit facility to the extent of outstanding balances. Effective September 30, 2023, the Company obtained from its lenders a waiver with respect to the Interest Coverage ratio covenant, reducing the minimum interest coverage ratio to 1.30 to 1.0 from 1.40 to 1.0 for the quarters ending September 30, 2023 and December 31, 2023. Absent any further waivers from the lenders, after December 31, 2023, the interest coverage ratio threshold will revert to 1.40 to 1.0 for the quarter ending March 31, 2024 and thereafter. The Company was in compliance with all financial covenants for its secured credit agreements and secured revolving credit facility to the extent of outstanding balances as of December 31, 2022.

(7) Schedule of Maturities

The

As of September 30, 2023 future principal payments for the following five years subsequent to September 30, 2017 and thereafter are as follows (in(dollars in thousands):

 

 

Senior Secured

Credit Facility

 

 

Repurchase

Agreements

 

 

Notes

Payable

 

2017

 

$

—

 

 

$

101,485

 

 

$

—

 

2018

 

 

—

 

 

 

901,253

 

 

 

186,540

 

2019

 

 

—

 

 

 

537,360

 

 

 

45,752

 

2020

 

 

—

 

 

 

—

 

 

 

32,500

 

2021

 

 

—

 

 

 

—

 

 

 

—

 

Thereafter

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

—

 

 

$

1,540,098

 

 

$

264,792

 

Total indebtedness
Collateralized loan obligations(1)
Secured credit agreements(2)
Secured revolving credit facility(2)
Asset-specific financing arrangements(3)
Mortgage loan payable
2023$234,761 $89,990 $56,725 $— $88,046 $— 
2024955,053 560,763 371,975 — 22,315 — 
20251,018,184 451,764 538,497 27,923 — — 
2026331,475 242,130 35,865 — 53,480 — 
202776,426 25,937 — — 50,489 — 
Thereafter640,159 608,959 — — — 31,200 
Total$3,256,058 $1,979,543 $1,003,062 $27,923 $214,330 $31,200 


(1)The scheduled maturities for the investment grade bonds issued by the Company's CRE CLOs are based upon the fully-extended maturity of the underlying mortgage loan collateral, considering the reinvestment window of each CRE CLO.

(2)The scheduled maturities of the Company's secured credit agreement liabilities are based on the extended maturity date for the specific credit agreement where extension options are at its option, subject to standard default provisions, or the current maturity date of those credit agreements where extension options are subject to counterparty approval.
(3)The scheduled maturities of the Company's asset-specific financing arrangements are based on the extended maturity date for the specific arrangement, or in the case of the BMO Facility and the Institutional Lender 2 arrangement, the fully-extended maturity date of the underlying mortgage loan collateral.
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(8) Fair Value Measurements

The Company’s consolidated balance sheet includes Level I fair value measurements related to cash equivalents, restricted cash, accounts receivable, and accounts payable and accrued liabilities. AtAs of September 30, 2017,2023 and December 31, 2022, the Company had $58.9$229.2 million and $145.1 million, respectively, invested in money market funds with original maturities of less than 90 days. The carrying values of these financial assets and liabilities are reasonable estimates of fair value because of the short-term maturities of these instruments. The consolidated balance sheet also includes Loans Heldloans held for Investment, a collateralized loan obligation,investment, the assets and liabilities of its CLOs, secured credit agreements, and asset-specific financing arrangements that are considered Level III fair value measurements thatmeasurements. Level III items are not measured at fair value on a recurring basis, but are subject to fair value adjustments utilizing the fair value of the underlying collateral when there is evidence of impairment. The Company did not have any nonrecurring fair value items asimpairment and when the loan is dependent solely on the collateral for payment of September 30, 2017principal and December 31, 2016.

interest.

The following tables provide information about the fair value of the Company’s financial assets and liabilities not carried at fair value on a recurring basis in ourthe Company’s consolidated balance sheetsheets (dollars in thousands):

 

 

September 30, 2017

 

 

 

Carrying Value

 

 

Level I

 

 

Level II

 

 

Level III

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans Held for Investment

 

$

2,824,713

 

 

$

—

 

 

$

—

 

 

$

2,848,390

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured Financing Arrangements

 

 

1,793,220

 

 

 

—

 

 

 

—

 

 

 

1,793,220

 

September 30, 2023
Fair value
Principal balanceCarrying valueLevel ILevel IILevel III
Financial assets  
Loans held for investment$3,970,164 $3,738,844 $— $— $3,933,425 
Financial liabilities
Collateralized loan obligations1,979,543 1,973,911 — — 1,937,693 
Secured credit agreements1,003,062 1,000,939 — — 982,835 
Asset-specific financing arrangements214,330 213,397 — — 213,691 
Secured revolving credit facility27,923 26,679 — — 27,369 
Mortgage loan payable31,200 30,514 — — 31,200 

 

 

December 31, 2016

 

 

 

Carrying Value

 

 

Level I

 

 

Level II

 

 

Level III

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans Held for Investment

 

$

2,449,990

 

 

$

—

 

 

$

—

 

 

$

2,469,717

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateralized Loan Obligation

 

 

540,780

 

 

 

—

 

 

 

—

 

 

 

540,780

 

Secured Financing Arrangements

 

 

1,121,869

 

 

 

—

 

 

 

—

 

 

 

1,121,869

 

December 31, 2022
Fair value
Principal balanceCarrying valueLevel ILevel IILevel III
Financial assets  
Loans held for investment$5,004,798 $4,781,402 $— $— $4,922,290 
Financial liabilities  
Collateralized loan obligations2,461,170 2,452,212 — — 2,498,853 
Secured credit agreements1,108,386 1,105,151 — — 1,128,847 
Asset-specific financing arrangements565,376 561,017 — — 571,097 
Secured revolving credit facility44,279 42,137 — — 42,137 

As of September 30, 2023 and December 31, 2022, the estimated fair value of the Company’s loans held for investment portfolio was $3.9 billion and $4.9 billion, respectively, which approximated carrying value. The weighted average gross credit spread for the Company’s loans held for investment portfolio as of September 30, 2023 and December 31, 2022 was 3.71% and 3.44%, respectively. The weighted average years to maturity as of September 30, 2023 and December 31, 2022 was 2.6 years and 2.8 years, respectively, assuming full extension of all loans held for investment.
As of September 30, 2023 and December 31, 2022, the estimated fair value of the collateralized loan obligation liabilities and secured credit agreements approximated fair value since current borrowing spreads reflect current market terms.
Level III fair values wereare determined based on standardized valuation models and significant unobservable market inputs, including holding period, discount rates based on loan to value,LTV, property type and loan pricing expectations developed by the Manager that were corroborated with other institutional lenders to determine a market spreadspreads that wasare added to the one-month LIBOR forward curve.curve of the underlying benchmark interest rate. There were no transfers of financial assets or liabilities within the levels of the fair value hierarchy during the current period.

Atthree and nine months ended September 30, 2017 and December 31, 2016, the estimated fair value2023.

36
Table of loans held for investment was $2.8 billion and $2.5 billion, respectively. The average gross spread at September 30, 2017 and December 31, 2016 was 4.88% and 5.10%, respectively. The weighted average years to maturity was 3.5 years, assuming full extension of all loans, at September 30, 2017.

At September 30, 2017 and December 31, 2016, the carrying value of the secured financing agreements approximates fair value as current borrowing spreads reflect market terms. At December 31, 2016, the carrying value of the collateralized loan obligation approximates fair value as current borrowing spreads reflect market terms.

Contents

(9) Income Taxes

As of September 30, 2017 and December 31, 2016, the

The Company indirectly owns 100% of the equity of TPG RE Finance Trust CLO TRS Corp. (“CLO TRS”), TPG RE Finance Trust CLO TRS 1 Corp. (“TRS 1”) and TPG RE Finance Trust CLO TRS 2 Corp. (“TRS 2”), each of which is a taxable REIT subsidiary (collectively, “TRS”). TRS isTRSs. TRSs are subject to applicable U.S. federal, state, local and foreign income tax on itstheir taxable income. In addition, as a REIT, the Company also may be subject to a 100% excise tax on certain transactions between it and its TRSTRSs that are not conducted on an arm’s-length basis. The Company files income tax returns in the United States federal jurisdiction as well as various state and local jurisdictions. The filings are subject to normal reviews by regulatory agenciestax authorities until the related statute of limitations expires, with open tax years for all years since the Company’s initial capitalization in 2014.expires. The years open to examination generally range from 20142020 to present. The Company’s TRS had no operations as of September 30, 2017 and December 31, 2016, and accordingly no deferred tax assets or liabilities exist relating to the TRS’s operations.


ASC 740 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company has analyzed its various federal and state filing positions and believes that its income tax filing positions and deductions are well documented and supported. As of September 30, 20172023 and December 31, 2016,2022, based on the Company’s evaluation, there is no reserve forthe Company did not have any material uncertain income tax positions.

The Company’s policy is to classify interest and penalties associated with underpayment of U.S. federal and state income taxes, if any, as a component of general and administrative expense on its consolidated statements of income and comprehensive income. For the periodsthree and nine months ended September 30, 20172023 and 2016,2022, the Company did not have interest or penalties associated with the underpayment of any income taxes.

The Company owns, through an entity classified as a partnership for U.S. federal tax purposes (“Parent LLC”), 100% of the common equity in Sub-REIT, which qualifies as a REIT for U.S. federal income tax purposes and is a separate taxpayer from both the Company and Parent LLC. Parent LLC is owned by the Company both directly and indirectly through a TRS. The Company, through Sub-REIT, issues CRE CLOs to finance on a non-recourse, non-mark-to-market basis a large proportion of its loan investment portfolio. Due to unusually low LIBOR rates between March 2020 and September 2022, coupled with high interest rate floors relating to many loans and participation interests pledged to Sub-REIT’s CLOs, certain of Sub-REIT’s CRE CLOs have in the past generated EII, which may be treated as UBTI. Published IRS guidance requires that Sub-REIT allocate its EII among its shareholders in proportion to its dividends paid. Accordingly, EII generated by Sub-REIT’s CRE CLOs is allocated to Parent LLC. Pursuant to the Parent LLC operating agreement, any EII allocated from Sub-REIT to Parent LLC is allocated further to the TRS. Consequently, no EII is allocated to the Company and, as a result, the Company’s shareholders will not be allocated any EII (or UBTI attributable to such EII) by the Company. The tax liability borne by the TRS on the EII is approximately 21%. This tax liability is included in the consolidated statements of income and comprehensive income and balance sheets of the Company.
For the three and nine months ended September 30, 20172023 and September 30, 2016,2022, the Company incurredrecognized $0.0 million and $0.1 million, respectively, of federal, state, and $0.1local tax expense. For the nine months ended September 30, 2023 and 2022, the Company recognized $0.2 million and $0.3 million, respectively, of federal, state, and local tax expense relating to its TRS. Atexpense. As of September 30, 20172023 and 2016,2022, the Company’s effective tax rate was 0.2%0.4% and 0.6%, respectively.

At

As of September 30, 2017 and December 31, 2016,2023, the Company had no deferredincome tax assets or liabilities.

and a $0.2 million income tax liability recorded for the operating activities of the Company’s TRSs. As of December 31, 2022, the Company had no income tax assets and a $0.1 million income tax liability recorded for the operating activities of the Company’s TRSs.

As of December 31, 2021, the Company had $187.6 million of remaining capital losses that it can carry forward into future years. During the year ended December 31, 2022, the Company utilized $13.3 million of the $187.6 million of available remaining capital loss carryforwards to offset the capital gain generated from the partial sale of a REO in April 2022. The Company has $174.3 million of capital losses that it can carry forward into future years as of September 30, 2023.
The Company does not expect these losses to reduce the amount that the Company will be required to distribute in accordance with the requirement that the Company distribute to its stockholders at least 90% of the Company’s REIT taxable income (computed without regard to the deduction for dividends paid and excluding net capital gain) each year to continue to qualify as a REIT.
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Table of Contents
(10) Related Party Transactions

Management Agreements

Agreement

The Company is externally managed and advised by the Manager pursuant to the terms of a management agreement between the Company and through July 24, 2017, paid the Manager a management fee in accordance with(as amended, the management agreement which was executed on December 15, 2014 (the “pre-IPO Management Agreement”). For the three months ended September 30, 2017, the management fee and incentive management fee calculated under the pre-IPO Management Agreement was from July 1, 2017 through July 24, 2017, or 24 days. The management fee is equal to 1.25% of the Company’s stockholders’ equity per annum, which is calculated and payable quarterly in arrears. For purposes of calculating the management fee, stockholders’ equity means: (i) the sum of (A) the net proceeds received by the Company from all issuances of the Company’s common stock, plus (B) the Company’s cumulative Core Earnings from and after the date of the pre-IPO Management Agreement to the end of the most recently completed calendar quarter, (ii) less (A) any distributions to the Company’s stockholders from and after the date of the pre-IPO Management Agreement, (B) any amount that the Company or any of its subsidiaries has paid to repurchase the Company’s common stock since the date of the pre-IPO Management Agreement, and (C) any incentive management fee paid from and after the date of the pre-IPO Management Agreement. With respect to that portion of the period from and after the date of the pre-IPO Management Agreement that is used in any calculation of the incentive management fee or the management fee, all items in the foregoing sentence (other than clause (i) (B)) are calculated on a daily weighted average basis.

In addition, the Manager is entitled to an incentive management fee each calendar quarter in arrears in an amount, not less than zero, equal to the product of (i) 16% and (ii) the positive sum, if any, remaining after (A) Core Earnings of the Company for such calendar quarter are reduced by (B) the product of (1) the Company’s stockholders’ equity as of the end of such calendar quarter, and (2) 7% per annum; provided, however, that no incentive management fee is payable with respect to any calendar quarter unless Core Earnings for the 12 most recently completed calendar quarters is greater than zero. The Manager also acts as Collateral Manager for the CLO. The collateral management fee is equal to 0.075% per annum of the aggregate par amount of the loans in the CLO, and is calculated and payable monthly in arrears in cash. Pursuant to an arrangement that the Company had with the Manager prior to the Company’s initial public offering, the Company was entitled to reduce the base management fee payable to the Manager under the pre-IPO Management Agreement by an amount equal to the collateral management fee the Manager was entitled to receive for acting as the collateral manager for the CLO. After the completion of the initial public offering and prior to the termination of the CLO, the Manager was entitled to earn a collateral management fee for acting as the collateral manager for the CLO without any reduction or offset right to the base management fee payable to the Manager under the Management Agreement (as defined below). As of September 30, 2017 and December 31, 2016, the aggregate par amount of the loans in the CLO was $0.0 million and $712.4 million, respectively.

Post-IPO Management Agreement

Upon the completion of the Company’s initial public offering on July 25, 2017, the pre-IPO Management Agreement terminated, without payment of any termination fee to the Manager, and the Company entered into a new management agreement with the Manager (the “Management Agreement”). For the three months ended September 30, 2017, the management fee and incentive management fee calculated under the Management Agreement was from July 25, 2017 through September 30, 2017, or 68 days.


Pursuant to the Management Agreement, the Company pays the Manager a base management fee equal to the greater of $250,000 per annum ($62,500 per quarter) andor 1.50% per annum (0.375% per quarter) of the Company’s “Equity.”“Equity” as defined in the Management Agreement. Net proceeds from the issuance of Series B and Series C Preferred Stock are included in the Company’s Equity for purposes of determining the base management fee using the same daily weighted average method as is utilized for common equity. The base management fee is payable in cash, quarterly in arrears. “Equity” means: (1) the sum of (a) the net proceeds received by the Company from all issuances of the Company’s common stock and Class A common stock (for purposes of calculating this amount, the net proceeds received by the Company from all issuances of the Company’s outstanding common stock and Class A common stock prior to the completion of the Company’s initial public offering equals approximately $1.0 billion), plus (b) the Company’s cumulative Core Earnings for the period commencing on the completion of the Company’s initial public offering to the end of the most recently completed calendar quarter, and (2) less (a) any distributions to the Company’s stockholders following the completion of the Company’s initial public offering, (b) any amount that the Company or any of its subsidiaries have paid to repurchase for cash the Company’s common stock or Class A common stock following the completion of the Company’s initial public offering and (c) any incentive compensation earned by the Manager following the completion of the Company’s initial public offering. With respect to that portion of the period from and after the completion of the Company’s initial public offering that is used in the calculation of incentive compensation, which is described below, or the base management fee, all items in the foregoing sentence (other than the Company’s cumulative Core Earnings) will be calculated on a daily weighted average basis.

The Manager is also entitled to incentive compensation which is calculated and payable in cash with respect to each calendar quarter following the completion of the Company’s initial public offering (or part thereof that the Management Agreement is in effect) in arrears in an amount, not less than zero, equal to the difference between: (1) the product of (a) 20% and (b) the difference between (i) the Company’s Core Earnings for the most recent 12-month period, (or such lesser number of completed calendar quarters, if applicable), including the calendar quarter (or part thereof) for which the calculation of incentive compensation is being made (the “applicable period”), and (ii) the product of (A) the Company’s Equity in the most recent 12-month period, (or such lesser number of completed calendar quarters, if applicable), including the applicable period, and (B) 7% per annum; and (2) the sum of any incentive compensation paid to the Manager with respect to the first three calendar quarters of the most recent 12-month period (or such lesser number of completed calendar quarters preceding the applicable period, if applicable).period. No incentive compensation is payable to the Manager with respect to any calendar quarter unless Core Earnings for the 12 most recently completed calendar quarters (or such lesser numberis greater than zero. For purposes of completed calendar quarters followingcalculating the completionManager’s incentive compensation, the Management Agreement specifies that equity securities of the Company or any of the Company’s initial public offering)subsidiaries that are entitled to a specified periodic distribution or have other debt characteristics will not constitute equity securities and will not be included in “Equity” for the purpose of calculating incentive compensation. Instead, the aggregate distribution amount that accrues to such equity securities during the calendar quarter of such calculation will be subtracted from Core Earnings, before incentive compensation for purposes of calculating incentive compensation, unless such distribution is greaterotherwise excluded from Core Earnings.

Core Earnings, as defined in the Management Agreement, means the net income (loss) attributable to the holders of the Company’s common stock and Class A common stock (in those periods in which such Class A shares were outstanding) and, without duplication, the holders of the Company’s subsidiaries’ equity securities (other than zero.

Thethe Company is requiredor any of the Company’s subsidiaries), computed in accordance with GAAP, including realized gains and losses not otherwise included in net income (loss), and excluding (i) non-cash equity compensation expense, (ii) the incentive compensation, (iii) depreciation and amortization, (iv) any unrealized gains or losses, including an allowance for credit losses, or other similar non-cash items that are included in net income for the applicable period, regardless of whether such items are included in other comprehensive income or loss or in net income and (v) one-time events pursuant to reimbursechanges in GAAP and certain material non-cash income or expense items, in each case after discussions between the Manager or its affiliates for documented costs and expensesthe Company’s independent directors and approved by a majority of the Company’s independent directors.

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Table of Contents
Management Fees and Incentive Management Fees Incurred and Paid
The following table details the management fees and incentive management fees incurred by it and itspaid pursuant to the Management Agreement (dollars in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Incurred
Management fees$5,545 $5,906 $17,513$17,471
Incentive management fee— — —5,183
Total management and incentive fees incurred$5,545 $5,906 $17,513 $22,654 
Paid
Management fees$5,949 $5,856 $17,952 $17,174 
Incentive management fee— 5,183 — 5,183 
Total management and incentive fees paid$5,949 $11,039 $17,952 $22,357 
Management fees and incentive management fees included in payable to affiliates on the Company’s behalf except those specifically requiredconsolidated balance sheets as of September 30, 2023 and December 31, 2022 are $5.5 million and $6.0 million, respectively. No incentive management fee was earned during the three and nine months ended September 30, 2023. During the nine months ended September 30, 2022, the Manager earned $5.2 million of incentive management fees.
Termination Fee
A termination fee would be due to the Manager upon termination of the Management Agreement by the Company absent a cause event. The termination fee would also be bornepayable to the Manager upon termination of the Management Agreement by the Manager or its affiliates underif the Company materially breaches the Management Agreement. The Company’s reimbursement obligationtermination fee is not be subjectequal to any dollar limitation. three times the sum of (x) the average annual base management fee and (y) the average annual incentive compensation earned by the Manager, in each case during the 24-month period immediately preceding the most recently completed calendar quarter prior to the date of termination.
Other Related Party Transactions
The Manager or its affiliates is responsible for, and the Company will not reimburse the Manager or its affiliates for the expenses related to the personnel of the Manager and its affiliates who provide services to the Company. However, the Company willdoes reimburse the Manager for agreed-upon amounts based upon the Company’s allocable share of the compensation (including, without limitation, annual base salary, bonus, any related withholding taxes and employee benefits) paid to (1) the Manager’s personnel serving as the Company’s chief financial officer based on the percentage of his or her time spent managing the Company’s affairs and (2) other corporate finance, tax, accounting, internal audit, legal risk management, operations, compliance and other non-investment personnel of the Manager or its affiliates who spend all or a portion of their time managing the Company’s affairs, based on the percentage of time devoted by such personnel to the Company’s and the Company’s subsidiaries’ affairs.

During the three months ended September 30, 2023 and 2022, the Company reimbursed to the Manager $0.3 million and $0.3 million, respectively, of expenses for services rendered on its behalf by the Manager and its affiliates. During the nine months ended September 30, 2023 and 2022, the Company reimbursed to the Manager $0.8 million and $0.8 million, respectively, of expenses for services rendered on its behalf by the Manager and its affiliates.

The Company is required to pay the Manager or its affiliates for documented costs and expenses incurred with third parties by the Manager or its affiliates on behalf of the Company, subject to the Company’s review and approval of such costs and expenses. The Company’s obligation to pay for costs and expenses incurred on its behalf is not subject to a dollar limitation.
As of September 30, 2023 and December 31, 2022, no amounts remained outstanding and payable to the Manager or its affiliates for third party expenses that were incurred on behalf of the Company. All expenses due and payable to the Manager are reflected in the respective expense category of the consolidated statements of income and comprehensive income or consolidated balance sheets based on the nature of the item.

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Table of Contents
(11) Earnings per Share
The Company calculates its basic and diluted earnings (loss) per share using the two-class method for all periods presented, which defines unvested stock-based compensation awards that contain nonforfeitable rights to dividends as participating securities. The two-class method is an allocation formula that determines earnings per share for each share of common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. The unvested restricted shares of its common stock granted to certain current and former employees and affiliates of the Manager qualify as participating securities. These restricted shares have the same rights as the Company’s other shares of common stock, including participating in any dividends, and therefore are included in the Company’s basic and diluted earnings per share calculation. For the three months ended September 30, 20172023 and 2016, the Company paid an aggregate of $1.12022, $0.3 million and $3.2$0.2 million, respectively, of common stock dividends declared and undistributed net income attributable to the Manager for management fees and incentive management feescommon stockholders were allocated to unvested shares of our common stock pursuant to stock grants made under the pre-IPO Management Agreement and collateral management fees under the collateral management agreement for the CLO.Company’s Incentive Plan. For the nine months ended September 30, 20172023 and 2016, the Company paid an aggregate of $10.02022, $1.1 million and $9.9$0.6 million, respectively, of common stock dividends declared and undistributed net income attributable to the Manager for management fees and incentive management feescommon stockholders were allocated to unvested shares of our common stock pursuant to stock grants made under the pre-IPO Management Agreement and collateral management fees underCompany’s Incentive Plan. See Note 12 for details.
The computation of diluted earnings per common share is based on the collateral management agreement forweighted average number of participating securities outstanding plus the CLO.incremental shares that would be outstanding assuming exercise of the Warrants. The number of incremental common shares is calculated utilizing the treasury stock method. For the three and nine months ended September 30, 2017,2023, and 2022, the Company paid an aggregateWarrants are excluded from the calculation of $3.4 million to the Manager for management fees and incentive management fees under the Management Agreement and collateral management fees under the collateral management agreement for the CLO. Management fees, incentive management fees, and collateral management fees included in payable to affiliates on the consolidated balance sheets at September 30, 2017 and December 31, 2016, is approximately $4.5 million and $2.9 million, respectively.

The Company is responsible for reimbursing the Manager for certain expenses paid by the Manager on behalf of the Company or for certain services provided by the Manager to the Company. Expenses incurred by the Manager and reimbursed by the Company, are reflected in the respective consolidated statements of income expense category or the consolidated balance sheets based on the nature of the item. For the nine months ended September 30, 2017 and 2016, $1.0 million and $0.1 million were incurred by the Manager and reimbursable by the Company, respectively.


Termination Fee

A termination fee willdiluted earnings per common since their effect would be payable to the Manager upon termination of the Management Agreement by the Company absent a cause event. The termination fee would also be payable to the Manager upon termination of the Management Agreement by the Manager if the Company materially breaches the Management Agreement. The termination fee is equal to three times the sum of (x) the average annual base management fee and (y) the average annual incentive compensation earned by the Manager, in each case during the 24-month period immediately preceding the most recently completed calendar quarter prior to the date of termination or, if such termination occurs prior to July 25, 2019, and such termination fee is payable, the base management fees and the incentive compensation will be annualized for such two-year period based on such fees actually received by the Manager during such period.

(11) Earnings per Share

At September 30, 2017, all share and per share data reflect the impact the common stock and Class A common stock dividend which was paid on July 25, 2017 to holders of record as of July 3, 2017 upon completion of the Company’s initial public offering. anti-dilutive.

The following table sets forth the calculation of basic and diluted earnings per common share (common stock and Class A common stock) based on the weighted-average number of shares of common stock and Class A common stock outstanding (in(dollars in thousands, except share and per share data):

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net Income Attributable to Common Stockholders

 

$

20,787

 

 

$

17,439

 

 

$

69,582

 

 

$

50,796

 

Weighted-Average Common Shares Outstanding, Basic and Diluted

 

 

58,685,979

 

 

 

40,946,029

 

 

 

51,969,733

 

 

 

39,096,974

 

Per Common Share Amount, Basic and Diluted

 

$

0.35

 

 

$

0.43

 

 

$

1.34

 

 

$

1.30

 

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net income (loss)$(61,213)$(114,607)$(123,011)$(96,260)
Preferred stock dividends(1)
(3,148)(3,148)(9,444)(9,444)
Participating securities' share in (loss) earnings(275)(159)(1,082)(582)
Net income attributable to common stockholders$(64,636)$(117,914)$(133,537)$(106,286)
Weighted average common shares outstanding, basic77,730,715 77,403,487 77,520,736 77,259,382 
Incremental shares of common stock issued from the assumed exercise of the Warrants— — — — 
Weighted average common shares outstanding, diluted77,730,715 77,403,487 77,520,736 77,259,382 
Earnings per common share, basic(2)
$(0.83)$(1.52)$(1.72)$(1.38)
Earnings per common share, diluted(2)
$(0.83)$(1.52)$(1.72)$(1.38)

(12) Stockholders’ Equity

Initial Public Offering

On July 25, 2017,

_______________________
(1)Includes preferred stock dividends declared and paid for Series A preferred stock and Series C Preferred Stock shares outstanding for the Company completed an initial public offering of 11 millionthree and nine months ended September 30, 2023 and 2022.
(2)Basic and diluted earnings per common share are computed independently based on the weighted-average shares of common stock at a priceoutstanding. Diluted earnings per common share also includes the impact of $20.00participating securities outstanding plus any incremental shares that would be outstanding assuming the exercise of the Warrants. The sum of the quarterly (loss) earnings per common share amounts may not agree to the total for the nine months ended September 30, 2023 and 2022.
40
Table of Contents
(12) Stockholders' Equity
Series C Cumulative Redeemable Preferred Stock
On June 14, 2021, the Company received net proceeds of $200.1$194.4 million from the sale of the 8,050,000 shares of Series C Preferred Stock after deducting the underwriting discountsdiscount and commissions of $13.2$6.3 million and estimated offering expenses payable by usissuance costs of $6.7 million. On August 17, 2017, the underwriters of the Company’s initial public offering partially exercised their option to purchase up to an additional 1,650,000 shares of common stock. On August 22, 2017, the Company issued and sold, and the underwriters purchased, 650,000 shares of common stock for net proceeds of $12.2 million, after deducting underwriting discounts of $0.8$0.6 million. The Company used the net proceeds from the offering to originate commercial mortgage loans consistentpartially fund the redemption of all of the outstanding shares of the Company’s Series B Preferred Stock. The Series C Preferred Stock is currently listed on the NYSE under the symbol “TRTX PRC.” In connection with its investment strategy and investment guidelines.

On July 28, 2017,the Series C Preferred Stock issuance the Company paid GACC $2.0TPG Capital BD, LLC a $0.7 million relatedunderwriting discount and commission for its services as joint bookrunner. The underwriting discount and commission was settled net of the preferred stock issuance proceeds and recorded as a reduction to its contractual deferred purchase price obligation dueadditional paid-in-capital in the Company’s consolidated statement of changes in equity at closing.

The Company’s Series C Preferred Stock has a liquidation preference of $25.00 per share. When, as, and if authorized by the Company’s board of directors and declared by the Company, dividends on Series C Preferred Stock will be payable quarterly in arrears on or about March 30, June 30, September 30, and December 30 of each year at a rate per annum equal to 6.25% per annum of the $25.00 per share liquidation preference ($1.5624 per share annually or $0.3906 per share quarterly). Dividends on the Series C Preferred Stock are cumulative. The first dividend on the Series C Preferred Stock was payable on September 30, 2021, and covered the period from, and including, June 14, 2021 to, but not including, September 30, 2021 and was in the amount of $0.4601 per share.
On and after June 14, 2026, the Company, at its option, upon not fewer than 30 days’ nor more than 60 days’ written notice, may redeem the Series C Preferred Stock, in whole, at any time, or in part, from time to time, for cash, at a redemption price of $25.00 per share, plus any accrued and unpaid dividends (whether or not declared) on such shares of Series C Preferred Stock to, but not including, the redemption date (other than any dividend with a record date before the applicable redemption date and a payment date after the applicable redemption date, which shall be paid on the payment date notwithstanding prior redemption of such shares).
Upon the occurrence of a Change of Control event, the holders of Series C Preferred Stock have the right to convert their shares solely into common stock at their request and do not have the right to request that their shares convert into cash or a combination of cash and common stock. The Company, consummated an initial public offeringupon the occurrence of a Change of Control event, at its option, upon not fewer than 30 days’ nor more than 60 days’ written notice, may redeem the shares of Series C Preferred Stock, in whole or in part, within 120 days after the first date on which such Change of Control occurred, for cash at a redemption price equal to $25.00 per share, plus any accrued and unpaid dividends (whether or not declared) to, but not including, the redemption date (other than any dividend with a record date before December 29, 2017.

the applicable redemption date and a payment date after the applicable redemption date, which will be paid on the payment date notwithstanding prior redemption of such shares).

Holders of Series C Preferred Stock Dividend

On July 3, 2017, we declared a stock dividend that resultedhave no voting rights except as set forth in the issuanceArticles Supplementary for the Series C Preferred Stock.

Series B Cumulative Redeemable Preferred Stock and Warrants to Purchase Shares of 9,224,268 shares of our common stock and 230,815 shares of our Class A common stock uponCommon Stock
On May 28, 2020, the completion of our initial public offering. The stock dividend was paid on July 25, 2017 to holders of record of our common stock and Class A common stock as of July 3, 2017. All prior periods have been restated to give effect to the impact of these transactions on our common and Class A common stock issued, shares outstanding, per share calculations, and basic and diluted weighted average number of common shares outstanding.

10b5-1 Purchase Plan

The Company entered into an agreementInvestment Agreement (the “10b5-1 Purchase Plan”“Investment Agreement”) with Goldman Sachs & Co. LLC,PE Holder L.L.C., a Delaware limited liability company (the “Purchaser”), an affiliate of Starwood Capital Group Global II, L.P., under which the Company agreed to issue and sell to the Purchaser up to 13,000,000 shares of 11.0% Series B Preferred Stock, par value $0.001 per share (plus any additional such shares paid as dividends pursuant to which Goldman Sachs & Co. LLC, as our agent, will buy in the open market upArticles Supplementary for the Series B Preferred Stock), and Warrants to $35.0 million in shares of our common stockpurchase, in the aggregate, duringup to 15,000,000 shares (subject to adjustment) of the period beginning on or about August 21, 2017Company’s Common Stock, for an aggregate cash purchase price of up to $325,000,000. Such purchases could occur in up to three tranches prior to December 31, 2020. The Investment Agreement contains market standard provisions regarding board representation, voting agreements, rights to information, and ending 12 months thereafter or, if sooner,a standstill agreement and registration rights agreement regarding common stock acquired via exercise of Warrants. At closing, the date on which allPurchaser acquired the capital committed to the 10b5-1 Purchase Plan has been exhausted. The 10b5-1 Purchase Plan requires Goldman Sachs & Co. LLCinitial tranche consisting of 9,000,000 shares of Series B Preferred Stock and Warrants to purchase for usup to 12,000,000 shares of our common stock whenCommon Stock, for an aggregate price of $225.0 million. The Company elected to allow its option to issue additional shares of Series B Preferred Stock to expire unused.

Series B Preferred Stock
On June 16, 2021, the marketCompany redeemed all 9,000,000 outstanding shares of the Series B Preferred Stock at an aggregate redemption price of approximately $247.5 million.
41
Table of Contents
Warrants to Purchase Common Stock
The Warrants had an initial exercise price of $7.50 per share is belowshare. The exercise price of the threshold price specified inWarrants and shares of Common Stock issuable upon exercise of the 10b5-1 Purchase Plan which is based on our book value per common share.Warrants are subject to customary adjustments. During the threenine months ended September 30, 2017, the Company repurchased 0.3 million shares of common stock, at an average price of $19.59 per share, for total consideration (including commissions and related fees) of $6.6 million. At September 30, 2017, the Company’s remaining commitment under the 10b5-1 Purchase Plan is $28.4 million.


Subscriptions

Prior2023, pursuant to the completion of the Company’s initial public offering on July 25, 2017, certain of the Company’s pre-IPO investors entered into subscription agreements for specified capital commitments. Unfunded capital commitments as of December 31, 2016 were $181.0 million. In connection with the completion of the Company’s initial public offering, the stockholderswarrant agreement between the Company and certainthe Purchaser and due to the Company's declaration of non-qualifying dividends, the exercise price of the Company’s pre-IPO stockholdersWarrants was reduced twice and allis now $7.02 per share. The Warrants are exercisable on a net-settlement basis and expire on May 28, 2025. The Warrants are classified as equity and were initially recorded at their estimated fair value of $14.4 million with no subsequent remeasurement. None of the obligations of certain of the Company’s pre-IPO stockholders to purchase additional shares of the Company’s common stock and Class A common stock using the undrawn portion of their capital commitments were terminated.

Articles of Amendment and Restatement

On July 19, 2017, the Company filed Articles of Amendment and Restatement with the State Department of Assessments and Taxation of Maryland. The Articles of Amendment and Restatement increased the Company’s authorized common stock to 300,000,000 shares of common stock and 2,500,000 shares of Class A common stock with $0.001 par value per share. Additionally, the Articles of Amendment and Restatement increased our authorized preferred stock to 100,000,000 shares of preferred stock with a $0.001 par value per share. Class A common stock hasWarrants have been issued to, and is owned by, certain individuals or entities affiliated with the Manager, and the sale or conversion to common stock by holders of such Class A common stock is subject to certain restrictions.

Asexercised as of September 30, 2017, the Company’s authorized common stock consisted of 300,000,000 shares of common stock and 2,500,000 shares of Class A common stock with $0.001 par value per share. As of September 30, 2017 and December 31, 2016, the Company had total common stock and Class A common stock shares of 61,004,768 and 48,446,028 issued and outstanding, respectively.

2023.

Dividends

Prior to the completion of the Company’s initial public offering, dividends were accrued at the time of approval by the Special Actions Committee (the ”Committee”), a standing committee comprised of directors who are employed by TPG Global, LLC or an affiliate thereof. Subsequent to the completion of the Company’s initial public offering, dividends are accrued at the time of approval by the Company’s Board of Directors.

Upon the approval of the Committee, or the Company’s Board of Directors, as applicable, dividendsthe Company accrues dividends. Dividends are paid first to the holders of the Company’s Series A preferred stock at the rate of 12.5% of the total $0.001 million liquidation preference per annum plus all accumulated and unpaid dividends thereon, then to the holder of the Company’s Series B Preferred Stock (which was redeemed in-full on June 16, 2021) at the rate of 11.0% per annum of the $25.00 per share liquidation preference, then to the holders of the Company’s Series C Preferred Stock at the rate of 6.25% per annum of the $25.00 per share liquidation preference, and secondthen to the holders of the Company’s common stock, and Class A common stock.in each case, to the extent outstanding. The Company intends to distribute each year substantially allnot less than 90% of its taxable income to its stockholders to comply with the REIT provisions of the Internal Revenue CodeCode. The Board of 1986, as amended.

Directors will determine whether to pay future dividends, entirely in cash, or in a combination of stock and cash based on facts and circumstances at the time such decisions are made.

On September 26, 2017,11, 2023, the Company’s Board of Directors declared and approved a cash dividend of $0.24 per share of common stock, or $18.9 million in the aggregate, for the third quarter of 2023. The common stock dividend was paid on October 25, 2023 to the holders of record of the Company’s common stock as of September 28, 2023.
On September 8, 2023, the Company’s Board of Directors declared a cash dividend of $0.3906 per share of Series C Preferred Stock, or $3.1 million in the aggregate, for the third quarter of 2017 in2023. The Series C Preferred Stock dividend was paid on September 29, 2023 to the amountpreferred stockholders of $0.33record as of September 19, 2023.
On September 12, 2022, the Company’s Board of Directors declared and approved a cash dividend of $0.24 per share of common stock, and Class A common stock, or $20.1$18.7 million in the aggregate, whichfor the third quarter of 2022. The common stock dividend was payablepaid on October 25, 20172022 to the holders of record of our common stock and Class Athe Company’s common stock as of October 6, 2017. September 28, 2022.
On September 29, 2016, we8, 2022, the Company’s Board of Directors declared a cash dividend associated withof $0.3906 per share of Series C Preferred Stock, or $3.1 million in the aggregate, for the third quarter of 2016 in the amount of $0.41 per share of common stock and Class A common stock, or $17.0 million in the aggregate, which2022. The Series C Preferred Stock dividend was paid on October 26, 2016.

September 30, 2022 to the preferred stockholders of record as of September 20, 2022.

For the nine months ended September 30, 20172023 and 2016, common and Class A2022, common stock dividends in the amount of $61.9$56.9 million and $48.5$56.1 million, respectively, were declared and approved.
For the nine months ended September 30, 2023 and 2022, Series C Preferred Stock dividends in the amount of $9.4 million and $9.4 million, respectively, were declared and approved.
As of September 30, 20172023 and December 31, 2016, $20.12022, common stock dividends of $18.9 million and $18.3$19.0 million, respectively, remainwere unpaid and are reflected in dividends payable on the Company’s consolidated balance sheets.

Liquidation

Upon liquidation

42
Table of Contents
(13) Stock-based Compensation
The Company does not have any employees. As of September 30, 2023, certain individuals employed by an affiliate of the Company, subsequent toManager and certain members of the redemptionCompany’s Board of preferred stock,Directors were compensated, in part, through the net assets attributable to all classesissuance of common stock shall be distributed pro rata among the common shareholders in proportion to the number of shares of common stock, regardless of class, held by each such holder.

Other Comprehensive (Loss) Income

For the three and nine months ended September 30, 2017 and September 30, 2016, other comprehensive (loss) income was $(2.6) million and $(1.3) million, respectively, and $1.5 million and $2.6 million, respectively. Other comprehensive (loss) income is a result of unrealized (losses) gains on CMBS available-for-sale.

stock-based instruments.

2017 Equity Incentive Plan

The Company’s Board of Directors has adopted, and itsthe Company’s stockholders have approved, the TPG RE Finance Trust, Inc. 2017 Equity Incentive Plan (the “Incentive Plan”). The Incentive Plan provides for the grant of equity-based compensation awards to the Company’s, and its affiliates’, directors, officers, employees (if any) and consultants, and the members, officers, directors, employees and consultants of our Manager or its affiliates, as well as to our Manager and other entities that provide services to us and our affiliates and the employees of such entities. The total number of shares of common stock or long termlong-term incentive plan (“LTIP”) units that may be awarded under the Incentive Plan is 4,600,463, or 7.5% of the issued and outstanding shares of our common stock after completion of our common and Class A common stock dividend, initial public offering and the issuance of shares in connection with the partial exercise of the option to purchase additional shares related to the initial public offering.4,600,463. The Incentive Plan will automatically expire on the tenth anniversary of its effective date, unless terminated earlier by the Company’s Board of Directors. No equity grants were awarded in conjunction with

The following table details the Company’s initial public offering or have otherwise been madeoutstanding common stock awards and includes the numbers of shares granted and weighted-average grant date fair value per share under the Incentive Plan.

(13) CommitmentsPlan:

Common StockWeighted-Average Grant Date Fair Value per Share
Balance as of December 31, 20221,683,440 $9.44 
Granted— — 
Vested(527,831)10.55 
Forfeited(6,545)7.64 
Balance as of September 30, 20231,149,064 $8.94 
Generally, common shares vest over a four-year period pursuant to the terms of the award and Contingencies

Unfunded Commitments

the Incentive Plan with the exception of deferred stock units granted to certain members of the Company's Board of Directors that are vested upon issuance.

The following table presents the number of shares associated with outstanding awards that will vest over the next four years:
Share Grant Vesting YearShares of Common Stock
2023— 
2024474,548 
2025390,649 
2026283,867 
Total1,149,064 
During the three and nine months ended September 30, 2023, the Company accrued 4,208 and 11,610 shares of common stock, respectively, for dividends that are paid-in kind to non-management members of its Board of Directors related to the dividend payable to holders of record of our common stock as of March 29, 2023, June 28, 2023, and September 28, 2023.
As of September 30, 20172023, total unrecognized compensation costs relating to unvested stock-based compensation arrangements was $9.2 million. These compensation costs are expected to be recognized over a weighted average period of 1.2 years from September 30, 2023. For the three months ended September 30, 2023 and 2022, the Company recognized $1.2 million and $0.9 million, respectively, of stock-based compensation expense. For the nine months ended September 30, 2023 and 2022, the Company recognized $4.8 million and $3.5 million, respectively, of stock-based compensation expense.
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Table of Contents
(14) Commitments and Contingencies
Impact of Global Macroeconomic Conditions
Global economic trends and economic conditions, including heightened inflation, slower growth or recession, changes to fiscal and monetary policy, increased interest rates, currency fluctuations and challenges in the supply chain, political unrest and economic uncertainty due to terrorism or war, stress to the commercial banking systems of the U.S. and Western Europe, and the lingering aftereffects of the COVID-19 pandemic have had, and may in the future have, an adverse impact on the Company's business, the U.S. and global economies, the real estate industry and the Company's borrowers, and the performance of the properties securing the Company's loans. As of September 30, 2023, no contingencies have been recorded on the Company's consolidated balance sheet as a result of such trends and conditions; however, if market conditions worsen or extend, it may have long-term impacts on the Company's financial condition, results of operations, and cash flows.
Unfunded Commitments
As part of its lending activities, the Company commits to certain funding obligations which are not advanced at loan closing and that have not been recognized in the Company’s consolidated financial statements. These commitments to extend credit are made as part of the Company’s loans held for investment portfolio and are generally utilized for base building work, tenant improvement costs and leasing commissions, and interest reserves. The aggregate amount of unrecognized unfunded loan commitments existing as of September 30, 2023 and December 31, 2016,2022 was $247.6 million and $426.1 million, respectively.
The Company recorded an allowance for credit losses on loan commitments that are not unconditionally cancellable by the Company had $581.6of $23.4 million and $574.6$17.3 million respectively,as of unfunded commitments related to loans held for investment. These commitments are not reflectedSeptember 30, 2023 and December 31, 2022 which is included in accrued expenses and other liabilities on the Company’s consolidated balance sheets.

Litigation

From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of business. The Company establishes an accrued liability for loss contingencies when a settlement arising from a legal proceeding is both probable and reasonably estimable. If a legal matter is not probable and reasonably estimable, no such liability is recorded. Examples of this include (i) early stages of a legal proceeding, (ii) damages that are unspecified or cannot be determined, (iii) discovery has not started or is incomplete or (iv) there is uncertainty as to the outcome of pending appeals or motions. If these items exist, an estimated range of potential loss cannot be determined and as such the Company does not record an accrued liability.
As of September 30, 20172023 and December 31, 2016,2022, the Company was not involved in any material legal proceedings.

(14)proceedings and has not recorded an accrued liability for loss contingencies.

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Table of Contents
(15) Concentration of Credit Risk

Property Type

A summary of the loanCompany’s portfolio of loans held for investment by property type as of September 30, 2017 and December 31, 2016 based on total loan commitment and current unpaid principal balance (“UPB”) and full loan commitment is as follows (amounts(dollars in thousands):

 

 

As of September 30, 2017

 

Property Type

 

Loan

Commitment

 

 

Unfunded

Commitment

 

 

% of

Portfolio

 

 

Loan UPB

 

 

% of

Portfolio

 

Office

 

$

769,251

 

 

$

148,756

 

 

 

22.4

%

 

$

620,494

 

 

 

21.8

%

Condominium

 

 

703,662

 

 

 

205,107

 

 

 

20.6

%

 

 

498,556

 

 

 

17.5

%

Multifamily

 

 

656,975

 

 

 

84,215

 

 

 

19.2

%

 

 

572,760

 

 

 

20.1

%

Hotel

 

 

570,676

 

 

 

25,382

 

 

 

16.7

%

 

 

548,945

 

 

 

19.3

%

Mixed Use

 

 

431,500

 

 

 

58,583

 

 

 

12.6

%

 

 

372,917

 

 

 

13.1

%

Retail

 

 

195,044

 

 

 

48,460

 

 

 

5.7

%

 

 

146,584

 

 

 

5.2

%

Industrial

 

 

86,270

 

 

 

11,087

 

 

 

2.5

%

 

 

75,183

 

 

 

2.6

%

Other

 

 

10,249

 

 

 

—

 

 

 

0.3

%

 

 

10,249

 

 

 

0.4

%

Total

 

$

3,423,627

 

 

$

581,590

 

 

 

100.0

%

 

$

2,845,688

 

 

 

100.0

%

 

As of December 31, 2016

 

Property Type

 

Loan

Commitment

 

 

Unfunded

Commitment

 

 

% of

Portfolio

 

 

Loan UPB

 

 

% of

Portfolio

 

Condominium

 

$

821,411

 

 

$

338,222

 

 

 

27.0

%

 

$

486,646

 

 

 

19.7

%

September 30, 2023
Property typeProperty typeLoan commitmentUnfunded commitment
% of loan commitment
Loan UPB
% of loan UPB
MultifamilyMultifamily$1,948,742 $56,919 46.1 %$1,891,039 47.5 %
OfficeOffice1,042,747 85,629 24.7 950,790 24.0 

Hotel

 

 

644,459

 

 

 

31,282

 

 

 

21.2

%

 

 

615,238

 

 

 

24.9

%

Hotel463,643 18,110 11.0 446,705 11.3 

Office

 

 

538,736

 

 

 

99,953

 

 

 

17.7

%

 

 

438,783

 

 

 

17.8

%

Mixed Use

 

 

527,548

 

 

 

74,100

 

 

 

17.4

%

 

 

453,448

 

 

 

18.4

%

Multifamily

 

 

327,578

 

 

 

11,217

 

 

 

10.8

%

 

 

316,360

 

 

 

12.8

%

Life ScienceLife Science404,600 54,308 9.6 350,292 8.8 
Mixed-UseMixed-Use137,340 6,256 3.3 131,084 3.3 

Industrial

 

 

131,987

 

 

 

11,468

 

 

 

4.3

%

 

 

120,519

 

 

 

4.9

%

Industrial107,000 8,043 2.5 98,957 2.5 
Self StorageSelf Storage69,000 2,000 1.6 67,000 1.7 

Other

 

 

48,483

 

 

 

8,400

 

 

 

1.6

%

 

 

40,083

 

 

 

1.6

%

Other50,600 16,303 1.2 34,297 0.9 

Total

 

$

3,040,202

 

 

$

574,642

 

 

 

100.0

%

 

$

2,471,078

 

 

 

100.0

%

Total$4,223,672 $247,568 100.0 %$3,970,164 100.0 %

December 31, 2022
Property typeLoan commitmentUnfunded commitment
% of loan commitment
Loan UPB
% of loan UPB
Multifamily$2,491,441 $110,769 46.0 %$2,380,672 47.5 %
Office1,553,378 155,986 28.5 1,397,392 28.0 
Hotel483,743 11,666 8.9 473,790 9.5 
Life Science404,600 93,092 7.5 311,508 6.2 
Mixed-Use283,340 15,061 5.2 268,279 5.4 
Industrial93,044 5,987 1.7 87,057 1.7 
Self Storage69,000 11,900 1.3 57,100 1.1 
Other50,600 21,600 0.9 29,000 0.6 
Total$5,429,146 $426,061 100.0 %$5,004,798 100.0 %
Loan commitments exclude capitalized interest resulting from previously modified loans of $1.2 million and $1.7 million as of September 30, 2023 and December 31, 2022, respectively.
45
Table of Contents
Geography

All of the Company’s loans held for investment are secured by properties within the United States. The geographic composition of loans held for investment based on fulltotal loan commitment and current UPB is as follows (dollars in thousands):

 

September 30, 2017

 

Geographic Region

 

Loan

Commitment

 

 

Unfunded

Commitment

 

 

% Loan

Commitment

 

 

Loan UPB

 

 

% Loan UPB

 

 

Carrying

Amount

 

September 30, 2023
Geographic regionGeographic regionLoan commitmentUnfunded commitment
% of loan commitment
Loan UPB
% of loan UPB
WestWest$1,535,653 $116,251 36.4 %$1,414,792 35.6 %

East

 

$

1,327,238

 

 

$

149,702

 

 

 

38.8

%

 

$

1,181,189

 

 

 

41.5

%

 

$

1,173,142

 

East1,257,101 35,109 29.8 1,220,662 30.8 

South

 

 

1,093,810

 

 

 

322,937

 

 

 

31.9

%

 

 

770,873

 

 

 

27.1

%

 

 

763,891

 

South1,061,968 80,657 25.1 981,311 24.7 

West

 

 

674,123

 

 

 

82,810

 

 

 

19.7

%

 

 

591,312

 

 

 

20.8

%

 

 

587,278

 

Midwest

 

 

259,686

 

 

 

15,054

 

 

 

7.6

%

 

 

244,631

 

 

 

8.6

%

 

 

242,900

 

Midwest229,950 9,509 5.4 220,441 5.6 

Various

 

 

68,770

 

 

 

11,087

 

 

 

2.0

%

 

 

57,683

 

 

 

2.0

%

 

 

57,502

 

Various139,000 6,042 3.3 132,958 3.3 

Total

 

$

3,423,627

 

 

$

581,590

 

 

 

100.0

%

 

$

2,845,688

 

 

 

100.0

%

 

$

2,824,713

 

Total$4,223,672 $247,568 100.0 %$3,970,164 100.0 %
December 31, 2022
Geographic regionGeographic regionLoan commitmentUnfunded commitment
% of loan commitment
Loan UPB
% of loan UPB
EastEast$1,844,087 $73,104 33.9 %$1,772,155 35.4 %
WestWest1,629,727 179,104 30.0 1,450,623 29.0 
SouthSouth1,496,382 138,836 27.6 1,358,087 27.1 
MidwestMidwest319,950 17,130 5.9 302,820 6.1 
VariousVarious139,000 17,887 2.6 121,113 2.4 
TotalTotal$5,429,146 $426,061 100.0 %$5,004,798 100.0 %

 

 

December 31, 2016

 

Geographic Region

 

Loan

Commitment

 

 

Unfunded

Commitment

 

 

% Loan

Commitment

 

 

Loan UPB

 

 

% Loan UPB

 

 

Carrying

Amount

 

East

 

$

1,330,003

 

 

$

132,951

 

 

 

43.7

%

 

$

1,197,052

 

 

 

48.4

%

 

$

1,192,153

 

West

 

 

867,494

 

 

 

116,057

 

 

 

28.5

%

 

 

751,437

 

 

 

30.4

%

 

 

741,513

 

South

 

 

578,340

 

 

 

311,166

 

 

 

19.0

%

 

 

272,692

 

 

 

11.0

%

 

 

268,443

 

Midwest

 

 

179,589

 

 

 

3,000

 

 

 

5.9

%

 

 

176,589

 

 

 

7.1

%

 

 

175,158

 

Various

 

 

84,776

 

 

 

11,468

 

 

 

2.8

%

 

 

73,308

 

 

 

3.0

%

 

 

72,723

 

Total

 

$

3,040,202

 

 

$

574,642

 

 

 

100.0

%

 

$

2,471,078

 

 

 

100.0

%

 

$

2,449,990

 

Loan commitments represent principal commitments made by the Company, and do not includeexclude capitalized interest resulting from previously modified loans of $3.7$1.2 million and $5.5$1.7 million atas of September 30, 20172023 and December 31, 2016,2022, respectively.

(15)

Category
A summary of the Company’s portfolio of loans held for investment by loan category based on total loan commitment and current UPB follows (dollars in thousands):
September 30, 2023
Loan categoryLoan commitmentUnfunded commitment
% of loan commitment
Loan UPB
% of loan UPB
Bridge$1,823,946 $38,093 43.2 %$1,785,070 44.9 %
Moderate Transitional1,276,284 138,918 30.2 1,134,711 28.6 
Light Transitional1,072,842 54,254 25.4 1,016,086 25.6 
Construction50,600 16,303 1.2 34,297 0.9 
Total$4,223,672 $247,568 100.0 %$3,970,164 100.0 %
December 31, 2022
Loan categoryLoan commitmentUnfunded commitment
% of loan commitment
Loan UPB
% of loan UPB
Bridge$2,249,442 $52,588 41.4 %$2,197,397 43.9 %
Light Transitional1,604,820 125,959 29.6 1,478,860 29.5 
Moderate Transitional1,524,284 225,914 28.1 1,299,541 26.0 
Construction50,600 21,600 0.9 29,000 0.6 
Total$5,429,146 $426,061 100.0 %$5,004,798 100.0 %
Loan commitments exclude capitalized interest resulting from previously modified loans of $1.2 million and $1.7 million as of September 30, 2023 and December 31, 2022, respectively.
46
Table of Contents
(16) Subsequent Events

The following events occurred subsequent to September 30, 2017:

Cash Dividend

On2023:

•The Company sold on October 25, 2017, the Company paid24, 2023 a cash dividend on its common stock,defaulted first mortgage loan relating to stockholdersan 315,903 square foot office property in Arlington, VA. As of record as of October 6, 2017, of $0.33 per share, or $20.1 million.

10b5-1 Purchase Plan

From September 30, 2017 through November 3, 2017,2023, the Company repurchased 0.2unpaid principal balance of the loan was $86.7 million sharesand the loan carried a "5" risk rating.


47
Table of common stock under the 10b5-1 Purchase Plan, at an average price of $19.60 per share for total consideration (including commissions and related fees) of $3.4 million.

Senior Mortgage Loan Originations

From September 30, 2017 through November 6, 2017, the Company originated three first mortgage loans, representing loans closed and in the process of closing, with an aggregate commitment amount of $294 million. These loans were funded, or will be funded upon closing, with a combination of cash-on-hand and borrowings.  

The Company has evaluated subsequent events through November 6, 2017, the date which the consolidated financial statements were available to be issued.

Contents

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

References herein to “TPG RE Finance Trust,” “Company,” “we,” “us,” or “our” refer to TPG RE Finance Trust, Inc. and its subsidiaries unless the context specially requires otherwise.

The following discussion and analysis should be read in conjunction with the unaudited and audited consolidated financial statements and the accompanying notes included elsewhere in this Form 10-Q and in our Form 10-K filed with the Prospectus, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contained in the Prospectus.SEC on February 21, 2023. In addition to historical data, this discussion contains forward-looking statements about our business, results of operations, cash flows, and financial condition based on current expectations that involve risks, uncertainties and assumptions. See “Cautionary Note Regarding Forward-Looking Statements”.Statements.” Our actual results may differ materially from those in this discussionany results expressed or implied by these forward-looking statements as a result of various factors, including but not limited to those discussed under the heading “Risk Factors” in our Form 10-K filed with the Prospectus.

SEC on February 21, 2023.

Overview

We are a commercial real estate finance company sponsoredexternally managed by TPG RE Finance Trust Management, L.P., an affiliate of our sponsor TPG. We directly originate, acquire and manage commercial mortgage loans and other commercial real estate-related debt instruments in North America for our balance sheet. Our objective is to provide attractive risk-adjusted returns to our stockholders over time through cash distributions and capital appreciation. To meet our objective, we focus primarily on directly originating and selectively acquiring floating rate first mortgage loans that are secured by high quality commercial real estate properties undergoing some form of transition and value creation, such as retenanting, refurbishment or other form of repositioning. The collateral underlying our loans is located in primary and select secondary markets in the U.S. that we believe have attractive economic conditions and commercial real estate fundamentals. As of September 30, 2017, approximately 67.7% of our loans (measured by commitment) were secured by properties located in the ten largest U.S. metropolitan areas, and approximately 80.9% of our loans (measured by commitment) were secured by properties located in the 25 largest U.S. metropolitan areas.

As of September 30, 2017, our portfolio consisted of 51 first mortgage loans (or interests therein) with an aggregate unpaid principal balance of $2.8 billion and four mezzanine loans with an aggregate unpaid principal balance of $67.1 million, and collectively having a weighted average credit spread of 4.9%, a weighted average all-in yield of 6.4%, a weighted average term to extended maturity (assuming all extension options have been exercised by borrowers) of 3.5 years, and a weighted average LTV of 59.2%. As of September 30, 2017, 99.0% of the loan commitments in our portfolio consisted of floating rate loans, and 97.8% of the loan commitments in our portfolio consisted of first mortgage loans (or interests therein). We also had $581.6 million of unfunded loan commitments as of September 30, 2017, our funding of which is subject to satisfaction of borrower milestones. In addition, as of September 30, 2017, we held five CMBS investments, with an aggregate face amount of $85.9 million and a weighted average yield to final maturity of 3.2%.

We operate our business as one segment which directly originates and acquires commercial mortgage loans and other commercial real estate-related debt instruments. segment.

We have made an election to be taxed as a REIT for U.S. federal income tax purposes, commencing with our initial taxable year ended December 31, 2014. We believe we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code of 1986, as amended, and we believe that our organization and current organization and intended manner of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT. As a REIT, we generally are not subject to U.S. federal income tax on our REIT taxable income that we distribute currently to our stockholders. We operate our business in a manner that permits us to maintain an exclusion or exemption from registration under the Investment Company Act.

We continue to evaluate the effects of macroeconomic concerns, including, without limitation, rising interest rates, which may be followed up by a period of sustained high interest rates, inflation, stress to the commercial banking systems of the U.S. and Western Europe, geopolitical tensions, concerns of an economic recession in the near term, and changes to the way commercial tenants use real estate. Rising interest rates, stress to the commercial banking systems of the U.S. and Western Europe, increased volatility in debt and equity markets, declining commercial property values, and elevated geopolitical risk led us to continue to curtail our loan origination volume and increase our liquidity during the first three quarters of 2023. From January 1, 2023 through September 30, 2023, we originated three first mortgage transitional loans, with total commitments of $167.4 million, an initial unpaid principal balance of $148.4 million, and unfunded commitments at closing of $19.0 million.
For more information regarding the impact that current macroeconomic concerns have had and may have on our business, see the risk factors set forth in our Form 10-K filed with the SEC on February 21, 2023.
Our Manager

We are externally managed by our Manager, TPG RE Finance Trust Management, L.P., an affiliate of TPG. TPG manages investments across multipleis a global, diversified alternative asset classes, includingmanagement firm consisting of five multi-product private equity investment platforms, including capital, growth, impact, real estate, energy, infrastructure, credit and hedge funds.market solutions. Our Manager manages our investments and our day-to-day business and affairs in conformity with our investment guidelines and other policies that are approved and monitored by our board of directors. Our Manager is responsible for, among other matters, (A) the selection, origination or purchase and sale of our portfolio investments, (B) our financing activities and (C) providing us with investment advisory services. Our Manager is also responsible for our day-to-day operations and performs (or causes to be performed) such services and activities relating to our investments and business and affairs as may be appropriate. Our investment decisions are approved by an investment committee of our Manager that is comprised of senior investment professionals of TPG, including a senior investment professionalprofessionals of TPG's real estate equity group. investment group and TPG’s executive committee.
For a summary of certain terms of the management agreement between us and our Manager (the “Management Agreement”), see Note 10 to our Consolidated Financial Statements included in this Form 10-Q.


48

Table of Contents
Third Quarter 2023 Activity
Operating Results:
•Recognized Net (loss) income attributable to common stockholders of ($64.6) million, compared to ($72.7) million for the three months ended June 30, 2023, an increase of $8.1 million.
•Produced Net interest income of $19.5 million, resulting from interest income of $90.0 million and interest expense of $70.5 million. Net interest income decreased $6.6 million compared to the three months ended June 30, 2023.
•Generated Distributable Earnings (Loss) of ($103.7) million, a decrease of $89.7 million compared to the three months ended June 30, 2023.
•Recorded a decrease to our allowance for credit losses on our loan portfolio of $41.7 million, for a total allowance for credit losses of $236.6 million, or 560 basis points of total loan commitments of $4.2 billion.
•Declared a common stock dividend of $0.24 per common share for the three months ended September 30, 2023.
Investment Portfolio Activity:
•Originated one first mortgage loan with a total loan commitment of $43.6 million, an initial unpaid principal balance of $37.2 million, unfunded loan commitment of $6.4 million, an interest rate of Term SOFR plus 4.55%, and an interest rate floor of 3.25%.
•Funded $21.4 million in future funding obligations associated with existing loans.
•Received two full loan repayments of $261.3 million, and partial principal payments of $25.9 million related to four loans, and cost-recovery proceeds of $9.8 million across five loans for total loan repayments of $297.0 million.
•Sold an office loan with an unpaid principal balance of $152.4 million for $79.0 million, resulting in a loss on sale of $74.4 million, including transaction costs of $0.9 million.
•Sold a mixed-use loan with an unpaid principal balance of $129.2 million for $95.0 million, resulting in a loss on sale of $35.0 million, including transaction costs of $0.8 million.
•Acquired through foreclosure a multifamily property with a carrying value at September 30, 2023 of $71.3 million and a fair value at foreclosure of $71.1 million.
Investment Portfolio Financing Activity:
•Extended by one year the maturity of the Goldman Sachs secured credit agreement to August 19, 2024.
Liquidity:
Available liquidity as of September 30, 2023 of $570.6 million was comprised of:
•$302.3 million of cash-on-hand, of which $286.7 million was available for investment, net of $15.6 million held to satisfy liquidity covenants under our secured financing agreements.
•$237.5 million of cash in our CRE CLOs available for investment in eligible collateral.
•Undrawn capacity (liquidity available to us without the need to pledge additional collateral to our lenders) of $30.5 million under secured credit agreements with six lenders, and $0.3 million under asset-specific financing arrangements.
We have financed our loan investments as of September 30, 2023 utilizing three CRE CLOs totaling $2.0 billion, one of which is open for reinvestment of eligible loan collateral at quarter end, $1.0 billion under secured credit agreements with total commitments of $2.8 billion provided by six lenders, $214.3 million under asset-specific financing arrangements, and $27.9 million under our $290.0 million secured revolving credit facility. As of September 30, 2023, 61.4% of our borrowings were pursuant to our CRE CLO vehicles, 32.0% were pursuant to our secured credit agreements and secured revolving credit facility and 6.6% were pursuant to our asset-specific financing arrangements. Non-mark-to-market financing comprised 68.9% of total loan portfolio borrowings as of September 30, 2023.
Our ability to draw on our secured credit agreements and secured revolving credit facility is dependent upon our lenders’ willingness to accept as collateral loan investments we pledge to them to secure additional borrowings. These financing arrangements have credit spreads based upon the LTV and other risk characteristics of collateral pledged, and provide financing with mark-to-market provisions generally limited to collateral-specific events (i.e., "credit" marks) and, in only one instance, to capital markets-driven events (i.e., "spread" marks). Borrowings under our secured revolving credit agreement are permitted with respect to collateral that satisfies pre-determined eligibility standards, and have a pre-determined advance rate (generally, 75% of the unpaid principal balance pledged) and credit spread (Term SOFR plus 2.00%). As of September 30, 2023, borrowings under these secured credit agreements and secured revolving credit facility had a weighted average credit spread of 2.05% (2.05% for arrangements with mark-to-market provisions and 2.00% for one arrangement with no mark-to-market provisions), and a weighted average term to extended maturity assuming exercise of all extension options and term-out provisions of 1.5 years. These financing arrangements are generally 25% recourse to Holdco, with the exception of the secured revolving credit facility that is 100% recourse to Holdco.
49
Table of Contents
Key Financial Measures and Indicators

As a commercial real estate finance company, we believe the key financial measures and indicators for our business are earnings per share, dividends declared per common share, CoreDistributable Earnings, and book value per common share. For the three months ended September 30, 2017, we recorded earnings per share of $0.35, declared a dividend of $0.33 per share, and reported $0.35 per share of Core Earnings. In addition, our book value per share as of September 30, 2017 was $19.80. As further described below, CoreDistributable Earnings is a measure that is not prepared in accordance with GAAP. We use CoreDistributable Earnings to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan activity and operations.

For the three months ended September 30, 2023, we recorded net (loss) attributable to common stockholders of ($0.83) per diluted common share, an increase of $0.11 per diluted common share from the three months ended June 30, 2023, of which $0.18 per diluted common share relates primarily to a decrease in our credit loss expense during the third quarter of 2023, which totaled $75.8 million as compared to $89.1 million during the second quarter of 2023.
Distributable Earnings Per Common Share(loss) per diluted common share was ($1.33) for three months ended September 30, 2023, a decrease of $1.15 per diluted common share from the three months ended June 30, 2023. The decrease in Distributable Earnings per diluted common share was primarily due to an increase in realized losses on loan sales and Dividends Declared Per Common Share

REO conversion of $1.08 per diluted common share during the third quarter of 2023 and a decrease in net interest income of $0.08 per diluted common share during the third quarter of 2023, partially offset by an increase in other income, net of expenses of $0.01 per diluted common share.

For the three months ended September 30, 2023, we declared a cash dividend of $0.24 per common share which was paid on October 25, 2023.
Our book value per common share as of September 30, 2023 was $12.04, a decrease of $2.44 per common share from our book value per common share as of December 31, 2022 of $14.48, primarily due to an increase in credit loss expense during the nine months ended September 30, 2023 of $172.7 million, or $2.22 per common share.
The following table sets forth the calculation of basic and diluted net (loss) income attributable to common stockholders per share and dividends declared per share (in(dollars in thousands, except share and per share data):

 

 

Three Months Ended

 

 

 

September 30, 2017

 

 

June 30, 2017

 

Net Income Attributable to Common Stockholders(1)

 

$

20,787

 

 

$

25,320

 

Weighted Average Number of Common Shares Outstanding, Basic and Diluted(2)(3)

 

 

58,685,979

 

 

 

48,664,664

 

Basic and Diluted Earnings per Common Share(3)

 

$

0.35

 

 

$

0.52

 

Dividends Declared per Common Share(3)

 

$

0.33

 

 

$

0.41

 

(1)

Represents net income attributable to holders of our common stock and Class A common stock.

(2)

Weighted average number of shares outstanding includes common stock and Class A common stock.

Three Months Ended,
September 30, 2023June 30, 2023
Net (loss)$(61,213)$(69,173)
Preferred stock dividends(1)
(3,148)(3,148)
Participating securities' share in earnings(275)(403)
Net (loss) attributable to common stockholders - see Note 11$(64,636)$(72,724)
Weighted average common shares outstanding, basic77,730,715 77,417,566 
Incremental shares of common stock issued from the assumed exercise of warrants— — 
Weighted average common shares outstanding, diluted - see Note 1177,730,715 77,417,566 
(Loss) earnings per common share, basic(2)
$(0.83)$(0.94)
(Loss) earnings per common share, diluted(2)
$(0.83)$(0.94)
Dividends declared per common share$0.24 $0.24 

(3)

Share and per share data reflect the impact of the common stock and Class A common stock dividend which was paid upon completion of the Company’s initial public offering on July 25, 2017 to holders of record as of July 3, 2017. See Note 12 to the Consolidated Financial Statements included in this Form 10-Q____________________________

(1)Includes preferred stock dividends declared and paid for Series A Preferred Stock and Series C Preferred Stock shares outstanding for details.

Core Earnings

We use Core Earnings to evaluate our performance excluding the effectsthree months ended September 30, 2023 and June 30, 2023.

(2)Basic and diluted earnings per common share are computed independently based on the weighted-average shares of certain transactions and GAAP adjustments we believe are not necessarily indicativecommon stock outstanding. Diluted earnings per common share also includes the impact of our current loan activity and operations. Coreparticipating securities outstanding plus any incremental shares that would be outstanding assuming the exercise of the Warrants.
Distributable Earnings
Distributable Earnings is a non-GAAP measure, which we define as GAAP net income (loss) attributable to our common stockholders, including realized gains and losses not otherwisefrom loan sales and other loan resolutions (including conversions to REO), regardless of whether such items are included in other comprehensive income or loss, or in GAAP net income (loss), and excluding (i) non-cash equitystock compensation expense, (ii) depreciation and amortization expense, (iii) unrealized gains (losses) (including credit loss expense (benefit), net), and (iv) certain non-cash items. Core Earnings may also be adjusted from time to time to exclude one-time events pursuant to changes in GAAPor income and certain other non-cash charges as determined by our Manager, subject to approval by a majority of our independent directors.expense items. The exclusion of depreciation and amortization expense from the calculation of CoreDistributable Earnings only applies to debt investments related to real estate to the extent we foreclose upon the property or properties underlying such debt investments.

50
Table of Contents
We believe that CoreDistributable Earnings provides meaningful information to consider in addition to our net income (loss) and cash flow from operating activities determined in accordance with GAAP. This adjustedWe generally must distribute at least 90% of our net taxable income annually, subject to certain adjustments and excluding any net capital gains, for us to continue to qualify as a REIT for U.S. federal income tax purposes. We believe that one of the primary reasons investors purchase our common stock is to receive our dividends. Because of our investors’ continued focus on our ability to pay dividends, Distributable Earnings is an important measure for us to consider when determining our distribution policy and dividends per common share. Further, Distributable Earnings helps us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolioinvestment and operations. Although pursuantoperating activities.
Distributable Earnings excludes the impact of our credit loss provision or reversals of our credit loss provision, but only to the Management Agreement we calculateextent that our credit loss provision exceeds any realized credit losses during the incentiveapplicable reporting period.
A loan will be written off as a realized loss when it is deemed non-recoverable or upon a realization event. Such a realized loss would generally be recognized at the time the loan receivable is settled, transferred or exchanged, or in the case of foreclosure, when the underlying property is foreclosed upon or sold. Non-recoverability may also be concluded by us if, in our determination, it is nearly certain that all amounts due will not be collected. A realized loss may equal the difference between the cash or consideration received or expected to be received, and base management fees due to our Manager using Core Earnings before incentive fees expense, we report Core Earnings after incentive fee expense, because we believe this is a more meaningful presentationthe net book value of the economic performanceloan, reflecting our economics as it relates to the ultimate realization of our common and Class A common stock.

Corethe asset.

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

For additional information on the fees we pay our Manager, see Note 10 to our Consolidated Financial Statements included in this Form 10-Q.


The following tables providetable provides a reconciliation of GAAP net (loss) income attributable to common stockholders to CoreDistributable Earnings (in(dollars in thousands, except share and per share data):

 

 

Three Months Ended

 

 

 

September 30, 2017

 

 

June 30, 2017

 

Net Income Attributable to Common Stockholders(1)

 

$

20,787

 

 

$

25,320

 

Non-Cash Compensation Expense

 

 

—

 

 

 

—

 

Depreciation and Amortization Expense

 

 

—

 

 

 

—

 

Unrealized Gains (Losses)

 

 

—

 

 

 

—

 

Other Items

 

 

—

 

 

 

—

 

Core Earnings

 

$

20,787

 

 

$

25,320

 

Weighted-Average Common Shares Outstanding, Basic and Diluted(2)

 

 

58,685,979

 

 

 

48,664,664

 

Core Earnings per Common Share, Basic and Diluted(2)

 

$

0.35

 

 

$

0.52

 

(1)

Represents GAAP net income attributable to our common and Class A common stockholders.

Three Months Ended,
September 30, 2023June 30, 2023
Net (loss) income attributable to common stockholders - see Note 11$(64,636)$(72,724)
Non-cash stock compensation expense1,153 1,813 
Depreciation and amortization1,394 964 
Credit loss expense, net75,805 89,069 
Distributable earnings before realized losses from loan sales and other loan resolutions$13,716 $19,122 
Realized loss on loan sales and REO conversions(117,461)(33,154)
Distributable (loss) earnings$(103,745)$(14,032)
Weighted average common shares outstanding, basic77,730,715 77,417,566 
Incremental shares of common stock issued from the assumed exercise of warrants— — 
Weighted average common shares outstanding, diluted - see Note 1177,730,715 77,417,566 
Distributable earnings per common share, basic$(1.33)$(0.18)
Distributable earnings per common share, diluted$(1.33)$(0.18)

(2)

Share and per share data reflect the impact of the common stock and Class A common stock dividend which was paid upon completion of the Company’s initial public offering on July 25, 2017 to holders of record as of July 3, 2017. See Note 12 to the Consolidated Financial Statements included in this Form 10-Q for details.


Book Value Per Common Share

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

 

 

September 30, 2017

 

 

June 30, 2017

 

Total Stockholders’ Equity

 

$

1,207,798

 

 

$

1,003,972

 

Preferred Stock

 

 

(125

)

 

 

(125

)

Stockholders’ Equity, Net of Preferred Stock

 

$

1,207,673

 

 

$

1,003,847

 

Number of Common Shares Outstanding at Period End(1)(2)

 

 

61,004,768

 

 

 

49,689,521

 

Book Value per Common Share(2)

 

$

19.80

 

 

$

20.20

 

(1)

Includes shares of common and Class A common stock.

 September 30, 2023 December 31, 2022
Total stockholders’ equity$1,137,455 $1,321,996 
Series C Preferred Stock ($201,250 aggregate liquidation preference)(201,250)(201,250)
Series A preferred stock ($125 aggregate liquidation preference)(125)(125)
Total stockholders’ equity, net of preferred stock$936,080 $1,120,621 
Number of common shares outstanding at period end77,734,78677,410,282
Book value per common share$12.04 $14.48 

(2)

Share and per share data reflect the impact of the common stock and Class A common stock dividend which was paid upon completion of the Company’s initial public offering on July 25, 2017 to holders of record as of July 3, 2017. See Note 12 to the Consolidated Financial Statements included in this Form 10-Q for details.

Third Quarter 2017 Highlights

Operating Results:

Generated net income of $20.8 million, an increase of $3.3 million, or 19.2%, as compared to the third quarter of 2016.

51

Declared dividends

Table of $20.1 million,Contents
Investment Portfolio Overview
Our interest-earning assets are comprised entirely of a portfolio of floating rate, first mortgage loans, or $0.33 per share, representing an annualized dividend yield of 6.7% on a Book Value per Common Share of $19.80 asin limited instances, mezzanine loans. As of September 30, 2017.

Reported Core Earnings2023, our loans held for investment portfolio consisted of $20.8 million, or $0.35 per share, a 17.9% decrease from the quarter ended June 30, 2017.  

Investment Portfolio Activity:

Originated seven59 first mortgage loans with a total commitment(or interests therein) totaling $4.2 billion of approximately $775.2 million,commitments with an unpaid principal balance of $637.1 million, unfunded commitments of $138.1 million, and a weighted average credit spread of LIBOR plus 4.2%.

Funded $66.8 million in connection with existing loans having future funding obligations.

Received cash proceeds of $67.8 million, including $55.0 million from principal repayments and $12.8 million from loan sales.


Portfolio Financing:

At September 30, 2017, we had unrestricted cash available for investment of $64.8 million.

At September 30, 2017, we had undrawn capacity (liquidity available to us without the need to pledge more collateral to our lenders) of $281.4 million under secured revolving repurchase and senior secured credit facilities with seven lenders and asset-specific financings:

$147.0 million of undrawn capacity on account of our secured revolving repurchase and senior secured credit facilities, with a maximum facility commitment of $2.9 billion and a weighted average credit spread of LIBOR plus 2.2% as of September 30, 2017, providing stable financing, with mark-to-market provisions limited to asset and market specific events and a weighted average term to extended maturity (assuming we have exercised all extension options and term out provisions) of 2.6 years.

$134.4 million of undrawn capacity on account of asset-specific financings with a maximum commitment amount of $399.2 million at a weighted average credit spread of 3.8% and a weighted average term to extended maturity (assuming we have exercised all extension options and term out provisions) of 2.6 years.  

$4.0 billion. As of September 30, 2017,2023, 100% of the loan commitments in our portfolio consisted of floating rate loans, of which 100.0% were first mortgage loans or, in one instance, a first mortgage loan and contiguous mezzanine loan both owned by us. As of September 30, 2023, we had $1.4 billion$247.6 million of financing capacity under secured revolving repurchaseunfunded loan commitments, our funding of which is subject to borrower satisfaction of certain milestones.

We may hold REO as a result of taking title to a loan's collateral. As of September 30, 2023, we owned one multifamily property and senior secured credit facilities provided by seven lenders. Our ability to draw on this capacity is dependent upon our lenders’ willingness to accept as collateral loans or CMBS we pledge to them to secure additional borrowings.

$1.2 billionone office property with an aggregate carrying value of financing capacity is available under our secured revolving repurchase and senior secured credit facilities for loan originations and acquisitions, with$117.8 million acquired through a maximum facility commitment of $2.7 billion and credit spreads based upon the LTV and other risk characteristics of collateral pledged, which together provide stable financing with mark-to-market provisions generally limited to asset and market specific events,foreclosure and a weighted average term to extended maturity (assuming we have exercised all extension options and term out provisions)deed-in-lieu of 2.7 years. These facilities are 25% recourse to the Company’s wholly-owned subsidiary, TPG RE Finance Trust Holdco, LLC (“Holdco”).

foreclosure, respectively.

$156.6 million of financing capacity is available for CMBS investments, with a maximum facility commitment of $200 million, credit spreads based upon the haircut and other risk characteristics of the collateral pledged and a weighted average term to extended maturity (assuming we have exercised all extension options and term out provisions and have obtained the consent of our lenders) of 0.1 years. These facilities are 100% recourse to Holdco.

Portfolio Overview

Loan Portfolio

During the ninethree months ended September 30, 2017,2023, we originated or acquired 15 loans with a total loan commitment amount of approximately $1.5 billion, of which $1.1 billion was funded. Other loan fundings included $259.1funded $21.4 million of deferred future fundings related to previously originated loan commitments. Proceedsloans. We received proceeds from two loan repayments in-full of $261.3 million, and salesprincipal amortization of $25.9 million across four loans, for total loan repayments of $287.2 million during the nineperiod. We received cost-recovery proceeds from five non-accrual loans of $9.8 million. Additionally, we sold two mortgage loans with an unpaid principal balance of $281.6 million for $174.0 million, resulting in a loss on sale of $109.3 million, including transaction costs of $1.7 million.
The following table details our loans held for investment portfolio activity by unpaid principal balance (dollars in thousands):
Three Months Ended,
September 30, 2023June 30, 2023
Loan originations and acquisitions — initial funding$37,230 $— 
Other loan fundings(1)
21,360 33,020 
Loan repayments(287,170)(277,835)
Accrued PIK interest repayments— — 
Cash interest received and applied under cost recovery method to reduce loan principal(9,807)(1,287)
Realized loss on loan sales and REO conversions(117,461)(33,154)
Loan extinguishment upon conversion to REO(2)
(77,059)(55,029)
Loan sales(164,179)(38,115)
Total loan activity, net$(597,086)$(372,400)

(1)Additional fundings made under existing loan commitments.
(2)Extinguishment of a first mortgage loan with an unpaid principal balance of $77.1 million and $55.0 million, respectively, pursuant to loan conversions to REO in August 2023 and April 2023, respectively, as a result of our acquisition of the underlying properties pursuant to foreclosure and a deed-in-lieu of foreclosure, respectively.
For the three months ended September 30, 2017 totaled $1.0 billion, and2023, we generated interest income of $146.4$90.0 million and incurred interest expense of $56.6$70.5 million, which resulted in net interest income of $89.8$19.5 million.

For the three months ended September 30, 2017, we originated seven loans with a total commitment

52
Table of approximately $775.2 million, of which $637.1 million was funded upon closing or during the current period. Other loan fundings included $66.8 million in connection with existing loans having future funding obligations. Proceeds from loan repayments and sales during the three months ended September 30, 2017 totaled $67.8 million, and we generated interest income of $46.7 million and incurred interest expense of $19.1 million, which resulted in net interest income of $27.6 million.  

The following table details our loan activity by unpaid principal balance (dollars in thousands):

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2017

 

 

September 30, 2017

 

Loan originations— initial funded

 

$

632,285

 

 

$

1,162,641

 

Loan acquisitions— funded

 

 

—

 

 

 

—

 

Other loan fundings(1)

 

 

71,622

 

 

 

226,187

 

Loan repayments

 

 

(55,036

)

 

 

(947,146

)

Loan sales(2)

 

 

(12,763

)

 

 

(65,206

)

Total net fundings (repayments)

 

$

636,108

 

 

$

376,476

 

Contents

(1)

Additional fundings made under existing loan commitments.


(2)

In certain instances, we originate our mezzanine loans through the use of non-consolidated senior interests—the contemporaneous issuance of a first mortgage loan to a third-party lender or the non-recourse transfer of a first mortgage loan originated by us. In either case, the senior mortgage loan (i.e., the non-consolidated senior interest) is not included on our balance sheet. When we originate a loan in connection with the contemporaneous issuance or the non-recourse transfer of a non-consolidated senior interest, we retain on our balance sheet a mezzanine loan. For the three and nine months ended September 30, 2017, such amounts include $0.0 million and $52.0 million, respectively, from the sale of two loans by our subsidiary, TPG RE Finance Trust CLO Issuer, L.P. (“the CLO Issuer”), and two non-consolidated senior interests sold or co-originated, respectively. See “—Portfolio Financing—Non-Consolidated Senior Interests” for additional information.

The following table details overall statistics for our loanloans held for investment portfolio as of September 30, 20172023 (dollars in thousands):

Balance sheet portfolio
Total loan exposure(1)
Number of loans(1)
5959
Floating rate loans100.0 %100.0 %
Total loan commitments$4,223,672$4,223,672 
Unpaid principal balance(2)
$3,970,164$3,970,164 
Unfunded loan commitments(3)
$247,568$247,568 
Amortized cost$3,952,102$3,952,102 
Weighted average credit spread3.7 %3.7 %
Weighted average all-in yield(4)
9.3 %9.3 %
Weighted average term to extended maturity (in years)(5)
2.62.6
Weighted average LTV(6)
67.2 %67.2 %

 

 

 

 

 

 

Total Loan Exposure(1)

 

 

 

Balance Sheet

Portfolio

 

 

Total Loan

Portfolio

 

 

Floating Rate

Loans

 

 

Fixed Rate

Loans

 

Number of loans

 

 

54

 

 

 

57

 

 

 

55

 

 

 

2

 

% of portfolio (by unpaid principal balance)

 

 

100.0

%

 

 

100.0

%

 

 

98.8

%

 

 

1.2

%

Total loan commitment

 

$

3,423,627

 

 

$

3,559,127

 

 

$

3,523,598

 

 

$

35,529

 

Unpaid principal balance

 

$

2,845,688

 

 

$

2,845,688

 

 

$

2,810,160

 

 

$

35,529

 

Unfunded loan commitments(2)

 

$

581,590

 

 

$

581,590

 

 

$

581,590

 

 

$

—

 

Carrying value

 

$

2,824,713

 

 

$

2,824,713

 

 

$

2,789,310

 

 

$

35,403

 

Weighted average credit spread(3)

 

 

4.9

%

 

 

4.9

%

 

 

4.9

%

 

 

6.0

%

Weighted average all-in yield(3)

 

 

6.4

%

 

 

6.4

%

 

 

6.4

%

 

 

5.3

%

Weighted average term to extended maturity (in years)(4)

 

 

3.5

 

 

 

3.5

 

 

 

3.6

 

 

 

0.5

 

Weighted average LTV(5)

 

 

59.2

%

 

 

59.2

%

 

 

58.9

%

 

 

79.2

%

(1)

In certain instances, we originate our mezzanine loans through the use of non-consolidated senior interests—the contemporaneous issuance of a first mortgage loan to a third-party lender or the non-recourse transfer of a first mortgage loan originated by us.(1)In certain instances, we create structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third-party. In either case, the senior mortgage loan (i.e., the non-consolidated senior interest) is not included on our balance sheet. When we originate a loan in connection with the contemporaneous issuance or the non-recourse transfer of a non-consolidated senior interest, we retain on our balance sheet a mezzanine loan. Total loan commitment encompasses the entire loan portfolio we originated, acquired and financed, including $135.5 million of such non-consolidated senior interests sold or co-originated in three loans that are not included in our balance sheet portfolio. See “—Portfolio Financing—Non-Consolidated Senior Interests” for additional information.

(2)

Unfunded loan commitments may be funded over the term of each loan, subject in certain cases to an expiration date or a force-funding date, primarily to finance development, property improvements or lease-related expenditures by our borrowers, and in some instances to finance operating deficits during renovation and lease-up.

(3)

As of September 30, 2017, our floating rate loans were indexed to LIBOR. In addition to credit spread, all-in yield includes the amortization of deferred origination fees, purchase price premium and discount, loan origination costs and accrual of both extension and exit fees. Credit spread and all-in yield for the total portfolio assumes the applicable floating benchmark rate as of September 30, 2017 for weighted average calculations.

(4)

Extended maturity assumes all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date. As of September 30, 2017, based on the unpaid principal balance of our total loan exposure, 69.1% of our loans were subject to yield maintenance or other prepayment restrictions and 30.9% were open to repayment by the borrower without penalty.

(5)

LTV is calculated as the total outstanding principal balance of the loan or participation interest in a loan plus any financing that is pari passu with or senior to such loan or participation interest as of September 30, 2017, divided by the applicable as-is real estate value at the time of origination or acquisition of such loan or participation interest in a loan. The as-is real estate value reflects our Manager’s estimates, at the time of origination or acquisition of a loan or participation interest in a loan, of the real estate value underlying such loan or participation interest, determined in accordance with our Manager’s underwriting standards and consistent with third-party appraisals obtained by our Manager.

See “Subsequent Events” for details about our mortgage loan originations subsequent(i.e., the non-consolidated senior interest) is not included on our balance sheet. When we create structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third-party, we retain on our balance sheet a mezzanine loan. Total loan exposure encompasses the entire loan portfolio we originated, acquired and financed. We did not have any non-consolidated senior interests as of September 30, 2017.

2023.

(2)Unpaid principal balance includes PIK interest of $1.2 million as of September 30, 2023.

CMBS Portfolio

We

(3)Unfunded loan commitments may investbe funded over the term of each loan, subject in CMBS,certain cases to an expiration date or CMBS-related, assets as parta force-funding date, primarily to finance property improvements or lease-related expenditures by our borrowers and to finance operating deficits during renovation and lease-up.
(4)As of September 30, 2023, all of our investment strategy, primarilyloans were indexed to Term SOFR. In addition to credit spread, all-in yield includes the amortization of deferred origination fees, purchase price premium and discount, and accrual of both extension and exit fees. All-in yield for the total portfolio assumes Term SOFR as of September 30, 2023 for weighted average calculations.
(5)Extended maturity assumes all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date. As of September 30, 2023, based on the unpaid principal balance of our total loan exposure, 11.2% of our loans were subject to yield maintenance or other prepayment restrictions and 88.8% were open to repayment without penalty.
(6)Except for construction loans, LTV is calculated for loan originations and existing loans as the total outstanding principal balance of the loan or participation interest in a short-term cash management tool. Our current CMBS Portfolio consistsloan (plus any financing that is pari passu with or senior to such loan or participation interest) as of five, fixed rate securities whose underlyingSeptember 30, 2023, divided by the as-is appraised value of our collateral at the time of origination or acquisition of such loan or participation interest. For construction loans only, LTV is United States treasury bonds or first mortgage loans securedcalculated as the total commitment amount of the loan divided by multifamily or office properties. The underlyingthe as-stabilized value of the real estate collateral is located acrosssecuring the United States, primarilyloan. The as-is or as-stabilized (as applicable) value reflects our Manager’s estimates, at the time of origination or acquisition of the loan or participation interest in Washington, Texas,a loan, of the real estate value underlying such loan or participation interest determined in accordance with our Manager’s underwriting standards and California,consistent with no state representing more than 13% of an investment’s par value. At September 30, 2017, there were no floating rate securities inthird-party appraisals obtained by our CMBS Portfolio. Manager.
The following table details overall statisticsthe interest rate floors for our CMBSloans held for investment portfolio as of September 30, 20172023 (dollars in thousands):

 

 

CMBS Portfolio

 

Number of securities

 

 

5

 

Fixed rate securities

 

 

5

 

% of portfolio

 

 

100

%

Par value

 

$

86,314

 

Face amount(1)

 

$

85,866

 

Weighted average coupon(2)

 

 

3.7

%

Weighted average yield to final maturity(2)

 

 

3.2

%

Weighted average life (in years)

 

 

2.5

 

Weighted average principal repayment window (in years)

 

 

4.6

 

Final maturity (in years)

 

 

16.6

 

Ratings range(3)

 

Unrated to AAA

 

(1)

Amounts disclosed are before giving effect to unamortized purchase price premium and discount and unrealized gains or losses.

(2)

Weighted by market value as of September 30, 2017.

Interest Rate Floors
Total Commitment(1)
Unpaid Principal BalanceWeighted Average Interest Rate Floor
0.50% or less$2,280,367 $2,151,077 0.17 %
0.51% to 1.00%472,535 465,618 0.92 
1.01% to 1.50%351,500 333,968 1.46 
1.51% to 2.00%271,400 244,035 1.88 
2.01% or greater847,870 775,466 3.21 
Total$4,223,672 $3,970,164 1.06 %
_________________________________

(3)

Ratings range includes one structured finance investment that is unrated. This three year structured finance investment is 100% collateralized by multifamily mortgage loans underwritten by the Federal Home Loan Mortgage Corporation (“FHLMC”), which loans are slated for near term securitization by FHLMC. Upon the contractual maturity of the structured finance investment, FHLMC is required to purchase all of the performing mortgage loans at par. Currently, all of the underlying mortgage loans are performing. The four other CMBS investments are rated AA+ through AAA.

(1)Excludes capitalized interest of $1.2 million relating to previously modified loans.

For information regarding the financing of our loans held for investment portfolio, see the section entitled “Investment Portfolio Financing.”
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Table of Contents
Real Estate Owned
In August 2023, we acquired a multifamily property under development in Los Angeles, CA pursuant to a foreclosure. The property previously served as collateral for a first mortgage loan receivable held for investment, which had a risk rating of "4", was on non-accrual status and had an amortized cost and carrying value of $77.1 million and $71.1 million, respectively, as of June 30, 2023. During the third quarter of 2023, we recognized the property as REO with a carrying value of $71.1 million, which included the estimated fair value of the property and capitalized transaction costs. As of September 30, 2023, the REO is reflected on our consolidated balance sheets with a carrying value of $71.3 million.
In April 2023, we acquired an office property in Houston, TX pursuant to a negotiated deed-in-lieu of foreclosure. The property previously served as collateral for a first mortgage loan receivable held for investment, which had a risk rating of "5", was on non-accrual status, was accounted for under cost-recovery and had an amortized cost and carrying value of $55.0 million and $46.0 million, respectively, as of March 31, 2023. During the second quarter of 2023, we recognized the property as REO with a carrying value of $46.0 million, which included the estimated fair value of the property and capitalized transaction costs. As of September 30, 2023, the REO is reflected on our consolidated balance sheets with a carrying value of $46.5 million. During June 2023, we obtained from a third party a $31.2 million first mortgage loan secured by the office property.
Asset Management

We proactivelyactively manage the assets in our portfolio from closing to final repayment.repayment or resolution. We are party to an agreement with Situs Asset Management, LLC (“Situs”SitusAMC”), one of the largest commercial mortgage loan servicers, pursuant to which SitusSitusAMC provides us with dedicated asset management employees for performingto provide asset management services pursuant to our proprietary guidelines. Following the closing of an investment, this dedicated asset management team rigorously monitors the investment under our Manager’s oversight, with an emphasis on ongoing financial, legal and quantitative analyses. Through the final repayment of an investment, the asset management team maintains regular contact with borrowers, servicers and local market experts monitoring performance of the collateral, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.

Loan Portfolio Review
Our Manager reviews our entire loan portfolio quarterly, undertakes an assessment of the performance of each loan, and assigns it a risk rating between “1” and “5,” from least risk to greatest risk, respectively. See NotesNote 2 and 3 to our Consolidated Financial Statements included in this Form 10-Q for a discussion regarding the risk rating system that we use in connection with our loan portfolio.
The following table allocates the carrying valueamortized cost basis of our loanloans held for investment portfolio as of September 30, 2017 and December 31, 2016 based on our internal risk ratings (dollars in thousands):

 

September 30, 2017

 

 

December 31, 2016

 

Risk Rating

 

Carrying

Value

 

 

Number of

Loans

 

 

Carrying

Value

 

 

Number of

Loans

 

September 30, 2023December 31, 2022
Risk ratingRisk ratingNumber of loansAmortized costNumber of loansAmortized cost

1

 

$

—

 

 

 

—

 

 

$

261,261

 

 

 

3

 

1— $— — $— 

2

 

 

1,073,455

 

 

 

21

 

 

 

745,340

 

 

 

17

 

24 178,552 8 511,878 

3

 

 

1,695,009

 

 

 

29

 

 

 

1,205,994

 

 

 

33

 

346 3,135,811 46 3,231,324 

4

 

 

56,249

 

 

 

4

 

 

 

237,395

 

 

 

4

 

44 257,712 12 990,337 

5

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

55 380,027 4 245,135 

 

$

2,824,713

 

 

 

54

 

 

$

2,449,990

 

 

 

57

 

TotalsTotals59 $3,952,102 70 $4,978,674 

54
Table of Contents
The following table allocates the amortized cost basis of our loans held for investment portfolio based on our property type classification (dollars in thousands):
September 30, 2023December 31, 2022
Property typeNumber
of loans		Amortized
cost		Weighted average
risk rating		Number
of loans		Amortized
cost		Weighted average
risk rating
Multifamily29 $1,878,780 3.1 35 $2,365,481 3.0 
Office12 949,876 3.6 17 1,396,005 3.6 
Hotel8 443,2412.9 7 466,311 2.7 
Life Science4 349,6563.0 4 310,577 3.0 
Mixed-Use2 131,0003.5 3 268,107 3.7 
Industrial2 98,6353.0 2 86,746 2.7 
Self Storage1 66,789 3.0 1 56,804 3.0 
Other1 34,125 3.0 1 28,643 3.0 
Totals59 $3,952,102 3.2 70 $4,978,674 3.2 
The weighted average risk rating of our total loan exposureportfolio was 2.63.2 as of both September 30, 2017 and2023, unchanged from December 31, 2016.

2022.

During the three months ended September 30, 2023, as part of our quarterly risk rating process, we assigned an initial risk rating of "3" to a newly-originated loan secured by two hotel properties. We downgraded one multifamily loan from risk category "4" to "5" due to deteriorating operating results, and one office loan from risk category "4" to "5" due to weak operating results due to tenant departures. We received repayment in full of two loans with a total unpaid principal balance of $261.3 million and a weighted average risk rating of 2.0 as of June 30, 2023. The two loan repayments were included within our hotel and multifamily property categories. We converted to REO one multifamily loan with a risk rating of "4". We sold a mixed-use loan and an office loan with an aggregate unpaid principal balance of $281.6 million, both with risk ratings of "5" as of June 30, 2023.

During the three months ended June 30, 2023, as part of our quarterly risk rating process, we downgraded three loans from risk category "4" to "5". We downgraded two office loans and one mixed-use loan from risk category "4" to "5" due to the continued deterioration of the office sector and property specific operating trends. During the three months ended June 30, 2023, we received repayment in full of four loans with a total unpaid principal balance of $236.0 million and a weighted average risk rating of 2.8 as of March 31, 2023. The four loan repayments were included within our office and multifamily property categories. Additionally, during the three months ended June 30, 2023, we sold one office loan with an unpaid principal balance of $71.3 million with a risk rating of "5" as of March 31, 2023.
During the three months ended March 31, 2023, as part of our quarterly risk rating process, we upgraded one loan and did not downgrade any of our loans. We upgraded one hotel loan from risk category "4" to "3" due to continued improvement in property-level operating performance. During the three months ended March 31, 2023, we received repayment in full of three loans with a total unpaid principal balance of $144.4 million and a weighted average risk rating of 3.1 as of December 31, 2022. The three loan repayments were included within our office, multifamily, and industrial property categories and had risk ratings of 4, 3, and 2, respectively, as of December 31, 2022. The two new loan investments made during the three months ended March 31, 2023 were assigned an initial risk rating of "3".
Loan Modification Activity
Loan modifications and amendments are commonplace in the transitional lending business. We may amend or modify a loan depending on the loan’s specific facts and circumstances. These loan modifications typically include additional time for the borrower to refinance or sell the collateral property, adjustment or waiver of performance tests that are prerequisite to the extension of a loan maturity, modification of terms of interest rate cap agreements, and/or deferral of scheduled principal payments. In exchange for a modification, we often receive a partial repayment of principal, a short-term accrual of PIK interest for a portion of interest due, a cash infusion to replenish interest or capital improvement reserves, termination of all or a portion of the remaining unfunded loan commitment, additional call protection, and/or an increase in the loan coupon or additional loan fees. None of our loan modifications resulted in a significant modification.
We continue to work with our borrowers to address issues as they arise, while seeking to protect the credit attributes of our loans. However, we cannot assure you that these efforts will be successful, and we may experience payment delinquencies, defaults, foreclosures, or losses.
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Table of Contents
Allowance for Credit Losses
Our allowance for credit losses is influenced by the size and weighted average maturity date of our loans, loan quality, risk rating, delinquency status, loan-to-value ratio, historical loss experience and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. During the three and nine months ended September 30, 2023, we recorded a decrease and an increase of $41.7 million and $22.0 million, respectively, in our allowance for credit losses resulting in an aggregate CECL reserve of $236.6 million at quarter-end. The increase in our allowance for credit losses reflects ongoing concerns about growing geopolitical tensions, the potential impact of market volatility, the possibility of an economic recession, limited liquidity in the capital markets, distress in the banking sector and a slowdown in investment sales, and loan specific property-level performance trends such as shifting office market fundamentals and inflationary pressures that may cause operating margins to narrow.
While the ultimate impact of the macroeconomic outlook and property performance trends remain uncertain, we selected our macroeconomic outlook to address this uncertainty, and made specific forward-looking adjustments to the inputs of our loan-level calculations to reflect collateral operating performance, credit structure features of loan agreements, variability in an economic climate marked by rising rates, and other impacts to the broader economy.
The following table presents the allowance for credit losses for loans held for investment (dollars in thousands):
September 30, 2023
Allowance for credit losses: loans held for investmentUnpaid principal balanceAllowance for credit losses: unfunded commitmentsUnfunded commitmentsTotal commitmentsTotal basis points
General reserve$59,360$3,581,260$1,976$208,236$3,788,324162  bps
Specific reserve153,898388,90421,39539,332435,3484,027  bps
Total$213,258$3,970,164$23,371$247,568$4,223,672560 bps
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Table of Contents
Investment Portfolio Financing

Our

We finance our investment portfolio using secured financing agreements, including secured credit agreements, secured revolving credit facilities, mortgage loans payable, asset-specific financing arrangements, include secured revolving repurchase facilities,and collateralized loan obligations. In certain instances, we may create structural leverage and obtain matched-term financing through the co-origination or non-recourse syndication of a senior securedloan interest to a third party (a “non-consolidated senior interest”). We generally seek to match-fund and match-index our investments by minimizing the differences between the durations and indices of our investments and those of our liabilities, while minimizing our exposure to mark-to-market risk involving either credit facility, a private, bi-lateral portfolio financing with a single investor structured as a collateralized loan obligation (“CLO”), asset-specific financings and non-consolidated senior interests.

or spread (capital markets) considerations.

The following table details our investment portfolio financing arrangements (dollars in thousands):

 

 

Portfolio Financing

Outstanding Principal Balance

 

 

 

September 30, 2017

 

 

December 31, 2016

 

Secured revolving repurchase facilities

 

$

1,540,098

 

 

$

1,021,529

 

Senior secured credit facility

 

 

—

 

 

 

—

 

CLO financing

 

 

—

 

 

 

543,320

 

Asset-specific financings

 

 

264,792

 

 

 

111,382

 

Total indebtedness(1)

 

$

1,804,890

 

 

$

1,676,231

 

(1)

Excludes deferred financing costs of $11.7 million and $13.6 million as of September 30, 2017 and December 31, 2016, respectively.

Secured Revolving Repurchase Facilities

The following table details our secured revolving repurchase facilities as of September 30, 2017 (dollars in thousands):

Lender

 

Facility

Commitment(1)

 

 

Collateral

UPB(2)

 

 

Outstanding

Facility

Balance

 

 

Capacity(3)

 

 

Undrawn

Capacity(4)

 

 

Effective

Advance

Rate

 

 

 

Initial

Maturity

 

 

Extended

Maturity(7)

 

 

Credit

Spread

Goldman Sachs

 

$

750,000

 

 

$

841,002

 

 

$

547,572

 

 

$

202,428

 

 

$

56,237

 

 

 

65.1

%

 

 

8/19/2018

 

 

8/19/2019

 

 

L+ 2.2%

Wells Fargo

 

 

750,000

 

 

 

682,221

 

 

 

393,488

 

 

 

356,512

 

 

 

52,949

 

 

 

57.7

%

(5)

 

5/25/2019

 

 

5/25/2021

 

 

L+ 2.1%

JP Morgan

 

 

417,250

 

 

 

380,621

 

 

 

261,868

 

 

 

155,382

 

 

 

10,635

 

 

 

68.8

%

 

 

8/20/2018

 

 

8/20/2020

 

 

L+ 2.5%

Morgan Stanley

 

 

400,000

 

 

 

397,592

 

 

 

272,732

 

 

 

127,268

 

 

 

27,165

 

 

 

68.6

%

 

 

5/3/2019

 

 

N/A

 

 

L+ 2.4%

US Bank

 

 

150,000

 

 

 

30,000

 

 

 

21,000

 

 

 

129,000

 

 

 

—

 

 

 

70.0

%

 

 

10/6/2019

 

 

10/6/2021

 

 

L+ 2.3%

Subtotal/Weighted

   Average—Loans

 

 

2,467,250

 

 

 

2,331,436

 

 

 

1,496,660

 

 

 

970,590

 

 

 

146,986

 

 

 

64.5

%

 

 

 

 

 

 

 

 

 

 

L+ 2.3%

Royal Bank of Canada

 

 

100,000

 

 

 

8,418

 

 

 

7,860

 

 

 

92,140

 

 

 

—

 

 

 

93.4

%

(6)

 

12/20/2017

 

(8)

12/20/2017

 

(8)

L+ 1.0%

Goldman Sachs

 

 

100,000

 

 

 

39,533

 

 

 

35,578

 

 

 

64,422

 

 

 

—

 

 

 

90.0

%

 

 

10/30/2017

 

(8)

10/30/2017

 

(8)

L+ 1.8%

Subtotal/Weighted

   Average—CMBS

 

 

200,000

 

 

 

47,951

 

 

 

43,438

 

 

 

156,562

 

 

 

—

 

 

 

90.6

%

 

 

 

 

 

 

 

 

 

 

L+ 1.6%

Total/Weighted Average

 

$

2,667,250

 

 

$

2,379,387

 

 

$

1,540,098

 

 

$

1,127,152

 

 

$

146,986

 

 

 

65.2

%

 

 

 

1.2

 

 

 

2.6

 

 

L+ 2.2%

(1)

Facility commitment represents the largest amount of borrowings available under a given facility once sufficient collateral assets have been approved by the lender and pledged by us.

(2)

Represents the unpaid principal balance of the collateral assets approved by the lender and pledged by us.

Outstanding principal balance
September 30, 2023December 31, 2022
Collateralized loan obligations$1,979,543 $2,461,170 
Secured credit agreements1,003,062 1,108,386 
Secured revolving credit facility27,923 44,279 
Asset-specific financing arrangements214,330 565,376 
Mortgage loan payable31,200 — 
Total$3,256,058 $4,179,211 

(3)

Represents the facility commitment less the outstanding facility balance.

(4)

Undrawn capacity represents the positive difference between the amount of collateral assets approved by the lender and pledged by us and the amount actually drawn against those collateral assets.

(5)

Reflects the exclusion by the lender of the purchase discount from the collateral base with respect to four loans acquired by us during 2016, thereby reducing the effective advance rate when measured against the unpaid principal balance of the collateral assets approved by the lender and pledged by us.

(6)

Reflects the inclusion by the lender of the purchase premium in the collateral base with respect to one CMBS bond acquired by us during 2016, thereby increasing the effective advance rate when measured against the unpaid principal balance of the collateral assets approved by the lender and pledged by us.

(7)

Our ability to extend our secured revolving repurchase facilities to the dates shown above is subject to satisfaction of certain conditions. Even if extended, our lenders retain sole discretion to determine whether to accept pledged collateral, and the advance rate and credit spread applicable to each borrowing thereunder.

(8)

Initial and Extended Maturity represents the sooner of the next maturity date of the CMBS repurchase agreement, or roll over date for the applicable underlying trade confirmation, subsequent to September 30, 2017.


The following table details our secured revolving repurchase facilities as of December 31, 2016 (dollars in thousands):

Lender

 

Facility

Commitment(1)

 

 

Collateral

UPB(2)

 

 

Outstanding

Facility

Balance

 

 

Capacity(3)

 

 

Undrawn

Capacity(4)

 

 

Effective

Advance

Rate

 

 

 

Initial

Maturity

 

Extended

Maturity(7)

 

Credit

Spread

Goldman Sachs

 

$

500,000

 

 

$

363,146

 

 

$

250,890

 

 

$

249,110

 

 

$

—

 

 

 

69.1

%

 

 

8/19/2017

 

8/19/2019

 

L+ 2.2%

Wells Fargo

 

 

500,000

 

 

 

461,618

 

 

 

320,271

 

 

 

179,729

 

 

 

—

 

 

 

69.4

%

(5)

 

5/25/2019

 

5/25/2021

 

L+ 2.2%

JP Morgan

 

 

313,750

 

 

 

414,269

 

 

 

288,749

 

 

 

25,001

 

 

 

439

 

 

 

69.7

%

 

 

8/20/2018

 

8/20/2020

 

L+ 2.7%

Morgan Stanley

 

 

250,000

 

 

 

175,884

 

 

 

125,964

 

 

 

124,036

 

 

 

605

 

 

 

71.6

%

 

 

5/4/2019

 

N/A

 

L+ 2.5%

Subtotal/Weighted

   Average—Loans

 

 

1,563,750

 

 

 

1,414,917

 

 

 

985,874

 

 

 

577,876

 

 

 

1,044

 

 

 

69.7

%

 

 

 

 

 

 

L+ 2.4%

Royal Bank of Canada

 

 

100,000

 

 

 

9,347

 

 

 

8,850

 

 

 

91,150

 

 

 

—

 

 

 

94.7

%

(6)

 

2/15/2021

 

2/15/2021

 

L+ 1.0%

Goldman Sachs

 

 

100,000

 

 

 

43,500

 

 

 

26,805

 

 

 

73,195

 

 

 

—

 

 

 

61.6

%

 

 

2/10/2021

 

2/10/2021

 

L+ 2.0%

Subtotal/Weighted

   Average—CMBS

 

 

200,000

 

 

 

52,847

 

 

 

35,655

 

 

 

164,345

 

 

 

—

 

 

 

69.8

%

 

 

 

 

 

 

L+ 1.7%

Total/Weighted Average

 

$

1,763,750

 

 

$

1,467,764

 

 

$

1,021,529

 

 

$

742,221

 

 

$

1,044

 

 

 

69.7

%

 

 

 

 

 

 

L+ 2.4%

(1)

Facility commitment represents the largest amount of borrowings available under a given facility once sufficient collateral assets have been approved by the lender and pledged by us.

(2)

Represents the unpaid principal balance of the collateral assets approved by the lender and pledged by us.

(3)

Represents the facility commitment less the outstanding facility balance.

(4)

Undrawn capacity represents the positive difference between the amount of collateral assets approved by the lender and pledged by us and the amount actually drawn against those collateral assets.

(5)

Reflects the exclusion by the lender of the purchase discount from the collateral base with respect to four loans acquired by us during 2016, thereby reducing the effective advance rate when measured against the unpaid principal balance of the collateral assets approved by the lender and pledged by us.

(6)

Reflects the inclusion by the lender of the purchase premium in the collateral base with respect to one CMBS bond acquired by us during 2016, thereby increasing the effective advance rate when measured against the unpaid principal balance of the collateral assets approved by the lender and pledged by us.

(7)

Our ability to extend our secured revolving repurchase facilities to the dates shown above is subject to satisfaction of certain conditions. Even if extended, our lenders retain sole discretion to determine whether to accept pledged collateral, and the advance rate and credit spread applicable to each borrowing thereunder.

As of September 30, 2017,2023, non-mark-to-market financing sources accounted for 68.9% of our total loan portfolio borrowings. The remaining 31.1% of our loan portfolio borrowings, comprised primarily of our six secured credit agreements, are subject to credit marks, and in only one instance to credit and spread marks. As of September 30, 2023, we did not have any non-consolidated senior interests.

The following table summarizes our loan portfolio financing arrangements (dollars in thousands):
Outstanding principal balance
September 30, 2023December 31, 2022
Loan portfolio financing arrangementsBasis of margin callsRecourse percentageNon-mark-to-marketMark-to-marketTotalNon-mark-to-marketMark-to-marketTotal
Secured credit agreements
Goldman SachsCredit25.0 %$— $318,175 $318,175 $— $385,338 $385,338 
Wells FargoCredit25.0 %— 405,871 405,871 — 422,002 422,002 
BarclaysCredit25.0 %— 132,626 132,626 — 96,926 96,926 
Morgan StanleyCredit25.0 %— 53,800 53,800 — 55,579 55,579 
JP MorganCredit and Spread25.0 %— 56,725 56,725 — 112,676 112,676 
Bank of AmericaCredit25.0 %— 35,865 35,865 — 35,865 35,865 
Institutional Lender 1Credit25.0 %— — — — — — 
— 1,003,062 1,003,062 — 1,108,386 1,108,386 
Secured revolving credit facility
Syndicate lendersNone100.0 %27,923 — 27,923 44,279 — 44,279 
Asset-specific financing
Axos BankNone15.0 %22,315 — 22,315 105,152 — 105,152
BMO FacilityNone25.0 %29,110 — 29,110 47,545 — 47,545
Institutional Lender 2Nonen.a141,526 — 141,526 392,070 — 392,070
Customers BankNonen.a21,379 — 21,379 20,609 — 20,609
214,330 — 214,330 565,376 — 565,376
Collateralized loan obligations
TRTX 2019-FL3Nonen.a188,407 — 188,407 516,639 — 516,639 
TRTX 2021-FL4Nonen.a884,105 — 884,105 1,037,500 — 1,037,500 
TRTX 2022-FL5Nonen.a907,031 — 907,031 907,031 — 907,031 
1,979,543 — 1,979,543 2,461,170 — 2,461,170 
Total indebtedness$2,221,796 $1,003,062 $3,224,858 $3,070,825 $1,108,386 $4,179,211 
Percentage of total indebtedness68.9%31.1%100.0%73.5%26.5%100.0%
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Secured Credit Agreements
As of September 30, 2023, aggregate borrowings outstanding under our secured revolving repurchase facilitiescredit agreements totaled $1.5 billion, with a$1.0 billion. As of September 30, 2023, the overall weighted average credit spread of LIBORinterest rate was the benchmark interest rate plus 2.2% per annum, a weighted average all-in cost of credit, including associated fees and expenses, of LIBOR plus 2.7%2.05% per annum and athe overall weighted average effective advance rate of 65.2%was 76.8%. As of September 30, 2017,2023, outstanding borrowings under these facilitiesarrangements had a weighted average term to extended maturity (assuming we have exercisedof 1.5 years assuming the exercise of all extension options and term out provisions)provisions. These secured credit agreements are generally 25.0% recourse to Holdco.
The following table details our secured credit agreements as of 2.6 years. The Morgan Stanley secured revolving repurchase facility has an initial maturity dateSeptember 30, 2023 (dollars in thousands):
Lender
Commitment
amount(1)
UPB of
collateral		Advance
rate		Approved
borrowings		Outstanding
balance
Undrawn
capacity(2)
Available
capacity(3)
Wtd. avg.
credit spread(4)
Extended
maturity(5)
Goldman Sachs$500,000 $427,078 75.4 %$323,460 $318,175 $5,285 $176,540 2.38 %08/19/24
Wells Fargo500,000 528,093 79.1 417,281 405,871 11,410 82,719 1.86 04/18/25
Barclays500,000 180,154 75.3 133,740 132,626 1,114 366,260 1.97 08/13/26
Morgan Stanley500,000 82,573 73.7 60,809 53,800 7,009 439,191 2.32 05/04/24
JP Morgan400,000 80,314 76.4 60,922 56,725 4,197 339,078 1.74 10/30/25
Bank of America200,000 49,849 75.0 37,386 35,865 1,521 162,614 1.75 06/06/26
Institutional Lender 1249,546 — — — — — 249,546 — 10/30/25
Totals / weighted average$2,849,546 $1,348,061 76.8 %$1,033,598 $1,003,062 $30,536 $1,815,948 2.05 %

(1)Commitment amount represents the maximum amount of May 4, 2019 and can be extended for additional successive one year periods, subject to approvalborrowings available under a given agreement once sufficient collateral assets have been approved by the lender. The number of extension options is not limitedlender and pledged by us.
(2)Undrawn capacity represents the positive difference between the borrowing amount approved by the termslender against collateral assets pledged by us and the amount actually drawn against those collateral assets. The funding of this facility.

During the three months ended September 30 2017, we closed the following amendments to the Company’s existing secured revolving repurchase facilities:

1.

On July 21, 2017, the Company closed an amendment to its existing secured revolving repurchase facility with Morgan Stanley Bank, N.A. to increase the maximum facility amount to $400 million from $250 million. Additionally, the Company has the right to further upsize the facility to $500 million from $400 million upon at least five days’ notice, subject to customary conditions. The facility can be extended for additional successive one year periods, subject to approval by the lender. As was the case prior to the amendment, the number of extension options is not limited by the terms of this facility.

2.

On August 18, 2017, and in connection with the repayment of the Class A Note and the dissolution of the collateralized loan obligation (as discussed below under “Private Collateralized Loan Obligation”), the Company closed an amendment to its existing secured revolving repurchase facility with JPMorgan Chase Bank, N.A. to increase the maximum facility amount by $103.5 million, to $417.3 million, and to include as pledged collateral under the facility the seven first mortgage loan participation interests purchased from the CLO Issuer by one of our wholly-owned subsidiaries on August 18, 2017. With respect only to the upsize amount, amounts borrowed may not be repaid and reborrowed. All other material terms of the credit facility remain unchanged.

Borrowings under our secured revolving repurchase facilities aresuch amounts is generally subject to the initial approvalsole and absolute discretion of eligibleeach lender.

(3)Represents the commitment amount less the approved borrowings, which amount is available to be borrowed provided we pledge, and the lender approves, additional collateral loans (or CMBS, depending onassets.
(4)Each secured credit agreement interest rate is subject to Term SOFR as its benchmark interest rate. The credit spread for each arrangement is added to Term SOFR to calculate the facility) byinterest rate charged for each borrowing.
(5)Our ability to extend our secured credit agreements to the lender. The maximumdates shown above is subject to satisfaction of certain conditions. Even if extended, our lenders retain sole discretion to determine whether to accept pledged collateral, and the advance rate and pricing rate of individual advances are determined with referencecredit spread applicable to the attributes of the respective collateral.


The maximum and average month end balances for our secured revolving repurchase facilities during the nine months ended September 30, 2017 are as follows (dollars in thousands):

 

 

Nine Months Ended September 30, 2017

 

 

 

Carrying Value

 

 

Maximum Month End Balance

 

 

Average Month End Balance

 

JP Morgan

 

$

261,868

 

 

$

269,041

 

 

$

231,832

 

Goldman Sachs

 

 

547,572

 

 

 

547,572

 

 

 

352,825

 

Wells Fargo

 

 

393,488

 

 

 

393,488

 

 

 

315,890

 

Morgan Stanley

 

 

272,732

 

 

 

272,732

 

 

 

211,085

 

US Bank

 

 

21,000

 

 

 

21,000

 

 

 

16,333

 

Subtotal / Averages - Loans(1)

 

 

1,496,660

 

 

 

1,496,660

 

 

 

1,127,965

 

Royal Bank of Canada

 

 

7,860

 

 

 

57,832

 

 

 

20,698

 

Goldman Sachs

 

 

35,578

 

 

 

63,103

 

 

 

40,153

 

Subtotal / Averages - CMBS(1)

 

 

43,438

 

 

 

102,509

 

 

 

60,852

 

Total / Averages - Loans and CMBS(1)

 

$

1,540,098

 

 

 

1,540,098

 

 

 

1,188,817

 

(1)

The Maximum month end balance subtotal and total represents the maximum outstanding borrowings on all secured revolving purchase facilities at a month end during the nine months ended September 30, 2017.

In connection with each facility, Holdco executed a guarantee agreement in favor of the counterparty pursuant to which Holdco guarantees the obligations of our subsidiary that is the borrower under the facility for customary “bad-boy events.” Also in connection with each facility, Holdco executed an indemnity in favor of the counterparty pursuant to which Holdco indemnifies the counterparty against actual losses incurred as a result of “bad boy events” on the part of our subsidiary that is the borrower.

We conduct substantially all of our operations and own substantially all of our assets through our holding company subsidiary, Holdco. Holdco has guaranteed repayment of 25% of the principal amount borrowed and other payment obligations under each of our secured revolving repurchase facilities secured by loans and 100% of the principal amount borrowed and other payment obligations under each of our secured revolving repurchase facilities secured by CMBS.

We use secured revolving repurchase facilities to finance certain of our originations or acquisitions of our target assets, which may be accepted by a respective secured revolving repurchase facility lender as collateral. borrowing thereunder.

Once we identify an asset and the asset is approved by the secured revolving repurchase facilitycredit agreement lender to serve as collateral (which lender’s approval is in its sole discretion), we and the lender may enter into a transaction whereby the lender advances to us a percentage of the value of the loan asset, which is referred to as the “advance rate,rate.” In the case of borrowings under our secured credit agreements that are repurchase arrangements, this advance serves as the purchase price for such transactionat which the lender acquires the loan asset from us with an obligation of ours to repurchase the asset from the lender for an amount equal to the purchase price for the transaction plus a price differential, which is calculated based on an interest rate. Advance rates are subject to negotiation between us and our secured credit agreement lenders.
For each transaction, we and the lender agree to a trade confirmation which sets forth, among other things, the asset purchase price, the maximum advance rate, the interest rate and the market value of the loan asset andasset. For transactions under our secured credit agreements, the trade confirmation may also set forth any future funding obligations which are contemplated with respect to the specific transaction and/or the underlying loan asset. For loan assets which involve future funding obligations of ours, the repurchase transaction may provide for the repurchase lender to fund portions (for example, pro rata per the maximum advance rate of the related repurchase transaction) of such future funding obligations. asset and loan-specific margin maintenance provisions, described below.
Generally, our secured revolving repurchase facilitiescredit agreements allow for revolving balances, which allow us to voluntarily repay balances and draw again on existing available credit. The primary obligor on each secured revolving repurchase facilitycredit agreement is a separate special purpose subsidiary of ours which is restricted from conducting activity other than activity related to the utilization of its secured revolving repurchase facility.credit agreement and the loans or loan interests that are originated or acquired by such subsidiary. As additional credit support, our holding company subsidiary, Holdco, provides certain guarantees of the obligations of its subsidiaries. TheHoldco’s liability of Holdco under the guarantees related to our secured revolving repurchase facilities secured by CMBS is in an amount equal to 100% of the outstanding obligations of the special purpose subsidiary which is the primary obligor under the related facility. The liability of Holdco under the guarantees related to our secured revolving repurchase facilities secured by loans is generally capped at 25% of the outstanding obligations of the special purpose subsidiary which is the primary obligor under the related facility.agreement. However, suchthis liability cap under the guarantees related to our secured revolving repurchase facilities secured by loans does not apply in the event of certain “bad boy” defaults which can trigger recourse to Holdco for losses or the entire outstanding obligations of the borrower depending on the nature of the “bad boy” default in question. Examples of such “bad boy” defaults include, without limitation, fraud, intentional misrepresentation, willful misconduct, incurrence of additional debt in violation of financing documents, and the filing of a voluntary or collusive involuntary bankruptcy or insolvency proceeding of the special purpose entity subsidiary or the guarantor entity.

Each of the secured revolving repurchase facilities involvescredit agreements has “margin maintenance” provisions, which are designed to allow the repurchase lender to maintain a certain margin of credit enhancement against the loan assets which serve as collateral. The lender’s margin amount is typically based on a
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Table of Contents
percentage of the market value of the loan asset and/or mortgaged property collateral; however, certain secured revolving repurchase facilitiescredit agreements may also involve margin maintenance based on maintenance of a minimum debt yield with respect to the cash flow from the underlying real estate collateral. MarketIn certain cases, margin maintenance provisions can relate to minimum debt yields for pledged collateral considered as a whole, or limits on concentration of loan exposure measured by property type or loan type.
Our secured credit agreements contain defined mark-to-market provisions that permit the lenders to issue margin calls to us in the event that the collateral properties underlying our loans pledged to our lenders experience a non-temporary decline in value determinations and redeterminationsor net cash flow (“credit marks”). In connection with one of these borrowing arrangements, the lender is also permitted to issue margin calls to us in the event the lender determines capital markets events have caused credit spreads to change for similar borrowing obligations (“spread marks”). Furthermore, in connection with one of these borrowing arrangements, the lender has the right to re-margin the secured credit agreement based solely on appraised loan-to-values in the third year of the facility. In the event that we experience market turbulence, we may be made byexposed to margin calls in connection with our secured credit agreements.
The maturity dates for each of our secured credit agreements are set forth in tables that appear earlier in this section. Our secured credit agreements generally have terms of between one and three years, but may be extended if we satisfy certain performance-based conditions. In the repurchase lender in its sole discretion subjectnormal course of business, we maintain discussions with our lenders to extend, amend or otherwise optimize any specified parameters regarding the repurchase lender’s

financing agreements related to our loans.

determination, which may involve the limitation or enumerationAs of factors which the repurchase lender may consider when determining market value.

At September 30, 2017,2023, the weighted average haircut (which is equal to one minus the advance rate percentage against collateral for our secured revolving repurchase facilitiescredit agreements taken as a whole) was 34.8%, as23.2% compared to 30.3% at21.9% as of December 31, 2016.

Generally, when the repurchase lender’s margin amount has fallen below the outstanding purchase price for a transaction, a margin deficit exists and the repurchase lender may require that we prepay outstanding amounts on the secured revolving repurchase facility to eliminate such margin deficit. In certain secured revolving repurchase facilities, the repurchase lender’s ability to make a margin call is further limited by certain prerequisites, such as the existence of enumerated “credit events” or that the margin deficit exceed a specified minimum threshold.

2022.

The secured revolving repurchase facilitiescredit agreements also include cash management features which generally require that income from collateral loan assets be deposited in a lender-controlled account and be disbursedfor distribution in accordance with a specified waterfall of payments designed to keep facility-related obligations current before such income is disbursed for our own account. The cash management features generally require the trapping of cash in such controlled account if an uncured default under our borrowing arrangement remains outstanding. Furthermore, some secured revolving repurchase facilitiescredit agreements may require an accelerated principal amortization schedule if the secured revolving repurchase facilitycredit agreement is in its final extended term.

Notwithstanding that a loan asset may be subject to a financing arrangement and serve as collateral under a secured revolving repurchase facility,credit agreement, we are generally grantedretain the right to administer and service the loan and interact directly with the underlying obligors and sponsors of our loan assets so long as there is no default under the secured revolving repurchase facilitycredit agreement, and so long as we do not engage in certain material modifications (including amendments, waivers, exercises of remedies, or releases of obligors and collateral, among other things) of the loan assets without the repurchase lender’s prior consent.

The

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Table of Contents
Secured Revolving Credit Facility
On February 22, 2022, we closed a $250.0 million, secured revolving repurchase facilities include customary affirmative and negative covenants for similar secured revolving repurchase facilities, including, but not limited to, reporting requirements, collateral diversity requirements and/or concentration limits, and certain operational restrictions. In addition, each secured revolving repurchasecredit facility requires that the guarantor (Holdco) maintain compliance with financial covenants, including the following:

maintenance of minimum cash liquidity (which includes available borrowing capacity) of no less than $50 million;

maintenance of minimum unrestricted cash of no less than the greater of $12 million and 5.0% of the guarantor’s recourse indebtedness;

maintenance of minimum tangible net worth of at least 75% of the net cash proceeds of all prior equity issuances plus 75% of the net cash proceeds of all subsequent equity issuances;

maintenance of a debt to equity ratio not to exceed 3.0x to 1.0x; and

maintenance of a minimum interest coverage ratio (EBITDA to interest expense) of no less than 1.5x to 1.0x.

Private Collateralized Loan Obligation

In December 2014, we acquired a controlling interest in a portfolio of 55 commercial real estate loans representing $1.9 billion of unpaid principal balance from German American Capital Corporation (“GACC”), and financed it with a note issued bysyndicate of 5 banks to provide interim funding of up to 180 days for newly-originated and existing loans. During the CLO Issuer. The financingfourth quarter of 2022, an additional lender was structured asadded to the facility, increasing the borrowing capacity to $290.0 million. This facility has an initial term of 3 years, an interest rate of Term SOFR plus 2.00% that is payable monthly in arrears, and an unused fee of 15 or 20 basis points, depending upon whether utilization exceeds 50.0%. During the three and nine months ended September 30, 2023, the weighted average unused fee was 20 and 20 basis points, respectively. This facility is 100% recourse to Holdco. As of September 30, 2023, we pledged one loan investment with a non-recourse CLO. CLO Issuer issued a Class A note with an originalcollateral principal balance of $1.4 billion due$37.2 million and had outstanding Term SOFR-based borrowings of $27.9 million.

Asset-Specific Financing Arrangements
As of September 10,30, 2023, we had four separate asset-specific financing arrangements with four third-party lenders. On November 17, 2022, we closed a $23.3 million asset-specific financing arrangement with Customers Bank. The arrangement provides non-mark-to-market matched term, non-recourse financing. On September 1, 2022, we closed a $397.9 million asset-specific financing arrangement with an Institutional Lender ("Institutional Lender 2"). The arrangement provides non-mark-to-market matched term, non-recourse financing. On July 5, 2022, we closed one asset-specific financing arrangement with Axos Bank secured by one mortgage loan. The arrangement provides non-mark-to-market financing, a term of up to Deutsche2 years, and is 15% recourse to Holdco. On June 30, 2022, we closed a $200.0 million loan financing facility (the "BMO Facility"). The BMO Facility provides asset-specific financing on a non-mark-to-market basis with matched term. This facility is 25% recourse to Holdco.    
The following table details our asset-specific financing arrangements (dollars in thousands):
September 30, 2023
FinancingCollateral
Asset-specific financingCountCommitment amountOutstanding principal balance
Carrying
value(1)
Wtd. avg.
spread(2)
Wtd. avg.
term(3)
CountOutstanding principal balanceAmortized CostWtd. avg.
term
Axos Bank1$22,315 $22,315 $22,027 4.7 %0.71$34,297 $34,125 0.7
BMO Facility1200,000 29,110 28,843 2.0 %3.9136,525 36,235 3.9
Institutional Lender 21141,526 141,526 141,526 3.5 %1.12197,264 186,017 1.1
Customers Bank123,250 21,379 21,001 2.5 %3.9128,799 28,601 3.9
Total / weighted average$387,091 $214,330 $213,397 3.3 %1.7 years$296,885 $284,978 1.7 years
_______________________
(1)Net of $0.9 million unamortized deferred financing costs.
(2)Collateral loan assets and related financings are indexed to Term SOFR.
(3)Term under Axos Bank A.G., New York branch, which is an affiliatebased on the extended maturity date for the specific arrangement. Borrowings under the BMO Facility, the Institutional Lender 2 arrangement and Customers Bank are term-matched to the corresponding collateral loan asset. The weighted-average term assumes all extension options of GACC. Our Manager served as the collateral managerloan asset are exercised by the borrower.
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Collateralized Loan Obligations
As of September 30, 2023, we had three collateralized loan obligations, TRTX 2022-FL5, TRTX 2021-FL4, and TRTX 2019-FL3, totaling $2.0 billion, financing $2.6 billion, or 64.3%, of our loans held for investment portfolio, and holding $237.5 million of cash for investment in eligible loan collateral. As of September 30, 2023, our CRE CLOs provide low cost, non-mark-to-market, non-recourse financing for 61.4% of our loan portfolio borrowings. The collateralized loan obligations bear a weighted average interest rate of Term SOFR or Compounded SOFR plus 1.94%, have a weighted average advance rate of 79.4%, and include a reinvestment feature that allows us to contribute existing or new loan investments in exchange for proceeds from loan repayments held by the CRE CLOs.
The following table details the loan collateral and borrowings under our CRE CLOs (dollars in thousands):
September 30, 2023
CRE CLOsCountBenchmark interest rateOutstanding principal balance
Carrying value(1)
Wtd. avg. spread(2)
Wtd. avg. maturity(3)
TRTX 2019-FL3
Collateral loan investments7
Term SOFR(4)
$379,418$280,4003.48 %1.7
Financing provided1
Term SOFR(4)
188,407188,4072.30 %11.0
TRTX 2021-FL4
Collateral loan investments18
Term SOFR(5)
1,096,6051,017,4683.53 %2.6
Financing provided1
Term SOFR(5)
884,105881,9031.79 %14.4
TRTX 2022-FL5
Collateral loan investments15
Term SOFR(6)
1,075,0001,060,2533.62 %3.1
Financing provided1
Term SOFR(6)
907,031903,6012.02 %15.4
Total
Collateral loan investments(7)
40Term SOFR$2,551,023$2,358,1213.55 %2.6 years
Financing provided(8)
3Term SOFR$1,979,543$1,973,9111.94 %14.5 years
________________________________
(1)Includes loan amounts held in our CRE CLO investment structures and does not include other loans held for investment, net of $3.6 million held within the Sub-REIT structure.
(2)Weighted average spread excludes the amortization of loan fees and deferred financing costs.
(3)Loan term represents weighted-average final maturity, assuming extension options are exercised by the borrower. Repayments of CRE CLO notes are dependent on timing of related loan repayments post-reinvestment period. The term of the CRE CLO notes represents the rated final distribution date.
(4)On October 1, 2021, the benchmark index interest rate for borrowings under TRTX 2019-FL3 was converted from Compounded SOFR to Term SOFR by the designated transaction representative under the FL3 indenture. We exercised our right to convert the mortgage assets' benchmark interest rate from LIBOR to Term SOFR to eliminate the difference between benchmark rates used for the CLOassets and was entitled to receive collateral management fees for such services.

On August 16, 2017, the outstanding principal balanceliabilities of the Class A Note issuedCRE CLO. As of September 30, 2023, the TRTX 2019-FL3 mortgage assets are indexed to Term SOFR.

(5)On May 15, 2023, the benchmark index interest rate for borrowings under TRTX 2021-FL4 was converted from LIBOR to Term SOFR by the CLO Issuerdesignated transaction representative under the FL4 indenture. We exercised our right to convert the mortgage assets' benchmark interest rate from LIBOR to Term SOFR to eliminate the difference between benchmark rates used for the assets and liabilities of the CRE CLO.
(6)We had the ability to convert the interest rate benchmark from Compounded SOFR to Term SOFR once 50% of the underlying mortgage loans were converted to Term SOFR. On September 12, 2023, the benchmark interest rate for borrowings under TRTX 2022-FL5 was approximately $118.0 million. On August 16, 2017,converted from Compounded SOFR to Term SOFR. As of September 30, 2023, all of the CLO Issuer soldTRTX 2022-FL5 mortgage assets are indexed to GACC two first mortgageTerm SOFR.
(7)Collateral loan participation interests with aninvestment assets of FL3, FL4 and FL5 represent 9.6%, 27.6% and 27.1% of the aggregate unpaid principal balance of $12.8our loans held for investment portfolio as of September 30, 2023.
(8)During the three months ended September 30, 2023, we recognized interest expense of $38.3 million, that collateralized in partwhich includes $1.2 million of deferred financing cost amortization. During the Class A Note issued bynine months ended September 30, 2023, we recognized interest expense of $115.1 million, which includes $3.6 million of deferred financing cost amortization.
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During the CLO Issuer and recognized a $0.2nine months ended September 30, 2023, we utilized our eligible reinvestment feature related to TRTX 2021-FL4 sixteen times, recycling repayment of loan principal received of $384.4 million. During the nine months ended September 30, 2023, we utilized our eligible reinvestment feature related to TRTX 2022-FL5 two times, recycling $31.8 million lossof principal repayments received. We did not use the reinvestment feature related to TRTX 2021-FL4 or TRTX 2022-FL5 during the three months ended September 30, 2023. The reinvestment period for TRTX 2019-FL3 ended on sale in Other Income, net.October 11, 2021. The sales pricereinvestment period for TRTX 2021-FL4 ended on March 11, 2023. In accordance with the TRTX 2021-FL4 indenture, prior to the end of the two first mortgage loans was approximately par value. These loans were sold because they were determinedreinvestment period on March 11, 2023, we committed to contribute certain assets and completed the contribution process by mid-May 2023.
See Note 5 to our management to no longer be consistent withConsolidated Financial Statements included in this Form 10-Q for details about our CRE CLO reinvestment feature.
Mortgage Loan Payable
Through a wholly-owned, special purpose subsidiary, we are the Company’s current investment strategy.

On August 18, 2017, one of the Company’s wholly-owned subsidiaries purchased from the CLO Issuer seven firstborrower under a $31.2 million mortgage loan participation interests withsecured by a deed of trust against an aggregate unpaid principal balance of $138.5 million that collateralized the remainder of the Class A Note issued by the CLO Issuer.REO asset. The first mortgage loan participation interests were soldwas provided by the CLO Issuer for approximately par value. On August 23, 2017, proceeds from both transactions were used in combination with approximately $3.0 millionan institutional lender, has an interest-only five year term and bears interest at a rate of Company


cash to retire all amounts outstanding under the Class A Note issued by the CLO Issuer, which totaled $118.0 million. The collateralized loan obligation was subsequently terminated.

Asset-Specific Financings

At7.7%. As of September 30, 2017 and December 31, 2016, we had outstanding seven and four loan investments financed with three and two separate counterparties as asset-specific financings, respectively. In those instances where we have multiple asset-specific financings with2023, the same lender, the financings are not cross-collateralized.

The following table details statistics for our asset-specific financings at September 30, 2017 (dollars in thousands):

Lender

 

Count

 

 

Commitments

 

 

Principal

Balance

 

 

Undrawn

Capacity(1)

 

 

Carrying

Value

 

 

Weighted

Average

Credit

Spread(2)

 

Extended

Maturity(3)

Deutsche Bank

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral assets

 

 

3

 

 

$

245,115

 

 

$

181,063

 

 

N/A

 

 

$

180,296

 

 

L+ 6.55%

 

12/6/2019

Financing provided

 

 

3

 

 

 

156,965

 

 

 

116,917

 

 

 

40,048

 

 

 

116,356

 

 

L+3.49%

 

12/6/2019

Bank of the Ozarks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral asset

 

 

3

 

 

 

305,000

 

 

 

167,940

 

 

N/A

 

 

 

166,823

 

 

L+ 7.11%

 

3/20/2020

Financing provided

 

 

3

 

 

 

209,750

 

 

 

115,375

 

 

 

94,375

 

 

 

114,213

 

 

L+ 4.34%

 

3/20/2020

BMO Harris

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral assets

 

 

1

 

 

 

45,000

 

 

 

45,000

 

 

N/A

 

 

 

44,628

 

 

L+ 5.25%

 

4/9/2022

Financing provided

 

 

1

 

 

 

32,500

 

 

 

32,500

 

 

$

—

 

 

 

32,240

 

 

L+ 2.65%

 

4/9/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total collateral assets

 

 

7

 

 

$

595,115

 

 

$

394,003

 

 

$

N/A

 

 

$

391,747

 

 

 

 

 

Total financing provided

 

 

7

 

 

$

399,215

 

 

$

264,792

 

 

$

134,423

 

 

$

262,809

 

 

 

 

 

(1)

Undrawn capacity represents the positive difference between the amount of collateral assets approved by the lender and pledged by us and the amount actually drawn against those collateral assets.

(2)

All of these floating rate loans and related liabilities are indexed to LIBOR.

(3)

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

The following table details statistics for our asset-specific financings at December 31, 2016 (dollars in thousands):

Lender

 

Count

 

 

Commitments

 

 

Principal

Balance

 

 

Undrawn

Capacity(1)

 

 

Carrying

Value

 

 

Weighted

Average

Credit

Spread(2)

 

Extended

Maturity(3)

Deutsche Bank

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral Assets

 

 

3

 

 

$

245,115

 

 

$

141,232

 

 

$

N/A

 

 

$

139,912

 

 

L + 6.52%

 

12/17/2019

Financing Provided

 

 

3

 

 

 

156,966

 

 

 

91,526

 

 

 

65,440

 

 

 

90,488

 

 

L + 3.50%

 

12/17/2019

Bank of the Ozarks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral Asset

 

 

1

 

 

 

132,000

 

 

 

28,366

 

 

N/A

 

 

 

27,203

 

 

L + 7.50%

 

8/23/2021

Financing Provided

 

 

1

 

 

 

92,400

 

 

 

19,856

 

 

 

72,544

 

 

 

18,812

 

 

L + 4.50%

 

8/23/2021

Total Collateral Assets

 

 

4

 

 

$

377,115

 

 

$

169,598

 

 

$

N/A

 

 

$

167,115

 

 

 

 

 

Total Financing Provided

 

 

4

 

 

$

249,366

 

 

$

111,382

 

 

$

137,984

 

 

$

109,300

 

 

 

 

 

(1)

Undrawn capacity represents the positive difference between the amount of collateral assets approved by the lender and pledged by us and the amount actually drawn against those collateral assets.

(2)

All of these floating rate loans and related liabilities are indexed to LIBOR.

(3)

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


In connection with the Deutsche Bank and Bankcarrying value of the Ozarks asset-specific financings, Holdco has provided funding guarantees under which Holdco guarantees the funding obligations of the special purpose lending entity in limited circumstances. In addition, under the Deutsche Bank and Bank of the Ozarks asset-specific financings, Holdco has delivered limited non-recourse carve-out guarantees in favor of the lenders as additional credit support for the financings. These guarantees trigger recourse to Holdco as a result of certain “bad boy” defaults for actual losses incurred by such party or the entire outstanding obligations of the financing borrower depending on the nature of the “bad boy” default in question.

In connection with the BMO Harris asset-specific financing, Holdco has delivered a payment guarantee in favor of the lender as additional credit support for the financing. The liability of Holdco under this guarantee is generally capped at 25% of the outstanding obligations of the special purpose subsidiary which is the primary obligor under the financing. In addition, Holdco has delivered a non-recourse carveout guarantee, which can trigger recourse to Holdco as a result of certain “bad boy” defaults for losses incurred by BMO Harris or the entire outstanding obligations of the financing borrower, depending on the nature of the “bad boy” default in question.

Examples of “bad boy” defaults under the Deutsche Bank, Bank of the Ozarks and BMO Harris asset-specific financings include, without limitation, fraud, intentional misrepresentation, willful misconduct, incurrence of additional debt in violation of financing documents, and the filing of a voluntary or collusive involuntary bankruptcy or insolvency proceeding of the special purpose entity subsidiary or the guarantor entity.

The guarantee agreements for each of the asset-specific financings also contain financial covenants covering liquid assets and net worth requirements.

Senior Secured Credit Facility

On September 29, 2017 we entered into a senior secured credit facility agreement with Bank of America Merrill Lynch N.A. that has a maximum facility amount $250 million, which may increase from time to time, up to $500 million, at our request and agreement by the lender. We have not drawn on the facility. The current extended maturity of this facility is September 2022.

loan was $30.5 million.

Non-Consolidated Senior Interests

and Retained Mezzanine Loans

In certain instances, we originate our mezzanine loanscreate structural leverage through the use of non-consolidated senior interests—the contemporaneous issuanceco-origination or non-recourse syndication of a first mortgagesenior loan interest to a third-party lender or the non-recourse transfer of a first mortgage loan originated by us.third party. In either case, the senior mortgage loan (i.e., the non-consolidated senior interest) is not included on our balance sheet. When we originate a loan in connection withcreate structural leverage through the contemporaneous issuanceco-origination or the non-recourse transfersyndication of a non-consolidated senior loan interest to a third party, we retain on our balance sheet a mezzanine loan.

The following table details the subordinate interests retained on our balance sheet based on the total loan we financed through the use

As of September 30, 2023, there are no non-consolidated senior interests sold or co-originated throughretained mezzanine loans outstanding.
Financial Covenants for Outstanding Borrowings
For a description of our financial covenants and guarantees for outstanding borrowings related to our secured financing agreements, see Note 6 to our Consolidated Financial Statements included in this Form 10-Q.
We were in compliance with all financial covenants for our secured credit agreements and secured revolving credit facility to the extent of outstanding balances. Effective September 30, 2017 (dollars2023, we obtained from our lenders a waiver with respect to the Interest Coverage ratio covenant, reducing the minimum interest coverage ratio to 1.30 to 1.0 from 1.40 to 1.0 for the quarters ending September 30, 2023 and December 31, 2023. Absent any further waivers from the lenders, after December 31, 2023, the interest coverage ratio threshold will revert to 1.40 to 1.0 for the quarter ending March 31, 2024 and thereafter. We were in thousands):

Non-Consolidated Senior Interests

 

Count

 

 

Principal

Balance

 

 

Carrying

Value

 

 

Credit

Spread(1)

 

Guarantee

 

Weighted

Average

Term to

Extended

Maturity(2)

Senior loans sold or co-originated

 

 

3

 

 

$

96,443

 

 

N/A

 

 

L+ 2.6%

 

N/A

 

10/7/2019

Retained mezzanine loans

 

 

3

 

 

 

44,689

 

 

 

44,409

 

 

L+ 11.4%

 

N/A

 

4/7/2020

Total loans

 

 

3

 

 

$

141,132

 

 

N/A

 

 

L+ 5.4%

 

N/A

 

12/4/2019

(1)

Our loan and the non-consolidated senior interest sold or co-originated are indexed to LIBOR.

compliance with all financial covenants for our secured credit agreements and secured revolving credit facility to the extent of outstanding balances as of December 31, 2022.

(2)

Weighted average term to extended maturity assumes all extension options are exercised by the borrowers; provided, however, that our loans may be repaid prior to such date.

If we fail to satisfy any of the covenants in our financing arrangements and are unable to obtain a waiver or other suitable relief from the lenders, we would be in default under these agreements, which could result in a cross-default or cross-acceleration under other financing arrangements, and our lenders could elect to declare outstanding amounts due and payable (or such amounts may automatically become due and payable), terminate their commitments, require the posting of additional collateral and enforce their respective interests against existing collateral. A default also could significantly limit our financing alternatives, which could cause us to curtail our investment activities or dispose of assets when we otherwise would not choose to do so. Further, this could make it difficult for us to satisfy the requirements necessary to maintain our qualification as a REIT for U.S. federal income tax purposes.

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Floating Rate Portfolio

Our business model seeks to minimize our exposure to changing interest rates by match-indexing our assets using the same, or similar, benchmark indices, typically one-month USD LIBOR, as well as durations.indices. Accordingly, rising interest rates will generally increase our net interest income, while declining interest rates will generally decrease our net income.interest income, subject to the impact of interest rate floors in our mortgage loan investment portfolio. As of September 30, 2017, 98.8%2023, 100.0% of our loansloan investments by unpaid principal balance earned a floating rate of interest and were financed with liabilities that require interest payments based on floating rates, which resulted in approximately $1.0$0.7 billion of net floating rate exposure, that is positively correlated to rising interest rates, subject to the impact of interest rate floors on certain ofall our floating rate loans. As of September 30, 2017, the remaining


1.2%loans and less than 1.8% of our loans by unpaid principal balance earned a fixed rate of interest, but were financed with liabilities that require interest payments based on floating rates, which results in a negative correlation to rising interest ratesliabilities. Subject to the extent ofspecific footnote disclosures in the preceding tables describing our amount of fixed rate financing. Due to the short remaining term to maturity of these fixed rate loansrevolving credit facilities, secured financing arrangements, asset-specific financing arrangements and CRE CLOs, and the small percentage oftable that follows, our loan portfolio represented by these fixed rate loans, we have elected not to employ interest rate derivatives (interest rate swaps, caps, collars or swaptions) to limit our exposure to increases in interest rates on such liabilities, but we may do so in the future.

Our liabilities are generally index-matched to each collateralloan investment asset, resulting in a net exposure to movements in floating benchmark interest rates that varyvaries based on the relative proportion of floating rate assets and liabilities.

The following table details our portfolio’sthe net floating rate exposure of our loan portfolio by unpaid principal balance as of September 30, 20172023 (dollars in thousands):

 

 

Net Exposure

 

Floating rate assets(1)

 

$

2,810,160

 

Floating rate debt(1)(2)

 

 

(1,804,890

)

Net floating rate exposure

 

$

1,005,270

 

(1)

Our floating rate loans and related liabilities are indexed to one-month USD LIBOR. Therefore, the net exposure to the benchmark rate is in direct proportion to our assets also indexed to that rate.

(2)

Includes borrowings under secured revolving repurchase facilities and asset-specific financings.

Net exposure
Floating rate mortgage loan assets(1)
$3,970,164 
Floating rate mortgage loan liabilities(1)(2)
(3,224,858)
Total floating rate mortgage loan exposure, net$745,306 

(1)As of September 30, 2023, all of our floating rate mortgage loan assets and all of our outstanding floating rate mortgage loan liabilities were subject to Term SOFR as the benchmark interest rate.
(2)Floating rate liabilities include secured credit agreements, a secured revolving credit facility, asset-specific financing arrangements and collateralized loan obligations.

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Interest-Earning Assets and Interest-Bearing Liabilities

The following table presents the average balance of interest-earning assets and related interest-bearing liabilities, associated interest income and interest expense, and financing costs and the corresponding weighted average yields for the nine months ended September 30, 2017 and 2016our loan portfolio (dollars in thousands):

Three Months Ended
September 30, 2023June 30, 2023
Average
amortized cost(1)
Interest
income / expense
Wtd. avg. yield /
financing cost(2)
Average
amortized cost(1)
Interest
income / expense
Wtd. avg. yield / financing cost(2)
Core Interest-earning assets:
First mortgage loans$4,346,596 $90,046 8.3 %$4,771,543 $96,716 8.1 %
Core interest-earning assets$4,346,596 $90,046 8.3 %$4,771,543 $96,716 8.1 %
Interest-bearing liabilities:
Collateralized loan obligations2,040,340 38,334 7.5 %$2,220,804 $39,241 7.1 %
Secured credit agreements1,062,256 20,670 7.8 %1,018,473 16,755 6.6 %
Secured revolving credit facility19,728 765 15.5 %111,094 2,246 8.1 %
Asset-specific financing arrangements405,039 10,037 9.9 %528,916 12,268 9.3 %
Mortgage loan payable31,200 691 7.7 %31,200 60 7.7 %
Total interest-bearing liabilities$3,558,563 $70,497 7.9 %$3,910,487 $70,570 7.3 %
Net interest income(3)
$19,549 $26,146 
Other Interest-earning assets:
Cash equivalents$302,540 $2,309 3.1 %$235,899 $1,274 2.2 %
Accounts receivable from servicer/trustee252,653 2,625 4.2 %337,933 3,558 4.2 %
Total interest-earning assets$4,901,789 $94,980 7.8 %$5,345,375 $101,548 7.6 %

 

 

Nine months ended September 30,

 

 

 

2017

 

 

2016

 

 

 

Average

Carrying

Value(1)

 

 

Interest

Income/

Expense

 

 

Wtd. Avg.

Yield/

Financing

Cost(2)

 

 

Average

Carrying

Value(1)

 

 

Interest

Income/

Expense

 

 

Wtd. Avg.

Yield/

Financing

Cost(2)

 

Core Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgage loans

 

$

2,462,864

 

 

$

134,747

 

 

 

5.5

%

 

$

2,253,784

 

 

$

109,426

 

 

 

4.9

%

Retained mezzanine loans

 

 

59,571

 

 

 

5,137

 

 

 

8.6

%

 

 

31,332

 

 

 

2,143

 

 

 

6.8

%

CMBS

 

 

110,945

 

 

 

6,527

 

 

 

5.9

%

 

 

23,329

 

 

 

982

 

 

 

4.2

%

Core interest-earning assets

 

 

2,633,380

 

 

 

146,411

 

 

 

5.6

%

 

 

2,308,445

 

 

 

112,551

 

 

 

4.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-specific financing

 

$

207,832

 

 

$

8,847

 

 

 

4.3

%

 

$

68,671

 

 

$

2,640

 

 

 

3.8

%

Repurchase & senior secured agreements

 

 

1,188,831

 

 

 

34,389

 

 

 

2.9

%

 

 

614,458

 

 

 

14,953

 

 

 

2.4

%

CLO

 

 

313,525

 

 

 

11,993

 

 

 

3.8

%

 

 

881,689

 

 

 

25,490

 

 

 

2.9

%

Subscription secured facility(3)

 

 

18,333

 

 

 

1,356

 

 

 

7.4

%

 

 

61,356

 

 

 

1,860

 

 

 

3.0

%

Total interest-bearing liabilities

 

$

1,728,521

 

 

$

56,585

 

 

 

3.3

%

 

$

1,626,174

 

 

$

44,943

 

 

 

2.8

%

Net interest income(4)

 

 

 

 

 

$

89,826

 

 

 

 

 

 

 

 

 

 

$

67,608

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

112,601

 

 

 

540

 

 

 

0.5

%

 

 

55,215

 

 

 

46

 

 

 

0.1

%

Accounts receivable from servicer/trustee

 

 

46,090

 

 

 

6

 

 

 

0.0

%

 

 

25,161

 

 

 

12

 

 

 

0.0

%

Total interest-earning assets

 

 

2,792,071

 

 

 

146,957

 

 

 

5.3

%

 

 

2,388,821

 

 

 

112,609

 

 

 

4.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Based on carrying value for loans, amortized cost for securities and carrying value for debt. Calculated as the month-end averages.

 

(2) Weighted average yield or financing cost calculated based on annualized interest income or expense divided by average carrying value.

 

(3) Weighted average yield for the period ended September 30, 2017 reflects significant borrowings that were repaid prior to March 31, 2017.

 

(4) Represents interest income on core interest-earning assets less interest expense on total interest-bearing liabilities.

 

(1)Based on amortized cost for loans held for investment and interest-bearing liabilities as of September 30, 2023. Calculated balances as the month-end averages.

(2)Weighted average yield or financing cost calculated based on annualized interest income or expense divided by calculated month-end average outstanding balance.

Debt-to-Equity Ratio

(3)Represents interest income on core interest-earning assets less interest expense on total interest-bearing liabilities. Interest income on Other Interest-earning assets is included in Other Income, net on the consolidated statements of income and Total Leverage Ratio

comprehensive income.

64
Table of Contents
The following table presents the average balance of interest-earning assets and related interest-bearing liabilities, associated interest income and interest expense, and financing costs and the corresponding weighted average yields for our debt-to-equity ratioloan portfolio (dollars in thousands):
Nine Months Ended
September 30, 2023September 30, 2022
Average
amortized cost(1)
Interest
income / expense
Wtd. avg. yield /
financing cost(2)
Average
amortized cost(1)
Interest
income / expense
Wtd. avg. yield / financing cost(2)
Core Interest-earning assets:
First mortgage loans$4,697,917 $278,488 7.9 %$4,951,235 $199,132 5.4 %
Retained mezzanine loans— — — %34,987 3,403 15.6 %
Core interest-earning assets$4,697,917 $278,488 7.9 %$4,986,222 $202,535 5.4 %
Interest-bearing liabilities:
Collateralized loan obligations2,192,338 115,143 7.0 %$2,660,559 $58,832 2.9 %
Secured credit agreements1,056,303 56,051 7.1 %1,135,636 28,246 3.3 %
Secured revolving credit facility68,722 4,340 8.4 %97,029 3,094 4.3 %
Asset-specific financing arrangements493,174 34,772 9.4 %113,501 5,409 6.4 %
Mortgage loan payable31,200 751 7.7 %— — — %
Total interest-bearing liabilities$3,841,737 $211,057 7.4 %$4,006,725 $95,581 3.2 %
Net interest income(3)
$67,431 $106,954 
Other Interest-earning assets:
Cash equivalents$246,336 $4,871 2.6 %$325,106 $1,134 0.5 %
Accounts receivable from servicer/trustee316,750 8,308 3.5 %172,093 485 0.4 %
Total interest-earning assets$5,261,003 $291,667 7.4 %$5,483,421 $204,154 5.0 %

(1)Based on amortized cost for loans held for investment and interest-bearing liabilities as of September 30, 2023. Calculated balances as the month-end averages.
(2)Weighted average yield or financing cost calculated based on annualized interest income or expense divided by calculated month-end average outstanding balance.
(3)Represents interest income on core interest-earning assets less interest expense on total leverage ratio:

September 30, 2017

December 31, 2016

Debt-to-equity ratio(1)

1.44x

1.62x

Total leverage ratio(2)

1.55x

1.67x

(1)

Represents (i) total outstanding borrowings under secured debt agreements (collateralized loan obligation, net), secured financing/repurchase agreements (net) and notes payable (net), less cash, to (ii) total stockholders’ equity, at period end.

interest-bearing liabilities. Interest income on Other Interest-earning assets is included in Other Income, net on the consolidated statements of income and comprehensive income.

(2)

Represents (i) total outstanding borrowings under secured debt agreements (collateralized loan obligation, net), secured financing/repurchase agreements (net) and notes payable (net) plus non-consolidated senior interests sold or co-originated (if any), less cash, to (ii) total stockholders’ equity, at period end.

65

Our Results of Operations

Operating Results

Comparison of the Three Months Ended September 30, 2023 and June 30, 2023
The following table sets forth information regarding our consolidated results of operations (dollars in thousands, except per share data):

 Three Months Ended
 September 30, 2023
June 30, 20232
Variance
Interest income and interest expense
Interest income$90,046 $96,716 $(6,670)
Interest expense(70,497)(70,570)73 
Net interest income19,549 26,146 (6,597)
Other revenue
Other income, net5,439 4,960 479 
Revenue from real estate owned operations2,028 1,528 500 
Total other revenue7,467 6,488 979 
Other expenses
Professional fees1,257 1,572 (315)
General and administrative718 1,261 (543)
Stock compensation expense1,153 1,813 (660)
Servicing and asset management fees648 290 358 
Management fee5,545 5,949 (404)
Expenses from real estate owned operations3,098 1,848 1,250 
Total other expenses12,419 12,733 (314)
Credit loss expense, net(75,805)(89,069)13,264 
(Loss) income before income taxes(61,208)(69,168)7,960 
Income tax expense, net(5)(5)— 
Net (loss) income$(61,213)$(69,173)$7,960 
Preferred stock dividends and participating securities' share in earnings(3,423)(3,551)128 
Net (loss) income attributable to common stockholders - see Note 11$(64,636)$(72,724)$8,088 
Other comprehensive income (loss)
Net (loss) income$(61,213)$(69,173)$7,960 
Comprehensive net (loss) income$(61,213)$(69,173)$7,960 
(Loss) earnings per common share, basic(1)
$(0.83)$(0.94)$0.11 
(Loss) earnings per common share, diluted(1)
$(0.83)$(0.94)$0.11 
Dividends declared per common share$0.24 $0.24 $— 

 

 

Three Months Ended

September 30,

 

 

2017 vs

2016

 

 

Nine Months Ended

September 30,

 

 

2017 vs

2016

 

 

 

2017

 

 

2016

 

 

$

 

 

2017

 

 

2016

 

 

$

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

$

46,734

 

 

$

40,419

 

 

$

6,315

 

 

$

146,411

 

 

$

112,551

 

 

$

33,860

 

Interest Expense

 

 

(19,150

)

 

 

(16,937

)

 

 

(2,213

)

 

 

(56,585

)

 

 

(44,943

)

 

 

(11,642

)

Net Interest Income

 

 

27,584

 

 

 

23,482

 

 

$

4,102

 

 

 

89,826

 

 

 

67,608

 

 

$

22,218

 

OTHER REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income, net

 

 

669

 

 

 

15

 

 

 

654

 

 

 

1,036

 

 

 

326

 

 

 

710

 

Total Other Revenue

 

 

669

 

 

 

15

 

 

 

654

 

 

 

1,036

 

 

 

326

 

 

 

710

 

OTHER EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional Fees

 

 

1,256

 

 

 

1,133

 

 

 

123

 

 

 

2,448

 

 

 

2,359

 

 

 

89

 

General and Administrative

 

 

1,003

 

 

 

387

 

 

 

616

 

 

 

2,192

 

 

 

1,833

 

 

 

359

 

Servicing and Asset Management Fees

 

 

720

 

 

 

1,232

 

 

 

(512

)

 

 

3,061

 

 

 

2,742

 

 

 

319

 

Management Fees

 

 

4,133

 

 

 

2,244

 

 

 

1,889

 

 

 

9,489

 

 

 

6,377

 

 

 

3,112

 

Collateral Management Fee

 

 

23

 

 

 

207

 

 

 

(184

)

 

 

225

 

 

 

700

 

 

 

(475

)

Incentive Management Fee

 

 

327

 

 

 

716

 

 

 

(389

)

 

 

3,713

 

 

 

2,790

 

 

 

923

 

Total Other Expenses

 

 

7,462

 

 

 

5,919

 

 

 

1,543

 

 

 

21,128

 

 

 

16,801

 

 

 

4,327

 

Income Before Income Taxes

 

 

20,791

 

 

 

17,578

 

 

 

3,213

 

 

 

69,734

 

 

 

51,133

 

 

 

18,601

 

Income Taxes

 

 

—

 

 

 

(136

)

 

 

136

 

 

 

(140

)

 

 

(326

)

 

 

186

 

Net Income

 

 

20,791

 

 

 

17,442

 

 

 

3,349

 

 

 

69,594

 

 

 

50,807

 

 

 

18,787

 

Preferred Stock Dividends

 

 

(4

)

 

 

(3

)

 

 

(1

)

 

 

(12

)

 

 

(11

)

 

 

(1

)

Net Income Attributable to Common Stockholders(1)

 

 

20,787

 

 

 

17,439

 

 

 

3,348

 

 

 

69,582

 

 

 

50,796

 

 

 

18,786

 

Basic Earnings per Common Share(2)

 

$

0.35

 

 

$

0.43

 

 

$

(0.08

)

 

$

1.34

 

 

$

1.30

 

 

$

0.04

 

Diluted Earnings per Common Share(2)

 

$

0.35

 

 

$

0.43

 

 

$

(0.08

)

 

$

1.34

 

 

$

1.30

 

 

$

0.04

 

Dividends Declared per Common Share(2)

 

$

0.33

 

 

$

0.41

 

 

$

(0.08

)

 

$

1.02

 

 

$

1.18

 

 

$

(0.16

)

OTHER COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (Loss) Gain on Commercial Mortgage-Backed Securities

 

$

(2,558

)

 

$

1,542

 

 

$

(4,100

)

 

$

(1,270

)

 

$

2,579

 

 

$

(3,849

)

Comprehensive Income

 

$

18,233

 

 

$

18,984

 

 

$

(751

)

 

$

68,324

 

 

$

53,386

 

 

$

14,938

 

(1)

Represents net income attributable to holders of our common stock and Class A common stock.

(2)

Share and per share data reflect the impact of the common stock and Class A common stock dividend which was paid upon completion of the Company’s initial public offering on July 25, 2017 to holders of record as of July 3, 2017. See Note 12 to the Consolidated Financial Statements included in this Form 10-Q for details.


Comparison(1)Basic and diluted earnings per common share are computed independently based on the weighted-average shares of common stock outstanding. Diluted earnings per common share also includes the impact of participating securities outstanding plus any incremental shares that would be outstanding assuming the exercise of the ThreeWarrants.

(2)Additional information regarding our consolidated results of operations and Nine Months Ended Septemberfinancial performance for the three months ended June 30, 2017 and 2016

2023 can be found in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 filed with the SEC on August 1, 2023.

Net Interest Income

Net interest income increased $4.1decreased by $6.6 million and $22.2to $19.5 million during the three and nine months ended September 30, 2017, compared to the three and nine months ended September 30, 2016, respectively. The increases were due primarily to portfolio growth, a higher average LIBOR on the underlying loans, and the recognition of $2.7 million of discount accretion from the sale of a CMBS investment during the three months ended September 30, 2017.2023 compared to $26.1 million for the three months ended June 30, 2023. The decrease was primarily due to full loan repayments during the second and third quarters of 2023.
Other Revenue
Other revenue increased $1.0 million for the three months ended September 30, 2023 compared to the three months ended June 30, 2023 primarily due to an entire quarter of revenue earned from real estate owned operations from an office property acquired through a deed-in-lieu of foreclosure during the second quarter of 2023, compared to two months of ownership in the previous quarter, and an increase in interest incomerates earned on higher cash balances during the period.
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Table of Contents
Other Expenses
Other expenses decreased $0.3 million for the three months ended September 30, 2023 compared to the three months ended June 30, 2023, primarily due to a decrease in stock compensation expense and management fee offset by an increase in expenses from real estate owned operations from an entire quarter's ownership of an office property acquired through a deed-in-lieu of foreclosure during the second quarter of 2023.
Credit Loss Expense
Credit loss expense decreased by $13.3 million for the three months ended September 30, 2023 compared to the three months ended June 30, 2023. The decrease to our credit loss expense was primarily due to the realized losses on loan sales and an REO conversion of $117.5 million during the period as compared to $33.2 million during the prior quarter, which includes the reversal of previously recorded credit loss expense. This decrease was partially offset by an increase in interest expenseour allowance for credit losses due to increased borrowings to fund portfolio growthweakening credit indicators, rising interest rates, and a higher average borrowing rate, due to an increase in LIBOR, during the current period as compared to the threeuncertain macroeconomic outlook. See Notes 3 and nine months ended September 30, 2016.

Other Revenue

Other revenue is comprised of net gain/loss on the sale of certain loans and CMBS investments, interest income earned on certain cash collection accounts, and miscellaneous fee income. Other revenue increased by $0.7 million during the three and nine months ended September 30, 2017, compared to the three and nine months ended September 30, 2016. The changes in other revenue were partially due to higher cash balances during the three and nine months ended September 30, 2017. Additionally, we recognized a gain on sale related to our CMBS investments of $0.3 million and a $0.1 million increase in miscellaneous fee income during the three and nine months ended September 30, 2017, compared to the three and nine months ended September 30, 2016.

Other Expenses

Other expenses are comprised of professional fees, general and administrative expenses, servicing and asset management fees, management fees payable to our Manager, and collateral management fees. Due primarily to increased operating costs as a public company and increased fees payable to our Manager as a result of our initial public offering and the calculation of such fees in our new Management Agreement, we expect these expenses to continue to increase following the completion of our initial public offering. We expect our general and administrative expenses to continue to increase following our initial public offering as a result of investor relations, SEC reporting costs, increased accounting fees, NYSE registration costs, regulatory compliance, and other items required of a public company.

Other expenses increased by $1.5 million and $4.3 million for the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016. The increase in other expenses for the three and nine months ended September 30, 2017, was primarily due to an increase in management fees due to growth in the Company’s quarterly common stockholder’s equity base and additional general and administrative expenses as compared to the same periods in the prior year.

See Note 1015 to our Consolidated Financial Statements included in this Form 10-Q for additional details regarding our Management Agreementallowance for credit losses, risk ratings, and the revisions madeproperty type concentration risk.

Preferred Stock Dividends and Participating Securities Share in connection with the initial public offering.

Incentive Compensation

The incentive compensation earned by our Manager decreased by $0.4 million and increased by $0.9 million forEarnings

During each of the three and nine monthsmonth periods ended September 30, 2017, respectively, compared to the three2023 and nine months ended SeptemberJune 30, 2016. The changes in incentive compensation2023, we declared and paid a cash dividend of $3.1 million related to our Manager were primarily a result of the Management Agreement revisions duringSeries C Preferred Stock.
Dividends Declared Per Common Share
During the three months ended September 30, 20172023, we declared cash dividends of $0.24 per common share, or $18.9 million. During the three months ended June 30, 2023, we declared cash dividends of $0.24 per common share, or $19.0 million.
67
Table of Contents
Comparison of the Nine Months Ended September 30, 2023 and September 30, 2022
The following table sets forth information regarding our consolidated results of operations (dollars in connection withthousands, except per share data):
 Nine Months Ended
 September 30, 2023September 30, 2022Variance
Interest income and interest expense
Interest income$278,488 $202,535 $75,953 
Interest expense(211,057)(95,581)(115,476)
Net interest income67,431 106,954 (39,523)
Other revenue
Other income, net13,918 2,009 11,909 
Revenue from real estate owned operations3,556 — 3,556 
Total other revenue17,474 2,009 15,465 
Other expenses
Professional fees4,159 3,370 789 
General and administrative2,875 3,315 (440)
Stock compensation expense4,770 3,526 1,244 
Servicing and asset management fees801 1,481 (680)
Management fee17,513 17,471 42 
Incentive management fee— 5,183 (5,183)
Expenses from real estate owned operations4,946 — 4,946 
Total other expenses35,064 34,346 718 
Gain on sale of real estate owned, net— 13,291 (13,291)
Credit loss expense, net(172,658)(183,840)11,182 
(Loss) income before income taxes(122,817)(95,932)(26,885)
Income tax expense, net(194)(328)134 
Net (loss) income$(123,011)$(96,260)$(26,751)
Preferred stock dividends and participating securities' share in earnings(10,526)(10,026)(500)
Net (loss) income attributable to common stockholders - see Note 11$(133,537)$(106,286)$(27,251)
Other comprehensive income (loss)
Net (loss) income$(123,011)$(96,260)$(26,751)
Comprehensive net income (loss)$(123,011)$(96,260)$(26,751)
(Loss) earnings per common share, basic(1)
$(1.72)$(1.38)$(0.34)
(Loss) earnings per common share, diluted(1)
$(1.72)$(1.38)$(0.34)
Dividends declared per common share$0.72 $0.72 $— 

(1)Basic and diluted earnings per common share are computed independently based on the completionweighted-average shares of our initial public offering.

The increasecommon stock outstanding. Diluted earnings per common share also includes the impact of $0.9participating securities outstanding plus any incremental shares that would be outstanding assuming the exercise of the Warrants.

Net Interest Income
Net interest income decreased $39.5 million to $67.4 million during the nine months ended September 30, 2023 compared to $107.0 million for the nine months ended September 30, 20172022. The decrease was primarily due to an increase in the number of loans placed on non-accrual, including those on cost-recovery, which totaled eight throughout the nine months ended September 30, 2023 compared to none during the comparable period. Our weighted average interest rate floors increased from 0.85% as of September 30, 2016 were2022 to 1.06% as of September 30, 2023.
Other Revenue
Other revenue increased $15.5 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to an increase in interest rates earned on our cash balances as well as revenue earned from real estate owned operations from an office property acquired through a resultdeed-in-lieu of Core Earnings growthforeclosure during the second quarter of 2023.
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Table of Contents
Other Expenses
Other expenses increased $0.7 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to an increase in expenses from real estate owned operations of $4.9 million from an office property acquired through a deed-in-lieu of foreclosure during the second quarter of 2023 and an increase in stock compensation of $1.2 million for the nine months ended September 30, 2023 compared to the Company’s quarterly common stockholder’s equity base.

same period in 2022. This increase was partially offset by a decrease in incentive management fee expense of $5.2 million earned during the nine months ended September 30, 2022 compared to no incentive management fee expense for the same period in 2023.

Gain on Sale of Real Estate Owned, net
During the nine months ended September 30, 2022, we sold a 10-acre parcel of REO property for net cash proceeds of $73.9 million and recognized a gain on sale of real estate owned, net of $13.3 million. We did not sell any real estate owned during the nine months ended September 30, 2023.
Credit Loss Expense
Credit loss expense decreased by $11.2 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to a $172.7 million increase to our allowance for credit losses during the nine months ended September 30, 2023 compared to a $183.8 million increase recognized during the comparable period. Additionally, during the nine months ended September 30, 2023, we recognized $150.6 million of realized losses from loan sales in addition to loan conversions to real estate owned. We increased our allowance for credit losses due to weakening credit indicators, rising interest rates, inflationary expectations, an uncertain macroeconomic outlook that informed a more conservative macroeconomic forecast used to estimate our potential future credit losses, weakening conditions in the capital markets and a decline in investment sales, and new loan investments offset by loan repayments in-full. See Note 10Notes 3 and 15 to our Consolidated Financial Statements included in this Form 10-Q for additional details regarding our Management agreementallowance for credit losses, risk ratings, and property type concentration risk.
Preferred Stock Dividends and Participating Securities Share in Earnings
During each of the revisions made in connection with the initial public offering.

nine month periods ended September 30, 2023 and 2022, we declared and paid cash dividends of $9.4 million related to our Series C Preferred Stock.

Dividends Declared Per Common Share

For the three months ended September 30, 2017, we declared dividends of $0.33 per share, or $20.1 million. On September 29, 2016, we declared a dividend associated with the third quarter of 2016 in the amount of $0.41 per share of common stock and Class A common stock, or $17.0 million in the aggregate, which was paid on October 26, 2016.

During the nine months ended September 30, 2017 and 2016,2023, we declared cash dividends of $1.02$0.72 per common share, or $61.9 million, and $1.18 per share, or $48.5 million, respectively.


Unrealized (Loss) Gain on CMBS

Other comprehensive (loss) income decreased $4.1 million and $3.8 million during$56.9 million. During the three and nine months ended September 30, 2017, respectively, compared to the three and nine months ended September 30, 2016. The decrease is primarily related to the sale2022, we declared cash dividends of a CMBS investment during the three and nine months ended September 30, 2017 and changes in the composition$0.72 per common share, or $56.1 million.

69
Table of our CMBS investments from repayment and investment activities during the comparable periods in 2016.

Contents

Liquidity and Capital Resources

Capitalization

We have capitalized our business to dateto-date through, among other things, the issuance and sale of shares of our common stock, issuance of Series C Preferred Stock classified as permanent equity, issuance of Series B Preferred Stock treated as temporary equity, borrowings under notes payable, repurchasesecured credit agreements, a privatesecured revolving credit facilities, collateralized loan obligation,obligations, mortgage loan payable, asset-specific financings, and a subscription secured credit facility.non-consolidated senior interests. As of September 30, 2017,2023, we had 61,004,768outstanding 77.7 million shares of our common stock and Class A common stock outstanding representing $1.2$0.9 billion of stockholders’ equity, $194.4 million of Series C Preferred Stock, and $1.8$3.2 billion of outstanding borrowings used to finance our investments and operations.

See Notes 5 and 6 to our Consolidated Financial Statements included in this Form 10-Q for additional details regarding our borrowings under notes payable, repurchasesecured credit agreements, a privatesecured revolving credit facility, asset-specific financings and collateralized loan obligation,obligations.
Debt-to-Equity Ratio and a subscriptionTotal Leverage Ratio
The following table presents our Debt-to-Equity ratio and Total Leverage ratio:
September 30, 2023December 31, 2022
Debt-to-equity ratio(1)
2.60x2.97x
Total leverage ratio(2)
2.60x2.97x

(1)Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, secured credit facility.

agreements, asset-specific financing arrangements, a secured revolving credit facility, and mortgage loans payable, less cash, to (ii) total stockholders’ equity, at period end.

(2)Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, secured credit agreements, asset-specific financing arrangements, a secured revolving credit facility, and mortgage loans payable, plus non-consolidated senior interests sold or co-originated (if any), less cash, to (ii) total stockholders’ equity, at period end.
Sources of Liquidity

Our primary sources of liquidity include cash and cash equivalents, accounts receivable from our servicer from loan repayments of our net loans held for investment, available borrowings under notes payable, repurchase agreements, a senior secured credit facility, a privateagreements, available borrowings under our asset-specific financing arrangements, capacity in our collateralized loan obligation,obligations available for reinvestment, and a subscription secured facility, whichrevolving credit facility.
Our current sources of near-term liquidity are set forth in the following table (dollars in thousands):

 

 

September 30, 2017

 

 

December 31, 2016

 

Cash and cash equivalents

 

$

64,801

 

 

$

103,126

 

Secured revolving repurchase facilities (undrawn capacity)

 

 

146,986

 

 

 

1,044

 

Senior secured credit facility

 

 

—

 

 

 

—

 

Collateralized loan obligation financing (additional note

   purchase obligation)

 

 

—

 

 

 

39,193

 

Asset-specific financing

 

 

134,423

 

 

 

137,984

 

Revolving credit facility-capital commitments

 

 

—

 

 

 

109,142

 

Total

 

$

346,210

 

 

$

390,489

 

September 30, 2023December 31, 2022
Cash and cash equivalents$302,262 $254,050 
Secured credit agreements30,536 38,380 
Secured revolving credit facility— 556 
Asset-specific financing arrangements330 770 
Collateralized loan obligation proceeds held at trustee237,521 297,168 
Total$570,649 $590,924 

Our existing loan portfolio also providesmay provide us with liquidity as loans are repaid or sold, in whole or in part, of which some proceeds may be included in accounts receivable from our servicers until released and the proceeds from such repayments become available for us to reinvest.

For the nine months ended September 30, 2023, loan repayments (including $0.5 million of accrued PIK interest) totaled $791.0 million, and loan sales totaled $218.7 million. Additionally, we held unencumbered loan investments with an aggregate unpaid principal balance of $10.2 million that are eligible to pledge under our existing financing arrangements.

Uses of Liquidity Needs

In addition to our ongoing loan activity, our primary liquidity needs include interest and principal payments under our $1.8$3.2 billion of outstanding borrowings under notes payablesecured credit agreements, a secured revolving credit facility, asset-specific financing arrangements, and collateralized loan obligations, the repurchase agreements,or deleveraging of loans, $247.6 million of unfunded loan commitments on our loans held for investment, dividend distributions to our preferred and common stockholders, and operating expenses.

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Consolidated Cash Flows
Our primary cash flow activities involve actively managing our investment portfolio, originating floating rate, first mortgage loan investments, and raising capital through public offerings of our equity and debt securities.
The following table provides a breakdown of the net change in our cash, cash equivalents, and restricted cash balances (dollars in thousands):
Nine Months Ended September 30,
20232022
Cash flows provided by operating activities$56,903 $82,540 
Cash flows provided by (used in) investing activities982,534 (616,841)
Cash flows (used in) provided by financing activities(991,407)509,840 
Net change in cash, cash equivalents, and restricted cash$48,030 $(24,461)
Operating Activities
During the nine months ended September 30, 2023 and 2022, cash flows provided by operating activities totaled $56.9 million and $82.5 million, respectively, primarily related to net interest income, offset by operating expenses.
Investing Activities
During the nine months ended September 30, 2023, cash flows provided by investing activities totaled $982.5 million primarily due to loan repayments of $1,018.8 million and proceeds from the sale of loans held for investment of $218.7 million, offset by new loan originations and acquisitions of $146.7 million, advances on loans of $105.9 million, and capital expenditures related to real estate owned of $2.3 million. During the nine months ended September 30, 2022 cash flows used in investing activities totaled $616.8 million primarily due to new loan originations of $1,461.9 million and advances on loans of $105.9 million, offset by loan repayments of $877.1 million and proceeds from the sale of real estate owned of $73.9 million.
Financing Activities
During the nine months ended September 30, 2023, cash flows used in financing activities totaled $991.4 million primarily due to repayments of CRE CLO liabilities of $481.6 million as a result of the repayment of underlying loans, payments on secured financing agreements of $569.5 million, payments on asset-specific financing arrangements of $361.1 million and payment of dividends on our common stock and Series C Preferred Stock of $66.4 million, offset by borrowings on our secured financing agreements of $447.8 million, borrowings on our asset-specific financing arrangements of $10.1 million and proceeds from mortgage loan payable of $31.2 million. During the nine months ended September 30, 2022, cash flows provided by financing activities totaled $509.8 million primarily due to proceeds from the issuance of TRTX 2022-FL5 of $907.0 million, borrowings on our secured financing agreements of $1,147.5 million, borrowings on our asset-specific financing arrangements of $564.2 million, offset by payments on CRE CLOs of $995.5 million (of which $600.8 million related to the redemption of TRTX 2018-FL2), payments on secured financing agreements of $1,025.5 million, and payment of dividends on our common stock and Series C Preferred Stock of $71.0 million.
See Note 5 to our Consolidated Financial Statements included in this Form 10-Q for additional details related to our CRE CLO financing activities.
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Table of Contents
Contractual Obligations and Commitments

Our contractual obligations and commitments as of September 30, 20172023 were as follows (dollars in thousands):

 

��

 

 

 

 

Payment Timing

 

 

 

Total

Obligation

 

 

Less than

1 Year

 

 

1 to 3 Years

 

 

3 to 5 Years

 

 

More than

5 Years

 

Unfunded loan commitments(1)

 

$

581,590

 

 

$

104,681

 

 

$

435,370

 

 

$

41,539

 

 

$

—

 

Secured debt agreements—principal(2)

 

 

1,804,890

 

 

 

1,110,511

 

 

 

694,379

 

 

 

—

 

 

 

—

 

Secured debt agreements—interest(2)

 

 

74,515

 

 

 

59,285

 

 

 

15,230

 

 

 

—

 

 

 

—

 

Total(3)

 

$

2,460,995

 

 

$

1,274,477

 

 

$

1,144,979

 

 

$

41,539

 

 

$

—

 

(1)

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


Total obligationPayment timing
Less than 1 Year1 to 3 Years3 to 5 YearsMore than 5 Years
Unfunded loan commitments(1)
$247,568 $113,256 $130,311 $4,001 $— 
Collateralized loan obligations—principal(2)
1,979,543 557,305 787,341 634,897 — 
Secured credit agreements—principal(3)
1,003,062 428,700 574,362 — — 
Secured revolving credit facility—principal(3)
27,923 — 27,923 — — 
Asset-specific financing arrangements—principal(4)
214,330 110,361 53,480 50,489 — 
Mortgage loan payable—principal31,200 — — 31,200 — 
Collateralized loan obligations—interest(5)
345,243 22,304 117,782 205,157 — 
Secured credit agreements—interest(5)
95,927 24,857 71,070 — — 
Secured revolving credit facility—interest(3)
2,901 — 2,901 — — 
Asset-specific financing arrangements—interest(5)
31,856 2,563 14,084 15,209 — 
Mortgage loan payable—interest11,581 — — 11,581 — 
Total$3,991,134 $1,259,346 $1,779,254 $952,534 $— 
________________________________________

(2)

The allocation of our secured debt agreements is based on the current maturity date of each individual borrowing under the respective agreement. Amounts include the related future interest payment obligations, which are estimated by assuming the amounts outstanding under our secured debt agreements and the interest rates in effect as of September 30, 2017 will remain constant into the future. This is only an estimate, as actual amounts borrowed and rates will vary over time. Our floating rate loans and related liabilities are indexed to LIBOR.

(1)The allocation of our unfunded loan commitments for our loans held for investment portfolio is based on the earlier of the commitment expiration date and the loan maturity date.

(3)

Total excludes the $135.5 million of non-consolidated senior interests sold or co-originated, as the satisfaction of these interests is not expected to require a cash outlay from us.

(2)Collateralized loan obligation liabilities are based on the fully extended maturity of mortgage loan collateral, considering the reinvestment window of our collateralized loan obligation.

(3)The allocation of secured credit agreements and secured revolving credit facility is based on the extended maturity date for those secured financing agreements where extensions are at our option, subject to no default, or the current maturity date of those facilities where extension options are subject to counterparty approval.
(4)The allocation of asset-specific financing arrangements are based on the extended maturity date for the specific arrangement or, in the case of the BMO Facility and the Institutional Lender 2 arrangement, the fully extended maturity date of the underlying mortgage loan collateral.
(5)Amounts include the related future interest payment obligations, which are estimated by assuming the amounts outstanding under our secured debt agreements, asset-specific financing arrangements and collateralized loan obligations and the interest rates in effect as of September 30, 2023 will remain constant into the future. This is only an estimate, as actual amounts borrowed and rates will vary over time. Our floating rate loans and our related liabilities are indexed to Term SOFR.
With respect to our debt obligations that are contractually obligated to be paid indue within the next fewfive years, we plan to employ several strategies to meet these obligations, including: (i) applying repayments from underlying loans to satisfy the debt obligations which they secure;exercising maturity date extension options that exist in our current financing arrangements; (ii) negotiating extensions of terms with our providers of credit; (iii) periodically accessing the private and public equity and debt capital markets to raise cash to fund new investments;investments or the repayment of indebtedness; (iv) exploring the issuance of aadditional structured finance vehicle,vehicles, such as a CLO,collateralized loan obligations similar to TRTX 2022-FL5, TRTX 2021-FL4, or TRTX 2019-FL3 as a method of financing; and/or (v) term loans with private lenders; (vi) selling loan assetsloans to generate cash to repay our debt obligations.

obligations; and/or (vii) applying repayments from underlying loans to satisfy the debt obligations which they secure. Although these avenues have been available to us in the past, we cannot offer any assurance that we will be able to access any or all of these alternatives in the future.

We are required to pay our Manager a base management fee, an incentive fee, and reimbursements for certain expenses pursuant to our Management Agreement. The table above does not include the amounts payable to our Manager under our Management Agreement as they are not fixed and determinable. Refer toDuring the nine months ended September 30, 2023, our Manager did not earn an incentive management fee. See Note 10 to our consolidated financial statementsConsolidated Financial Statements included in this Form 10-Q for additional terms and details of the fees payable under our Management Agreement.

As a REIT, we generally must distribute substantially all of our net taxable income to stockholders in the form of dividends to comply with the REIT provisions of the Internal Revenue CodeCode. In 2017, the IRS issued a revenue procedure permitting “publicly offered” REITs to make elective stock dividends (i.e. dividends paid in a mixture of 1986, as amended. stock and cash), with at least 20% of the total distribution being paid in cash, to satisfy their REIT distribution requirements. Pursuant to this revenue procedure, we may elect to make future distributions of our taxable income in a mixture of stock and cash.
Our REIT taxable income does not necessarily equal our net income as calculated in accordance with GAAP or our CoreDistributable Earnings as described above.

Cash Flows

The following table provides a breakdown See Note 9 to our Consolidated Financial Statements included in this Form 10-Q for additional details.

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Table of Contents
Corporate Activities
Dividends
Upon the approval of our Board of Directors, we accrue dividends. Dividends are paid first to the holders of our Series A preferred stock at the rate of 12.5% of the net changetotal $0.001 million liquidation preference per annum plus all accumulated and unpaid dividends thereon, then to the holder of our Series B Preferred Stock (which was redeemed in-full on June 16, 2021) at the rate of 11.0% per annum of the $25.00 per share liquidation preference, then to the holders of our Series C Preferred Stock at the rate of 6.25% per annum of the $25.00 per share liquidation preference, and then to the holders of our common stock, in each case, to the extent outstanding. We intend to distribute each year not less than 90% of our taxable income to our stockholders to comply with the REIT provisions of the Internal Revenue Code. The Board of Directors will determine whether to pay future dividends, entirely in cash, or in a combination of stock and cash equivalents forbased on facts and circumstances at the nine months ended September 30, 2017 and 2016 (dollars in thousands):

time such decisions are made.

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

Cash flows provided by operating activities

 

$

67,240

 

 

$

67,827

 

Cash flows used in investing activities

 

 

(401,540

)

 

 

(591,092

)

Cash flows provided by financing activities

 

 

295,975

 

 

 

497,601

 

Net decrease in cash and cash equivalents

 

$

(38,325

)

 

$

(25,664

)

We experienced a net decrease in cash of $38.3 million for the nine months ended September 30, 2017, compared to a net decrease of $25.7 million for the nine months ended September 30, 2016. During the nine months ended September 30, 2017, cash flows provided by operating activities totaled $67.2 million related primarily to net interest income. During the nine months ended September 30, 2017, cash flows used in investing activities totaled $401.5 million due primarily to loan originations. During the nine months ended September 30, 2017, cash flows provided by financing activities totaled $296.0 million due primarily to proceeds from secured financing agreements and the completion of our initial public offering. We used the proceeds from our investing and financing activities, including cash provided by principal repayments and sales of loans and debt investments, to originate new loans and acquire CMBS investments of $1.2 billion during the nine months ended September 30, 2017.

Corporate Activities

Dividends

On September 26, 2017, we11, 2023, our Board of Directors declared and approved a cash dividend of $0.24 per share of common stock, or $18.9 million in the aggregate, for the third quarter of 2017,2023. The common stock dividend was paid on October 25, 2023 to the holders of record of our common stock and Class A common stock as of October 6, 2017,September 28, 2023.

On September 8, 2023, our Board of Directors declared a cash dividend of $0.3906 per share of Series C Preferred Stock, or $3.1 million in the amountaggregate, for the third quarter of $0.332023. The Series C Preferred Stock dividend was paid on September 29, 2023 to the preferred stockholders of record as of September 19, 2023.
On September 12, 2022, our Board of Directors declared and approved a cash dividend of $0.24 per share of common stock, and Class A common stock, or $20.1$18.7 million in the aggregate, whichfor the third quarter of 2022. The common stock dividend was paid on October 25, 2017.

Initial Public Offering

On July 25, 2017, we completed our initial public offering in which we sold 11,000,000 shares of our common stock at an initial public offering price of $20.00 per share. The shares offered and sold in2022 to the initial public offering were registered under the Securities Act pursuant to our Registration Statement on Form S-11 (File No. 333-217446), which was declared effective by the SEC on July 19, 2017. The aggregate offering price for the shares registered and sold by us was approximately $220 million. The underwriters of the offering were Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, Wells Fargo Securities, LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Barclays Capital Inc., TPG Capital BD, LLC and JMP Securities LLC.


The initial public offering generated $200.1 million in net proceeds, after deducting underwriting discounts of $13.2 million and estimated offering expenses payable by us of $6.7 million. On August 17, 2017, the underwriters of the Company’s initial public offering partially exercised their option to purchase up to an additional 1,650,000 shares of common stock. On August 22, 2017, the Company issued and sold, and the underwriters purchased, 650,000 shares of common stock for net proceeds of $12.2 million, after deducting underwriting discounts of $0.8 million. TPG Capital BD, LLC, an underwriter in the offering, is an affiliate and received underwriting discounts of approximately $0.6 million. No other offering expenses were paid directly or indirectly to any of our directors or officers (or their associates), persons owning 10 percent or more of our common stock or any other affiliates.

We used the net proceeds from the offering to originate commercial mortgage loans consistent with our investment strategy and investment guidelines.

Articles of Amendment and Restatement

On July 19, 2017, we filed Articles of Amendment and Restatement with the State Department of Assessments and Taxation of Maryland. The Articles of Amendment and Restatement increased our authorized common stock to 300,000,000 shares of common stock and 2,500,000 shares of Class A common stock with $0.001 par value per share. Additionally, the Articles of Amendment and Restatement increased our authorized preferred stock to 100,000,000 shares of preferred stock with a $0.001 par value per share.

Stock Dividend

On July 3, 2017, we declared a stock dividend that resulted in the issuance of 9,224,268 shares of our common stock and 230,815 shares of our Class A common stock upon the completion of our initial public offering. The stock dividend was paid on July 25, 2017 to holders of record of our common stock as of September 28, 2022.

On September 8, 2022, our Board of Directors declared a cash dividend of $0.3906 per share of Series C Preferred Stock, or $3.1 million in the aggregate, for the third quarter of 2022. The Series C Preferred Stock dividend was paid on September 30, 2022 to the preferred stockholders of record as of September 20, 2022.
For the nine months ended September 30, 2023 and Class A2022, common stock asdividends in the amount of July 3, 2017.

Termination$56.9 million and $56.1 million, respectively, were declared and approved.

As of Pre-IPO Capital Commitments

In connection with the completion of our initial public offering, all of the obligations of certain of our pre-IPO stockholders to purchase additional shares of ourSeptember 30, 2023 and December 31, 2022, common stock dividends of $18.9 million and Class A common stock using the undrawn portion$19.0 million, respectively, were unpaid and are reflected in dividends payable on our consolidated balance sheets.

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Table of their capital commitments was terminated.

Termination of Stockholders Agreement

Upon the completion of our initial public offering, the stockholders agreement between us and certain of our pre-IPO stockholders terminated in accordance with its terms.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Contents

Critical Accounting Policies

and Use of Estimates

The preparation of our consolidated financial statements in accordance with GAAP requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities, interest income and other revenue recognition, allowance for loan losses, expense recognition, tax liability, future impairment of our investments, valuation of our investment portfolio and disclosure of contingent assets and liabilities, among other items. Our management bases these estimates and judgments about current, and for some estimates, future economic and market conditions and their effects on available information, historical experience and other assumptions that we believe are reasonable under the circumstances. However, these estimates, judgments and assumptions are often subjective and may be impacted negatively based on changing circumstances or changes in our analyses.

If conditions change from those expected, it is possible that our judgments, estimates and assumptions described below could change, which may result in a change in our interest income and other revenue recognition, allowance for loan losses, expense recognition, tax liability, future impairment of our investments, and valuation of our investment portfolio, among other effects. If actual amounts are ultimately different from those estimated, judged or assumed, revisions are included in the consolidated financial statements in the period in which the actual amounts become known. We believe our critical accounting policiesestimates could potentially produce materially different results if we were to change underlying estimates, judgments or assumptions.

For Except as discussed below, there have been no material changes to our Critical Accounting Policies and Use of Estimates as described within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K Filed with the SEC on February 21, 2023.

Allowance for Credit Losses
As discussed in Note 2 to the Consolidated Financial Statements included in our Form 10-K filed with the SEC on February 21, 2023, on January 1, 2020, we adopted Accounting Standard Update (“ASU”) 2016-13, Financial Instruments-Credit Losses, and subsequent amendments, which replaced the incurred loss methodology with an expected loss model known as the Current Expected Credit Loss ("CECL") model. The initial CECL reserve recorded on January 1, 2020 is reflected as a direct charge to our retained earnings on the consolidated statements of changes in equity. Subsequent changes to the CECL reserve are recognized through net income on our consolidated statements of income and comprehensive income. The allowance for credit losses measured under the CECL accounting framework represents an estimate of current expected losses for our existing portfolio of loans held for investment and is presented as a valuation reserve on our consolidated balance sheets. Expected credit losses related to non-cancelable unfunded loan commitments are accounted for as separate liabilities included in accrued expenses and other liabilities on the consolidated balance sheets. The allowance for credit losses for loans held for investment, as reported in our consolidated balance sheets, is adjusted by a credit loss (expense) benefit , which is reported in earnings in the consolidated statements of income and comprehensive income and reduced by the write-off of loan amounts, net of recoveries and additions related to purchased credit-deteriorated (“PCD”) assets, if relevant. The allowance for credit losses includes a modeled component and an individually-assessed component. We have elected to not measure an allowance for credit losses on accrued interest receivables related to all of our loans held for investment because we write off uncollectible accrued interest receivable in a timely manner pursuant to our non-accrual policy.
We consider key credit quality indicators in underwriting loans and estimating credit losses, including but not limited to: the capitalization of borrowers and sponsors; the expertise of the borrowers and sponsors in a particular real estate sector and geographic market; collateral type; geographic region; use and occupancy of the property; property market value; loan-to-value (“LTV”) ratio; loan amount and lien position; debt service and coverage ratio; our risk rating for the same and similar loans; and prior experience with the borrower and sponsor. This information is used to assess the financial and operating capability, experience and profitability of the sponsor/borrower. Ultimate repayment of our loans is sensitive to interest rate changes, general economic conditions, liquidity, LTV ratio, existence of a liquid investment sales market for commercial properties, and availability of replacement short-term or long-term financing. The loans in our commercial mortgage loan portfolio are secured by collateral of the following property types: office; life science; multifamily; hotel; industrial; mixed-use; land for industrial and office use; and self storage.
Our loans are typically collateralized by real estate, or in the case of mezzanine loans, by a partnership interest or similar equity interest in the entity that owns the real estate securing our first mortgage loan. We regularly evaluate on a loan-by-loan basis, typically no less frequently than quarterly, the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property, and the financial and operating capability of the borrower/sponsor. We also evaluate the financial strength of loan guarantors, if any, and the borrower’s competency in managing and operating the property or properties. In addition, we consider the overall economic environment, real estate sector, and geographic sub-market in which the borrower operates. Such analyses are completed and reviewed by asset management personnel and evaluated by senior management, who utilize various data sources, including, to the extent available (i) periodic financial data such as property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections, (iii) sales and financing comparables, (iv) current credit spreads for refinancing and (v) other market data.
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Table of Contents
Quarterly, we evaluate the risk of all loans and assign a risk rating based on a variety of factors, grouped as follows: (i) loan and credit structure, including the as-is LTV and structural features; (ii) quality and stability of real estate value and operating cash flow, including debt yield, property type, dynamics of the geography, property type and local market, physical condition, stability of cash flow, leasing velocity and quality and diversity of tenancy; (iii) performance against underwritten business plan; and (iv) quality, experience and financial condition of sponsor, borrower and guarantor(s). Based on a 5-point scale, our loans are rated “1” through “5,” from least risk to greatest risk, respectively:
1 -Very Low Risk
2 -Low Risk
3 -Medium Risk
4 -High Risk/Potential for Loss—A loan that has a risk of realizing a principal loss; and
5 -Default/Loss Likely—A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss.
We generally assign a risk rating of “3” to all loans originated or acquired during the most recent quarter, except when specific circumstances warrant an exception. During the three months ended March 31, 2023, the Company simplified its risk rating definitions. The Company re-evaluated its risk ratings based on the simplified definitions and concluded that there was no impact to prior period risk ratings.
Our CECL reserve also reflects estimates of the current and future economic conditions that impact the performance of the commercial real estate assets securing the loans. These estimates include unemployment rates, inflation rates, interest rates, price indices for commercial property, current and expected future availability of liquidity in the commercial property debt and equity capital markets, and other macroeconomic factors that may influence the likelihood and magnitude of potential credit losses for our loans during their anticipated term. We license certain macroeconomic financial forecasts to inform our view of the potential future impact that broader economic conditions may have on our loan portfolio’s performance. Selection of the economic forecast or forecasts used, in conjunction with loan level inputs, to determine the CECL reserve requires significant judgment about future events that, while based on the information available to us as of the balance sheet date, are ultimately unknowable with certainty. The actual economic conditions impacting our loan portfolio could vary significantly from the estimates made for the periods presented.
The commercial property investment sales and commercial mortgage loan markets have experienced uneven liquidity due to global macroeconomic conditions, including heightened inflation, changes to fiscal and monetary policy, increased interest rates, currency fluctuations, labor shortages and recent distress in the banking sector, which continue to make it more difficult to estimate key inputs for estimating the allowance for credit losses. The amount of allowance for credit losses is influenced by the size of our loan portfolio, loan asset quality, risk rating, delinquency status, historic loss experience and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. We employ two methods to estimate credit losses in our loan portfolio: (1) a model-based approach and (2) an individually-assessed approach for loans considered to be "collateral-dependent" as the repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral and the borrower is experiencing financial difficulty or foreclosure is probable. Estimates made by us are necessarily subject to change due to the limited number of observable inputs and uncertainty regarding the global macroeconomic conditions described above. See Note 2 to the Consolidated Financial Statements in this Form 10-Q for further discussion of our critical accounting policies, seemethodologies.
Significant judgment is required when estimating future credit losses and as a result actual losses over time could be materially different. During the three and nine months ended September 30, 2023, we recognized a decrease and an increase of $41.7 million and $22.0 million, respectively, to our allowance for credit losses. The credit loss allowance was $236.6 million as of September 30, 2023.
See Note 2 to our Consolidated Financial Statements included in this Form 10-Q.

10-Q for a listing and description of our significant accounting policies.

Recent Accounting Pronouncements

For a discussion of recently issued accounting pronouncements, see Note 2 to our Consolidated Financial Statements included in this Form 10-Q.

Subsequent Events

The following

For a discussion of subsequent events, occurred subsequentsee Note 16 to quarter end:

Cash Dividend

On October 25, 2017, the Company paid a cash dividend on its common stock, to stockholdersour Consolidated Financial Statements included in this Form 10-Q.

75
Table of record as of October 6, 2017, of $0.33 per share, or $20.1 million.

10b5-1 Purchase Plan

From September 30, 2017 through November 3, 2017, the Company has repurchased 0.2 million shares of common stock under the Company’s 10b5-1 Purchase Plan, at an average price of $19.60, for total consideration (including commissions and related fees) of $3.4 million.

Senior Mortgage Loan Originations

From September 30, 2017 through November 6, 2017, we originated three first mortgage loans, representing loans closed and in the process of closing, totaling $294 million. These loans were funded, or will be funded upon closing, with a combination of cash-on-hand and borrowings.

Contents

Loan Portfolio Details

The following table provides details with respect to our loans held for investment portfolio excluding our investments in CMBS, on a loan-by-loan basis as of September 30, 20172023 (dollars in millions, except loan per square foot/unit):

Loan #Form of
investment
Origination or
acquisition date(2)
Total
loan		Principal
balance
Amortized
cost(3)
Interest rate
All-in
yield(4)
Fixed /
floating
Extended
maturity(5)
City / stateProperty
type		Loan
type		Loan per
SQFT / unit
LTV(6)
Risk
rating(7)
First mortgage loans(1)
1Senior Loan7/28/2022$245.0 $245.0 $245.0 S + 3.4%S + 3.7%Floating8/9/2027San Jose, CAMultifamilyBridge$444,646 Unit75.9 %3
2
Senior Loan(9)
8/21/2019227.1 227.1 227.1 S + 3.0%S + 3.2%Floating9/9/2026New York, NYOfficeLight Transitional$447 Sq ft65.2 %3
3Senior Loan5/5/2021215.0 197.7 197.4 S + 4.0%S + 4.2%Floating5/9/2026Daly City, CALife ScienceModerate Transitional$545 Sq ft63.1 %3
4
Senior Loan(10)
9/18/2019170.0 170.0 170.0 S + 4.1%S + 4.4%Floating12/9/2024New York, NYOfficeModerate Transitional$764 Sq ft65.2 %3
5Senior Loan7/20/2021143.1 143.1 143.1 S + 3.5%S + 3.9%Floating8/9/2026Various, NJMultifamilyBridge$115,178 Unit71.3 %3
6
Senior Loan(11)
10/29/2020128.0 127.3 118.4 S + 3.6%S + 3.5%Floating11/15/2023San Francisco, CAMultifamilyBridge$388,528 Unit67.1 %5
7Senior Loan5/7/2021122.5 120.8 120.8 S + 3.0%S + 3.2%Floating5/9/2026Towson, MDMultifamilyBridge$147,947 Unit70.2 %3
8Senior Loan6/14/2021114.0 86.0 86.0 S + 3.2%S + 3.5%Floating7/9/2026Hayward, CALife ScienceModerate Transitional$308 Sq ft49.7 %3
9Senior Loan12/18/2019101.0 86.7 86.7 S + 2.7%S + 3.0%Floating1/9/2025Arlington, VAOfficeLight Transitional$320 Sq ft71.1 %5
10Senior Loan12/20/2018100.9 97.2 97.2 S + 4.1%S + 4.4%Floating1/9/2025Torrance, CAMixed-UseModerate Transitional$240 Sq ft61.1 %4
11Senior Loan12/9/202196.0 93.0 92.6 S + 3.9%S + 4.2%Floating12/9/2026Los Angeles, CAMultifamilyLight Transitional$211,921 Unit78.1 %3
12Senior Loan11/21/202287.0 64.4 63.8 S + 5.3%S + 5.6%Floating12/9/2027Dallas, TXOfficeModerate Transitional$100 Sq ft60.8 %3
13Senior Loan2/2/202386.8 79.1 78.4 S + 5.1%S + 5.4%Floating3/9/2028Miami, FLHotelBridge$170,866 Unit58.4 %3
14Senior Loan11/30/202180.0 80.0 79.7 S + 3.6%S + 3.9%Floating12/9/2026Arlington Heights, ILMultifamilyBridge$304,183 Unit70.9 %4
15Senior Loan8/8/201976.5 60.3 60.3 S + 3.1%S + 3.3%Floating8/9/2024Orange, CAOfficeModerate Transitional$217 Sq ft64.2 %5
16Senior Loan12/10/201975.8 61.9 61.9 S + 2.6%S + 2.9%Floating12/9/2024San Mateo, CAOfficeModerate Transitional$378 Sq ft65.8 %5
17Senior Loan10/12/202174.0 70.0 70.0 S + 5.4%S + 5.7%Floating10/9/2026Los Angeles, CAHotelBridge$250,847 Unit60.9 %3
18Senior Loan7/28/202272.0 71.3 71.3 S + 4.0%S + 4.3%Floating8/9/2027Yonkers, NYMultifamilyBridge$400,000 Unit64.8 %3
19Senior Loan2/9/202270.0 66.0 66.0 S + 3.3%S + 3.6%Floating2/9/2027Various, VariousIndustrialBridge$187 Sq ft72.1 %3
20
Senior Loan(12)
8/31/202170.0 70.0 67.6 S + 3.6%S + 3.2%Floating9/9/2026Cedar Creek, TXHotelBridge$345,825 Unit61.2 %3
21Senior Loan9/30/202169.0 64.6 64.6 S + 3.8%S + 4.1%Floating10/9/2026Tampa, FLMultifamilyModerate Transitional$221,154 Unit64.2 %3
22Senior Loan7/26/202269.0 67.0 66.8 S + 4.2%S + 4.5%Floating8/9/2027Various, VariousSelf StorageLight Transitional$173 Sq ft66.2 %3
23Senior Loan11/30/202165.6 56.2 56.0 S + 3.5%S + 3.8%Floating12/9/2026St. Louis, MOMultifamilyModerate Transitional$158,838 Unit69.3 %3
24Senior Loan6/28/201963.9 60.3 60.3 S + 2.6%S + 2.8%Floating7/9/2024Burlingame, CAOfficeLight Transitional$352 Sq ft70.9 %3
25Senior Loan4/20/202263.0 63.0 62.7 S + 3.7%S + 4.0%Floating5/9/2027Buffalo, NYMultifamilyBridge$167,553 Unit67.1 %3
26Senior Loan4/11/202262.4 60.1 60.1 S + 3.4%S + 3.7%Floating5/9/2027San Antonio, TXMultifamilyBridge$104,017 Unit81.2 %3
27Senior Loan6/25/201962.0 62.0 62.0 S + 3.2%S + 3.4%Floating7/9/2024Calistoga, CAHotelModerate Transitional$696,629 Unit48.6 %2
28
Senior Loan(13)
6/9/202161.5 61.5 60.8 S + 2.9%S + 1.9%Floating5/9/2026Raleigh, NCMultifamilyBridge$188,650 Unit66.2 %3
29Senior Loan12/29/202160.6 56.0 55.7 S + 3.4%S + 3.7%Floating1/9/2027Rogers, ARMultifamilyBridge$153,125 Unit75.9 %3
30Senior Loan3/3/202258.0 58.0 58.0 S + 3.4%S + 3.7%Floating3/9/2027Hampton, VAMultifamilyBridge$202,091 Unit72.4 %3
31Senior Loan3/12/202055.0 51.8 51.8 S + 3.8%S + 3.9%Floating12/9/2023Round Rock, TXMultifamilyLight Transitional$133,820 Unit75.4 %3
32Senior Loan1/22/201954.0 52.6 52.6 S + 4.5%S + 4.9%Floating10/16/2023Manhattan, NYOfficeLight Transitional$445 Sq ft61.1 %5
33Senior Loan12/17/202152.1 48.8 48.8 S + 3.8%S + 4.1%Floating1/9/2027Newport News, VAMultifamilyLight Transitional$135,677 Unit67.3 %3
34Senior Loan10/27/202151.9 43.7 43.5 S + 3.5%S + 3.8%Floating11/9/2026Longmont, COOfficeModerate Transitional$150 Sq ft70.6 %3
35Senior Loan6/24/202251.6 49.8 49.8 S + 3.8%S + 4.1%Floating7/9/2027San Antonio, TXMultifamilyBridge$159,259 Unit70.2 %3
36Senior Loan12/20/201751.0 51.0 51.0 S + 4.9%S + 5.3%Floating3/9/2025New Orleans, LAHotelBridge$217,949 Unit59.9 %3
37Senior Loan8/26/202151.0 43.8 43.6 S + 4.2%S + 4.5%Floating9/9/2026San Diego, CALife ScienceModerate Transitional$599 Sq ft72.1 %3
38Senior Loan5/26/202250.6 34.3 34.1 S + 8.5%S + 9.5%Floating6/9/2024Durham, NCOtherConstruction$34 Sq ft37.0 %3
39Senior Loan3/12/202050.2 48.2 48.2 S + 3.8%S + 3.9%Floating12/9/2023Round Rock, TXMultifamilyLight Transitional$137,049 Unit75.6 %3
40Senior Loan6/2/202148.6 48.2 48.1 S + 3.9%S + 4.2%Floating6/9/2026Fort Lauderdale, FLOfficeLight Transitional$187 Sq ft71.0 %3
41Senior Loan8/10/202246.2 36.5 36.2 S + 3.9%S + 4.4%Floating9/9/2027Plano, TXMultifamilyModerate Transitional$173,534 Unit66.3 %3
42Senior Loan9/30/202145.9 45.9 45.7 S + 3.4%S + 3.7%Floating10/9/2026San Antonio, TXMultifamilyBridge$136,488 Unit64.1 %2
76
Table of Contents
Loan #Form of
investment
Origination or
acquisition date(2)
Total
loan		Principal
balance
Amortized
cost(3)
Interest rate
All-in
yield(4)
Fixed /
floating
Extended
maturity(5)
City / stateProperty
type		Loan
type		Loan per
SQFT / unit
LTV(6)
Risk
rating(7)
43Senior Loan3/17/202145.4 45.2 45.1 S + 3.4%S + 3.7%Floating4/9/2026Indianapolis, INMultifamilyLight Transitional$62,294 Unit63.7 %3
44Senior Loan12/21/202145.0 44.9 44.9 S + 3.8%S + 4.1%Floating1/9/2027Knoxville, TNMultifamilyBridge$119,681 Unit84.9 %3
45Senior Loan8/7/201844.5 35.0 35.0 S + 3.5%S + 3.7%Floating8/9/2024Atlanta, GAOfficeLight Transitional$63 Sq ft61.4 %3
46Senior Loan7/28/202343.6 37.2 36.8 S + 4.6%S + 5.1%Floating8/9/2028Various, AZHotelBridge$150,345 Unit63.3 %3
47Senior Loan1/14/202243.0 43.0 43.0 S + 3.7%S + 4.0%Floating2/9/2027Columbia, SCMultifamilyBridge$162,879 Unit79.8 %3
48Senior Loan3/30/201842.4 40.4 40.4 S + 3.8%S + 4.0%Floating11/22/2024Honolulu, HIOfficeLight Transitional$147 Sq ft57.9 %4
49Senior Loan3/7/201939.2 40.4 40.4 S + 4.0%S + 4.4%Floating3/9/2024Lexington, KYHotelModerate Transitional$107,221 Unit61.6 %4
50Senior Loan7/15/202139.0 39.0 38.9 S + 3.6%S + 3.9%Floating8/9/2026Chicago, ILMultifamilyBridge$261,745 Unit78.8 %3
51Senior Loan3/11/201937.0 37.0 37.0 S + 4.0%S + 4.2%Floating4/9/2024Miami Beach, FLHotelBridge$280,303 Unit59.3 %2
52Senior Loan3/24/202337.0 33.0 32.7 S + 3.5%S + 3.9%Floating4/9/2028Dallas, TXIndustrialLight Transitional$83 Sq ft61.2 %3
53Senior Loan6/3/202136.4 33.9 33.8 S + 3.7%S + 4.0%Floating6/9/2026Riverside, CAMixed-UseBridge$103 Sq ft62.2 %2
54Senior Loan8/11/202134.5 32.3 32.2 S + 3.7%S + 3.9%Floating9/9/2026Mesa, AZMultifamilyBridge$171,642 Unit78.5 %3
55Senior Loan6/9/202231.2 27.8 27.6 S + 3.6%S + 3.9%Floating6/9/2027Centerton, ARMultifamilyLight Transitional$156,859 Unit73.8 %3
56Senior Loan8/23/202231.0 28.8 28.6 S + 4.0%S + 4.7%Floating9/9/2027Marietta, GAMultifamilyLight Transitional$127,049 Unit68.5 %3
57Senior Loan5/14/202127.6 27.1 27.1 S + 3.3%S + 3.6%Floating6/9/2026Pensacola, FLMultifamilyModerate Transitional$137,752 Unit72.8 %3
58Senior Loan10/27/202124.6 22.7 22.7 S + 5.6%S + 5.9%Floating11/9/2026San Diego, CALife ScienceModerate Transitional$814 Sq ft75.8 %3
59Senior Loan6/29/202224.5 22.0 22.0 S + 3.9%S + 4.2%Floating7/9/2027San Antonio, TXMultifamilyLight Transitional$107,456 Unit75.5 %3
Total / weighted average(8)
$4,223.7 $3,970.2 $3,952.1 S +3.7%S +4.0%2.6 years67.2 %3.2

Loan #

 

 

Form of

Investment

 

Origination

/ Acquisition

Date(2)

 

Total

Loan

 

 

Principal

Balance

 

 

Carrying

Value(3)

 

 

Credit

Spread(4)

 

 

 

All-in

Yield(5)

 

 

Fixed /

Floating

 

Extended

Maturity(6)

 

City, State

 

Property

Type

 

Loan

Type

 

Loan Per

SQFT / Unit

 

LTV(7)

 

 

 

Risk

Rating(8)

 

First Mortgage

   Loans(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

Senior Loan

 

04/28/17

 

$

188.0

 

 

$

142.0

 

 

$

140.5

 

 

L +4.1%

 

 

 

L +4.4%

 

 

Floating

 

10/9/21

 

Nashville, TN

 

Mixed Use

 

Bridge

 

$292 Sq ft

 

 

60.7

%

(10)

 

 

3

 

 

2

 

 

Senior Loan

 

09/29/17

 

 

173.3

 

 

 

143.8

 

 

 

142.0

 

 

L +4.3%

 

 

 

L +4.6%

 

 

Floating

 

10/9/22

 

Philadelphia, PA

 

Office

 

Moderate Transitional

 

$213 Sq ft

 

 

72.2

%

 

 

 

3

 

 

3

 

 

Senior Loan

 

12/16/16

 

 

164.0

 

 

 

122.5

 

 

 

121.3

 

 

L +4.5%

 

 

 

L +4.7%

 

 

Floating

 

1/9/22

 

Atlanta, GA

 

Retail

 

Bridge

 

$461 Sq ft

 

 

47.7

%

 

 

 

3

 

 

4

 

 

Senior Loan

 

08/23/16

 

 

132.0

 

 

 

51.7

 

 

 

50.9

 

 

L +7.5%

 

 

 

L +7.9%

 

 

Floating

 

8/23/21

 

Fort Lauderdale, FL

 

Condominium

 

Construction

 

$280 Sq ft

 

 

19.8

%

 

 

 

2

 

 

5

 

 

Senior Loan

 

08/10/17

 

 

125.9

 

 

 

101.4

 

 

 

100.4

 

 

L +4.8%

 

 

 

L +5.0%

 

 

Floating

 

9/9/22

 

Cliffside, NJ

 

Multifamily

 

Bridge

 

$400,828 Unit

 

 

56.8

%

 

 

 

3

 

 

6

 

 

Senior Loan

 

08/22/17

 

 

121.6

 

 

 

96.9

 

 

 

96.2

 

 

L +4.4%

 

 

 

L +4.7%

 

 

Floating

 

7/26/22

 

Houston, TX

 

Multifamily

 

Bridge

 

$425,245 Unit

 

 

62.5

%

 

 

 

3

 

 

7

 

 

Senior Loan

 

09/25/15

 

 

108.0

 

 

 

76.3

 

 

 

75.7

 

 

L +7.0%

 

 

 

L +7.3%

 

 

Floating

 

9/25/19

 

Miami, FL

 

Condominium

 

Construction

 

$253 Sq ft

 

 

84.7

%

 

 

 

2

 

 

8

 

 

Senior Loan

 

07/21/17

 

 

106.6

 

 

 

90.0

 

 

 

89.0

 

 

L +4.5%

 

 

 

L +4.8%

 

 

Floating

 

8/9/24

 

Pittsburgh, PA

 

Multifamily

 

Bridge

 

$296,042 Unit

 

 

59.4

%

 

 

 

3

 

 

9

 

 

Senior Loan

 

08/31/15

 

 

98.0

 

 

 

72.5

 

 

 

72.3

 

 

L +6.0%

 

 

 

L +6.2%

 

 

Floating

 

8/31/19

 

Dallas, TX

 

Condominium

 

Construction

 

$301 Sq ft

 

 

5.4

%

 

 

 

2

 

 

10

 

 

Senior Loan

 

10/16/15

 

 

96.4

 

 

 

89.0

 

 

 

88.7

 

 

L +4.8%

 

 

 

L +5.0%

 

 

Floating

 

10/16/20

 

San Diego, CA

 

Office

 

Moderate Transitional

 

$310 Sq ft

 

 

73.1

%

 

 

 

3

 

 

11

 

 

Senior Loan

 

07/24/17

 

 

93.5

 

 

 

85.2

 

 

 

84.4

 

 

L +3.3%

 

 

 

L +3.5%

 

 

Floating

 

8/9/22

 

Phoenix, AZ

 

Mixed Use

 

Bridge

 

$148 Sq ft

 

 

64.0

%

 

 

 

2

 

 

12

 

 

Senior Loan

 

02/13/17

 

 

90.5

 

 

 

66.5

 

 

 

65.8

 

 

L +4.8%

 

 

 

L +5.0%

 

 

Floating

 

2/13/22

 

Torrance, CA

 

Office

 

Moderate Transitional

 

$254 Sq ft

 

 

64.4

%

 

 

 

3

 

 

13

 

 

Senior Loan

 

10/14/15

 

 

90.0

 

 

 

85.7

 

 

 

85.4

 

 

L +3.9%

 

 

 

L +4.2%

 

 

Floating

 

10/14/20

 

Brooklyn, NY

 

Mixed Use

 

Light Transitional

 

$359 Sq ft

 

 

58.2

%

 

 

 

2

 

 

14

 

 

Senior Loan

 

09/29/17

 

 

89.5

 

 

 

67.0

 

 

 

66.1

 

 

L +3.9%

 

 

 

L +4.2%

 

 

Floating

 

10/9/22

 

Dallas, TX

 

Office

 

Light Transitional

 

$106 Sq ft

 

 

50.7

%

 

 

 

2

 

 

15

 

 

Senior Loan

 

06/13/17

 

 

84.4

 

 

 

81.1

 

 

 

80.6

 

 

L +3.8%

 

 

 

L +4.0%

 

 

Floating

 

7/9/22

 

Jersey City, NJ

 

Multifamily

 

Bridge

 

$148,330 Unit

 

 

81.0

%

 

 

 

3

 

 

16

 

 

Senior Loan

 

03/16/16

 

 

84.2

 

 

 

59.3

 

 

 

58.9

 

 

L +4.8%

 

 

 

L +5.0%

 

 

Floating

 

3/16/21

 

Herndon, VA

 

Office

 

Light Transitional

 

$138 Sq ft

 

 

61.1

%

 

 

 

3

 

 

17

 

 

Senior Loan

 

02/01/17

 

 

82.3

 

 

 

72.3

 

 

 

71.6

 

 

L +4.7%

 

 

 

L +5.0%

 

 

Floating

 

2/9/22

 

St. Pete Beach, FL

 

Hotel

 

Light Transitional

 

$215,314 Unit

 

 

60.7

%

 

 

 

3

 

 

18

 

 

Senior Loan

 

06/29/15

 

 

76.4

 

 

 

44.0

 

 

 

43.8

 

 

L +6.8%

 

 

 

L +7.3%

 

 

Floating

 

6/29/19

 

Miami, FL

 

Condominium

 

Construction

 

$257 Sq ft

 

 

34.7

%

 

 

 

2

 

 

19

 

 

Senior Loan

 

05/22/15

 

 

75.0

 

 

 

43.7

 

 

 

43.6

 

 

L +8.5%

 

 

 

L +8.8%

 

 

Floating

 

5/22/19

 

Aspen, CO

 

Condominium

 

Construction

 

$1,090 Sq ft

 

 

8.1

%

 

 

 

2

 

 

20

 

 

Senior Loan

 

02/19/15

 

 

74.2

 

 

 

75.6

 

 

 

75.5

 

 

L +7.5%

 

 

 

L +7.8%

 

 

Floating

 

12/23/18

 

Brooklyn, NY

 

Hotel

 

Construction

 

$297,992 Unit

 

 

68.2

%

 

 

 

3

 

 

21

 

 

Senior Loan

 

05/25/16

 

 

67.0

 

 

 

67.0

 

 

 

66.3

 

 

L +3.7%

 

 

 

L +4.4%

 

 

Floating

 

9/9/20

 

Manhattan, NY

 

Hotel

 

Bridge

 

$167,920 Unit

 

 

55.8

%

 

 

 

3

 

 

22

 

 

Senior Loan

 

05/25/16

 

 

65.0

 

 

 

65.0

 

 

 

63.8

 

 

L +2.3%

 

 

 

L +3.7%

 

 

Floating

 

8/9/19

 

Sacramento, CA

 

Office

 

Bridge

 

$170 Sq ft

 

 

55.7

%

 

 

 

2

 

 

23

 

 

Senior Loan

 

09/20/17

 

 

64.9

 

 

 

52.8

 

 

 

52.2

 

 

L +4.3%

 

 

 

L +4.6%

 

 

Floating

 

10/9/22

 

Glenview, IL

 

Multifamily

 

Light Transitional

 

$153,428 Unit

 

 

70.5

%

 

 

 

3

 

 

24

 

 

Senior Loan

 

03/01/16

 

 

64.2

 

 

 

49.4

 

 

 

49.1

 

 

L +4.9%

 

 

 

L +5.1%

 

 

Floating

 

3/1/21

 

Long Island City, NY

 

Office

 

Moderate Transitional

 

$289 Sq ft

 

 

54.1

%

 

 

 

2

 

 

25

 

 

Senior Loan

 

03/01/16

 

 

61.2

 

 

 

41.4

 

 

 

41.2

 

 

L +5.1%

 

 

 

L +5.3%

 

 

Floating

 

3/1/21

 

Long Island City, NY

 

Office

 

Moderate Transitional

 

$474 Sq ft

 

 

67.9

%

 

 

 

3

 

 

26

 

 

Senior Loan

 

02/19/15

 

 

60.8

 

 

 

60.8

 

 

 

60.7

 

 

L +5.9%

 

 

 

L +6.1%

 

 

Floating

 

6/9/20

 

Pacific Palisades, CA

 

Condominium

 

Construction

 

$456 Sq ft

 

 

60.5

%

 

 

 

3

 

 

27

 

 

Senior Loan

 

06/14/17

 

 

60.0

 

 

 

60.0

 

 

 

59.5

 

 

L +3.9%

 

 

 

L +4.3%

 

 

Floating

 

7/9/20

 

Newark, NJ

 

Mixed Use

 

Bridge

 

$255 Sq ft

 

 

62.2

%

 

 

 

2

 

 

28

 

 

Senior Loan

 

04/20/16

 

 

54.5

 

 

 

52.4

 

 

 

52.2

 

 

L +2.8%

 

 

 

L +3.0%

 

 

Floating

 

4/20/21

 

Minneapolis, MN

 

Multifamily

 

Bridge

 

$153,881 Unit

 

 

42.6

%

 

 

 

2

 

 

29

 

 

Senior Loan

 

12/29/14

 

 

49.6

 

 

 

47.4

 

 

 

47.4

 

 

L +5.3%

 

 

 

L +4.0%

 

 

Floating

 

3/14/19

 

Manhattan, NY

 

Condominium

 

Construction

 

$1,305 Sq ft

 

 

19.9

%

 

 

 

3

 

 

30

 

 

Senior Loan

 

05/11/15

 

 

49.1

 

 

 

46.7

 

 

 

46.7

 

 

L +5.3%

 

 

 

L +5.4%

 

 

Floating

 

12/3/20

 

San Francisco, CA

 

Hotel

 

Light Transitional

 

$192,112 Unit

 

 

76.8

%

 

 

 

3

 

 

31

 

 

Senior Loan

 

05/25/16

 

 

49.0

 

 

 

49.0

 

 

 

48.8

 

 

L +2.8%

 

 

 

L +3.4%

 

 

Floating

 

2/9/20

 

Various, Multiple

 

Hotel

 

Light Transitional

 

$64,644 Unit

 

 

61.4

%

 

 

 

2

 

 

32

 

 

Senior Loan

 

09/13/16

 

 

48.5

 

 

 

46.0

 

 

 

45.7

 

 

L +4.3%

 

 

 

L +4.5%

 

 

Floating

 

9/13/21

 

Calistoga, CA

 

Hotel

 

Bridge

 

$544,944 Unit

 

 

51.4

%

 

 

 

2

 

 

33

 

 

Senior Loan

 

08/20/15

 

 

45.9

 

 

 

45.9

 

 

 

45.5

 

 

L +4.7%

 

 

 

L +4.9%

 

 

Floating

 

8/20/20

 

Manhattan, NY

 

Condominium

 

Bridge

 

$546 Sq ft

 

 

70.1

%

 

 

 

2

 

 

34

 

 

Senior Loan

 

01/22/16

 

 

45.0

 

 

 

39.0

 

 

 

38.8

 

 

L +4.3%

 

 

 

L +4.5%

 

 

Floating

 

1/22/21

 

New York, NY

 

Office

 

Light Transitional

 

$334 Sq ft

 

 

71.0

%

 

 

 

3

 

 

35

 

 

Senior Loan

 

03/21/17

 

 

45.0

 

 

 

45.0

 

 

 

44.6

 

 

L +5.3%

 

 

 

L +5.5%

 

 

Floating

 

4/9/22

 

Chicago, IL

 

Hotel

 

Bridge

 

$172,414 Unit

 

 

60.2

%

 

 

 

3

 

 

36

 

 

Senior Loan

 

04/09/16

 

 

39.2

 

 

 

39.2

 

 

 

39.2

 

 

L +5.4%

 

 

 

L +6.3%

 

 

Floating

 

3/9/19

 

Norfolk, VA

 

Multifamily

 

Bridge

 

$174,222 Unit

 

 

86.1

%

 

 

 

2

 

 

37

 

 

Senior Loan

 

12/29/14

 

 

37.3

 

 

 

37.3

 

 

 

37.3

 

 

L +6.3%

 

 

 

L +6.1%

 

 

Floating

 

12/6/17

 

Chicago, IL

 

Hotel

 

Bridge

 

$141,265 Unit

 

 

68.4

%

(11)

 

 

3

 

 

38

 

 

Senior Loan

 

09/01/15

 

 

37.0

 

 

 

37.0

 

 

 

36.9

 

 

L +4.6%

 

 

 

L +4.9%

 

 

Floating

 

9/1/20

 

Santa Barbara, CA

 

Hotel

 

Bridge

 

$234,177 Unit

 

 

67.3

%

 

 

 

3

 

 

39

 

 

Senior Loan

 

02/18/16

 

 

36.5

 

 

 

36.5

 

 

 

36.3

 

 

L +4.0%

 

 

 

L +4.3%

 

 

Floating

 

2/18/21

 

Long Island City, NY

 

Industrial

 

Bridge

 

$133 Sq ft

 

 

75.6

%

 

 

 

2

 

 

40

 

 

Senior Loan

 

12/29/14

 

 

32.9

 

 

 

32.9

 

 

 

33.0

 

 

6.1%

 

 

 

5.1%

 

 

Fixed

 

1/11/18

 

Charlotte, NC

 

Hotel

 

Bridge

 

$231,339 Unit

 

 

78.8

%

 

 

 

2

 

*    Numbers presented may not foot due to rounding.

(1)First mortgage loans are whole mortgage loans unless otherwise noted.

Loan #

 

 

Form of

Investment

 

Origination

/ Acquisition

Date(2)

 

Total

Loan

 

 

Principal

Balance

 

 

Carrying

Value(3)

 

 

Credit

Spread(4)

 

 

 

All-in

Yield(5)

 

 

Fixed /

Floating

 

Extended

Maturity(6)

 

City, State

 

Property

Type

 

Loan

Type

 

Loan Per

SQFT / Unit

 

LTV(7)

 

 

 

Risk

Rating(8)

 

 

41

 

 

Senior Loan

 

10/11/16

 

 

32.0

 

 

 

32.0

 

 

 

31.8

 

 

L +5.9%

 

 

 

L +6.3%

 

 

Floating

 

10/11/21

 

Chicago, IL

 

Hotel

 

Bridge

 

$147,465 Unit

 

 

59.8

%

 

 

 

3

 

 

42

 

 

Senior Loan

 

10/06/16

 

 

30.0

 

 

 

30.0

 

 

 

29.8

 

 

L +5.0%

 

 

 

L +5.3%

 

 

Floating

 

10/6/21

 

Los Angeles, CA

 

Industrial

 

Bridge

 

$113 Sq ft

 

 

73.3

%

 

 

 

2

 

 

43

 

 

Senior Loan

 

06/08/16

 

 

28.4

 

 

 

21.4

 

 

 

21.3

 

 

L +4.6%

 

 

 

L +4.9%

 

 

Floating

 

6/8/21

 

Woodland Hills, CA

 

Retail

 

Moderate Transitional

 

$401 Sq ft

 

 

61.7

%

 

 

 

3

 

 

44

 

 

Senior Loan

 

11/16/16

 

 

21.3

 

 

 

20.3

 

 

 

20.3

 

 

L +4.8%

 

 

 

L +5.2%

 

 

Floating

 

11/9/19

 

Manhattan, NY

 

Condominium

 

Moderate Transitional

 

$946 Sq ft

 

 

49.8

%

 

 

 

4

 

 

45

 

 

Senior Loan

 

12/29/14

 

 

19.8

 

 

 

8.7

 

 

 

8.7

 

 

L +5.8%

 

 

 

L +6.1%

 

 

Floating

 

11/8/19

 

Various, Multiple

 

Industrial

 

Light Transitional

 

$8 Sq ft

 

 

53.6

%

 

 

 

2

 

 

46

 

 

Senior Loan

 

11/16/16

 

 

16.0

 

 

 

15.8

 

 

 

15.8

 

 

L +4.8%

 

 

 

L +5.2%

 

 

Floating

 

11/9/19

 

Manhattan, NY

 

Condominium

 

Moderate Transitional

 

$1,035 Sq ft

 

 

43.3

%

 

 

 

4

 

 

47

 

 

Senior Loan

 

11/16/16

 

 

11.0

 

 

 

11.0

 

 

 

11.0

 

 

L +4.8%

 

 

 

L +5.2%

 

 

Floating

 

11/9/19

 

Manhattan, NY

 

Condominium

 

Moderate Transitional

 

$1,029 Sq ft

 

 

46.6

%

 

 

 

4

 

 

48

 

 

Senior Loan

 

11/16/16

 

 

9.6

 

 

 

9.2

 

 

 

9.2

 

 

L +4.8%

 

 

 

L +5.2%

 

 

Floating

 

11/9/19

 

Manhattan, NY

 

Condominium

 

Moderate Transitional

 

$946 Sq ft

 

 

40.7

%

(11)

 

 

4

 

 

49

 

 

Senior Loan

 

12/29/14

 

 

7.7

 

 

 

7.8

 

 

 

7.4

 

 

L +4.3%

 

 

 

L +10.9%

 

 

Floating

 

5/1/18

 

Raleigh, NC

 

Land

 

Bridge

 

$6 Sq ft

 

 

56.3

%

 

 

 

3

 

 

50

 

 

Senior Loan

 

12/29/14

 

 

2.6

 

 

 

2.7

 

 

 

2.4

 

 

5.6%

 

 

 

7.9%

 

 

Fixed

 

9/10/20

 

Shelby Township, MI

 

Retail

 

Bridge

 

$25 Sq ft

 

 

84.2

%

(11)

 

 

3

 

 

51

 

 

Senior Loan

 

12/29/14

 

 

2.4

 

 

 

2.5

 

 

 

2.3

 

 

L +4.3%

 

 

 

L +7.8%

 

 

Floating

 

5/1/18

 

Cary, NC

 

Land

 

Bridge

 

$1 Sq ft

 

 

53.3

%

 

 

 

3

 

Subtotal / Weighted

   Average

 

 

 

 

 

 

 

3,347.2

 

 

 

2,778.6

 

 

 

2,757.9

 

 

 

4.7

%

(9)

 

 

6.3

%

 

 

 

3.5 yrs

 

 

 

 

 

 

 

 

 

 

59.0

%

 

 

 

2.6

 

Mezzanine Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52

 

 

Mezzanine Loan

 

4/20/16

 

 

23.3

 

 

 

22.4

 

 

 

22.4

 

 

L +7.8%

 

 

 

L +8.0%

 

 

Floating

 

4/20/21

 

Minneapolis, MN

 

Multifamily

 

Bridge

 

$219,830 Unit

 

 

60.8

%

 

 

 

2

 

 

53

 

 

Mezzanine Loan

 

7/20/15

 

 

19.0

 

 

 

19.0

 

 

 

19.0

 

 

L +8.5%

 

 

 

L +8.7%

 

 

Floating

 

7/20/20

 

Manhattan, NY

 

Multifamily

 

Bridge

 

$777,778 Unit

 

 

87.9

%

 

 

 

3

 

 

54

 

 

Mezzanine Loan

 

2/2/17

 

 

17.6

 

 

 

17.4

 

 

 

17.3

 

 

L +13.4%

 

 

 

L +13.6%

 

 

Floating

 

2/9/19

 

Orlando, FL

 

Multifamily

 

Bridge

 

$215,015 Unit

 

 

81.8

%

 

 

 

2

 

 

55

 

 

Mezzanine Loan

 

1/19/17

 

 

16.5

 

 

 

8.3

 

 

 

8.1

 

 

L +14.0%

 

 

 

L +14.4%

 

 

Floating

 

1/19/22

 

Savannah, GA

 

Hotel

 

Construction

 

$321,429 Unit

 

 

0.0

%

 

 

 

3

 

Subtotal / Weighted

   Average

 

 

 

 

 

 

$

76.4

 

 

$

67.1

 

 

$

66.8

 

 

 

10.2

%

 

 

L +10.5%

 

 

 

 

2.9 yrs

 

 

 

 

 

 

 

 

 

 

66.4

%

 

 

 

2.4

 

Total / Weighted

   Average

 

 

 

 

 

 

$

3,423.6

 

 

$

2,845.7

 

 

$

2,824.7

 

 

 

4.9

%

(9)

 

 

6.4

%

 

 

 

3.5 yrs

 

 

 

 

 

 

 

 

 

 

59.2

%

 

 

 

2.6

 

(1)

First mortgage loans are whole mortgage loans unless otherwise noted. Loans numbered 37, 45, 49, 50 and 51 represent 75% pari passu participation interests in whole mortgage loans. Loans numbered 7, 18, 26, and 30 represent 65% pari passu participation interests in whole mortgage loans. Loan number 29 represents a 50% pari passu participation interest in the whole mortgage loan. Loans numbered 44, 46, 47, and 48 represent 24% pari passu participation interests in whole mortgage loans.

(2)Date loan was originated or acquired by us. The origination or acquisition date is not updated for subsequent loan modifications.

(2)

Date loan was originated or acquired by us, which date has not been updated for subsequent loan modifications.

(3)Represents unpaid principal balance net of unamortized costs.

(3)

Represents unpaid principal balance net of unamortized costs.

(4)In addition to the interest rate, all-in yield includes the amortization of deferred origination fees, purchase price premium and discount, and accrual of both extension and exit fees. All-in yield for our loan assets and total loan portfolio excludes the applicable floating benchmark interest rate as of September 30, 2023 and excludes the impact of our interest rate floors and borrower interest rate caps.

(4)

Represents the formula pursuant to which our right to receive a cash coupon on a loan is determined. One floating rate loan with a total loan amount of $37.3 million earned interest income based on a floor above LIBOR of 1.00%.

(5)Extended maturity assumes all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date. As of September 30, 2023, based on unpaid principal balance, 11.2% of our loans were subject to yield maintenance or other prepayment restrictions and 88.8% were open to repayment by the borrower without penalty.

(5)

In addition to credit spread, all-in yield includes the amortization of deferred origination fees, purchase price premium and discount, loan origination costs and accrual of both extension and exit fees. All-in yield for the total portfolio assumes the applicable floating benchmark rate as of September 30, 2017 for weighted average calculations.

(6)Except for construction loans, LTV is calculated for loan originations and existing loans as the total outstanding principal balance of the loan or participation interest in a loan (plus any financing that is pari passu with or senior to such loan or participation interest) divided by the as-is appraised value of our collateral at the time of origination or acquisition of such loan or participation interest. For construction loans only, LTV is calculated as the total commitment amount of the loan divided by the as-stabilized value of the real estate securing the loan. The as-is or as-stabilized (as applicable) value reflects our Manager’s estimates, at the time of origination or acquisition of the loan or participation interest in a loan, of the real estate value underlying such loan or participation interest determined in accordance with our Manager’s underwriting standards and consistent with third-party appraisals obtained by our Manager.

(6)

Extended maturity assumes all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date. As of September 30, 2017, based on unpaid principal balance, 69.1% of our loans were subject to yield maintenance or other prepayment restrictions and 30.9% were open to repayment by the borrower without penalty.

(7)For a discussion of risk ratings, please see Notes 2 and 3 to our Consolidated Financial Statements included in this Form 10-Q.

(7)

LTV is calculated as the total outstanding principal balance of the loan or participation interest in a loan plus any financing that is pari passu with or senior to such loan or participation interest at the time of origination or acquisition divided by the applicable as-is real estate value at the time of origination or acquisition of such loan or participation interest in a loan. The as-is real estate value reflects our Manager’s estimates, at the time of origination or acquisition of a loan or participation interest in a loan, of the real estate value underlying such loan or participation interest, determined in accordance with our Manager’s underwriting standards and consistent with third-party appraisals obtained by our Manager.

(8)Represents the weighted average of the credit spread as of September 30, 2023 for the loans, all of which are floating rate.

(8)

For a discussion of risk ratings, please see Notes 2 and 3 to our Consolidated Financial Statements included in this Form 10-Q.

(9)Calculated as the ratio of unpaid principal balance as of September 30, 2023 to the as-is appraised value at origination, to reflect the sale by us in August 2020 of the contiguous mezzanine loan with an unpaid principal balance of $46.4 million and a commitment amount of $50.0 million as of sale date.

(9)

Represents the weighted average of the credit spread as of September 30, 2017 for the floating rate loans and the coupon for the fixed rate loans.

(10)This loan is comprised of a first mortgage loan of $88.0 million and a contiguous mezzanine loan of $82.0 million, of which we own both. Each loan carries the same interest rate.

(10)

LTV is calculated using an as-complete real estate value at the time of origination. The as-complete real estate value reflects our Manager’s estimate, at the time of origination of the underlying real estate value, determined in accordance with our Manager’s underwriting standards and consistent with third-party appraisals obtained by our Manager.

(11)This loan represents a 19.2% pari passu participation interest in a first mortgage loan, that was originated by a third party on October 29, 2020 and acquired by us on September 1, 2022.

(11)

LTV is calculated using an as-is real estate value updated subsequent to the loan origination or acquisition date prepared pursuant to a third party appraisal obtained by our Manager. This as-is real estate value reflects our Manager’s estimate, as of the appraisal date of the underlying real estate value, pursuant to the third-party appraisal obtained by our Manager and is consistent with our Manager’s underwriting standards.

(12)This loan represents a 41.2% pari passu participation interest in a first mortgage loan, that was originated by a third party on August 31, 2021 and acquired by us on September 1, 2022.


(13)This loan was originated by a third party on June 9, 2021 and acquired by us on September 1, 2022.

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Table of Contents
Item 3. Quantitative and QualitativeQualitative Disclosures About Market Risk

Investment Portfolio Risks
Interest Rate Risk

Our business model is such thatseeks to minimize our exposure to changing interest rates by matching duration of our assets and liabilities and match-indexing our assets using the same, or similar, benchmark indices. Accordingly, rising interest rates will generally increase our net interest income, while declining interest rates will generally decrease our net income.interest income, subject to the impact of interest rate floors embedded in substantially all of our loans. As of September 30, 2017, 98.8%2023, the weighted average interest rate floor for our loan portfolio was 1.06%. As of September 30, 2023, all of our loans by unpaid principal balance earned a floating rate of interest, subject to the impact of embedded interest rate floors, and were financed with liabilities that require interest payments based on floating rates, which resulted in an amount of net equity that is positively correlated to rising interest rates. As of September 30, 2017, the remaining 1.2%2023, less than 1.8% of our loans by unpaid principal balance earned a fixedliabilities do not contain interest rate of interest, but were financed with liabilities that require interest payments based on floating rates, which resulted in a negative correlation to rising interest rates to the extent of our amount of fixed rate financing.

floors greater than zero.

The following table illustrates the impact on our interest income and interest expense, for the twelve-month period following September 30, 2017, assuming2023, of an immediate increase or decrease in the underlying benchmark interest rate of both 25, 50 and 5075 basis points in the applicable intereston our existing floating rate benchmarkloans held for investment portfolio and related liabilities (dollars in thousands):

Assets (Liabilities)

Subject to Interest

Rate Sensitivity(1)

 

 

 

 

 

25 Basis Point

Increase

 

 

25 Basis Point

Decrease

 

 

50 Basis Point

Increase

 

 

50 Basis Point

Decrease

 

$

2,810,160

 

 

 

Interest income

 

$

6,416

 

 

$

(5,670

)

 

$

12,832

 

 

$

(10,121

)

 

(1,804,890

)

(2)

 

Interest expense

 

 

(4,512

)

 

 

4,512

 

 

 

(9,024

)

 

 

9,024

 

$

1,005,270

 

 

 

Total Net Interest Income

 

$

1,904

 

 

$

(1,158

)

 

$

3,808

 

 

$

(1,097

)

(1)

Our floating rate loans and related liabilities are indexed to LIBOR.

(2)

Borrowings include secured revolving repurchase facilities, asset-specific financings, and non-consolidated senior interests sold or co-originated.

Assets (liabilities) subject to
interest rate sensitivity(1)(2)
Net exposureIncome (expense) subject to
interest rate sensitivity		25 Basis Point50 Basis Point75 Basis Point
IncreaseDecreaseIncreaseDecreaseIncreaseDecrease
Floating rate mortgage loan assets$3,970,164 Interest income$9,925 $(9,925)$19,851 $(19,840)$29,776 $(29,515)
Floating rate mortgage loan liabilities(3,224,858)Interest expense(8,062)8,062 (16,124)16,124 (24,186)24,186 
Total floating rate mortgage loan exposure, net$745,306 Total change in net interest income$1,863 $(1,863)$3,727 $(3,716)$5,590 $(5,329)

__________________________
(1)As of September 30, 2023, all of our floating rate mortgage loan assets and all of our floating rate mortgage loan liabilities were subject to Term SOFR as the benchmark interest rate.
(2)Floating rate liabilities include secured credit agreements, a secured revolving credit facility, asset-specific financing arrangements, and collateralized loan obligations.
Credit Risk

Our loans and other investments are also subject to credit risk. The performance and value of our loans and other investments depend upon the sponsors’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, the asset management team reviews our portfolio and maintains regular contact with borrowers, co-lenders and local market experts to monitor the performance of the underlying collateral, anticipate borrower, property and market issues and, to the extent necessary or appropriate, enforce our rights as the lender.

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

Prepayment Risk

Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, causing the return on certain investments to be less than expected. As we receive prepayments of principal on our assets, any premiums paid on such assets are amortized against interest income. In general, an increase in prepayment rates accelerates the amortization of purchase premiums, thereby reducing the interest income earned on the assets. Conversely, discounts on such assets are accreted into interest income. In general, an increase in prepayment rates accelerates the accretion of purchase discounts, thereby increasing the interest income earned on the assets.

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Table of Contents
Extension Risk

Our Manager computes the projected weighted average life of our assets based on assumptions regarding the ratepace at which theindividual borrowers will prepay the mortgages or extend. If prepayment ratesspeeds decrease in a rising interest rate environment or extension options are exercised, the life of the fixed rate assetsour loan investments could extend beyond the term of the secured debt agreements.agreements we use to finance our loan investments, except for our CRE CLOs for which the obligation to repay liabilities is tied to the repayment of underlying loans held by the CRE CLO trust. We expect that higher interest rates imposed by the Federal Reserve to rein in inflation may lead to a decrease in prepayment speeds and an increase in the number of our borrowers who exercise extension options, especially for loans involving office and hotel properties. This could have a negative impact on our results of operations. In some situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses.


Non-Performance Risk

Capital Market Risks

We are exposed

In addition to the risks related to fluctuations in cash flows and asset values associated with movements in interest rates, there is also the equity capital markets and our related ability to raise capital throughrisk of non-performance on floating rate assets. In the issuancecase of our stock or other equity instruments. We are also exposed to risks related to the debt capital markets and our related ability to finance our business through borrowings under secured revolving repurchase facilities or other debt instruments or facilities. As a REIT, we are required to distribute a significant portion ofincrease in interest rates, the additional debt service payments due from our taxable income annually, which constrains our ability to accumulateborrowers may strain the operating cash flowflows of the collateral real estate assets and, therefore requires uspotentially, contribute to utilize debtnon-performance or, equity capitalin severe cases, default. This risk is partially mitigated by various factors we consider during our underwriting and loan structuring process, including but not limited to, finance our business. We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing and terms of capital we raise.

Counterparty Risk

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

The nature ofestablishing interest reserves in our loans and other investments also exposes usrequiring substantially all of our borrowers to the risk that our counterparties do not make requiredpurchase an interest and principal payments on scheduled due dates. We seek to manage this risk through a comprehensive credit analysis prior to making an investment and rigorous monitoringrate cap contract for all, or substantially all, of the underlying collateral.

Currency Risk

initial term of our loan.

Loan Portfolio Value
We may in the future hold assets denominated in foreign currencies, which would expose usoriginate loans that earn a fixed rate of interest on unpaid principal balance. The value of fixed rate loans is sensitive to foreign currency risk. As a result, a change in foreign currency exchange rates may have an adverse impact on the valuation of our assets, as well as our income and distributions. Any such changes in foreign currency exchange rates may impact the measurement of such assets or income for the purposes of our REIT tests and may affect the amounts available for payment of dividends on our common stock.

interest rates. We intend to hedge any currency exposures in a prudent manner. However, our currency hedging strategies may not eliminategenerally hold all of our currency risk dueloans to among other things, uncertainties in the timing and/maturity, and do not expect to realize gains or amount of payments receivedlosses on the related investments and/or unequal, inaccurate or unavailability of hedges to perfectly offset changes in future exchange rates. Additionally,any fixed rate loan we may be required under certain circumstances to collateralize our currency hedges for the benefit of the hedge counterparty, which could adversely affect our liquidity.

We may hedge foreign currency exposure on certain investmentshold in the future, by entering intoas a seriesresult of forwards to fix the U.S. dollar amount of foreign currency denominated cash flows (interest income, rental income and principal payments) we expect to receive from any foreign currency denominated investments. Accordingly, the notional values and expiration dates of our foreign currency hedges would approximate the amounts and timing ofmovements in market interest rates during future payments we expect to receive on the related investments.

periods.

Real Estate Risk

The market values of commercial mortgage assets are subject to volatility and may be adversely affected 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; and retroactive changes to building or similar codes. 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, which could also cause us to suffer losses.


Operating and Capital Market Risks

Liquidity Risk
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings including margin calls, fund and maintain investments, pay dividends to our stockholders and other general business needs. Our liquidity risk is principally associated with our financing of longer-maturity investments with shorter-term borrowings in the form of secured credit agreements. We are subject to “margin call” risk under our secured credit agreements. In the event that the value of our assets pledged as collateral decreases as a result of changes in credit spreads or interest rates, or due to an other-than-temporary decline in the value of the collateral securing our pledged loan, margin calls relating to our secured credit agreements could increase, causing an adverse change in our liquidity position. Additionally, if one or more of our secured credit agreement counterparties chooses not to provide ongoing funding, we may be unable to replace the financing through other lenders on favorable terms or at all. As such, we provide no assurance that we will be able to roll over or replace our secured credit agreements as they mature from time to time in the future. We maintain frequent dialogue with the lenders under our secured credit agreements regarding our management of their collateral assets.
In some situations, we have in the past, and may in the future, decide to sell assets to adjust our portfolio construction or maintain adequate liquidity. Market disruptions may lead to a significant decline in transaction activity in all or a significant portion of the asset classes in which we invest and may at the same time lead to a significant contraction in short-term and long-term debt and equity funding sources. A decline in market liquidity of real estate-related investments, as well as a lack of availability of observable transaction data and inputs, may make it more difficult to sell assets or determine their fair values. As a result, we may be unable to sell investments, or only be able to sell investments at a price that may be materially different from the fair values presented. Also, in such conditions, there is no guarantee that our borrowing arrangements or other arrangements for obtaining leverage will continue to be available or, if available, will be available on terms and conditions acceptable to us.
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Capital Markets Risk
We are exposed to risks related to the equity capital markets and our related ability to raise capital through the issuance of our stock or other equity instruments. We are also exposed to risks related to the debt capital markets and our related ability to finance our business through borrowings under secured credit agreements, secured revolving credit facilities, collateralized loan obligations, mortgage loans, term loans, or other debt instruments or arrangements. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business. We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing and terms of capital we raise.
Global macroeconomic conditions, including, without limitation, heightened inflation, changes to fiscal and monetary policy, increased interest rates, stress to the commercial banking systems of the U.S. and Western Europe, currency fluctuations, and labor shortages, have contributed to increased volatility in public debt and equity markets, increased cost of funds and reduced availability of efficient debt capital, factors which caused us to reduce our investment activity in the first half of 2023, and may cause us to restrain our investment activity in the future.
Counterparty Risk
The nature of our business requires us to hold our cash and cash equivalents with, and obtain financing from, various financial institutions. This exposes us to the risk that these financial institutions may not fulfill their obligations to us under these various contractual arrangements. We seek to mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with what we believe to be high credit-quality institutions.
The nature of our loans and other investments also exposes us to the risk that our counterparties do not make required interest and principal payments on scheduled due dates. We seek to manage this risk through a comprehensive credit analysis prior to making an investment and rigorous monitoring of the underlying collateral during the term of our investments.
Currency Risk
We may in the future hold assets denominated in foreign currencies, which would expose us to foreign currency risk. As a result, a change in foreign currency exchange rates may have an adverse impact on the valuation of our assets, as well as our income and distributions. Any such changes in foreign currency exchange rates may impact the measurement of such assets or income for the purposes of our REIT tests and may affect the amounts available for payment of dividends on our common stock.
We intend to hedge any currency exposures in a prudent manner. However, our currency hedging strategies may not eliminate all of our currency risk due to, among other things, uncertainties in the timing and/or amount of payments received on the related investments and/or unequal, inaccurate or unavailability of hedges to perfectly offset changes in future exchange rates. Additionally, we may be required under certain circumstances to collateralize our currency hedges for the benefit of the hedge counterparty, which could adversely affect our liquidity.
We may hedge foreign currency exposure on certain investments in the future by entering into a series of forwards to fix the U.S. dollar amount of foreign currency denominated cash flows (interest income, rental income and principal payments) we expect to receive from any foreign currency denominated investments. Accordingly, the notional values and expiration dates of our foreign currency hedges would approximate the amounts and timing of future payments we expect to receive on the related investments.
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Item 4. Controls and Procedures

Disclosure Controls and Procedures.We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rules 13a-15(b) and 15d-15(b) ofunder the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2017.2023. Based upon that evaluation, our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2017.

2023.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting (as such term as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recently completed fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of September 30, 2017,2023, we were not involved in any material legal proceedings. See the “Litigation” section of Note 1314 to the consolidated financial statements included in this Form 10-Q for information regarding legal proceedings, which information is incorporated by reference in this Item 1.

Item 1A. Risk Factors

For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in the Prospectus.

There have been no material changes to our principal risks that we believe are material to our business, results of operations, and financial condition from the risk factors previously disclosed inunder Part I, Item 1A of our Annual Report on Form 10-K for the Prospectus, which is accessibleyear ended December 31, 2022 filed with the SEC on the SEC’s website at www.sec.gov.

February 21, 2023.

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

(a) Unregistered Sales of Equity Securities

None.

(b) Initial Public Offering

On July 25, 2017, we completed our initial public offering in which we sold 11,000,000 shares of our common stock at an initial public offering price of $20.00 per share. The shares offered and sold in the initial public offering were registered under the Securities Act pursuant to our Registration Statement on Form S-11 (File No. 333-217446), which was declared effective by the SEC on July 19, 2017. The aggregate offering price for the shares registered and sold by us was approximately $220 million. The initial public offering generated $200.1 million in net proceeds, after deducting underwriting discounts of $13.2 million and estimated offering expenses payable by us of $6.7 million. On August 17, 2017, the underwriters of the Company’s initial public offering partially exercised their option to purchase up to an additional 1,650,000 shares of common stock. On August 22, 2017, we issued and sold, and the underwriters purchased, 650,000 shares of common stock for net proceeds of approximately $12.2 million, after deducting underwriting discounts of $0.8 million. The underwriters of the offering were Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, Wells Fargo Securities, LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Barclays Capital Inc., TPG Capital BD, LLC and JMP Securities LLC. TPG Capital BD, LLC, an underwriter in the offering, is an affiliate and received underwriting discounts of approximately $0.6 million. No other offering expenses were paid directly or indirectly to any of our directors or officers (or their associates), persons owning 10 percent or more of our common stock or any other affiliates.

We used the net proceeds from the offering to originate commercial mortgage loans consistent with our investment strategy and investment guidelines.

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides information about common stock purchases by or on behalf of the Company pursuant to the 10b5-1 program during the quarter ended September 30, 2017 (dollars in thousands):

Fiscal Period

 

Total Number of Shares Purchased

 

 

Average Price Paid per Share

 

 

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

 

 

Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1)

 

July 1, 2017 to July 31, 2017

 

 

—

 

 

$

—

 

 

 

—

 

 

$

35,000

 

August 1, 2017 to August 31, 2017

 

 

121,978

 

 

 

19.43

 

 

 

121,978

 

 

 

32,600

 

September 1, 2017 to September 30, 2017

 

 

212,767

 

 

 

19.68

 

 

 

212,767

 

 

 

28,400

 

Totals / Averages

 

 

334,745

 

 

$

19.59

 

 

 

334,745

 

 

$

28,400

 

(1)

In July 2017, the Company announced an agreement pursuant to which Goldman Sachs & Co. LLC, as our agent, will buy in the open market up to $35.0 million in shares of our common stock in the aggregate during the period beginning on or about August 21, 2017 and ending 12 months thereafter or, if sooner, the date on which all the capital committed has been exhausted.


None.

Item 3. Defaults UponUpon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.


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Item 6. Exhibits

Exhibit
Number

Description

Exhibit
Number

Description

    3.1

3.1

3.2

3.3

    4.1

3.4

3.5
4.1

    4.2

31.1

Indenture, dated as of December 18, 2014, among TPG RE Finance Trust CLO Issuer, L.P., TPG RE Finance Trust GENPAR, Inc. and U.S. Bank National Association (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-11/A (333-217446) filed on May 30, 2017)

  10.1

Credit Agreement, dated as of September 29, 2017, among TPG RE Finance 20, Ltd., TPG RE Finance Pledgor 20, LLC, and Bank of America, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (001-38156) filed on October 2, 2017)

  10.2

Guaranty, dated as of September 29, 2017, made by TPG RE Finance Trust Holdco, LLC in favor of Bank of America, N.A. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (001-38156) filed on October 2, 2017)

  31.1

  31.2

Certificate of Robert R. Foley, Chief Financial and Risk Officer, pursuant to Section 302 of the Sarbanes­OxleySarbanes-Oxley Act of 2002

  32.1

31.2

  32.2

32.1

101.INS

32.2

101.INSInline XBRL Instance Document

– the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



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Table of ContentsSIGNATURES

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.

Date: November 6, 2017

October 31, 2023

TPG RE Finance Trust, Inc.

(Registrant)

/s/ GRETA GUGGENHEIM

Doug Bouquard

Greta Guggenheim

Doug Bouquard

Chief Executive Officer

(Principal Executive Officer)

/s/ Robert Foley

/s/ ROBERT R. FOLEY

Robert Foley

Robert R. Foley

Chief Financial Officer

Chief Financial and Risk Officer

(Principal Financial Officer)

53

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