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Senior Secured Notes, Net | 9 Months Ended
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Sep. 30, 2023
Receivables [Abstract] |
Secured Debt Arrangement, Net/Participations Sold | Secured Debt Arrangements, Net We utilize secured debt arrangements to finance the origination activity in our loan portfolio. Our secured debt arrangements are comprised of secured credit facilities, a private securitization, and a revolving credit facility. During the nine months ended September 30, 2023, we entered into three new secured debt arrangements, including credit facilities with Banco Santander, S.A., New York Branch and Churchill MRA Funding I LLC, and a revolving credit facility administered by Bank of America, N.A. ("Revolving Credit Facility") which provided a combined $600.0 million of additional capacity, and upsized the Atlas Facility, as defined in this Form 10-Q, by $83.3 million. Our borrowings under secured debt arrangements at September 30, 2023 and December 31, 2022 are detailed in the following table ($ in thousands):
| September 30, 2023 |  | December 31, 2022 |
| Maximum Amount of Borrowings(1) |  | Borrowings Outstanding(1) |  | Maturity (2) |  | Maximum Amount of Borrowings(1) |  | Borrowings Outstanding(1) |  | Maturity (2) |
JPMorgan Facility - USD(3)(4) | $ | 1,483,312 |  |  | $ | 1,155,531 |  |  | September 2026 |  | $ | 1,532,722 |  |  | $ | 1,306,320 |  |  | September 2026 |
JPMorgan Facility - GBP(3)(4) | 16,688 |  |  | 16,688 |  |  | September 2026 |  | 67,278 |  |  | 67,278 |  |  | September 2026 |
Deutsche Bank Facility - USD(3) | 700,000 |  |  | 275,815 |  |  | March 2026 |  | 700,000 |  |  | 385,818 |  |  | March 2026 |
Atlas Facility - USD(5) | 689,770 |  |  | 663,817 |  |  | April 2027(6)(7) |  | 635,653 |  |  | 632,747 |  |  | August 2026(6)(7) |
HSBC Facility - GBP | 367,922 |  |  | 367,922 |  |  | April 2025 |  | 364,423 |  |  | 364,423 |  |  | April 2025 |
HSBC Facility - EUR | 269,518 |  |  | 269,518 |  |  | January 2026(7) |  | 272,890 |  |  | 272,890 |  |  | January 2026 |
Goldman Sachs Facility - USD | 300,000 |  |  | 17,868 |  |  | November 2025(8) |  | 300,000 |  |  | 70,249 |  |  | November 2025(8) |
Barclays Facility - USD | 200,000 |  |  | 109,843 |  |  | June 2027(6) |  | 200,000 |  |  | 111,909 |  |  | June 2027 |
MUFG Securities Facility - GBP | 196,137 |  |  | 196,137 |  |  | June 2025(6) |  | 194,272 |  |  | 194,272 |  |  | June 2025 |
Churchill Facility - USD | 130,000 |  |  | 127,822 |  |  | March 2026 |  | — |  |  | — |  |  | N/A |
Santander Facility - USD | 300,000 |  |  | 75,000 |  |  | February 2026(6) |  | — |  |  | — |  |  | N/A |
Santander Facility - EUR | 57,094 |  |  | 53,267 |  |  | August 2024 |  | 57,807 |  |  | 53,320 |  |  | August 2024 |
Total Secured Credit Facilities | 4,710,441 |  |  | 3,329,228 |  |  |  |  | 4,325,045 |  |  | 3,459,226 |  |  |  |
Barclays Private Securitization - GBP, EUR, SEK | 1,818,199 |  |  | 1,818,199 |  |  | February 2026(7) |  | 1,850,076 |  |  | 1,850,076 |  |  | February 2026(7) |
Revolving Credit Facility - USD(9) | 170,000 |  |  | — |  |  | March 2026 |  | — |  |  | — |  |  | N/A |
Total Secured Debt Arrangements | 6,698,640 |  |  | 5,147,427 |  |  |  |  | 6,175,121 |  |  | 5,309,302 |  |  |  |
Less: deferred financing costs | N/A |  | (11,572) |  |  |  |  | N/A |  | (12,477) |  |  |  |
Total Secured Debt Arrangements, net(10)(11)(12) | $ | 6,698,640 |  |  | $ | 5,135,855 |  |  |  |  | $ | 6,175,121 |  |  | $ | 5,296,825 |  |  |
——————— (1)As of September 30, 2023, British Pound Sterling("GBP"), Euro ("EUR"), and Swedish Krona ("SEK") borrowings were converted to USD at a rate of 1.22, 1.06, and 0.09, respectively. As of December 31, 2022, GBP, EUR and SEK borrowings were converted to USD at a rate of 1.21, 1.07 and 0.10, respectively. (2)Maturity date assumes extensions at our option are exercised with consent of financing providers, where applicable. (3)The JPMorgan Facility and Deutsche Bank Facility enable us to elect to receive advances in USD, GBP, or EUR. (4)The JPMorgan Facility allows for $1.5 billion of maximum borrowings in total as of September 30, 2023. The JPMorgan Facility was temporarily upsized from $1.5 billion to $1.6 billion during August 2022 and the maximum borrowings decreased to $1.5 billion as of January 2023. (5)The Atlas Facility was formerly the Credit Suisse Facility. See "—Atlas Facility" below for additional discussion. (6)Assumes financings are extended in line with the underlying loans. (7)Represents weighted average maturity across various financings with the counterparty. See below for additional details. (8)Assumes facility enters the two-year amortization period subsequent to the November 2023 maturity, which allows for the refinancing or pay down of assets under the facility. (9)The current stated maturity of the Revolving Credit Facility is March 2026. Borrowings under the Revolving Credit Facility bear interest at a per annum rate equal to the sum of (i) a floating rate index and (ii) a fixed margin. Borrowings under the Revolving Credit Facility are full recourse to certain guarantor wholly-owned subsidiaries of the Company. See "—Revolving Credit Facility" below for additional discussion. (10)Weighted-average borrowing costs as of September 30, 2023 and December 31, 2022 were applicable benchmark rates and credit spread adjustments, plus spreads of USD: +2.45% / GBP: +1.99% / EUR: +1.65% / SEK: +1.50% and USD: +2.28% / GBP: +2.02% / EUR: +1.54%/ SEK: +1.50%, respectively. (11)Weighted average advance rates based on cost as of September 30, 2023 and December 31, 2022 were 68.7% (65.0% (USD) / 71.6% (GBP) / 72.1% (EUR) / 80.4% (SEK)) and 68.8% (63.9% (USD) / 74.0% (GBP) / 72.1% (EUR) / 80.5% (SEK)), respectively. (12)As of September 30, 2023 and December 31, 2022, approximately 58% and 58% of the outstanding balance under these secured borrowings were recourse to us. Terms of our secured credit facilities are designed to keep each lender's credit exposure generally constant as a percentage of the underlying value of the assets pledged as security to the facility. If the credit of the underlying collateral value decreases, the amount of leverage to us may be reduced. As of September 30, 2023 and December 31, 2022, t he weighted average haircut under our secured debt arrangements was approxi mately 31.3% and 31.2%, respectively. Our secured credit facilities do not contain capital markets-based mark-to-market provisions. Atlas Facility On February 8, 2023, in connection with the acquisition by certain subsidiaries of Atlas Securitized Products Holdings (“Atlas”), which is a wholly-owned investment of a fund managed by an affiliate of the Manager, of certain warehouse assets and liabilities of the Credit Suisse AG Securitized Products Group ("Credit Suisse AG")(the “Transaction”), the Credit Suisse Facility was acquired by Atlas ("Atlas Facility"). In order to effect the assignment of the Credit Suisse Facility and related agreements, the Company and one of its subsidiaries, similar to the other sellers and guarantors party to the subject agreements in the Transaction, entered into an Omnibus Assignment, Assumption and Amendment Agreement as well as certain related agreements with Credit Suisse AG and Atlas. Refer to "Note 15 - Related Party Transactions" for further discussion regarding the transaction. Revolving Credit Facility On March 3, 2023, we entered into the Revolving Credit Facility administered by Bank of America, N.A. Revolving Credit Facility provides up to $170.0 million of borrowings secured by qualifying commercial mortgage loans and real property owned assets. The Revolving Credit Facility has a term of three years, maturing in March 2026. The Revolving Credit Facility enables us to borrow on qualifying commercial mortgage loans for up to two years and real property owned assets for up to six months. As of September 30, 2023 we had no borrowings outstanding on the Revolving Credit Facility. During the three and nine months ended September 30, 2023, we recorded $86.9 thousand and $200.2 thousand, respectively in unused fees related to the Revolving Credit Facility. The guarantees related to the Revolving Credit Facility contain the following financial covenants: (i) our liquidity cannot be less than an amount equal to the greater of 5% of total recourse indebtedness or $30.0 million; (ii) our ratio of total indebtedness to tangible net worth cannot be greater than 4:1; (iii) tangible net worth must be greater than $1.25 billion plus 75% of the net cash proceeds of any equity issuance after March 31, 2017; and (iv) maintain a minimum interest coverage ratio of 1.5:1. We were in compliance with the covenants under the Revolving Credit Facility as of September 30, 2023. Subsequent to September 30, 2023, we modified our interest coverage ratio covenant to a minimum of 1.4 to 1. Barclays Private Securitization We are party to a private securitization with Barclays Bank plc (the "Barclays Private Securitization"). Commercial mortgage loans currently financed under the Barclays Securitization are denominated in GBP, EUR and SEK. The Barclays Private Securitization does not include daily margining provisions and grants us significant discretion to modify certain terms of the underlying collateral including waiving certain loan-level covenant breaches and deferring or waiving of debt service payments for up to 18 months. The securitization includes loan-to-value based covenants with deleveraging requirements that are based on significant declines in the value of the collateral as determined by an annual third-party (engaged by us) appraisal process tied to the provisions of the underlying loan agreements. We believe this provides us with both cushion and predictability to avoid sudden unexpected outcomes and material repayment requirements. The table below provides principal balances and the carrying value for commercial mortgage loans pledged to the Barclays Private Securitization as of September 30, 2023 and December 31, 2022 ($ in thousands):
| September 30, 2023
Local Currency | Count |  | Outstanding Principal |  | Carrying Value
GBP | 7 |  | $ | 1,537,840 |  |  | $ | 1,519,137 |
EUR | 5 |  | 726,912 |  | 723,610
SEK | 1 |  | 236,381 |  |  | 234,376 |
Total | 13 |  | $ | 2,501,133 |  |  | $ | 2,477,123 |
| December 31, 2022
Local Currency | Count |  | Outstanding Principal |  | Carrying Value
GBP | 7 |  | $ | 1,495,616 |  |  | $ | 1,475,241 |
EUR | 5 |  | 752,531 |  | 747,240
SEK | 1 |  | 248,064 |  |  | 245,714 |
Total | 13 |  | $ | 2,496,211 |  |  | $ | 2,468,195 |
The table below provides the borrowings outstanding (on an as converted basis) and weighted-average fully-extended maturities by currency for the assets financed under the Barclays Private Securitization as of September 30, 2023 ($ in thousands):
| Borrowings Outstanding(1) |  | Fully-Extended Maturity(2)
Total/Weighted-Average GBP | $ | 1,114,701 |  |  | June 2026
Total/Weighted-Average EUR | 514,393 |  | June 2025(3)
Total/Weighted-Average SEK | 189,105 |  | May 2026
Total/Weighted-Average Securitization | $ | 1,818,199 |  |  | February 2026
——————— (1)As of September 30, 2023, we had £913.8 million, €486.5 million, and kr2.1 billion of borrowings outstanding under the Barclays Private Securitization secured by certain of our commercial mortgage loans. (2)Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised. (3)The EUR portion of the Barclays Private Securitization has an "evergreen" feature such that the facility continues for one year and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve months' notice. The table below provides the borrowings outstanding (on an as converted basis) and weighted-average fully-extended maturities by currency for the assets financed under the Barclays Private Securitization as of December 31, 2022 ($ in thousands):
| Borrowings Outstanding(1) |  | Fully-Extended Maturity(2)
Total/Weighted-Average GBP | 1,125,420 |  | May 2026
Total/Weighted-Average EUR | 526,204 |  | July 2025(3)
Total/Weighted-Average SEK | 198,452 |  | May 2026
Total/Weighted-Average Securitization | $ | 1,850,076 |  |  | February 2026
——————— (1)As of December 31, 2022, we had £931.4 million, €491.6 million, and kr2.1 billion of borrowings outstanding under the Barclays Private Securitization secured by certain of our commercial mortgage loans. (2)Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised. (3)The EUR portion of the Barclays Private Securitization has an "evergreen" feature such that the facility continues for one year and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve months' notice. The table below provides the assets and liabilities of the Barclays Private Securitization VIE included in our condensed consolidated balance sheets ($ in thousands):
| September 30, 2023 |  | December 31, 2022
Assets: |  |  |
Cash | $ | 1,740 |  |  | $ | 758 |
Commercial mortgage loans, net(1) | 2,477,123 |  |  | 2,468,195 |
Other Assets | 39,055 |  |  | 30,992 |
Total Assets | $ | 2,517,918 |  |  | $ | 2,499,945 |
Liabilities: |  |  |
Secured debt arrangements, net (net of deferred financing costs of $2.0 million and $2.3 million in 2023 and 2022, respectively) | $ | 1,816,213 |  |  | $ | 1,847,799 |
Accounts payable, accrued expenses and other liabilities(2) | 7,623 |  |  | 8,814 |
Total Liabilities | $ | 1,823,836 |  |  | $ | 1,856,613 |
——————— (1)Net of the General CECL Al lowance of $7.2 million and $8.2 million as of September 30, 2023 and December 31, 2022, respectively. (2)Includes General CECL Allowance related to unfunded commitments on commercial mortgage loans, net o f $2.7 million and $2.9 million as of September 30, 2023 and December 31, 2022, respectively. The table below provides the net income (loss) of the Barclays Private Securitization VIE included in our condensed consolidated statement of operations ($ in thousands):
| Three months ended September 30, |  | Nine months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Net Interest Income: |  |  |  |  |  |  |
Interest income from commercial mortgage loans | $ | 56,537 |  |  | $ | 30,518 |  |  | $ | 156,295 |  |  | $ | 86,695 |
Interest expense | (30,379) |  |  | (12,668) |  |  | (80,753) |  |  | (32,830) |
Net interest income | $ | 26,158 |  |  | $ | 17,850 |  |  | $ | 75,542 |  |  | $ | 53,865 |
General and administrative expense | (2) |  |  | — |  |  | (9) |  |  | — |
Decrease (increase) in current expected credit loss allowance, net | 1,744 |  |  | 889 |  |  | 1,169 |  |  | 4,698 |
Foreign currency translation gain (loss) | (24,266) |  |  | (50,237) |  |  | (3,555) |  |  | (111,745) |
Net Income (Loss) | $ | 3,634 |  |  | $ | (31,498) |  |  | $ | 73,147 |  |  | $ | (53,182) |
At September 30, 2023, our borrowings had the following remaining maturities ($ in thousands):
| Less than 1 year |  | 1 to 3 years |  | 3 to 5 years |  | More than 5 years |  | Total
JPMorgan Facility | $ | 356,095 |  |  | $ | 586,476 |  |  | $ | 229,648 |  |  | $ | — |  |  | $ | 1,172,219 |
Deutsche Bank Facility | 95,686 |  |  | 180,129 |  |  | — |  |  | — |  |  | 275,815 |
Atlas Facility | — |  |  | 83,300 |  |  | 580,517 |  |  | — |  |  | 663,817 |
HSBC Facility | — |  |  | 637,440 |  |  | — |  |  | — |  |  | 637,440 |
Goldman Sachs Facility | — |  |  | 17,868 |  |  | — |  |  | — |  |  | 17,868 |
Barclays Facility | — |  |  | — |  |  | 109,843 |  |  | — |  |  | 109,843 |
MUFG Securities Facility | — |  |  | 196,137 |  |  | — |  |  | — |  |  | 196,137 |
Churchill Facility | — |  |  | 127,822 |  |  | — |  |  | — |  |  | 127,822 |
Santander Facility - USD | — |  |  | 75,000 |  |  | — |  |  | — |  |  | 75,000 |
Santander Facility - EUR | 53,267 |  |  | — |  |  | — |  |  | — |  |  | 53,267 |
Barclays Private Securitization | 253,436 |  |  | 781,989 |  |  | 782,774 |  |  | — |  |  | 1,818,199 |
Total | $ | 758,484 |  |  | $ | 2,686,161 |  |  | $ | 1,702,782 |  |  | $ | — |  |  | $ | 5,147,427 |
The table above reflects the fully extended maturity date of the facility and assumes facilities with an "evergreen" feature continue to extend through the fully-extended maturity of the underlying asset and assumes underlying loans are extended with consent of financing providers. The table below summarizes the outstanding balances at September 30, 2023, as well as the maximum and average month-end balances for the nine months ended September 30, 2023 for our borrowings under secured debt arrangements ($ in thousands).
| As of September 30, 2023 |  | For the nine months ended September 30, 2023
| Balance |  | Amortized Cost of Collateral |  | Maximum Month-End Balance |  | Average Month-End Balance
JPMorgan Facility | $ | 1,172,219 |  |  | $ | 1,981,220 |  |  | $ | 1,324,226 |  |  | $ | 1,226,645 |
Deutsche Bank Facility | 275,815 |  |  | 417,733 |  |  | 385,818 |  |  | 338,297 |
Goldman Sachs Facility | 17,868 |  |  | 35,852 |  |  | 70,249 |  |  | 35,181 |
Atlas Facility | 663,817 |  |  | 932,656 |  |  | 688,126 |  |  | 668,655 |
HSBC Facility | 637,440 |  |  | 822,049 |  |  | 667,430 |  |  | 651,260 |
Barclays Facility | 109,843 |  |  | 136,354 |  |  | 111,909 |  |  | 111,450 |
MUFG Securities Facility | 196,137 |  |  | 266,007 |  |  | 206,362 |  |  | 200,256 |
Churchill Facility | 127,822 |  |  | 169,707 |  |  | 130,000 |  |  | 128,780 |
Santander Facility - USD | 75,000 |  |  | 99,560 |  |  | 75,000 |  |  | 66,667 |
Santander Facility - EUR | 53,267 |  |  | 71,023 |  |  | 55,403 |  |  | 54,244 |
Barclays Private Securitization | 1,818,199 |  |  | 2,484,328 |  |  | 1,937,131 |  |  | 1,877,409 |
Total | $ | 5,147,427 |  |  | $ | 7,416,489 |  |  |  |  |
The table below summarizes the outstanding balances at December 31, 2022, as well as the maximum and average month-end balances for the year ended December 31, 2022 for our borrowings under secured debt arrangements ($ in thousands).
| As of December 31, 2022 |  | For the year ended December 31, 2022
| Balance |  | Amortized Cost of Collateral |  | Maximum Month-End Balance |  | Average Month-End Balance
JPMorgan Facility | $ | 1,373,598 |  |  | $ | 2,376,154 |  |  | $ | 1,584,171 |  |  | $ | 1,411,644 |
Deutsche Bank Facility | 385,818 |  |  | 565,387 |  |  | 432,455 |  |  | 400,337 |
Goldman Sachs Facility | 70,249 |  |  | 116,619 |  |  | 164,607 |  |  | 140,599 |
Atlas Facility | 632,747 |  |  | 855,119 |  |  | 633,143 |  |  | 541,245 |
HSBC Facility | 637,313 |  |  | 813,716 |  |  | 660,004 |  |  | 501,674 |
Barclays Facility | 111,909 |  |  | 138,510 |  |  | 172,693 |  |  | 102,664 |
MUFG Securities Facility | 194,272 |  |  | 261,319 |  |  | 194,272 |  |  | 156,499 |
Santander Facility | 53,320 |  |  | 71,093 |  |  | 53,320 |  |  | 50,450 |
Barclays Private Securitization | 1,850,076 |  |  | 2,476,349 |  |  | 1,963,837 |  |  | 1,828,794 |
Total | $ | 5,309,302 |  |  | $ | 7,674,266 |  |  |  |  |
Debt Covenants The guarantees related to our secured debt arrangements contain the following financial covenants: (i) tangible net worth must be greater than $1.25 billion plus 75% of the net cash proceeds of any equity issuance after March 31, 2017; (ii) our ratio of total indebtedness to tangible net worth cannot be greater than 3.75:1; and (iii) our liquidity cannot be less than an amount equal to the greater of 5% of total recourse indebtedness or $30.0 million. Under these covenants, our General CECL Allowance is added back to our tangible net worth calculation. Subsequent to September 30, 2023, we modified our interest coverage ratio covenant related to our Revolving Credit Facility to a minimum of 1.4 to 1 from a minimum of 1.5 to 1. We were in compliance with the covenants under each of our secured debt arrangements and Revolving Credit Facility at September 30, 2023 and December 31, 2022. The impact of macroeconomic conditions on the commercial real estate markets and global capital markets, including increased interest rates, foreign currency fluctuations, changes to fiscal and monetary policy, slower economic growth or recession, labor shortages, and recent distress in the banking sector, may make it more difficult to meet or satisfy these covenants in the future. Senior Secured Term Loans, Net In May 2019, we entered into a $500.0 million senior secured term loan (the "2026 Term Loan"), which matures in May 2026 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities. The 2026 Term Loan was issued at a price of 99.5%. During the second quarter of 2023, the 2026 Term Loan transitioned from LIBOR to SOFR and currently bears interest at SOFR plus 2.86%. In March 2021, we entered into an additional $300.0 million senior secured term loan, with substantially the same terms as the 2026 Term Loan, (the "2028 Term Loan" and, together with the 2026 Term Loan, the "Term Loans"), which matures in March 2028 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities. The 2028 Term Loan was issued at a price of 99.0%. During the second quarter of 2023, the 2028 Term Loan transitioned from LIBOR to SOFR and currently bears interest at SOFR (with a floor of 0.50%) plus 3.61%. The Term Loans are amortizing with repayments of 0.25% per quarter of the total committed principal. During the three and nine months ended September 30, 2023 and 2022, we repaid $1.3 million and $3.8 million, of principal respectively related to the 2026 Term Loan. During the three and nine months ended September 30, 2023 and 2022, we repaid $0.75 million and $2.25 million, of principal respectively related to the 2028 Term Loan. The following table summarizes the terms of the Term Loans as of September 30, 2023 ($ in thousands):
| Principal Amount | Unamortized Issuance Discount(1) | Deferred Financing Costs(1) | Carrying Value | Rate | Maturity Date
2026 Term Loan | $ | 478,750 |  | $ | (923) |  | $ | (4,685) |  | $ | 473,142 |  | 2.86 | % | 5/15/2026
2028 Term Loan | 292,500 |  | (1,893) |  | (3,368) |  | 287,239 |  | 3.61 | % | 3/11/2028
Total | $ | 771,250 |  | $ | (2,816) |  | $ | (8,053) |  | $ | 760,381 |  |  |
——————— (1) Unamortized issuance discount and deferred financing costs will be amortized to interest expense over remaining life of respective term loans. The following table summarizes the terms of the Term Loans as of December 31, 2022 ($ in thousands):
| Principal Amount | Unamortized Issuance Discount(1) | Deferred Financing Costs(1) | Carrying Value | Rate | Maturity Date
2026 Term Loan | $ | 482,500 |  | $ | (1,190) |  | $ | (6,106) |  | $ | 475,204 |  | 2.75 | % | 5/15/2026
2028 Term Loan | 294,750 |  | (2,214) |  | (3,927) |  | 288,609 |  | 3.50 | % | 3/11/2028
Total | $ | 777,250 |  | $ | (3,404) |  | $ | (10,033) |  | $ | 763,813 |  |  |
——————— (1) Unamortized issuance discount and deferred financing costs will be amortized to interest expense over remaining life of respective term loans. Covenants The financial covenants of the Term Loans include the requirements that we maintain: (i) a maximum ratio of total recourse debt to tangible net worth of 4:1; and (ii) a maximum ratio of total unencumbered assets to total pari-passu indebtedness of 2.50:1. We were in compliance with the covenants under the Term Loans at September 30, 2023 and December 31, 2022. Interest Rate Cap During the second quarter of 2020, we entered into a three-year interest rate cap to cap LIBOR at 0.75%. This effectively limited the maximum all-in coupon on our 2026 Term Loan to 3.50%. The interest rate cap matured on June 15, 2023 and the effective all-in coupon on our 2026 Term Loan increased to one month SOFR plus the spread of 2.86%. During 2023, through the interest rate cap maturity, LIBOR exceeded the cap rate of 0.75%. As such, during the nine months ended September 30, 2023, we realized a gain from the interest rate cap in the amount of $9.1 million, which is included in gain (loss) on interest rate hedging instruments in our condensed consolidated statement of operations. The realized gain was a result of the increase in the current interest rate forward curve. As the interest rate cap matured during the three months ended June 30, 2023, there was no realized gain or loss recorded during three months ended September 30, 2023. Senior Secured Notes, Net In June 2021, we issued $500.0 million of 4.625% Senior Secured Notes due 2029 (the "2029 Notes"), for which we received net proceeds of $495.0 million, after deducting initial purchasers' discounts and commissions. The 2029 Notes will mature on June 15, 2029, unless earlier repurchased or redeemed. The 2029 Notes are secured by a first-priority lien, and rank pari-passu in right of payment with all of our existing and future first lien obligations, including indebtedness under the Term Loans. The 2029 Notes were issued at par and contain covenants relating to liens, indebtedness, and investments in non-wholly owned entities. The 2029 Notes had a carrying value of $495.4 million and $494.8 million, net of deferred financing costs of $4.6 million and $5.2 million, as of September 30, 2023 and December 31, 2022, respectively. Covenants The 2029 Notes include certain covenants including a requirement that we maintain a ratio of total unencumbered assets to total pari-passu indebtedness of at least 1.20:1. As of September 30, 2023 and December 31, 2022, we were in compliance with all covenants. Participations Sold Participations sold represents the subordinate interests in loans we originated and subsequently partially sold. We account for participations sold as secured borrowings on our condensed consolidated balance sheet with both assets and non-recourse liabilities because the participations do not qualify as a sale under ASC 860. The income earned on the participations sold is recorded as interest income and an identical amount is recorded as interest expense in our condensed consolidated statements of operations. In December 2020, we sold a £6.7 million ($8.9 million assuming conversion into USD at time of transfer) interest, at par, in a first mortgage loan collateralized by an office building located in London, United Kingdom that was originated by us in December 2017. In connection with this sale, we transferred our remaining unfunded commitment of £19.1 million ($25.3 million assuming conversion into USD at time of transfer). The participation interest sold was subordinate to our first mortgage loan and was accounted for as a secured borrowing on our consolidated balance sheet. In January 2023, the first mortgage loan, including participations sold, was fully satisfied, including all contractual and default interest accrued to date. The table below details participations sold included in our condensed consolidated balance sheets ($ in thousands):
| September 30, 2023 |  | December 31, 2022
Participation sold on commercial mortgage loans | $ | — |  |  | $ | 25,130 |
Total participations sold | $ | — |  |  | $ | 25,130 |

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