v3.25.3
Commercial Mortgage Loans Held for Investment (Tables)
 9 Months Ended
Sep. 30, 2025
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]  
Schedule of Commercial Mortgage Loans Held for Investment

The following tables show a summary of the Company’s commercial mortgage loans held for investment as of September 30, 2025 and December 31, 2024:

September 30, 2025

Loan Type (1)

Number
of Loans

 

Principal
Balance

 

Unamortized (fees)/costs, net

 

Allowance for credit losses

 

Carrying
Value

 

Weighted Average
Interest Rate (2)

 

Weighted Average
Years to Maturity (3)

 

First mortgage loans

 

16

 

$

369,577

 

$

1,092

 

$

(5,012

)

$

365,657

 

 

7.5

%

 

0.4

 

Credit loans

 

2

 

 

12,880

 

 

—

 

 

(3,150

)

 

9,730

 

 

9.2

%

 

2.2

 

Total and average

 

18

 

$

382,457

 

$

1,092

 

$

(8,162

)

$

375,387

 

 

7.5

%

 

0.5

 

December 31, 2024

Loan Type (1)

Number
of Loans

 

Principal
Balance

 

Unamortized (fees)/costs, net

 

Allowance for credit losses

 

Carrying
Value

 

Weighted Average
Interest Rate (2)

 

Weighted Average
Years to Maturity (3)

 

First mortgage loans

 

23

 

$

549,303

 

$

388

 

$

(9,898

)

$

539,793

 

 

7.7

%

 

0.6

 

Credit loans

 

2

 

 

13,380

 

 

—

 

 

(4,000

)

 

9,380

 

 

9.2

%

 

1.9

 

Total and average

 

25

 

$

562,683

 

$

388

 

$

(13,898

)

$

549,173

 

 

7.7

%

 

0.6

 

 

 

(1)
First mortgage loans are first position mortgage loans and credit loans are mezzanine and subordinated loans.
(2)
Weighted average interest rate is based on the loan spreads plus the applicable indices as of the last interest reset date, which is typically the 15th of each month. On September 15, 2025, the one-month term USD Secured Overnight Financing Rate (“SOFR”) rate reset to 4.15%. On December 15, 2024, the SOFR rate reset to 4.40%. Weighted average interest rate excludes maturity default interest and interest on loans placed on nonaccrual status.
(3)
Weighted average years to maturity excludes allowable extensions on the loans.
Schedule of Commercial Mortgage Loans held for Investment Portfolio

For the nine months ended September 30, 2025, the activity in the Company’s commercial mortgage loans, held-for-investment portfolio was as follows:

 

 

Commercial mortgage loans at cost

 

 

Allowance for credit losses

 

 

Carrying Value

 

Balance at Beginning of Year

 

$

563,071

 

 

$

(13,898

)

 

$

549,173

 

Loan originations/advances

 

 

2,043

 

 

 

—

 

 

 

2,043

 

Principal repayments

 

 

(72,967

)

 

 

—

 

 

 

(72,967

)

Sale of loan (1)

 

 

(47,476

)

 

 

—

 

 

 

(47,476

)

Amortization of loan origination and deferred exit fees

 

 

849

 

 

 

—

 

 

 

849

 

Deferred interest capitalized on real estate loan

 

 

631

 

 

 

—

 

 

 

631

 

Origination fees and extension fees received on commercial loans

 

 

(776

)

 

 

—

 

 

 

(776

)

Transfer on foreclosure to real estate owned (2)

 

 

(61,826

)

 

 

—

 

 

 

(61,826

)

Reversal of credit losses

 

 

—

 

 

 

3,357

 

 

 

3,357

 

Charge-offs (2)

 

 

—

 

 

 

2,379

 

 

 

2,379

 

Balance at End of Period

 

$

383,549

 

 

$

(8,162

)

 

$

375,387

 

 

(1)
Relates to the sale of a loan that was placed on nonaccrual status as of July 15, 2025. The Company completed the sale of the loan in September 2025 and recognized a loss on sale of $8,413 on the loan, which is included within net realized (loss) gain on disposition of commercial loans in the accompanying consolidated statements of operations.
(2)
Relates to the acquisition of two properties secured by senior loans. See Note 13 – “Real Estate Owned” for additional information.
Schedule of Allowance for Credit Losses

The following table presents the activity in the Company’s allowance for credit losses for the nine months ended September 30, 2025:

 

 

Commercial Mortgage Loans

 

 

Unfunded Loan Commitments (1)

 

 

Total

 

Balance at beginning of period

 

$

(13,898

)

 

$

(96

)

 

$

(13,994

)

Reversal of credit losses

 

 

3,357

 

 

 

47

 

 

 

3,404

 

Charge-offs (2)

 

 

2,379

 

 

 

—

 

 

 

2,379

 

Ending allowance for credit losses

 

$

(8,162

)

 

$

(49

)

 

$

(8,211

)

 

(1)
The reserve for expected credit losses related to unfunded loan commitments is recorded in “accrued expenses and other liabilities” on the consolidated balance sheets.
(2)
Relates to the acquisition of two properties secured by senior loans. See Note 13 – “Real Estate Owned” for additional information.

The following table presents the activity in the Company’s allowance for credit losses for the nine months ended September 30, 2024:

 

 

Commercial Mortgage Loans

 

 

Unfunded Loan Commitments (1)

 

 

Total

 

Balance at beginning of period

 

$

(21,849

)

 

$

(289

)

 

$

(22,138

)

(Provision for) reversal of credit losses

 

(3,055

)

 

 

150

 

 

 

(2,905

)

Charge-offs (2)

 

855

 

 

 

—

 

 

 

855

 

Ending allowance for credit losses

$

(24,049

)

 

$

(139

)

 

$

(24,188

)

 

(1)
The reserve for expected credit losses related to unfunded loan commitments is recorded in “accrued expenses and other liabilities” on the consolidated balance sheets.
(2)
Relates to the acquisition of two properties secured by a senior loan in July 2024. See Note 13 - “Real Estate Owned” for additional information.
Summary of Investment Grade of Loans Loss

As part of the Company’s process for monitoring the credit quality of its investments, it performs a quarterly asset review of the investment portfolio and assigns risk ratings to each of its loans and certain securities it may own, such as CMBS. Risk factors include payment status, lien position, borrower financial resources and investment in collateral, collateral type, project economics and geographic location, as well as national and regional economic factors. To determine the likelihood of loss, the loans are rated on a 5-point scale as follows:

 

Investment

Grade

Investment Grade Definition

1

Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable.

2

Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.

3

Performing investment requiring closer monitoring. Trends and risk factors show some deterioration. Collection of principal and interest is still expected.

4

Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative.

5

Underperforming investment with expected loss of interest and some principal.
Schedule of asset specific Cecl reserve

The table below provides the components of the asset-specific CECL reserve as of September 30, 2025 and December 31, 2024:

Loan Type

Collateral Type

September 30, 2025

 

December 31, 2024

 

 

Senior

 Multifamily

$

—

 

$

212

 

(1)

Credit

 Office

 

3,150

 

 

4,000

 

(2)

Senior

 Office

 

1,208

 

 

937

 

(3)

Senior

 Office

 

—

 

 

1,080

 

(4)

Senior

 Office

 

—

 

 

803

 

(5)

Senior

 Industrial

 

—

 

 

187

 

(6)

Total

 

$

4,358

 

$

7,219

 

 

____________

 

 

 

 

 

 
(1)
The loan is secured by a multifamily property in Arlington, TX with an outstanding balance of $24,331 and no unfunded commitment as of September 30, 2025, and a maturity date of December 9, 2025. During the quarter ended March 31, 2025, the Company observed an increase in the in-place net operating income and other macroeconomic improvements which resulted in
an improvement in the estimated value of the property. As the estimated value exceeded the loan balance, the asset-specific CECL reserve was reversed. During the quarter ended September 30, 2025, the Company reviewed the property performance and estimated the property value, noting that the valuation exceeded the outstanding loan balance. As a result, no asset-specific CECL reserve was recorded for the loan as of September 30, 2025. The loan has a risk rating of 3 as of September 30, 2025.
(2)
The loan is secured by an office property in Las Vegas, NV with an outstanding balance of $5,380 and no unfunded commitment as of September 30, 2025. The Company has recorded an asset-specific CECL reserve of $3,150 for the loan as of September 30, 2025. On July 1, 2025, the Company entered into a forbearance and modification agreement with the borrower, which extended the maturity date of the loan to December 31, 2025. In addition, the Company agreed to accept $2,250 for the satisfaction of the loan balance plus all accrued and unpaid interest and lender fees. The borrower made a payment of $500 in July 2025 that was applied against the required amounts due. The loan has a risk rating of 5 as of September 30, 2025 and has been on nonaccrual status since July 1, 2024.
(3)
The loan was secured by an office property in Memphis, TN with an outstanding balance of $2,862 and no unfunded commitment as of September 30, 2025 and a maturity date of November 9, 2026. During the fourth quarter of 2024, the borrower sold a property included in the loan and paid down the principal balance of $5,072, and the Company extended the loan for one year. The Company has recorded an asset-specific CECL reserve of $1,208 as of September 30, 2025 as the estimated value of the property securing the loan was below the loan balance. The loan had a risk rating of 4 as of September 30, 2025. On October 28, 2025, the Company entered into a discounted payoff agreement with the borrower, pursuant to which the loan was settled for $1,678 in full satisfaction of all obligations under the loan.
(4)
The loan is secured by an office property in San Diego, CA with an outstanding balance of $13,626 and an unfunded commitment of $669 as of September 30, 2025, and a maturity date of May 9, 2026. During the quarter ended March 31, 2025, the Company observed an increase in the in-place net operating income and other macroeconomic improvements which resulted in an improvement in the estimated value of the property. As the estimated value exceeded the loan balance, the asset-specific CECL reserve was reversed. During the quarter ended September 30, 2025, the Company reviewed the property performance and estimated the property value, noting that the valuation exceeded the outstanding loan balance. As a result, no asset-specific CECL reserve was recorded for the loan as of September 30, 2025. The loan has a risk rating of 3 as of September 30, 2025.
(5)
The loan is secured by an office property in Honolulu, HI with an outstanding balance of $12,700 and no unfunded commitment as of September 30, 2025. The loan matured on April 9, 2023 and was accruing default interest. On March 18, 2025, the Company extended the loan maturity date to February 9, 2026 to allow the borrower to obtain long-term financing or other bridge financing. As part of the extension, the borrower made a principal reduction payment of $750 and paid other considerations. See “Loan Modifications” below for further information. During the quarter ended June 30, 2025, the Company observed an increase in the in-place net operating income and other macroeconomic improvements which resulted in an improvement in the estimated value of the property. As the estimated value exceeded the loan balance, the asset-specific CECL reserve was reversed. During the quarter ended September 30, 2025, the Company reviewed the property performance and estimated the property value, noting that the valuation exceeded the outstanding loan balance. As a result, no asset-specific CECL reserve was recorded for the loan as of September 30, 2025. The loan has a risk rating of 3 as of September 30, 2025.
(6)
The loan was secured by an industrial property in Mangonia Park, FL with an outstanding balance of $17,096 and no unfunded commitment as of June 30, 2025. The loan matured on April 9, 2025. During the quarter ended March 31, 2025, the Company observed an increase in the in-place net operating income and other macroeconomic improvements which resulted in an improvement in the estimated value of the property. As the estimated value exceeded the loan balance, the asset-specific CECL reserve was reversed. The loan was paid off in full including all outstanding accrued interest on July 8, 2025.