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

Our loan portfolio consisted of 96% floating rate loans, based on amortized cost, net of Specific CECL Allowance, as of June 30, 2025 and December 31, 2024.

Activity relating to our loan portfolio for the six months ended June 30, 2025 was as follows ($ in thousands):


	Principal Balance			Deferred Fees/Other Items			Specific CECL Allowance			Carrying Value, Net(1)
December 31, 2024	$	7,550,410		$	(31,718	)	$	(342,500	)	$	7,176,192
New loan fundings		1,376,101			—			—			1,376,101
Add-on loan fundings(2)		467,200			—			—			467,200
Loan repayments and sale		(724,016	)		—			—			(724,016	)
Gain (loss) on foreign currency translation		425,832			(1,668	)		—			424,164
Valuation allowance, loans and other lending assets held for sale		—			(1,236	)		—			(1,236	)
Deferred fees and other items(3)		—			(26,899	)		—			(26,899	)
Amortization of fees		—			12,216			—			12,216
June 30, 2025	$	9,095,527		$	(49,305	)	$	(342,500	)	$	8,703,722
General CECL Allowance(4)											(38,848	)
Carrying value, net										$	8,664,874

(1)

Includes Note receivable, held for sale.

(2)

Represents fundings subsequent to loan closing.

(3)

Other items primarily consist of purchase discounts or premiums, cost recovery interest, exit fees, and deferred origination expenses.

(4)

$5.1 million of the General CECL Allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheet.

Property Type

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


	June 30, 2025				December 31, 2024
Property Type	Carrying Value			% of Portfolio(1)	Carrying Value			% of Portfolio(1)
Residential(2)	$	2,126,799		24.6%	$	1,556,819		21.8%
Office		2,027,872		23.5		1,756,965			24.6
Hotel		1,371,199		15.8		1,575,270		22.1
Retail		1,190,400		13.7		946,017		13.3
Industrial		1,057,883		12.2		399,546		5.6
Mixed Use		313,526		3.6		363,211		5.1
Other(3)		576,079		6.6		537,164		7.5
Total	$	8,663,758		100.0%	$	7,134,992		100.0%
General CECL Allowance(4)		(38,848	)			(30,836	)
Total Carrying Value, net	$	8,624,910			$	7,104,156

(1)

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

(2)

Includes senior housing (7.5%), multifamily (7.2%), student housing (4.1%), residential-for-sale (4.0%), and vacation rentals (1.8%) in 2025 and senior housing (4.7%), multifamily (4.7%), student housing (4.6%), residential-for-sale (5.5%), and vacation rentals (2.3%) in 2024.

(3)

Other property types include pubs (2.6%), caravan parks (2.4%), and urban predevelopment (1.6%) in 2025, and pubs (2.9%), caravan parks (2.7%), and urban predevelopment (1.9%) in 2024.

(4)

$5.1 million and $5.9 million of the General CECL Allowance for 2025 and 2024, respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheets.

Geography

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


	June 30, 2025				December 31, 2024
Geographic Location	Carrying Value			% of Portfolio(1)	Carrying Value			% of Portfolio(1)
United Kingdom	$	3,140,487		36.2%	$	2,423,856		33.9%
New York City		1,497,147		17.3		1,539,995		21.6
Other Europe(2)		1,157,797		13.3		1,265,344		17.7
West		899,484		10.4		489,008		6.9
Southeast		804,340		9.3		511,742		7.2
Midwest		559,857		6.5		560,436		7.9
Other(3)		604,646		7.0		344,611		4.8
Total	$	8,663,758		100.0%	$	7,134,992		100.0%
General CECL Allowance(4)		(38,848	)			(30,836	)
Total Carrying Value, net	$	8,624,910			$	7,104,156

(1)

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

(2)

Other Europe includes Germany (7.9%), Italy (2.2%), Sweden (3.0%) and the Netherlands (0.2%) in 2025 and Germany (8.4%), Italy (2.4%), Spain (3.5%), Sweden (3.1%) and the Netherlands (0.3%) in 2024.

(3)

Other includes Northeast (3.3%), Mid-Atlantic (1.3%), Southwest (1.3%) and Other (1.1%) in 2025 and Northeast (0.6%), Mid-Atlantic (1.4%), Southwest (1.5%) and Other (1.3%) in 2024.

(4)

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

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

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

The following tables present the carrying value of our loan portfolio by year of origination and internal risk rating and gross write-offs by year of origination as of June 30, 2025 and December 31, 2024, respectively ($ in thousands):


June 30, 2025
							Amortized Cost(1) by Year Originated
Risk Rating	Number of Loans		Total			% of Portfolio	2025		2024		2023		2022		2021		Prior
1		—	$	—		— %	$	—	$	—	$	—	$	—	$	—	$	—
2		2		734,766		8.5%	$	—	$	—	$	—	$	734,766	$	—	$	—
3		47		7,731,635		89.3%	$	1,366,726	$	1,505,783	$	705,416	$	1,668,645	$	1,274,987	$	1,210,078
4		1		73,112		0.8%	$	—	$	—	$	—	$	—	$	—	$	73,112
5		3		124,245		1.4%	$	—	$	—	$	—	$	—	$	—	$	124,245
Total		53	$	8,663,758		100.0%		1,366,726		1,505,783		705,416		2,403,411		1,274,987		1,407,435
General CECL Allowance(2)				(38,848	)
Total loans, net			$	8,624,910
Weighted-Average Risk Rating				3.0
Gross write-offs			$	—			$	—	$	—	$	—	$	—	$	—	$	—


December 31, 2024
									Amortized Cost(1) by Year Originated
Risk Rating	Number of Loans		Total			% of Portfolio			2024		2023		2022		2021		2020		Prior
1		—	$	—			—	%	$	—	$	—	$	—	$	—	$	—	$	—
2		3		560,180		7.9%				—		—		547,851		12,329		—		—
3		37		6,169,860		86.4%				1,218,189		649,599		1,549,750		1,173,982		397,972		1,180,368
4		2		279,732		3.9%				—		—		—		—		—		279,732
5		3		125,220		1.8%				—		—		—		—		27,881		97,339
Total		45	$	7,134,992		100.0%			$	1,218,189	$	649,599	$	2,097,601	$	1,186,311	$	425,853	$	1,557,439
General CECL Allowance(2)				(30,836	)
Total loans, net			$	7,104,156
Weighted-Average Risk Rating				3.0
Gross write-offs			$	127,512					$	—	$	—	$	127,512	$	—	$	—	$	—

(1)

Net of Specific CECL Allowance.

(2)

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

The following table summarizes changes in CECL Allowances for the six months ended June 30, 2025 ($ in thousands):


	Specific CECL		General CECL Allowance							Total CECL		CECL Allowance as % of Amortized Cost
	Allowance(1)		Funded		Unfunded			Total		Allowance		General(1)			Total
December 31, 2024	$	342,500	$	30,836	$	5,948		$	36,784	$	379,284		0.52	%		5.07	%
Changes:
Allowances (Reversals), net(2)		—		3,876		132			4,008		4,008
March 31, 2025	$	342,500	$	34,712	$	6,080		$	40,792	$	383,292		0.54	%		4.75	%
Changes:
Allowances (Reversals), net(3)		—		4,136		(1,023	)		3,113		3,113
June 30, 2025	$	342,500	$	38,848	$	5,057		$	43,905	$	386,405		0.51	%		4.29	%

(1)

Loans evaluated for Specific CECL Allowance are excluded from General CECL Allowance pool.

(2)

During the three months ended March 31, 2025, our General CECL Allowance increased by $4.0 million. The increase was primarily due to a more adverse macroeconomic outlook as well as the effect of loan originations. The increase was partially offset by the favorable impacts of portfolio seasoning.

(3)

During the three months ended June 30, 2025, our General CECL Allowance increased by $3.1 million. The increase was primarily due to the effect of loan originations as well as extending our expected loan repayment dates. The increase was partially offset by the favorable impacts of portfolio seasoning.

The following table summarizes changes in CECL Allowances for the six months ended June 30, 2024 ($ in thousands):


	Specific CECL		General CECL Allowance							Total CECL		CECL Allowance as % of Amortized Cost
	Allowance(1)		Funded		Unfunded			Total		Allowance		General(1)			Total
December 31, 2023	$	193,000	$	26,482	$	4,017		$	30,499	$	223,499		0.38	%		2.61	%
Changes:
Allowances (Reversals), net(2)		142,000		6,076		(392	)		5,684		147,684
March 31, 2024	$	335,000	$	32,558	$	3,625		$	36,183	$	371,183		0.44	%		4.29	%
Changes:
Allowances (Reversals), net(3)		7,500		2,761		(3	)		2,758		10,258
June 30, 2024	$	342,500	$	35,319	$	3,622		$	38,941	$	381,441		0.47	%		4.40	%

(1)

Loans evaluated for Specific CECL Allowance are excluded from General CECL Allowance pool.

(2)

During the three months ended March 31, 2024, our General CECL Allowance increased by $5.7 million. The increase was primarily related to extending our expected loan repayment dates as well as an increase to the historical loss rate derived from Trepp's data. The increase was partially offset by the favorable impacts of portfolio seasoning. During the three months ended March 31, 2024, we also recorded an additional $142.0 million Specific CECL Allowance on our Junior Mezzanine A Loan (as defined below - see "Manhattan Residential"), resulting in the loan’s aggregate Specific CECL allowance of $268.0 million. The additional allowance was recorded primarily due to a reduction in list pricing of remaining units and slower sales pace at the property. The slower sales velocity coincided with the continued overall softening in the midtown Manhattan ultra-luxury submarket.

(3)

During the three months ended June 30, 2024, our General CECL Allowance increased by $2.8 million primarily due to new loan originations as well as a more adverse outlook on our office portfolio. The increase was partially offset by the favorable impacts of portfolio seasoning. Additionally, during the

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

We derive an annual historical loss rate based on a commercial mortgage-backed securities ("CMBS") database with historical losses from 1998 through the second quarter of 2025 provided by a third party, Trepp LLC ("Trepp"). We apply various filters to arrive at a CMBS dataset most analogous to our current portfolio from which to determine an appropriate historical loss rate. The annual historical loss rate is further adjusted to reflect our expectations of the macroeconomic environment for a reasonable and supportable forecast period of eight quarters. In assessing the macroeconomic environment, we consider macroeconomic factors, including unemployment rate, commercial real estate prices, and market liquidity. We compare the historical data for each metric to historical commercial real estate losses in order to determine the correlation of the data. We use projections, obtained from third-party service providers, of each factor to approximate the impact the macroeconomic outlook may have on our loss rate.

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

Additionally, we have made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of the related commercial mortgage loans and subordinate loans and other lending assets in determining the General CECL Allowance, as any uncollectible accrued interest receivable is written off in a timely manner. As of June 30, 2025 and December 31, 2024, accrued interest receivable was $74.9 million and $58.5 million, respectively, and included within other assets on our condensed consolidated balance sheets.

For collateral-dependent loans where we have deemed the borrower/sponsor to be experiencing financial difficulty and a more than moderate/average risk of realizing a principal loss, we have elected to apply a practical expedient in accordance with the CECL Standard in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a Specific CECL Allowance. The Specific CECL Allowance is determined as the difference between the fair value of the

underlying collateral and the carrying value of the loan (prior to the Specific CECL Allowance). When the repayment or satisfaction of a loan is dependent on a sale, rather than operations, of the collateral, the fair value is adjusted for the estimated cost to sell the collateral. Collateral-dependent loans evaluated for a Specific CECL Allowance are removed from the General CECL Allowance pool. The fair value of the underlying collateral is determined by using method(s) such as discounted cash flow, the market approach, or direct capitalization approach. The key unobservable inputs used to determine the fair value of the underlying collateral may vary depending on the information available to us and market conditions as of the valuation date.

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

During the twelve months ended June 30, 2025, we provided the following loan modification that requires disclosure pursuant to ASC 326.

During the three months ended June 30, 2025, we modified our commercial mortgage loan secured by an office property in Berlin, Germany (the "Berlin Office Loan"). The loan’s final maturity date was extended from August 2026 to June 2030. The loan is performing pursuant to its modified contractual terms, and the loan’s risk rating was upgraded from a 4 to a 3.

As of June 30, 2025, the amortized cost basis of the Berlin Office Loan was $235.2 million, or 2.7% of our aggregate commercial mortgage loans and subordinate loans by amortized cost. The loan had an unfunded commitment of $36.7 million as of June 30, 2025.

We cease accruing interest on loans if we deem the interest to be uncollectible with any previously accrued uncollected interest on the loan charged to interest income in the same period. The amortized cost basis, net of Specific CECL Allowance, for loans on nonaccrual was $366.9 million and $486.8 million as of June 30, 2025 and December 31, 2024, respectively.

Under certain circumstances, we may apply the cost recovery method under which interest collected on a loan reduces the loan's amortized cost. We received $0.4 million and $1.0 million in interest that reduced amortized cost under the cost recovery method during the three and six months ended June 30, 2025, respectively, and $0.8 million and $1.4 million during the three and six months ended June 30, 2024, respectively.

As of June 30, 2025 and December 31, 2024, the amortized cost basis, net of Specific CECL Allowance, for loans that are past due 90 days or more as to principal or interest, was $366.9 million and $486.8 million, respectively. As of June 30, 2025 and December 31, 2024, there were no loans with accrued interest between 30 and 89 days past due.

During the three months ended June 30, 2025, the third-party mortgage, which was senior to our mezzanine positions secured by an ultra-luxury residential property in Manhattan, NY, was repaid in full. Accordingly, our Senior Mezzanine A Loan and a portion of our Senior Mezzanine Loan were restructured into a mortgage loan (the "Senior Loan") as we are now the sole lender in the capital structure. The Senior Loan remains on nonaccrual status subsequent to the restructuring.

We recognized $0.4 million in pre-payment penalties and accelerated fees for both the three and six months ended June 30, 2025 and $0.7 million and $0.8 million for the three and six months ended June 30, 2024, respectively.

We recognized PIK interest of $0.3 million for the three and six months ended June 30, 2025. There was no recognized PIK interest during the three and six months ended June 30, 2024.

From time to time, we may enter into sale transactions with other parties. All sale transactions are evaluated in accordance with ASC Topic 860, "Transfers and Servicing" ("ASC 860").

In February 2025, we originated a $114.0 million commercial mortgage loan secured by a multifamily property located in Miami, FL, which included a $24.0 million contiguous subordinate loan. In March 2025, we sold our interest in the $24.0 million subordinate loan. We evaluated the transaction under ASC 860 and determined the sale met the criteria for sale accounting. We recorded no gain or loss related to this transaction.

During the three months ended June 30, 2024, we sold a commercial mortgage loan collateralized by a hotel property located in Honolulu, HI. The loan was previously classified as held for sale and was sold at a price of 99.5%. Upon selling the commercial mortgage loan, we reversed the previously recorded valuation allowance and recorded a realized loss of $0.7 million included within realized loss on investments on our condensed consolidated statement of operations for the three and six months ended June 30, 2024.

Loans are classified as held for sale if there is an intent to sell them in the short-term following the reporting date. Loans classified as held for sale are carried at the lower of amortized cost or fair value less costs to sell, unless the fair value option is elected at origination. Additionally, held for sale loans are not subject to the General CECL Allowance.

During the fourth quarter of 2024, we received a promissory note as consideration related to the sale of one of the eight hospitals that previously secured the Massachusetts Healthcare Loan as defined and discussed in "Note 6 – Other Assets." As of June 30, 2025 and December 31, 2024, the promissory note was classified as held for sale and recorded within Note receivable, held for sale on our consolidated balance sheet at its fair value of $40.0 million and $41.2 million, respectively. The note was subsequently sold in July 2025 at a price of 97.0%, upon which we reversed its valuation allowance and recorded an equivalent realized loss.

Refer also to "Note 3 – Fair Value Disclosure" for further discussion on held for sale classification and fair value measurement policies.