| Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net | Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net Our loan portfolio was comprised of the following at December 31, 2024 and December 31, 2023 ($ in thousands):
Loan Type December 31, 2024 December 31, 2023
Commercial mortgage loans, net (1) $ 6,715,347 $ 7,925,359
Subordinate loans, net 388,809 432,734
Total loans, net $ 7,104,156 $ 8,358,093
Note receivable, held for sale 41,200 —
Carrying value, net $ 7,145,356 $ 8,358,093 (1) Includes $ 8.3 million and $ 95.5 million in 2024 and 2023 , respectively, of contiguous financing structured as subordinate loans. Our loan portfolio consisted of 95 % and 99 % floating rate loans, based on amortized cost, net of Specific CECL Allowance, as of December 31, 2024 and December 31, 2023, respectively. Activity relating to our loan portfolio for the year ended December 31, 2024 was as follows ($ in thousands):
Principal Deferred Fees/Other Items Specific CECL Allowance Carrying Value, Net (1)
December 31, 2023 $ 8,610,110 $ ( 32,535 ) $ ( 193,000 ) $ 8,384,575
New loan fundings (1) 1,285,614 — — 1,285,614
Add-on loan fundings (2) 627,378 — — 627,378
Loan repayments and sale ( 2,541,740 ) — — ( 2,541,740 )
Gain (loss) on foreign currency translation ( 133,973 ) 496 — ( 133,477 )
Increase in Specific CECL Allowance, net — — ( 149,500 ) ( 149,500 )
Transfer to Other Assets (3) ( 159,667 ) — — ( 159,667 )
Realized loss on investment (4) ( 137,312 ) 9,121 — ( 128,191 )
Deferred fees and other items (5) — ( 39,554 ) — ( 39,554 )
Amortization of fees — 30,754 — 30,754
December 31, 2024 $ 7,550,410 $ ( 31,718 ) $ ( 342,500 ) $ 7,176,192
General CECL Allowance (6) ( 30,836 )
Carrying value, net $ 7,145,356 (1) Includes Note receivable, held for sale. (2) Represents fundings subsequent to loan closing. (3) Refer to "Massachusetts Healthcare" below for full discussion. (4) Real ized loss on investment includes a realized loss of $ 127.5 million during the third quarter of 2024 related to the Massachusetts Healthcare Loan, discussed below, consisting of a $ 136.6 million write-off of principal, partially offset by $ 9.1 million, reflecting the cost recovery interest received and unamortized origination fees, and $ 0.7 million loss on the sale of a commercial mortgage loan collateralized by a hotel property located in Honolulu, HI in April 2024. (5) Other items primarily consist of purchase discounts or premiums, cost recovery interest, exit fees, and deferred origination expenses. (6) $ 5.9 million of the General CECL Allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our consolidated balance sheet. The following table details overall statistics for our loan portfolio at the dates indicated ($ in thousands):
December 31, 2024 (1) December 31, 2023
Number of loans 46 50
Principal balance $ 7,550,410 $ 8,610,110
Carrying value, net $ 7,145,356 $ 8,358,093
Unfunded loan commitments (2) $ 840,627 $ 868,582
Weighted-average cash coupon (3) 7.5 % 8.3 %
Weighted-average remaining fully-extended term (4) 2.5 years 2.3 years
Weighted-average expected term (5) 1.9 years 1.8 years (1) Includes Note receivable, held for sale. (2) Unfunded loan commitments are primarily funded to finance construction costs, tenant improvements, leasing commissions, or carrying costs. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date. (3) For floating rate loans, based on applicable benchmark rates as of the specified dates. For loans placed on nonaccrual, the interest rate used in calculating weighted-average cash coupon is 0 %. (4) Assumes all extension options are exercised. (5) Expected term represents our estimated timing of repayments as of the specified dates. Excludes risk-rated 5 loans. Property Type The table below details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):
December 31, 2024 December 31, 2023
Property Type Carrying % of (1) Carrying % of (1)
Office $ 1,756,965 24.6 % $ 1,593,320 19.0 %
Hotel 1,575,270 22.1 2,128,256 25.4
Residential (2) 1,556,819 21.8 1,407,518 16.8
Retail 946,017 13.3 1,407,764 16.8
Industrial 399,546 5.6 293,133 3.5
Mixed Use 363,211 5.1 679,303 8.1
Healthcare — — 351,523 4.2
Other (3) 537,164 7.5 523,758 6.2
Total $ 7,134,992 100.0 % $ 8,384,575 100.0 %
General CECL Allowance (4) ( 30,836 ) ( 26,482 )
Carrying value, net $ 7,104,156 $ 8,358,093 (1) Percentage of portfolio calculations are made prior to consideration of General CECL Allowance. (2) Includes residential-for-sale ( 5.5 %), senior care facilities ( 4.7 %), multifamily ( 4.7 %), student housing ( 4.6 %), and vacation rentals ( 2.3 %) in 2024 and residential-for-sale ( 8.1 %), senior care facilities ( 1.9 %), multifamily ( 2.1 %), student housing ( 2.7 %), and vacation rentals ( 2.0 %) in 2023. (3) Other property types include pubs ( 2.9 % ), caravan parks ( 2.7 % ), and urban predevelopment ( 1.9 %) in 2024 , and caravan parks ( 2.4 %), parking garages ( 2.3 %) and urban predevelopment ( 1.5 %) in 2023. (4) $ 5.9 million and $ 4.0 million of the General CECL Allowance for 2024 and 2023, respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our consolidated balance sheets. Geography The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):
December 31, 2024 December 31, 2023
Geographic Location Carrying % of (1) Carrying % of (1)
United Kingdom $ 2,423,856 33.9 % $ 2,675,097 31.9 %
New York City 1,539,995 21.6 1,736,856 20.7
Other Europe (2) 1,265,344 17.7 1,686,425 20.1
Midwest 560,436 7.9 522,137 6.2
Southeast 511,742 7.2 535,054 6.4
West 489,008 6.9 484,842 5.8
Other (3) 344,611 4.8 744,164 8.9
Total $ 7,134,992 100.0 % $ 8,384,575 100.0 %
General CECL Allowance (4) ( 30,836 ) ( 26,482 )
Carrying value, net $ 7,104,156 $ 8,358,093 (1) Percentage of portfolio calculations are made prior to consideration of General CECL Allowance. (2) Other Europe includes Germany ( 8.4 %) , Italy ( 2.4 %), Spain ( 3.5 %), Sweden ( 3.1 %) and the Netherlands ( 0.3 %) in 2024 , and Germany ( 7.4 %), Italy ( 4.9 %), Spain ( 4.2 %), Sweden ( 2.9 %), Ireland ( 0.5 %) and the Netherlands ( 0.2 %) in 2023. (3) Other includes Northeast ( 0.6 %), Mid-Atlantic ( 1.4 %), Southwest ( 1.5 %) and Other ( 1.3 %) in 2024 , and Northeast ( 5.0 %), Mid-Atlantic ( 1.1 %), Southwest ( 1.7 %) and Other ( 1.1 %) in 2023. (4) $ 5.9 million and $ 4.0 million of the General CECL Allowance for 2024 and 2023 , respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our consolidated balance sheets. Risk Rating We assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan to value ("LTV") ratio, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. We apply these various factors on a case-by-case basis depending on the facts and circumstances for each loan, and the different factors may be given different weightings in different situations. This review is performed quarterly. Based on a 5-point scale, our loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows: 1. Very low risk 2. Low risk 3. Moderate/average risk 4. High risk/potential for loss: a loan that has a risk of realizing a principal loss 5. Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss, or an impairment has been recorded The following tables present the carrying value of our loan portfolio by year of origination and internal risk rating and gross write-offs by year of origination as of December 31, 2024 and December 31, 2023, respectively ($ in thousands):
December 31, 2024
Amortized Cost (1) by Year Originated
Risk Rating Number of Loans Total % of Portfolio 2024 2023 2022 2021 2020 Prior
1 — $ — — % $ — $ — $ — $ — $ — $ —
2 3 560,180 7.9 % — — 547,851 12,329 — —
3 37 6,169,860 86.4 % 1,218,189 649,599 1,549,750 1,173,982 397,972 1,180,368
4 2 279,732 3.9 % — — — — — 279,732
5 3 125,220 1.8 % — — — — 27,881 97,339
Total 45 $ 7,134,992 100.0 % 1,218,189 649,599 2,097,601 1,186,311 425,853 1,557,439
General CECL Allowance (2) ( 30,836 )
Total carrying value, net $ 7,104,156
Weighted-Average Risk Rating 3.0
Gross write-offs $ 127,512 $ — $ — $ 127,512 $ — $ — $ —
December 31, 2023
Amortized Cost (1) by Year Originated
Risk Rating Number of Loans Total % of Portfolio 2023 2022 2021 2020 2019 Prior
1 — $ — — % $ — $ — $ — $ — $ — $ —
2 4 478,440 5.7 % — 280,572 — — 132,309 65,560
3 42 7,548,252 90.0 % 440,720 2,426,511 2,285,902 387,323 1,465,618 542,177
4 2 88,112 1.1 % — — — — — 88,112
5 2 269,771 3.2 % — — — 169,881 — 99,890
Total 50 $ 8,384,575 100.0 % $ 440,720 $ 2,707,083 $ 2,285,902 $ 557,204 $ 1,597,927 $ 795,739
General CECL Allowance (2) ( 26,482 )
Total carrying value, net $ 8,358,093
Weighted-Average Risk Rating 3.0
Gross write-offs $ 81,890 $ — $ — $ — $ — $ — $ 81,890 (1) Net of Specific CECL Allowance. (2) $ 5.9 million and $ 4.0 million of the General CECL Allowance for 2024 and 2023 , respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our consolidated balance sheets. CECL In accordance with ASC Topic 326 "Financial Instruments – Credit Losses" ("ASC 326"), which we refer to as the "CECL Standard," we record allowances for loans and held-to-maturity debt securities that are deducted from the carrying amount of the assets to present the net carrying value of the amounts expected to be collected on the assets. We record loan specific allowances as a practical expedient under the CECL Standard ("Specific CECL Allowance"), which we apply to assets that are collateral dependent and where the borrower or sponsor is experiencing financial difficulty. For the remainder of the portfolio, we record a general allowance ("General CECL Allowance," and together with the Specific CECL Allowance, "CECL Allowances") on a collective basis by assets with similar risk characteristics. We have elected to use the weighted-average remaining maturity ("WARM") method in determining a General CECL Allowance for a majority of our portfolio. In the future, we may use other acceptable methods, such as a probability-of-default/loss-given-default method. The following schedule illustrates changes in CECL Allowances for the year ended December 31, 2024 ($ in thousands):
Specific CECL General CECL Allowance Total CECL CECL Allowance as % of Amortized Cost
Allowance (1) Funded Unfunded Total Allowance General (1) Total
December 31, 2023 $ 193,000 $ 26,482 $ 4,017 $ 30,499 $ 223,499 0.38 % 2.61 %
Changes:
Allowances (Reversals), net 277,012 4,354 1,931 6,285 283,297
Write-offs ( 127,512 ) — — — ( 127,512 )
December 31, 2024 $ 342,500 $ 30,836 $ 5,948 $ 36,784 $ 379,284 0.52 % 5.07 % (1) General CECL Allowance pool excludes loans and other lending assets that are held for sale or have a Specific CECL Allowance. The following schedule illustrates changes in CECL Allowances for the year ended December 31, 2023 ($ in thousands):
Specific CECL General CECL Allowance Total CECL CECL Allowance as % of Amortized Cost
Allowance (1) Funded Unfunded Total Allowance General (1) Total
December 31, 2022 $ 133,500 $ 26,224 $ 4,347 $ 30,571 $ 164,071 0.36 % 1.86 %
Changes:
Allowances (Reversals), net 141,480 258 ( 330 ) ( 72 ) 141,408
Write-offs ( 81,980 ) — — — ( 81,980 )
December 31, 2023 $ 193,000 $ 26,482 $ 4,017 $ 30,499 $ 223,499 0.38 % 2.61 % (1) General CECL Allowance pool excludes loans and other lending assets that have a Specific CECL Allowance General CECL Allowance In determining the General CECL Allowance using the WARM method, an annual historical loss rate, adjusted for macroeconomic estimates, is applied to the amortized cost of an asset, or pool of assets, over each subsequent period for the assets' remaining expected life. We considered various factors including (i) historical loss experience in the commercial real estate lending market, (ii) timing of expected repayments and satisfactions, (iii) expected future funding, (iv) capital subordinate to us when we are the senior lender, (v) capital senior to us when we are the subordinate lender, and (vi) our current and future view of the macroeconomic environment for a reasonable and supportable forecast period. The CECL Standard requires the use of significant judgment to arrive at an estimated credit loss. There is significant uncertainty related to future macroeconomic conditions, including inflation, labor shortages and interest rates. We derive an annual historical loss rate based on a commercial mortgage-backed securities ("CMBS") database with historical losses from 1998 through the fourth quarter of 2024 provided by a third party, Trepp LLC ("Trepp"). We apply various filters to arrive at a CMBS dataset most analogous to our current portfolio from which to determine an appropriate historical loss rate. The annual historical loss rate is further adjusted to reflect our expectations of the macroeconomic environment for a reasonable and supportable forecast period of eight quarters. In assessing the macroeconomic environment, we consider macroeconomic factors, including unemployment rate, commercial real estate prices, and market liquidity. We compare the historical data for each metric to historical commercial real estate losses in order to determine the correlation of the data. We use projections, obtained from third-party service providers, of each factor to approximate the impact the macroeconomic outlook may have on our loss rate. The General CECL Allowance on subordinate loans is calculated by incorporating both the loan balance of the position(s) of the structurally senior third-party lender(s) and the balance of our subordinate loan(s). The subordinate loans, by virtue of being the first loss position, are required to absorb losses prior to the senior position(s) being impacted, resulting in a higher percentage allowance attributable to the subordinate loan. The General CECL Allowance on unfunded loan commitments is time-weighted based on our expected commitment to fund such obligations. The General CECL Allowance on unfunded commitments is recorded as a liability on our consolidated balance sheets within accounts payable, accrued expenses and other liabilities. The considerations in estimating our General CECL reserve for unfunded loan commitments are similar to those used for the related outstanding loans receivable. Additionally, we have made an accounting policy election to exclude accrued interest receivables from the amortized cost basis of the related commercial mortgage loans and subordinate loans and other lending assets in determining the General CECL Allowance, as any uncollectible accrued interest receivable is written off in a timely manner. As of December 31, 2024 and December 31, 2023, accrued interest receivable was $ 58.5 million and $ 72.4 million , respectively, and included within other assets on our consolidated balance sheets. Although our secured debt obligations and senior secured term loan financing have a minimum tangible net worth maintenance covenant, the General CECL Allowance has no impact on these covenants as we are permitted to add back the General CECL Allowance for the computation of tangible net worth as defined in the respective agreements. The following schedule sets forth our General CECL Allowance as of December 31, 2024 and December 31, 2023 ($ in thousands):
December 31, 2024 December 31, 2023
Commercial mortgage loans, net $ 30,167 $ 25,723
Subordinate loans, net 669 759
Unfunded commitments (1) 5,948 4,017
Total General CECL Allowance $ 36,784 $ 30,499 (1) The General CECL Allowance on unfunded commitments is recorded as a liability on our consolidated balance sheets within accounts payable, accrued expenses and other liabilities. Our General CECL Allowance increased by $ 6.3 million during the year ended December 31, 2024. The increase was primarily related to loan originations and the impacts of extending our expected loan repayment dates. The increase was partially offset by the effects of portfolio seasoning and earlier than expected loan repayments. Our General CECL Allowance decreased by $ 0.1 million during the year ended December 31, 2023. The decrease was primarily related to portfolio seasoning and loan repayments outpacing originations. The decrease was partially offset by the impacts of extending our expected loan repayment dates. Specific CECL Allowance For collateral-dependent loans where we have deemed the borrower/sponsor to be experiencing financial difficulty and a more than moderate/average risk of realizing a principal loss, we have elected to apply a practical expedient in accordance with the CECL Standard in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a Specific CECL Allowance. The Specific CECL Allowance is determined as the difference between the fair value of the underlying collateral and the carrying value of the loan (prior to the Specific CECL Allowance). When the repayment or satisfaction of a loan is dependent on a sale, rather than operations, of the collateral, the fair value is adjusted for the estimated cost to sell the collateral. Collateral-dependent loans evaluated for a Specific CECL Allowance are removed from the General CECL Allowance pool. The fair value of the underlying collateral is determined by using method(s) such as discounted cash flow, the market approach, or direct capitalization approach. The key unobservable inputs used to determine the fair value of the underlying collateral may vary depending on the information available to us and market conditions as of the valuation date. We regularly evaluate the extent and impact of any credit migration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan-by-loan basis. The Specific CECL Allowance is evaluated on a quarterly basis. Specifically, a property's operating results and any cash reserves are analyzed and used to assess (i) whether cash from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the liquidation value of the underlying collateral. We also evaluate the financial wherewithal of any loan guarantors as well as the borrower's competency in managing and operating the properties. In addition, we consider the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. Such impairment analysis is completed and reviewed by asset management and finance personnel who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower's exit plan, and capitalization and discount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants. The following table summarizes our risk rated five loans as of December 31, 2024, which were analyzed for Specific CECL Allowances ($ in thousands):
Type Property type Location Amortized cost prior to Specific CECL Allowance Specific CECL Allowance Amortized cost Interest recognition status/ as of date Risk Rating
Mortgage Retail (1)(2) Cincinnati, OH $ 164,339 $ 67,000 $ 97,339 Nonaccrual/ 10/1/2019 5
Mezzanine Residential (3) Manhattan, NY 295,881 268,000 27,881 Nonaccrual/ 7/1/2021 5
Mezzanine Office (4) Troy, MI 7,500 7,500 - Nonaccrual/ 6/30/2024 5
Total $ 467,720 $ 342,500 $ 125,220 (1) The fair value of retail collateral was determined by applying a capitalization rate of 9.0 %. (2) In September 2018, we entered a joint venture with Turner Consulting II, LLC ("Turner Consulting"), through an entity which owns the underlying property that secures our loan. Turner Consulting contributed 10 % of the venture's equity and we contributed 90 %. The entity was deemed to be a variable interest entity ("VIE"), and we determined that we are not the primary beneficiary of that VIE as we do not have the power to direct the entity's activities. During the second quarter of 2024, the loan's maturity was extended from September 2024 to September 2025. (3) The fair value of the residential collateral was determined by making certain projections and assumptions with respect to future performance and a discount rate of 10 %. (4) The fair value of the office collateral was determined by applying an exit capitalization rate of 10 % and a discount rate of 20 % For the year ended December 31, 2024 , we recorded a net increase in our Specific CECL Allowance of $ 149.5 million. This net increase was comprised of Specific CECL Allowances on two of our mezzanine loans mentioned in the table above and a Specific CECL Allowance on our Massachusetts Healthcare Loan (defined below), which was subsequently fully written off. Massachusetts Healthcare During the third quarter of 2024, we ceased accruing interest on our commercial mortgage loan ("Massachusetts Healthcare Loan") secured by eight hospitals in Massachusetts. During the same quarter, we and other Apollo-managed entities ("Apollo Co-Lenders"), through a joint venture ("Massachusetts Healthcare JV"), acquired title to one of the eight hospitals that previously secured our loan. During the same period, the hospital was taken by eminent domain by the Commonwealth of Massachusetts (the "Commonwealth"). Refer to "Note 18 - Commitments and Contingencies" for additional information regarding the Commonwealth's taking of the hospital. On September 30, 2024, the guarantors made a guaranty payment on the Massachusetts Healthcare Loan, and the Borrowers transferred the deeds of the remaining seven hospitals into escrow, thereby releasing the borrowers from their obligation under the loan agreement. Accordingly, we realized loss representing the difference between the Massachusetts Healthcare Loan' s amortized cost basis and (i) the amount to be paid by the Commonwealth for the eminent domain taking of one of the hospitals; (ii) our allocation of the value of the seven remaining hospitals, less costs to sell, as determined per the executed purchase and sale agreements and appraised values, where applicable, of the properties underlying the deeds in escrow. In aggregate, we recorded a $ 127.5 million realized loss on our original $ 378.7 million loan ( 41.2 % of whole loan) within net realized loss on investments in our consolidated statement of operations, and all previously recorded Specific CECL Allowances related to the Massachusetts Healthcare Loan were written off. During the fourth quarter of 2024, five of the seven hospitals were sold to third parties in accordance with the previously executed purchase and sale agreements, and the proceeds were allocated among us and other Apollo Co-Lenders based on our pro-rata interests in the Massachusetts Healthcare Loan. We received consideration of approximately $ 133.1 million, which included a $ 41.2 million promissory note. Additionally , the Massachusetts Healthcare JV received the proceeds from the Commonwealth for the hospital taken by eminent domain, and distributed our allocation of $ 9.0 million. As of December 31, 2024, $ 20.1 million remained in other assets on our consolidated balance sheet related to our allocation of fair value the two unsold hospitals. We did not hold title to either property as of December 31, 2024. As of December 31, 2024, the promissory note was classified as held for sale and recorded within Note receivable, held for sale on our consolidated balance sheet at its fair value. Refer to "Note 2 – Summary of Significant Accounting Policies" and "Note 3 – Fair Value Disclosure" for further discussion on held for sale classification and fair value measurement policies. Michigan Office During the second quarter of 2024, we recorded a Specific CECL Allowance of $ 7.5 million on a subordinate loan secured by our interest in a Class A office building in Troy, MI, which was attributable to low occupancy and limited leasing activity in the property's submarket. The $ 7.5 million Specific CECL Allowance represents a full reserve against the loan's amortized cost basis. The loan's risk rating was downgraded from a four to a five and the loan was moved to nonaccrual status as of June 30, 2024. As of December 31, 2024, the loan is past its final contractual maturity of September 2024. Negotiations with the sponsor are currently in process. As discussed further below, we recorded an additional $ 142.0 million Specific CECL Allowance on our Junior Mezzanine A Loan (as defined below), during the first quarter of 2024. Loan Modifications Pursuant to ASC 326 During the twelve months ended December 31, 2024, we provided the following loan modifications that require disclosure pursuant to ASC 326. As of December 31, 2024 and December 31, 2023, the aggregate amortized cost basis, net of Specific CECL Allowance, of these modified receivables was $ 721.7 million and $ 674.5 million , respectively, or 10.1 % and 8 .0 % of our aggregate commercial mortgage loans and subordinate loans by amortized cost, respectively. There were unfunded commitments related to these loans of $ 10.6 million as of December 31, 2024, and none as of December 31, 2023. Cleveland Multifamily In May 2021, we originated a first mortgage loan secured by a multifamily property in Cleveland, OH. During the second quarter of 2024, we modified our loan to convert from a floating rate of Secured Overnight Financing Rate (" SOFR ") + 3.25 % to a 6.0 % fixed rate, and to provide a two year term extension. These modified terms are included in the determination of our general CECL reserve for the fourth quarter of 2024 . The loan is performing pursuant to its modified contractual terms, and its risk rating remains a three as of December 31, 2024. Manhattan Office In March 2022, we originated a first mortgage loan secured by an office property in Manhattan, NY. During the second quarter of 2024, we modified our loan to convert from a floating rate of SOFR + 3.92 % to a 5.0 % fixed rate. This modified term is included in the determination of our general CECL reserve for the fourth quarter of 2024 . The loan is performing pursuant to its modified contractual terms, and its risk rating remains a three as of December 31, 2024. Manhattan Residential During 2022, we recorded a total loan Specific CECL Allowance of $ 66.5 million on a junior mezzanine loan secured by an ultra-luxury residential property in Manhattan, NY ("Junior Mezzanine B Loan"), and downgraded its risk rating to a five. The allowance was recorded as sales velocity on the underlying property lagged behind the borrower's business plan and management's expectations amid broader uncertainty in the ultra-luxury residential property market. At this time, we also held a senior mezzanine loan ("Senior Mezzanine Loan"), an additional junior mezzanine loan ("Junior Mezzanine A Loan"), and a commercial mortgage loan ("Senior Loan"), secured by the same property. During 2023, as property sales continued to trail behind the borrower's business plan, we ceased accruing interest on the Senior Loan and the Senior Mezzanine Loan. We also wrote off the $ 82.0 million Junior Mezzanine B Loan, as it was deemed to be unrecoverable, and recorded a realized loss of $ 82.0 million within net realized loss on investments in our consolidated statement of operations. Additionally, we recorded a $ 126.0 million Specific CECL Allowance on the Junior Mezzanine A Loan and downgraded its risk rating to a five. During the first quarter of 2024, we recorded an additional $ 142.0 million Specific CECL Allowance on our Junior Mezzanine A Loan, resulting in an aggregate reserve of $ 268.0 million. The additional Specific CECL Allowance was primarily attributable to a reduction in list pricing of remaining units and slower sales pace at the property. The slower sales velocity coincided with the continued overall softening in the midtown Manhattan ultra-luxury submarket. During the second quarter of 2024, our Senior Loan was refinanced by a third-party lender, which resulted in a repayment of $ 108.3 million. The remaining Senior Loan balance was restructured into a subordinate loan ("Senior Mezzanine A Loan"), and extended by fourteen months to November 2025. Concurrently, the maturities of the Senior Mezzanine Loan and the Junior Mezzanine A Loan were also extended to November 2025. All three loans remain on nonaccrual status subsequent to the refinancing. Based on our analysis under ASC 310-20, we have deemed this refinance to be a continuation of our existing loans. The modified loan terms as discussed above have been reflected in our calculation of CECL for the year ended December 31, 2024. Refer to the "CECL" section above for additional information regarding our calculation of CECL Allowances. Any future change to the Specific CECL Allowance will be based upon a number of factors, including but not limited to the continued assessment of both the potential nominal value of remaining inventory as well as the expected sales velocity. Nonaccrual and Past Due Loans We cease accruing interest on loans if we deem the interest to be uncollectible with any previously accrued uncollected interest on the loan charged to interest income in the same period. The amortized cost basis, net of Specific CECL Allowance, for loans on nonaccrual was $ 486.8 million and $ 693.7 million as of December 31, 2024 and December 31, 2023, respectively. Under certain circumstances, we may apply the cost recovery method under which interest collected on a loan reduces the loan's amortized cost. For the years ended December 31, 2024 and 2023, we received $ 9.1 million and $ 2.5 million , respectively, in interest that reduced amortized cost under the cost recovery method. The increase in interest recorded under the cost recovery method during the year ended December 31, 2024 is related to our Massachusetts Healthcare Loan discussed above. As of December 31, 2024 and December 31, 2023, the amortized cost basis, net of Specific CECL Allowance, for loans that are past due 90 days or more as to principal or interest, was $ 486.8 million and $ 693.7 million , respectively. As of December 31, 2024 and December 31, 2023, there were no loans with accrued interest between 30 and 89 days past due. Other Loan Activity We recognized no payment-in-kind interest for the years ended December 31, 2024 and 2023 . We recognized payment-in-kind interest of $ 10.0 million for the year ended December 31, 2022. We recognized $ 7.4 million , $ 0.4 million and $ 3.8 million of pre-payment penalties and accelerated fees for the years ended December 31, 2024, 2023 and 2022, respectively. During the years ended December 31, 2023 and 2022, we recorded $ 3.1 million and $ 3.6 million of interest income related to a subordinate risk retention interest in a securitization vehicle, respectively. The subordinate risk retention interest was repaid in full during the third quarter of 2023. During 2022, one of our commercial mortgage loans collateralized by an office building located in London, United Kingdom was not repaid upon its contractual maturity, triggering an event of default. To provide the borrower with additional time to refinance the loan, we agreed to a conditional waiver of the event of default, and modified the terms of the loan agreement to include (i) a short term extension and (ii) default interest of 2.0 %, which we commenced accruing in addition to our contractual rate. In 2023, the first mortgage loan, including participations sold, was fully satisfied, including all contractual and default interest accrued to date, which was approximately $ 0.7 million. Refer to "Note 12 – Participations Sold" for additional detail related to the subordinate interest. In November 2020, the borrower under a £ 309.2 mil |
| Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net | Schedule IV — Mortgage Loans on Real Estate (1) As of December 31, 2024 ($ in thousands)
Description Number Property Type/location Contractual (2) Maturity (3) Periodic Payment (4) Principal Carrying Principal Amount of Mortgages Subject to Delinquent Principal or Interest
Commercial mortgage loans individually >3%
Loan A Retail/United Kingdom 8.0 % Apr-27 I/O $ 480,865 $ 479,201 $ —
Loan B Office/United Kingdom 9.2 % Dec-28 I/O 468,041 462,825 —
Loan C Hotel/Various Europe 7.4 % Dec-28 I/O 283,891 281,034 —
Loan D Office/New York City 5.0 % Apr-27 I/O 256,102 255,936 —
Loan E Retail/New York City 8.6 % Sep-25 I/O 250,398 249,980 —
Loan F Hotel/Spain 6.5 % Aug-27 I/O 248,775 247,990 —
Loan G Office/New York City 8.6 % Mar-28 I/O 227,200 226,313 —
Loan H Residential/United Kingdom 8.0 % Dec-26 I/O 226,975 226,022 —
Loan I Industrial/Sweden 5.9 % May-26 I/O 223,992 223,346 —
Commercial mortgage loans individually <3%
First Mortgage 9 Hotel/Various 8.0 %- 10.1 % 2025-2030 I/O $ 1,047,736 $ 1,046,246 $ —
First Mortgage 8 Residential/Various 6.0 %- 10.5 % 2026-2029 P&I 945,478 941,317 —
First Mortgage 5 Office/Various 5.8 %- 9.5 % 2025-2026 I/O 704,450 704,194 —
First Mortgage 2 Mixed Use/Various 8.3 %- 9.5 % 2025-2027 I/O 359,971 363,210 —
First Mortgage 3 Retail/Various 0.0 %- 9.0 % 2025-2030 P&I 259,187 182,365 173,924
First Mortgage 1 Industrial/United Kingdom 8.20 % Aug-29 I/O 134,181 132,040 —
First Mortgage (5) 5 Other/Various 6.2 %- 10.1 % 2026-2029 I/O 725,368 723,495 —
Total Commercial mortgage loans $ 6,842,610 $ 6,745,514 $ 173,924
Description Number Property Type/location Contractual (2) Maturity (3) Periodic Payment (4) Principal Carrying Principal Amount of Mortgages Subject to Delinquent Principal or Interest
Subordinate loans individually >3%
Loan A 1 Residential/New York City 0.0 % Nov-25 I/O $ 287,940 $ 287,293 $ 287,940
Subordinate loans individually <3%
Subordinate Mortgage 2 Residential/New York City 0.0 % Nov-25 I/O $ 371,160 $ 102,185 $ 371,160
Subordinate Mortgage (6) 1 Office/Midwest 0.0 % Sep-24 I/O 7,500 — 7,500
Total Subordinate loans (7) $ 666,600 $ 389,478 $ 666,601
Total loans (8) $ 7,509,210 $ 7,134,992 $ 840,525
General CECL Allowance (9) ( 30,836 )
Carrying value, net $ 7,104,156 ——————— 1. Excludes Note receivable, held for sale with an outstanding principal and carrying value of $ 41.2 million. 2. Assumes applicable benchmark rate as of December 31, 2024 for all floating rate loans. For loans placed on nonaccrual the interest rate noted above is 0 %. 3. Assumes all extension options are exercised. 4. Payment terms: P&I = Periodic payment of principal and interest; I/O = Periodic payment of interest only with principal at maturity. 5. Includes loans collateralized by caravan parks, pubs, urban predevelopment, and a portfolio of office, industrial, and retail property types. 6. Loan matured in September 2024. Negotiations with sponsor currently in process. 7. Subject to prior liens of approxima tely $ 115.5 million. Represents only third-party liens. 8. The aggregate cost for U.S. federal income tax purpos es is $ 7.4 billion. 9. Exclude s $ 5.9 million of General CECL Allowance related to unfunded commitments on commercial mortgage loans, subordinate loans and other lending assets, net in 2024 . The following table summarizes the changes in the carrying amounts of our loan portfolio during 2024 , 2023 and 2022, respectively ($ in thousands):
Reconciliation of Carrying Amount of Loans December 31, 2024 December 31, 2023 December 31, 2022
Balance at beginning of year $ 8,358,093 $ 8,681,990 $ 7,857,260
Loan fundings 1,871,792 929,106 3,624,661
Loan repayments and sales ( 2,541,740 ) ( 1,225,930 ) ( 2,214,621 )
Gain (loss) on foreign currency translation ( 133,477 ) 175,707 ( 356,436 )
Realized loss on investments (1) ( 128,191 ) ( 86,604 ) ( 24,894 )
Transfer to Other Assets ( 159,667 ) ( 75,000 ) ( 226,459 )
Decrease (increase) in Specific CECL Allowance (2) ( 149,500 ) ( 59,500 ) 11,500
Decrease (increase) in General CECL Allowance (3) ( 4,354 ) ( 258 ) 7,364
Deferred Fees and other items (4) ( 39,554 ) ( 16,453 ) ( 46,874 )
Payment-in-kind interest and amortization of fees 30,754 35,035 50,489
Balance at the close of year $ 7,104,156 $ 8,358,093 $ 8,681,990
——————— 1. During the year ended December 31, 2024, we recorded a $ 128.2 million net realized loss on investments, consisting of (i) a $ 127.5 million realized loss related to the extinguishment of the Massachusetts Healthcare Loan and (ii) a $ 0.7 million realized loss related to the sale of a commercial mortgage loan collateralized by a hotel property located in Honolulu, HI, which was sold at a price of 99.5 %. During the year ended December 31, 2023, we recorded a $ 86.6 million realized loss on investments comprised of (i) a $ 4.8 million realized loss related to the acquisition of the Atlanta Hotel through a deed-in-lieu of foreclosure and (ii) a $ 82.0 million realized loss representing a write-off of previously recorded Specific CECL Allowance on one of our subordinate loans secured by an ultra-luxury residential property in Manhattan, NY. These losses were partially offset by a $ 0.2 million gain on investments recorded in connection with the sale of our entire interest in three commercial loans secured by properties in Europe and a partial interest in one commercial loan secured by property located in London, United Kingdom. During the year ended December 31, 2022, we recorded a $ 24.9 million realized loss on investments represented with a write-off of a previously recorded Specific CECL Allowance comprised of (i) a $ 17.9 million loss on a first mortgage loan secured by an urban predevelopment property following the sale of the underlying property, and (ii) a $ 7.0 million loss, related to a first mortgage secured by the Atlanta hotel in anticipation of consensual foreclosure in the first quarter of 2023. 2. During the year ended December 31, 2024, we recorded a net increase in our Specific CECL Allowance of $ 149.5 million . This net increase was comprised of Specific CECL Allowances on two of our mezzanine loans and a Specific CECL Allowance on our Massachusetts Healthcare Loan, which was subsequently fully written off. During the year ended Decembe r 31, 2023, the Specific CECL Allowance increased $ 59.5 million. We recorded a $ 141.5 million increase to our Specific CECL Allowance, related to two mezzanine loans secured by the same ultra-luxury residential property in Manhattan, NY. As of June 30, 2023, $ 82.0 million related to the most junior mezzanine loan was deemed unrecoverable. Accordingly, $ 82.0 million of previously recorded Specific CECL was written-off and recorded as a realized loss within net realized loss on investments during the second quarter of 2023. The $ 11.5 million decrease during the year ended December 31, 2022 was comprised of (i) a reversal and write-off of a previously recorded Specific CECL Allowance of $ 53.0 million and $ 15.0 million, respectively, on an urban predevelopment first mortgage loan in Miami, FL and (ii) a $ 10.0 million reversal of a previously recorded Specific CECL Allowance on a loan related to a multifamily development in Brooklyn, NY. These write-offs and reversals recorded during the year ended December 31, 2022 were offset by the Specific CECL Allowance of $ 66.5 million recorded in relation to a mezzanine loan secured by our interest in an ultra-luxury residential property in Manhattan, NY. 3. $ 5.9 million , $ 4.0 million , and $ 4.3 million as of December 31, 2024, 2023, and 2022, respectively, of the General CECL Allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability on our consolidated balance sheets. 4. Other items primarily consist of purchase discounts or premiums, exit fees and deferred origination expenses, as well as $ 9.1 million , $ 2.5 million , and $ 3.2 million in cost recovery proceeds in 2024, 2023 , and 2022, respectively. |
