| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
References herein to “we,” “us,” “our,” “FCR,” and the “Company” refer to Fortress Credit Realty Income Trust, together with its consolidated subsidiaries, unless the context specifically requires otherwise.
The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed under “Cautionary Statement Regarding Forward-Looking Statements” and in “Item 1A.—Risk Factors” in our Registration Statement.
Overview
Fortress Credit Realty Income Trust is a credit-focused diversified mortgage REIT, which will invest in the senior parts of the capital structure, with a focus on (i) floating rate loans across commercial real estate (“CRE”) debt (“CRE Debt”) and (ii) investments in real estate-related assets. We are externally managed by FCR Advisors LLC, our Adviser and an affiliate of Fortress.
The Company is a Maryland statutory trust formed on June 4, 2024 (“Date of Formation”); however, no activity occurred until August 2, 2024. The Company is a non-listed, perpetual life REIT that intends to make an election to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), for U.S. federal income tax purposes commencing with our initial taxable year ending December 31, 2024. The Company generally will not be subject to U.S. federal income taxes on our taxable income to the extent we annually distribute all of our net taxable income to shareholders and maintain our qualification as a REIT.
As of September 30, 2024, we have received aggregate proceeds of $104.9 million from the sale of our common shares. The Company has primarily used the net proceeds to make investments in real estate debt as further described below under “Investment Portfolio.” The Company intends to continue selling common shares on a monthly basis.
Market Conditions and Trends
The Company’s businesses are materially affected by conditions in the financial markets and economic conditions in the U.S. and, to a lesser extent, elsewhere in the world.
During the third quarter of 2024, the persistence of both elevated inflation and interest rates, in conjunction with geopolitical uncertainty (including the conflict between Russia and Ukraine and the ongoing and developing conflicts in the Middle East), and uncertainty around future capital availability continued to weigh on industry deal activity and market valuations.
However, industry transaction volumes increased slightly compared to the previous quarter and are expected to continue to grow. Our business, focused on floating rate loans across CRE debt and residential loans and assets, continued to deploy significant capital across senior components of the capital structure. Our investors continue to benefit from the inflation-mitigating characteristics and long term risk adjusted returns of our credit-focused diversified mortgage REIT strategy.
We are continuing to closely monitor developments related to the macroeconomic factors that have contributed to market volatility, and to assess the impact of these factors on financial markets and on our business. Our future results may be adversely affected by slowdowns in fundraising activity and the pace of capital deployment. It remains difficult to predict the ultimate effects of these events on the financial markets, overall economy, and our financial statements. See “Item 1A. Risk Factors — Risks Related to Our Business and Operations” in our Registration Statement.
Since September 30, 2024, and through and including the date hereof, we have (i) originated 10 CRE loans across the United States with an aggregate loan amount and outstanding principal amount of $269.7 million and $262.4 million, respectively, (ii) acquired tax liens on properties located in California, Colorado, New Jersey and Illinois for a combined purchase price of $81.2 million, (iii) contributed $1.0 million to our equity investments in our mortgage servicing rights portfolio subscription agreement, (iv) issued and sold an aggregate of 6,282,841 common shares in our private offering, resulting in proceeds of $126.0 million, (v) entered into repurchase agreements as described below and (vi) and authorized the sale of new common share classes as described below (see “Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 11. Subsequent Events—Investment Activity” and the section titled “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds”).
On October 11, 2024, a subsidiary of the Company, FCR DC GS Seller III LLC, as seller (the “GS Seller III”), and Goldman Sachs Bank USA, as purchaser (“Goldman Sachs”), entered into a Master Repurchase Agreement (together with the related transaction documents, the “GS Seller III Repurchase Agreement”). On December 18, 2024, a subsidiary of the Company, FCR Key GS Seller II LLC, as seller (the “GS Seller II” and, together with the GS Seller I (as defined below) and GS Seller III, the “GS Sellers”), and Goldman Sachs, as purchaser, entered into a Master Repurchase Agreement (together with the related transaction documents, the “GS Seller II Repurchase Agreement” and, together with the GS Seller I Repurchase Agreement (as defined below) and GS Seller III Repurchase Agreement, the “GS Repurchase Agreements”). The GS Repurchase Agreements provide financing of up to an aggregate of $500 million in connection with the acquisition and/or origination by the Company of certain loans as more particularly described in the GS Repurchase Agreements. Subject to the terms and conditions thereof, the GS Repurchase Agreements provide for the purchase, sale and repurchase of commercial mortgage loans, related mezzanine loans and participation interests in such commercial mortgage loans satisfying certain conditions set forth in the GS Repurchase Agreements (collectively, the “GS Repurchase Facilities”).
Advances under the GS Repurchase Agreements accrue interest at a per annum rate equal to Term SOFR for a one-month period plus a margin as agreed upon by Goldman Sachs and the GS Sellers for each transaction. The termination date of the GS Repurchase Agreements is August 16, 2027, as such date may be extended with availability for new transactions pursuant to a one-year extension option and as such date may be further extended without availability for new transactions for an amortization extension period of up to one additional year, subject to satisfaction of certain customary conditions in accordance with the GS Repurchase Agreements.
In connection with the GS Repurchase Agreements, the Company provided a guaranty (the “GS Guaranty II” and “GS Guaranty III” and, together with the GS Guaranty I (as defined below), the “GS Guaranties”), under which the Company (i) guarantees losses associated with customary non-recourse carve-outs with respect to the Company and the GS Sellers and (ii) agrees to satisfy certain financial covenants including minimum net worth, liquidity and interest coverage and maximum leverage. The GS Guaranties may become fully recourse to the Company up to the entire amount needed for the GS Sellers to repurchase the loans and interests in such loans comprising the GS Repurchase Facilities if the GS Sellers or the Company become the subject of a voluntary or involuntary proceeding under any bankruptcy, insolvency or similar law. The Company is also liable under the GS Guaranties for costs, expenses, damages and losses actually incurred by Goldman Sachs resulting from customary “bad boy” events pertaining to the Company and/or the GS Sellers as described in the GS Guaranties.
Atlas Repurchase Agreement
On October 11, 2024, a subsidiary of the Company, FCR DC JV Atlas Seller I LLC, as seller (the “Atlas Seller”), and Atlas Securitized Product Investments 2, L.P., as administrative agent and buyer (“Atlas”), entered into a Master Repurchase Agreement (together with the related transaction documents, the “Atlas Repurchase Agreement”) to finance the acquisition and origination by the Company of up to $200 million of certain loans as more particularly described in the Atlas Repurchase Agreement. Subject to the terms and conditions thereof, the Atlas Repurchase Agreement provides for the purchase, sale and repurchase of commercial mortgage loans, related mezzanine loans and participation interests in such commercial mortgage loans satisfying certain conditions set forth in the Atlas Repurchase Agreement (the “Atlas Repurchase Facility”).
Advances under the Atlas Repurchase Agreement, with respect to each transaction, accrue interest at a per annum rate equal to Term SOFR for a one-month period (subject to a SOFR floor rate of 2.50%) plus 250 bps. The termination date of the Atlas Repurchase Facility is October 11, 2027, as such date may be extended with availability for new transactions pursuant to one or more one-year extension options, subject to satisfaction of certain customary conditions in accordance with the Atlas Repurchase Agreement.
In connection with the Atlas Repurchase Agreement, the Company provided a guaranty (the “Atlas Guaranty”), under which the Company (i) guarantees losses associated with customary non-recourse carve-outs with respect to the Company and Atlas Seller and (ii) agrees to satisfy certain financial covenants including minimum net worth and liquidity. The Atlas Guaranty may become fully recourse to the Company up to the entire amount needed for Atlas Seller to repurchase the loans and interests in such loans comprising the Atlas Repurchase Facility if the Atlas Seller or FCR DC JV Atlas Pledgor LLC, a Delaware limited liability company, as equity pledgor, becomes the subject of a voluntary or involuntary proceeding under any bankruptcy, insolvency or similar law. The Company is also liable under the Atlas Guaranty for costs, expenses, damages and losses actually incurred by Atlas resulting from customary “bad boy” events pertaining to the Company and/or Atlas Seller as described in the Atlas Guaranty.
JPM Loan Agreement
On November 8, 2024, FCR TL Holdings LLC, an indirect, wholly-owned subsidiary of the Company (“FCR TL”), as borrower, entered into a Loan and Security Agreement (the “Subsidiary Loan Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the “Administrative Agent”), pursuant to which, among other things, the lenders from time to time party thereto agreed to make loans and other financial accommodations available to FCR TL on an uncommitted basis in an aggregate principal amount not to exceed $300 million (the “Subsidiary Loan”). Subject to the terms and conditions of the Subsidiary Loan Agreement, all amounts outstanding under the Subsidiary Loan Agreement will be due and payable in full on May 8, 2027, or such earlier date upon which the Subsidiary Loan Agreement shall terminate in accordance with the provisions thereof. Capitalized terms used herein and not otherwise defined herein shall have the meaning attributed to such terms in the Subsidiary Loan Agreement.
The obligations of FCR TL under the Subsidiary Loan Agreement are secured by, among other things, (i) substantially all of the assets of FCR TL and certain other direct and indirect subsidiaries of FCR TL, each of which has provided a guaranty of FCR TL’s obligations under the Subsidiary Loan Agreement, (ii) a pledge of the equity interests of FCR TL by its immediate parent entity, FCR TL Investors LLC, and (iii) all proceeds of the foregoing, in each case subject to certain exclusions set forth in the Subsidiary Loan Agreement and the other Subsidiary Loan Documents. Further, the Subsidiary Loan will bear interest at the greater of (i) a rate equal to daily simple SOFR and (ii) zero (0%), plus two percent (2.00%). The Subsidiary Loan is prepayable, in whole or in part, at any time without premium or penalty, in accordance with the terms of the Subsidiary Loan Agreement.
The Subsidiary Loan Agreement contains various restrictions and covenants applicable to FCR TL. Among other requirements, FCR TL may not exceed certain debt limitations and is subject to certain investment limitations, subject to certain carveouts described more fully therein.
The Subsidiary Loan Agreement also contains customary events of default. If an event of default under the Subsidiary Loan Agreement occurs and is continuing, then the Administrative Agent may declare any outstanding obligations under the Subsidiary Loan Agreement to be immediately due and payable. In addition, if FCR TL becomes the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the Subsidiary Loan Agreement will automatically become due and payable.
In connection with the Subsidiary Loan Agreement, the Company provided a Limited Guaranty (the “Limited Guaranty”), pursuant to which the Company (i) has agreed to guarantee losses associated with customary non-recourse carve-outs with respect to the Guarantors (as defined in the Limited Guaranty), FCR TL, FCR TL Investors LLC or any Eligible Asset Owner and (ii) agreed to satisfy certain financial covenants as set forth in the Subsidiary Loan Agreement, including minimum net worth and liquidity requirements. The Company is also liable under the Limited Guaranty for costs, expenses, damages and losses actually incurred by the Administrative Agent resulting from customary “bad boy” events pertaining to the Company as described more fully in the Limited Guaranty.
Authorization of New Share Classes and Amended Offering Documents
On November 18, 2024, the Company’s board of trustees authorized the Company to offer and sell new classes of common shares to be designated the “Class J-1 common shares”, “Class J-2 common shares” and “Class J-3 common shares”. The Class J-3 common shares will pay a 1.25% management fee and a 12.5% performance fee. The Class J-1 and Class J-2 common shares will pay a 1.00% management fee (which the Adviser has agreed to waive until March 31, 2025) and will not pay a performance fee.
On December 16, 2024, the Company’s board of trustees authorized the Company to rename the previously designated Class J-3 common shares to “Class J-4 common shares” and authorized the Company to offer and sell new classes of common shares to be designated the “Class J-3 common shares” and “Class J-5 common shares”. The Class J-5 common shares will pay a 1.25% management fee and a 12.5% performance fee. The Class J-3 common shares will pay a 1.00% management fee (which the Adviser has agreed to waive until March 31, 2025) and will not pay a performance fee.
In connection with the authorization of new share classes, the Company amended its Fourth Amended and Restated Declaration of Trust, Fourth Amended and Restated Management Agreement, Second Amended and Restated Dealer Manager Agreement, share repurchase plan and distribution reinvestment plan, which are further described in “Item 5. Other Information”.
Emerging Growth Company Status
We are and will remain an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) until the earlier of (a) the last day of the fiscal year (i) following the fifth anniversary of the date of an initial public offering pursuant to an effective registration statement under the Securities Act, (ii) in which we have total annual gross revenue of at least $1.235 billion, or (iii) in which we are deemed to be a large accelerated filer, which means the market value of our shares that is held by non-affiliates exceeds $700 million as of the date of our most recently completed second fiscal quarter, and (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. For so long as we remain an “emerging growth company” we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We cannot predict if investors will find our shares less attractive because we may rely on some or all of these exemptions.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We will take advantage of the extended transition period for complying with new or revised accounting standards, which may make it more difficult for investors and securities analysts to evaluate us since our financial statements may not be comparable to companies that comply with public company effective dates.
Q3 2024 Highlights
Operating Results
| • | We declared monthly net distributions totaling $0.7 million for the three months ended September 30, 2024. The details of our total returns are shown in the following table: |
| | | | | | | | | | | | | | | | |
Inception-to-Date Total Return (1) | | | 1.32 | % | | | — | % | | | — | % | | | 0.81 | % | | | 1.32 | % |
| | (1) | Total return is calculated as the change in NAV per share during the respective periods plus any distributions per share declared in the period and assumes any distributions are reinvested in accordance with our distribution reinvestment plan. The Company believes total return is a useful measure of the overall investment performance of our shares. |
| | (2) | Shares were outstanding for a portion of the three months ended September 30, 2024. |
Investment Activity
| • | For the three months ended September 30, 2024, we originated the below senior secured CRE loans ($ in thousands): |
| Location | | | Property Type | | | Loan Amount (1) | | | Outstanding Principal | | | Fair Value | | | Interest Rate(2) | | | Maturity Date |
| New York | | | Multifamily | | | $ | 12,500 | | | $ | 11,558 | | | $ | 11,558 | | | | 9.13 | % | | | 8/9/2026 |
| New York | | | Multifamily | | | $ | 9,250 | | | $ | 8,194 | | | $ | 8,194 | | | | 9.13 | % | | | 8/9/2026 |
| New York | | | Multifamily | | | $ | 3,800 | | | $ | 3,525 | | | $ | 3,525 | | | | 9.06 | % | | | 10/1/2026 |
| California | | | Retail | | | $ | 32,910 | | | $ | 30,500 | | | $ | 30,500 | | | | 8.90 | % | | | 9/26/2027 |
| New York | | | Multifamily | | | $ | 5,700 | | | $ | 5,325 | | | $ | 5,325 | | | | 9.06 | % | | | 10/1/2026 |
(1) Loan amount consists of outstanding principal balance plus unfunded loan commitments.
(2) Represents weighted average interest rate of the most recent interest period in effect for each loan as of period end. As of September 30, 2024, loans earn interest at the one-month term Secured Overnight Financing Rate (“SOFR”) of 5.16% plus a spread and are subject to a rate floor ranging from 4.00% to 5.38%.
| • | On August 2, 2024, we entered into a subscription agreement for an equity investment in a conventional mortgage servicing rights portfolio. We have agreed to an aggregate capital commitment of $150.0 million and have funded $8.9 million as of September 30, 2024. |
| • | On August 30, 2024, we acquired 155 tax liens in New Jersey for a purchase price of $1.4 million. |
| • | On September 4, 2024, we acquired 755 tax liens in Mississippi for a purchase price of $3.8 million. |
Capital Activity and Financings
| • | On August 16, 2024, a subsidiary of the Company, FCR GS Seller I LLC, as seller (the “GS Seller I”), and Goldman Sachs, as purchaser, entered into a Master Repurchase Agreement (together with the related transaction documents, the “GS Seller I Repurchase Agreement”) to finance the acquisition and origination by the Company of up to $500 million of certain loans as more particularly described in the GS Seller I Repurchase Agreement. Subject to the terms and conditions thereof, the GS Seller I Repurchase Agreement provides for the purchase, sale and repurchase of commercial mortgage loans, related mezzanine loans and participation interests in such commercial mortgage loans satisfying certain conditions set forth in the GS Seller I Repurchase Agreement (the “GS Seller I Repurchase Facility”). In connection with the GS Seller I Repurchase Agreement, the Company provided a Guaranty (the “GS Guaranty I”), under which the Company (i) guarantees losses associated with customary non-recourse carve-outs with respect to the Company and GS Seller I and (ii) agrees to satisfy certain financial covenants including minimum net worth, liquidity and interest coverage and maximum leverage. |
| • | Raised proceeds of $104.9 million from the sale of our common shares for the period from June 4, 2024 (Date of Formation) through September 30, 2024. |
Overall Portfolio
| • | As of September 30, 2024, our portfolio was comprised of the following: |
| Asset Type | | Fair Value | | | Fair Value as % of Overall Portfolio | |
| Commercial real estate loans | | $ | | | | | | % |
| Tax liens | | | | | | | 7 | % |
| Equity investments | | | 8,884 | | | | 12 | % |
| Total | | $ | | | | | 100 | % |
Results of Operations
The following table sets forth the results of our operations for the three months ended September 30, 2024 ($ in thousands, except per share data):
| | | Three months ended September 30, 2024 | |
| Revenues | | | |
| Interest income | | $ | 1,437 | |
| Total revenues | | | 1,437 | |
| | | | | |
| Expenses | | | | |
| Organizational costs | | | 2,412 | |
| General and administrative | | | 1,093 | |
| Total expenses | | | 3,505 | |
| | | | | |
| Other income (expense) | | | | |
| Net unrealized loss on investments | | | (46 | ) |
| Other income | | | 106 | |
| Total other income (expense) | | | 60 | |
| | | | | |
| Net loss | | | (2,008 | ) |
| Net income attributable to non-controlling interests | | | 93 | |
| Net loss attributable to common stockholders | | $ | (2,101 | ) |
| Net loss per share of common stock – basic and diluted | | $ | (0.90 | ) |
| Weighted-average shares of common stock outstanding, basic and diluted | | | 2,327 | |
Interest income
Interest Income
For the three months ended September 30, 2024, interest income was $1.4 million, primarily as a result of interest and origination fees earned on real estate related debt.
Other income (expense)
Net unrealized gain (loss) on investments
For the three months ended September 30, 2024, net unrealized gain (loss) on investments was ($46,100), primarily as a result of changes in fair value of equity investments.
Other income
For the three months ended September 30, 2024, other income was $0.1 million, primarily as a result of investment income from equity investment fees.
Expenses
Organizational costs
For the three months ended September 30, 2024, organizational costs were $2.4 million. These costs were incurred primarily in conjunction with the Company’s formation.
General and administrative
For the three months ended September 30, 2024, general and administrative costs were $1.1 million, primarily as a result of professional services and operating expenses.
The following table sets forth the results of our operations for the period from June 4, 2024 (Date of Formation) through September 30, 2024 ($ in thousands, except per share data):
| | | For the period from June 4, 2024 (Date of Formation) through September 30, 2024 | |
| Revenues | | | |
| Interest income | | $ | 1,437 | |
| Total revenues | | | 1,437 | |
| | | | | |
| Expenses | | | | |
| Organizational costs | | | 2,412 | |
| General and administrative | | | 1,093 | |
| Total expenses | | | 3,505 | |
| | | | | |
| Other income (expense) | | | | |
| Net unrealized loss on investments | | | (46 | ) |
| Other income | | | 106 | |
| Total other income (expense) | | | 60 | |
| | | | | |
| Net loss | | | (2,008 | ) |
| Net income attributable to non-controlling interests | | | 93 | |
| Net loss attributable to common stockholders | | $ | (2,101 | ) |
| Net loss per share of common stock – basic and diluted | | $ | (1.17 | ) |
| Weighted-average shares of common stock outstanding, basic and diluted | | | 1,799 | |
Interest income
Interest Income
For the period from June 4, 2024 (Date of Formation) through September 30, 2024, interest income was $1.4 million, primarily as a result of interest and origination fees earned on real estate related debt.
Other income (expense)
Net unrealized gain (loss) on investments
For the period from June 4, 2024 (Date of Formation) through September 30, 2024, net unrealized gain (loss) on investments was ($46,100), primarily as a result of changes in fair value of equity investments.
Other income
For the period from June 4, 2024 (Date of Formation) through September 30, 2024, other income was $0.1 million, primarily as a result of investment income from equity investment fees.
Expenses
Organizational costs
For the period from June 4, 2024 (Date of Formation) through September 30, 2024, organizational costs were $2.4 million. These costs were incurred primarily in conjunction with the Company’s formation.
General and administrative
For the period from June 4, 2024 (Date of Formation) through September 30, 2024, general and administrative costs were $1.1 million, primarily as a result of professional services and operating expenses.
Net Asset Value
EA RESIG, LLC, a subsidiary of Eisner Advisory Group LLC, calculates our NAV per share, which our Adviser subsequently reviews and confirms the calculations in connection therewith, in each case, in accordance with the valuation guidelines that have been approved by our board of trustees. Our total NAV presented in the following tables includes the NAV of our outstanding classes of common shares, which includes Class B, Class R, Class S, Class D, Class I and Class E common shares. The following table provides a breakdown of the major components of our NAV as of September 30, 2024 ($ in thousands):
| Components of NAV | | Amount | |
Commercial real estate loan investments | | $ | 59,102 | |
Investments in real estate-related assets | | | 14,046 | |
Cash and cash equivalents | | | 38,283 | |
Restricted cash | | | 20,911 | |
Other assets | | | 1,850 | |
Subscriptions received in advance | | | (20,605 | ) |
Other liabilities | | | (4,045 | ) |
Non-controlling interests | | | (4,312 | ) |
| Net Asset Value | | $ | 105,230 | |
Number of outstanding shares | | | 5,245 | |
The following table provides a breakdown of our total NAV and NAV per share by class as of September 30, 2024 ($ in thousands, except per share data):
| | | NAV | | | Number of Outstanding Shares | | | NAV Per Share | |
| Class B | | $ | 87,284 | | | | 4,351 | | | $ | 20.0622 | |
| Class R | | | — | | | | — | | | | — | |
| Class S | | | — | | | | — | | | | — | |
| Class D | | | — | | | | — | | | | — | |
| Class I | | | 5,016 | | | | 250 | | | $ | 20.0622 | |
| Class E | | | 12,930 | | | | 645 | | | $ | 20.0622 | |
| Total | | $ | 105,230 | | | | 5,246 | | | | | |
Distributions
Beginning on September 30, 2024, we declared monthly distributions for each class of our common shares, which are generally paid four days after month-end. The net distribution may vary for each class based on the applicable shareholder servicing fee, which is deducted from the monthly distribution per share and paid directly to the Independent Brokerage Solutions LLC, as dealer manager, for further remittance to the applicable distributor.
The following table details the total net distribution for each of our share classes for the three months ended September 30, 2024:
| | | | | | | | | | | | | | | | | | |
| June 30, 2024 | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| July 31, 2024 | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| August 31, 2024 | | $ | 0.1000 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 0.1000 | |
| September 30, 2024 | | $ | 0.1000 | | | $ | — | | | $ | — | | | $ | — | | | $ | 0.1000 | | | $ | 0.1000 | |
| Total | | $ | 0.2000 | | | $ | — | | | $ | — | | | $ | — | | | $ | 0.1000 | | | $ | 0.2000 | |
For the three months ended September 30, 2024, we declared net distributions in the amount of $0.7 million. The Company intends for long-term cumulative distributions to be funded primarily from operating cash flows.
The following table details our distributions declared for the three months ended September 30, 2024 ($ in thousands):
| | | Three months ended September 30, 2024 | |
| | | Amount | | | Percentage | |
| Distributions | | | | | | |
| Payable in cash | | $ | 725 | | | | 100 | % |
| Reinvested in shares | | | — | | | | — | % |
| Total distributions | | $ | 725 | | | | 100 | % |
| Sources of Distributions | | | | | | | | |
| Cash flows from operating activities | | $ | 725 | | | | 100 | % |
| Offering proceeds | | | — | | | | 0 | % |
| Total sources of distributions | | $ | 725 | | | | 100 | % |
| Cash flows from operating activities | | $ | 725 | | | | | |
Liquidity and Capital Resources
Liquidity
We believe we have sufficient liquidity to operate our business, with immediate liquidity comprised of cash and cash equivalents of $38.3 million and $500 million available under the GS Repurchase Agreement as of September 30, 2024. In addition to our immediate liquidity, we obtain incremental liquidity through the sale of our common shares, from which we generated proceeds of approximately $104.9 million for the three months ended September 30, 2024. In addition, we may incur indebtedness secured by our real estate and real estate debt investments, borrow money through unsecured financings, or incur other forms of indebtedness.
Our primary use of cash will be for (i) origination or acquisition of CRE debt and investments in real estate-related assets, (ii) the cost of operations (including the management fee and performance participation), (iii) debt service of any borrowings, (iv) periodic repurchases, including under our share repurchase plan, and (v) cash distributions (if any) to the holders of our common shares to the extent declared by our board of trustees.
Our cash needs for acquisitions and other capital investments will be funded primarily from the sale of common shares and through the incurrence or assumption of debt. We plan on fulfilling our outstanding commitment obligations for properties under development from the sale of common shares. Other potential future sources of capital include secured or unsecured financings from banks or other lenders and proceeds from the sale of assets. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures. We continue to believe that our current liquidity position is sufficient to meet the need of our expected investment activity.
Capital Resources
For the period from June 4, 2024 (Date of Formation) through September 30, 2024, we issued and sold 5,245,175 common shares, consisting of 4,350,675 Class B shares, 250,000 Class I shares and 644,500 Class E shares to accredited investors in our private offering, amounting to proceeds of $104.9 million as payment for such shares, including shares issued pursuant to our distribution reinvestment plan. During the three months ended September 30, 2024, we did not receive any repurchase requests for our common shares.
As of September 30, 2024, we had received aggregate proceeds of $104.9 million from the issuance and sale of common shares in our private offering and pursuant to our distribution reinvestment program. As of September 30, 2024, after giving effect to shares issued pursuant to our distribution reinvestment plan, share transfers, conversions, and redemptions we had an aggregate of 5,245,175 common shares outstanding, consisting of 4,350,675 Class B shares, 250,000 Class I shares and 644,500 Class E shares.
Cash Flows
Cash flows provided by operating activities were $1.0 million for the period from June 4, 2024 (Date of Formation) through September 30, 2024. The cash flows provided by operating activities were primarily due to interest income of $1.4 million.
Cash flows used in investing activities of $59.1 million and $15.4 million were used to fund CRE loan investments and real estate related assets, respectively.
Cash flows provided by financing activities were $129.5 million for the period from June 4, 2024 (Date of Formation) through September 30, 2024, attributable primarily due to $104.9 million from the issuance of our common shares and $20.6 million from subscriptions received in advance.
Future Cash Requirements
The following table aggregates our contractual obligations and commitments as of September 30, 2024.
| Obligations | | Total | | | Less than 1 year | | | 1-3 years | | | 3-5 years | | | More than 5 years | |
| MSR commitments | | $ | 141,100 | | | $ | — | | | $ | — | | | $ | — | | | $ | 141,100 | |
| CRE loan commitments | | | 5,058 | | | | — | | | | 5,058 | | | | — | | | | — | |
| Advanced organizational and offering costs | | | 3,302 | | | | — | | | | 1,100 | | | | 1,320 | | | | 882 | |
| Operating expense reimbursement | | | 740 | | | | 111 | | | | 296 | | | | 296 | | | | 37 | |
| Total | | $ | 150,200 | | | $ | 111 | | | $ | 6,454 | | | $ | 1,616 | | | $ | 142,019 | |
Critical Accounting Estimates
The preparation of our condensed consolidated financial statements in accordance with GAAP involves significant judgments and assumptions and requires estimates about matters that are inherently uncertain. These judgments will affect our reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our condensed consolidated financial statements. The following is a summary of our significant accounting policies that we believe are the most affected by our judgments, estimates, and assumptions. See “Item 1. Financial Statements-Notes to Condensed Consolidated Financial Statements—Note 2. Summary of Significant Accounting Policies and Estimates” for further descriptions of the below accounting policies.
The guidance in ASC 825, Financial Instruments, provides a fair value option election that allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets. In the cases of loans and investments in real estate-related assets for which the fair value option is elected, loan origination fees and costs related to the origination or acquisition of the instrument should be immediately recognized in earnings. Unrealized gains and losses on assets for which the fair value option has been elected are also reported in earnings without deferral. This is because under the fair value option, a lender reports the instrument at its exit price (i.e., the price that would be received to sell the instrument in an orderly transaction), which reflects the market’s assessment of the instrument’s cash flows and risks and does not include any entity-specific costs or fees.
As discussed in Note 2 – “Summary of Significant Accounting Policies” to our condensed consolidated financial statements, the Company has elected the fair value option for certain eligible financial assets including CRE loans and real estate-related investments.
The decision to elect the fair value option is determined on an instrument-by-instrument basis and must be applied to an entire instrument and is irrevocable once elected. Assets measured at fair value pursuant to this guidance are required to be reported separately on the Company’s Condensed Consolidated Balance Sheets from those instruments using another accounting method.
Recent Accounting Pronouncements
In November of 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The amendments are intended to increase reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective on a retrospective basis for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of this guidance on the disclosures within its Condensed Consolidated Financial Statements.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Quantitative and Qualitative Disclosures about Market Risk
The primary components of our market risk are related to interest rates, credit risk, credit market values, liquidity and foreign currency exchange rates. While we do not seek to avoid risk completely, we believe that risk can be quantified from historical experience, and we seek to actively manage that risk, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake.
Interest Rate Risk
Interest rate risk is highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. Our net interest income is exposed to interest rate volatility primarily as a result of the floating rate nature of the investments we hold and the financing we place on them. Additionally, we may use company-level facilities featuring floating interest rates for liquidity and working capital purposes. Furthermore, we may make investments in fixed and floating rate debt securities; the value of our positions may increase or decrease depending on interest rate movements. Finally, interest rate changes may impact the demand for loans and the availability of financing needed to expand our investment portfolio.
A rise in the general level of interest rates can be expected to lead to higher debt service payment requirements relative to any variable rate investments we hold and to declines in the value of any fixed rate investments we may hold. Rising interest rates carry default risk to our borrowers, because cash flows from underlying properties may fall below the debt service payments due to us on the investments, triggering borrower liquidity covenants. Therefore, we expect to protect property cash flows by requiring borrowers to purchase interest rate caps, which provides a hedge against rising interest rates, whereby the borrower will receive excess cash if interest rates exceed predetermined strike prices. Furthermore, rising interest rates also cause our overall cost of borrowing to increase, partially or fully, offsetting any increase in elevated debt service payments received on our variable rate investments. In general, we will seek to match the interest rate characteristics of our investments with the interest rate characteristics of any related financing obligations. In instances where the interest rate characteristics of an investment and the related financing obligation are not matched, we may mitigate such disparity through the utilization of interest rate derivatives of the same or more similar characteristics to the related financing obligation. An increase in interest rates may result in an increase in our net investment income and the amount of the performance fee payable to the Adviser.
A decline in interest rates can be expected to lead to lower debt service payments received from any variable rate investments we may hold, decreases in the interest income earned on any floating rate investments we hold, and increases in the value of any fixed rate investments we hold. To mitigate the impact of reduced earnings as a result of declining interest rates, we expect to structure interest rate floors into each loan where the borrower will be required to pay minimum interest payments should interest rates fall below a predetermined rate. Additionally, reduced interest rates also cause our overall cost of borrowings to decrease. Because our borrowings do not typically feature interest rate floors, but our variable rate investments feature minimum interest payments due to us, declining interest rates may result in an increase to the Company’s net interest income and an increase in the amount of the performance fee payable to the Adviser.
As of September 30, 2024, we had no market sensitive instruments.
Credit Spread Risk
Credit spread risk is the risk that interest rate spreads between two different financial instruments will change. In general, U.S. fixed-rate commercial mortgage loans and CMBS are priced based on a spread to U.S. Treasury securities or interest rate swaps. We will generally benefit if credit spreads narrow during the time that we hold a portfolio of mortgage loans, CMBS and/or CLO investments, and we may experience losses if credit spreads widen during the time that we hold a portfolio of mortgage loans, CMBS and/or CLO investments. We actively monitor our exposure to changes in credit spreads and we may enter into credit total return swaps or take positions in other credit-related derivative instruments to moderate our exposure to losses associated with a widening of credit spreads.
Credit Risk
We are exposed to credit risk in our investments with respect to a borrower’s ability to make required debt service payments to us and repay the unpaid principal balance in accordance to the terms of the loan agreement. We manage this risk by conducting a credit analysis prior to making an investment and by actively monitoring our portfolio and the underlying credit quality, including subordination and diversification, of our investments on an ongoing basis. In addition, we re-evaluate the credit risk inherent in our investments on a regular basis taking into consideration a number of fundamental macro-economic factors such as gross domestic product, unemployment, interest rates, capital markets activity, retail sales, store closing/openings, corporate earnings, housing inventory, affordability and regional home price trends.
We are exposed to credit risk with respect to the tenants that occupy properties that serve as collateral to our investments. To mitigate this risk, we seek to avoid large single tenant exposure and we undertake a credit evaluation of major tenants prior to making a loan. This analysis includes extensive due diligence of a potential tenant’s creditworthiness and business, as well as an assessment of the strategic importance of the property to the tenant’s core business operations.
Finally, we may be exposed to counterparty credit risk under the terms of a derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We may seek to mitigate the credit risk associated with derivative instruments by entering into transactions with high-quality counterparties.
Market Value Risks
We may also be exposed to market value risk with respect to the fair value of our investments, including debt securities and borrowings due to changes in market conditions, including credit spreads, interest rates, property cash flows, and commercial property values that serve as collateral. We seek to manage our exposure to market risk by originating or acquiring investments secured by different property types located in diverse, but liquid markets with stable credit ratings. The fair value of our investments may fluctuate, therefore the amount we will realize upon any repayment, sale, or an alternative liquidation event is unknown.
Commercial property values are subject to volatility and may be adversely affected by a number of factors, including: national, regional and local economic conditions; local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes and/or tax and legal considerations. Changes in commercial property values are difficult to predict with accuracy. We model a range of valuation scenarios and the resulting impacts to our investments.
Liquidity Risk
Market disruptions may lead to a significant decline in transaction activity in all or a significant portion of the asset classes in which we intend to 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 liquidity of real estate and real estate-related investments, as well as a lack of availability of observable transaction data and inputs, may make it more difficult to sell our investments 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 the Company’s 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. In addition, a decline in market value of our assets may have particular adverse consequences in instances where we borrowed money based on the fair value of our assets. A decrease in the market value of our assets may result in the lender requiring us to post additional collateral or otherwise sell assets at a time when it may not be in our best interest to do so.
Foreign Currency Risk
Our loans and investments that are denominated in a foreign currency will also be subject to risks related to fluctuations in exchange rates. We generally expect to mitigate this exposure by hedging the net currency exposure of our foreign currency assets to the currency of the borrowings that finance those assets. As a result, we expect to reduce our exposure to changes in portfolio value related to changes in foreign exchange rates. However, our currency hedging strategies may not eliminate all of our currency risk due to, among other things, uncertainties in the timing and/or amounts of payments received on the related investments, and/or unequal, inaccurate, or unavailable hedges to offset changes in future exchange rates.
| ITEM 4. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act), as of the end of the period covered by this quarterly report on Form 10-Q was made under the supervision and with the participation of our management, including our Co-Chief Executive Officers (“Co-CEOs”), who are our principal executive officers, and our Chief Financial Officer (“CFO”), who is our principal financial officer. Based upon this evaluation, our Co-CEOs and CFO have concluded that our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by SEC rules and forms and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Co-CEOs and CFO, as appropriate to allow timely decisions regarding required disclosure.
PART II - OTHER INFORMATION
From time to time, we, the Adviser or Fortress may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. We may also be subject to regulatory proceedings. While the outcome of these legal or regulatory proceedings cannot be predicted with certainty, we may incur significant costs and expenses in connection with any such proceedings.
For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed in “Item 1A. Risk Factors” in our Registration Statement.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Unregistered Sales of Equity Securities
On July 16, 2024, we issued and sold 2,500 Class E shares to FIG LLC in connection with the Initial Capitalization at a price of $20.00 per share for an aggregate purchase price of $50,000. As of the date of this Form 10-Q, we have issued and sold an aggregate of 848,346 Class E shares to FIG LLC in connection with the Initial Capitalization for an aggregate purchase price of $20.0 million. These shares were issued and sold in reliance upon the available exemption from registration requirements of the Securities Act under Section 4(a)(2) thereof.
We are engaging in a continuous, unlimited private placement offering of our common shares to “accredited investors” (as defined in Rule 501 promulgated pursuant to the Securities Act) made pursuant to exemptions provided by Section 4(a)(2) of the Securities Act and applicable state securities laws.
On July 31, 2024, we entered into a subscription agreement (the “BTG Subscription Agreement”) with BTG Pactual NY Corporation (“BTG”), pursuant to which BTG agreed to purchase an aggregate of $100 million of our Class B shares in one or more closings, as determined by us in our sole discretion. BTG will have the option to acquire up to an additional $100 million of our Class B shares on the same terms as its initial purchase for a period of three years. As of the date of this Form 10-Q, we have issued and sold an aggregate of 4,993,024 Class B shares to BTG pursuant to the BTG Subscription Agreement for an aggregate purchase price of $100 million.
On September 3, 2024, we issued and sold an aggregate of 2,750,675 Class B shares, 250,000 Class I shares and 244,500 Class E shares for aggregate proceeds of $64.9 million, which includes the shares issued to FIG LLC and BTG as described above.
As of September 30, 2024, we had received aggregate proceeds of $104.9 million from the issuance and sale of common shares in our private offering and pursuant to our distribution reinvestment program. As of September 30, 2024, after giving effect to shares issued pursuant to our distribution reinvestment plan, share transfers, conversions, and redemptions we had an aggregate of 5,245,175 common shares outstanding, consisting of 4,350,675 Class B shares, 250,000 Class I shares and 644,500 Class E shares.
Each of the foregoing shares have been issued and sold in reliance upon the available exemption from registration requirements of the Securities Act under Section 4(a)(2) thereof and Regulation D thereunder.
The Company has adopted a share repurchase plan whereby, subject to certain limitations, shareholders may request, on a quarterly basis, that the Company repurchase all or any portion of their shares. For Class S shares, Class D shares, Class I shares and Class E shares held for less than one year, there is a 2% early purchase deduction applied to the repurchase price to shareholders, subject to certain exceptions. Class B shares and Class R shares may only be repurchased to the extent they have been outstanding for at least two years. The Company is not obligated to repurchase any shares and may choose to repurchase fewer shares than have been requested to be repurchased, or none at all, in its discretion at any time, and the amount of shares the Company may repurchase is subject to caps. Further, the Company’s board of trustees may make exceptions to, modify or suspend the Company’s share repurchase plan (including to make exceptions to the repurchase limitations or repurchase fewer shares than such repurchase limitations) if it deems in its reasonable judgment such action to be in the Company’s best interest and the best interest of the Company’s shareholders. In the event that the Company determines to repurchase some but not all of the shares submitted for repurchase during any quarter, shares repurchased at the end of the quarter will be repurchased on a pro-rata basis.
The Company had no repurchase requests for the period from June 4, 2024 (Date of Formation) through September 30, 2024.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
Fifth Amended and Restated Declaration of Trust
On December 16, 2024, the Company adopted the Fifth Amended and Restated Declaration of Trust (the “Amended Declaration of Trust”).
Pursuant to the Amended Declaration of Trust, the Company has established a new series of Class J-3 common shares, par value $0.01 per share (the “Class J-3 shares”), and Class J-5 common shares, par value $0.01 per share (the “Class J-5 shares” and, together with the Class J-3 shares, the “New Shares”).
In connection with the establishment of the New Shares and substantially concurrently with the Company’s adoption of the Amended Declaration of Trust, the Company renamed the existing series of Class J-3 common shares, par value $0.01 per share (the “Legacy Class J-3 shares”), as Class J-4 common shares (the “Class J-4 shares”). Other than the name change effectuated under the Amended Declaration of Trust, the Class J-4 shares are identical to the Legacy Class J-3 shares in all respects, including as it relates to preferences, rights, voting powers, restrictions and limitations.
The preferences, rights, voting powers, restrictions and limitations of redemptions for the Class J-3 shares are substantially similar to the preferences, rights, voting powers, restrictions and limitations of the Company’s existing Class B common shares (except for certain voting rights contained in the Company’s Amended Declaration of Trust that are specific to the Class B common shares), and the preferences, rights, voting powers, restrictions and limitations of redemptions for the Class J-5 shares are substantially similar to the preferences, rights, voting powers, restrictions and limitations of the Company’s existing Class I common shares, in each case, including the same proportional rights to the Company’s assets.
The foregoing description is only a summary of the material provisions of the Amended Declaration of Trust and is qualified in its entirety by reference to the full text of the Amended Declaration of Trust, which is filed as Exhibit 3.1 hereto and incorporated by reference herein.
Fourth Amended and Restated Management Agreement
On December 16, 2024, the Company and the Adviser entered into the Fourth Amended and Restated Management Agreement (the “Amended Management Agreement”). The Amended Management Agreement has been amended and restated to reflect the inclusion of the New Shares. The Amended Management Agreement, including the terms and conditions set forth therein prior to the amendment, otherwise remains unchanged.
The foregoing description is only a summary of the material provisions of the Amended Management Agreement and is qualified in its entirety by reference to the full text of the Amended Management Agreement, which is filed as Exhibit 10.1 hereto and incorporated by reference herein.
Third Amended and Restated Dealer Manager Agreement
On December 16, 2024, the Company, the Adviser and Independent Brokerage Solutions LLC (in such capacity, the “Dealer Manager”) entered into the Third Amended and Restated Dealer Manager Agreement (the “Amended Dealer Manager Agreement”). The Amended Dealer Manager Agreement has been amended and restated to reflect the inclusion of the New Shares. The Amended Dealer Manager Agreement, including the terms and conditions set forth therein prior to the amendment, otherwise remains unchanged.
The foregoing description is only a summary of the material provisions of the Amended Dealer Manager Agreement and is qualified in its entirety by reference to the full text of the Amended Dealer Manager Agreement, which is filed as Exhibit 10.2 hereto and incorporated by reference herein.
Amended and Restated Share Repurchase Plan
Effective December 16, 2024, the Company’s board of trustees amended the Company’s share repurchase plan (the “Share Repurchase Plan”) to incorporate the New Shares in the Share Repurchase Plan. The Share Repurchase Plan otherwise remains unchanged.
The foregoing description is only a summary of the material provisions of the Share Repurchase Plan and is qualified in its entirety by reference to the full text of the Share Repurchase Plan, which is filed as Exhibit 4.2 hereto and incorporated by reference herein.
Amended and Restated Distribution Reinvestment Plan
Effective December 16, 2024, the Company’s board of trustees amended the Company’s distribution reinvestment plan (the “DRIP”) to incorporate the New Shares. The DRIP otherwise remains unchanged.
The foregoing description is only a summary of the material provisions of the DRIP and is qualified in its entirety by reference to the full text of the DRIP, which is filed as Exhibit 4.1 hereto and incorporated by reference herein.
Repurchase Agreement
On December 18, 2024, GS Seller II, as seller, a subsidiary of the Company, and Goldman Sachs, as purchaser, entered into the GS Seller II Repurchase Agreement. On October 11, 2024, GS Seller III, as seller, a subsidiary of the Company, and Goldman Sachs, as purchaser, entered into the GS Seller III Repurchase Agreement. On August 16, 2024, GS Seller I, as seller, a subsidiary of the Company, and Goldman Sachs, as purchaser, entered into the GS Seller I Repurchase Agreement. The GS Repurchase Agreements provide financing of up to an aggregate of $500 million in connection with the acquisition and/or origination by the Company of certain loans as more particularly described in the GS Repurchase Agreements. Subject to the terms and conditions thereof, the GS Repurchase Agreements provide for the purchase, sale and repurchase
of commercial mortgage loans, related mezzanine loans and participation interests in such commercial mortgage loans satisfying certain conditions set forth in the GS Repurchase Agreements.
Advances under the GS Repurchase Agreements accrue interest at a per annum rate equal to Term SOFR for a one-month period plus a margin as agreed upon by Goldman Sachs and the GS Sellers for each transaction. The termination date of the GS Seller II Repurchase Agreement is August 16, 2027, as such date may be extended with availability for new transactions pursuant to a one-year extension option and as such date may be further extended without availability for new transactions for an amortization extension period of up to one additional year, subject to satisfaction of certain customary conditions in accordance with the GS Repurchase Agreements.
In connection with the GS Repurchase Agreements, the Company provided the GS Guaranties, under which the Company (i) guarantees losses associated with customary non-recourse carve-outs with respect to the Company and the GS Sellers and (ii) agrees to satisfy certain financial covenants including minimum net worth, liquidity and interest coverage and maximum leverage. The GS Guaranties may become fully recourse to the Company up to the entire amount needed for the GS Sellers to repurchase the loans and interests in such loans comprising the GS Repurchase Facilities if the GS Sellers or the Company become the subject of a voluntary or involuntary proceeding under any bankruptcy, insolvency or similar law. The Company is also liable under the GS Guaranties for costs, expenses, damages and losses actually incurred by Goldman Sachs resulting from customary “bad boy” events pertaining to the Company and/or the GS Sellers as described in the GS Guaranties.
Rule 10b5-1 Trading Plans
During the three months ended September 30, 2024, no director or officer adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
(b) Exhibits
3.1
| Fourth Amended and Restated Declaration of Trust of the Company, dated November 18, 2024 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on November 22, 2024) |
| Fifth Amended and Restated Declaration of Trust of the Company, dated December 16, 2024
|
| Amended and Restated Bylaws of the Company, as adopted July 31, 2024 (incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form 10 (File No. 000-56685) initially filed with the SEC on September 6, 2024) |
| Amended and Restated Distribution Reinvestment Plan adopted by the Company, effective as of December 16, 2024 |
| Amended and Restated Share Repurchase Plan |
| Fourth Amended and Restated Management Agreement, dated December 16, 2024, by and among the Company and the Adviser |
| Third Amended and Restated Dealer Manager Agreement, dated December 16, 2024, by and among the Company, the Adviser and the Dealer Manager |
| Subscription Agreement, dated July 15, 2024, by and between the Company and FIG LLC (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form 10 (File No. 000-56685) initially filed with the SEC on September 6, 2024) |
| Subscription Agreement, dated July 31, 2024, by and between the Company and BTG Pactual NY Corporation (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form 10 (File No. 000-56685) initially filed with the SEC on September 6, 2024) |
| Master Repurchase Agreement, dated August 16, 2024, by and between FCR GS Seller I LLC, as seller, and Goldman Sachs Bank USA, as purchaser (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form 10 (File No. 000-56685) initially filed with the SEC on September 6, 2024) |
| Guaranty, dated August 16, 2024, made by the Company, as guarantor, for the benefit of Goldman Sachs Bank USA (incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form 10 (File No. 000-56685) initially filed with the SEC on September 6, 2024) |
10.7
| Master Repurchase Agreement, dated October 11, 2024, by and between FCR DC GS Seller III LLC, as seller, and Goldman Sachs Bank USA, as purchaser (incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form 10 (File No. 000-56685) filed with the SEC on October 18, 2024)
|
10.8
| Guaranty, dated October 11, 2024, made by the Company, as guarantor, for the benefit of Goldman Sachs Bank USA (incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form 10 (File No. 000-56685) filed with the SEC on October 18, 2024)
|
| Certification of the Co-Chief Executive Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith* |
| Certification of the Co-Chief Executive Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith* |
| Certification of the Chief Financial Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith* |
| Certification of the Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, filed herewith* |
| Certification of the Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, filed herewith* |
| Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, filed herewith* |
101.INS | XBRL Instance Document ** |
101.SCH | XBRL Taxonomy Schema ** |
101.CAL | XBRL Taxonomy Definition ** |
101.DEF | XBRL Taxonomy Calculation ** |
101.LAB | XBRL Taxonomy Labels ** |
101.PRE | XBRL Taxonomy Presentation ** |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)** |
* The certifications furnished in Exhibits 32.1, 32.2 and 32.3 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.
** The financial information contained in these XBRL documents is unaudited
Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | Fortress Credit Realty Income Trust |
| | |
| | By: | /s/ Avraham Dreyfuss
|
| | | Name: | Avraham Dreyfuss |
| | | Title: | Chief Financial Officer |
| | | Date: | December 19, 2024 |
