Granite Point Mortgage Trust Inc.
11/05/2025 | Press release | Distributed by Public on 11/05/2025 15:42
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the interim unaudited condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the year ended December 31, 2024.
Our Company
Granite Point Mortgage Trust Inc. is an internally-managed real estate finance company that focuses primarily on directly originating, investing in and managing senior floating-rate commercial mortgage loans and other debt and debt-like commercial real estate investments. Our common stock is listed on the New York Stock Exchange, or NYSE, under the symbol "GPMT." Our investment objective is to preserve our stockholders' capital while generating attractive risk-adjusted returns over the long term, primarily through dividends derived from current income produced by our investment portfolio. We operate as a REIT, as defined under the Code. We also operate our business in a manner intended to maintain our exclusion from registration under the Investment Company Act. We operate our business as one segment.
Recent Developments
Macroeconomic Environment
The past several quarters were characterized by continued volatility in the global securities markets. Volatility was likely driven by investor concerns over tariffs, inflation, elevated interest rates, escalating trade tensions, slowing economic growth, political and regulatory uncertainty and geopolitical conditions. During the year, financial institutions were affected by certain events which also contributed to global markets volatility, diminished liquidity and credit availability.
On September 17, 2025, the Federal Reserve reduced interest rates by 25 basis points, although the timing, direction and extent of any future interest rate changes remained uncertain and interest rates remained at an elevated level. Absent other factors, our business model is such that higher interest rates should generally correlate to higher net interest income. However, interest rates have remained elevated for an extended period of time, adversely affecting our existing borrowers and the cost of financing their properties. Continued higher interest rates may further impact our borrowers and lead to non-performance, as well as dampen consumer spending and slow corporate profit growth, which may negatively impact the collateral underlying certain of our loans. Higher interest rates have adversely impacted, and may continue to adversely impact, commercial real estate property values. It remains difficult to predict the full impact of recent events, interest rate fluctuation, and inflation on macroeconomic conditions and our business.
On April 2, 2025, the U.S. presidential administration initiated significant changes to U.S. tariff policy, with the specific policies changing multiple times since that date. The initial announcement and subsequent related announcements had and continue to have global repercussions, causing capital market uncertainty worldwide. The impact from these changes to U.S. trade policy on commercial real estate remains uncertain, and it is challenging to predict the impact on our business. Tariffs have had and could continue to have an inflationary effect, slow economic growth, result in rising interest rates, and increase unemployment, all of which could decrease demand for space, and the attractiveness of commercial real estate to investors.
Office Property Market
The office property market has experienced higher vacancies, slower leasing activity, and tenant reevaluation of space needs, largely due to remote and hybrid work arrangements. These factors coupled with tariffs, inflation, elevated interest rates and limited market liquidity have created a high level of uncertainty with respect to property values. These dynamics have stressed certain borrowers' ability and willingness to support their properties and perform in accordance with their loan terms. Given this uncertainty, it remains difficult to predict the effect these challenging conditions may have on the office property market, our borrowers, their performance under the terms of our loans secured by office properties and our financial results.
Third Quarter 2025 Activity
Operating Results:
•Recognized GAAP net (loss) attributable to common stockholders of $(0.6) million, or $(0.01) per basic share.
•Generated Distributable (Loss) to common stockholders of $(18.9) million, or $(0.40) per basic share, which includes $(19.8) million in write-offs, and excludes $1.6 million in benefit from credit losses, $(0.9) million of equity compensation expense and $(2.2) million of depreciation and amortization on REO.
•Generated Distributable (Loss) Before Realized Gains and Losses to common stockholders of $0.9 million, or $0.02 per basic share.
•Recorded a decrease to the allowance for credit losses of $(21.4) million, for a total allowance of credit losses of $133.6 million, or approximately 7.4% of total loan commitments of $1.8 billion at September 30, 2025.
•Book value per share of common stock at September 30, 2025, was $7.94, inclusive of $(2.82) per basic common share of total CECL reserve.
•Declared common stock dividends of $2.6 million, or $0.05 per share of common stock, and preferred dividends of $3.6 million, or $0.43750 per share of Series A Preferred Stock.
Investment Portfolio Activity:
•Realized $(122.4) million of total unpaid principal balance in loan repayments, principal paydowns, principal amortization, resolutions and write-offs.
•Funded $12.7 million of prior loan commitments and upsizes, including $0.4 million of capitalized deferred interest.
•Received a $3.4 million partial paydown on a loan secured by office and retail property located in Chicago, IL, with a $79.7 million unpaid principal balance. The net sale proceeds were applied to the outstanding principal balance, which is now secured by the retail portion of the property.
•Resolved a senior loan secured by a student housing property located in Louisville, KY, with a $50.0 million unpaid principal balance via property sale.
•Ended the quarter with a portfolio of 44 loan investments with an aggregate unpaid principal balance of $1.7 billion and total commitments of $1.8 billion, a weighted average stabilized LTV at origination of 65.0%, and a weighted average all-in yield at origination of S+3.92%.
Corporate Financing Activity:
•Extended the secured credit facility to December 21, 2026, and reduced the financing spread by 75 basis points and borrowings by $7.5 million.
Liquidity:
•At September 30, 2025, carried unrestricted cash of $62.7 million, a portion of which is subject to certain liquidity covenants.
Key Financial Measures and Indicators
As a commercial real estate finance company, we believe the key financial measures and indicators for our business are earnings per share presented on a GAAP basis, dividends declared on common stock, Distributable Earnings and book value per share of common stock. For the three months ended September 30, 2025, we recorded a GAAP net (loss) per basic common share of $(0.01), declared a cash dividend of $0.05 per share of common stock and reported Distributable (Loss) of $(0.40) per basic common share. Our book value as of September 30, 2025, was $7.94 per share of common stock, inclusive of $(2.82) per share of total CECL reserves.
As further described below, Distributable Earnings is a "non-GAAP financial measure." We use Distributable Earnings to evaluate our performance, excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations. In addition, Distributable Earnings is a performance metric we consider, along with other measures, when declaring our common stock dividends.
(Loss) Earnings Per Share and Dividends Declared Per Common Share
The following table sets forth the calculation of basic and diluted earnings (loss) per share and dividends declared per share for the three and nine months ended September 30, 2025, and 2024:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (in thousands, except share data) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Net (loss) attributable to common stockholders | $ | (565) | $ | (34,624) | $ | (28,144) | $ | (179,015) | |||||||||||||||
| Basic and diluted weighted average common shares outstanding | 47,394,519 | 50,526,492 | 48,026,438 | 50,736,066 | |||||||||||||||||||
| Basic (loss) per weighted average common share | $ | (0.01) | $ | (0.69) | $ | (0.59) | $ | (3.53) | |||||||||||||||
| Diluted (loss) per weighted average common share | $ | (0.01) | $ | (0.69) | (0.59) | $ | (3.53) | ||||||||||||||||
| Dividend declared per common share | $ | 0.05 | $ | 0.05 | $ | 0.15 | $ | 0.25 | |||||||||||||||
Distributable Earnings (Loss)
In order to maintain our status as a REIT, we are required to distribute at least 90% of our taxable income to stockholders, subject to certain distribution requirements. Distributable Earnings (Loss) is intended to over time serve as a general, though imperfect, proxy for our taxable income. As such, Distributable Earnings (Loss) is considered a key indicator of our ability to generate sufficient income to pay dividends on our common stock, which is the primary focus of income-oriented investors who comprise a meaningful segment of our stockholder base. We believe providing Distributable Earnings (Loss) on a supplemental basis to our net income (loss) and cash flow from operating activities, as determined in accordance with GAAP, is helpful to stockholders in assessing the overall operating performance of our business.
For reporting purposes, we define Distributable Earnings (Loss) as net income (loss) attributable to our stockholders, computed in accordance with GAAP, excluding: (i) non-cash equity compensation expenses; (ii) depreciation and amortization; (iii) any unrealized gains (losses) or other similar non-cash items that are included in net income (loss) for the applicable reporting period (regardless of whether such items are included in other comprehensive income or in net income (loss) for such period); and (iv) certain non-cash items and one-time expenses. Distributable Earnings (Loss) may also be adjusted from time to time for reporting purposes to exclude one-time events pursuant to changes in GAAP and certain other material non-cash income or expense items approved by a majority of our independent directors. The exclusion of depreciation and amortization from the calculation of Distributable Earnings (Loss) only applies to debt investments related to real estate to the extent we foreclose upon the property or properties underlying such debt investments.
While Distributable Earnings (Loss) excludes the impact of the unrealized non-cash current provision for credit losses, we expect to only recognize such potential credit losses in Distributable Earnings (Loss) if and when such amounts are deemed non-recoverable. This is generally at the time a loan is repaid, or in the case of foreclosure, when the underlying asset is sold, but non-recoverability may also be concluded if, in our determination, it is nearly certain that all amounts due will not be collected. The realized loss amount reflected in Distributable Earnings (Loss) will equal the difference between the cash received, or expected to be received, and the carrying value of the asset, and is reflective of our economic experience as it relates to the ultimate realization of the loan. During the three and nine months ended September 30, 2025, we recorded a (benefit from) provision for credit losses of $(1.6) million and $13.1 million, respectively, which has been excluded from Distributable Earnings (Loss), consistent with other unrealized gains (losses) and other non-cash items pursuant to our existing policy for reporting Distributable Earnings (Loss) referenced above. During the three and nine months ended September 30, 2025, we recorded $(2.2) million and $(5.7) million, respectively, in depreciation and amortization on REO and related intangibles, which has been excluded from Distributable Earnings (Loss) consistent with other unrealized gains (losses) and other non-cash items pursuant to our existing policy for reporting Distributable Earnings (Loss) referenced above.
Distributable Earnings (Loss) does not represent GAAP net income (loss) attributable to common stockholders or cash flow from operating activities and should not be considered as an alternative to GAAP net income (loss) attributable to common stockholders, or an indication of our GAAP cash flows from operations, a measure of our liquidity, or an indication of funds available for our cash needs. In addition, our methodology for calculating Distributable Earnings (Loss) may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures, and, accordingly, our reported Distributable Earnings (Loss) may not be comparable to the Distributable Earnings (Loss) reported by other companies.
We believe it is useful to our stockholders to present Distributable Earnings (Loss) Before Realized Gains and Losses, a non-GAAP measure, to reflect our run-rate operating results as (i) our operating results are mainly comprised of net interest income earned on our loan investments net of our operating expenses, which comprise our ongoing operations, (ii) it helps our stockholders in assessing the overall run-rate operating performance of our business, and (iii) it has been a useful reference related to our common dividend as it is one of the factors we and our Board of Directors consider when declaring the dividend. We believe that our stockholders use Distributable Earnings (Loss) and Distributable Earnings (Loss) Before Realized Gains
and Losses, or a comparable supplemental performance measure, to evaluate and compare the performance of our company and our peers.
The following table provides a reconciliation of GAAP net (loss) attributable to common stockholders to Distributable Earnings (Loss) Before Realized Gains and Losses and Distributable Earnings (Loss) for the three and nine months ended September 30, 2025, and 2024:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (in thousands, except share data) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Reconciliation of GAAP net (loss) income to Distributable Earnings (Loss): | |||||||||||||||||||||||
| GAAP net (loss) income attributable to common stockholders | $ | (565) | $ | (34,624) | $ | (28,144) | $ | (179,015) | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
|
(Benefit from) provision for credit losses
|
(1,643) | 27,911 | 13,111 | 164,219 | |||||||||||||||||||
| Depreciation and amortization on real estate owned | 2,164 | 1,945 | 5,650 | 4,421 | |||||||||||||||||||
|
(Gain) loss on sale of real estate owned
|
- | - | (301) | - | |||||||||||||||||||
| Loss (gain) on extinguishment of debt | - | - | - | 786 | |||||||||||||||||||
| Non-cash equity compensation | 896 | 2,534 | 5,534 | 6,164 | |||||||||||||||||||
| Distributable Earnings (Loss) Before Realized Gains and Losses | $ | 852 | $ | (2,234) | $ | (4,150) | $ | (3,425) | |||||||||||||||
| Realized losses on write-offs, loan sales and REO conversions | (19,786) | (44,580) | (80,498) | (51,146) | |||||||||||||||||||
| Realized gain on REO sale | - | - | 301 | - | |||||||||||||||||||
| Accumulated depreciation and amortization on REO sale | - | - | (7,569) | - | |||||||||||||||||||
| Recoveries of previous write-offs | - | 8,819 | - | 8,819 | |||||||||||||||||||
| Distributable Earnings (Loss) | $ | (18,934) | $ | (37,995) | $ | (91,916) | $ | (45,752) | |||||||||||||||
|
Distributable Earnings (Loss) per basic weighted average common share
|
$ | (0.40) | $ | (0.75) | $ | (1.91) | $ | (0.90) | |||||||||||||||
|
Distributable Earnings (Loss) per diluted weighted average common share
|
$ | (0.40) | $ | (0.75) | $ | (1.91) | $ | (0.90) | |||||||||||||||
|
Distributable Earnings (Loss) Before Realized Gains and Losses per basic weighted average common share
|
$ | 0.02 | $ | (0.04) | $ | (0.09) | $ | (0.07) | |||||||||||||||
|
Distributable Earnings (Loss) Before Realized Gains and Losses per diluted weighted average common share
|
$ | 0.02 | $ | (0.04) | $ | (0.09) | $ | (0.07) | |||||||||||||||
| Basic weighted average common shares | 47,394,519 | 50,526,492 | 48,026,438 | 50,736,066 | |||||||||||||||||||
| Diluted weighted average common shares | 47,394,519 | 50,526,492 | 48,026,438 | 50,736,066 | |||||||||||||||||||
Book Value Per Common Share
The following table provides the calculation of our book value per share of common stock as of September 30, 2025, and December 31, 2024:
| (in thousands, except share data) |
September 30, 2025 |
December 31, 2024 |
|||||||||
| Total Granite Point Mortgage Trust Inc. Stockholders' Equity | $ | 581,986 | $ | 619,092 | |||||||
| Series A cumulative redeemable preferred stock liquidation preference | (205,738) | (205,738) | |||||||||
| Common stockholders' equity | $ | 376,248 | $ | 413,354 | |||||||
| Shares: | |||||||||||
| Common shares outstanding | 47,394,519 | 48,801,690 | |||||||||
| Book value per share of common stock | $ | 7.94 | $ | 8.47 | |||||||
Book value per share as of September 30, 2025, includes the impact of an estimated allowance for credit losses of $133.6 million, or $(2.82) per common share. See Note 3 - Loans Held-for-Investment, Net of Allowance for Credit Lossesto our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a detailed discussion of allowance for credit losses.
Loan Portfolio Overview
Our business model is mainly focused on directly originating, investing in and managing senior floating-rate commercial mortgage loans and other debt and debt-like commercial real estate investments. As a result of this strategy, our operating
performance is subject to overall market demand for commercial real estate loan products and other debt and debt-like commercial real estate investments. We place emphasis on diversifying our investment portfolio across geographical regions and local markets, property types, borrowers and loan structures. We do not limit our loan originations by geographical area or property type so that we may develop a well-diversified investment portfolio.
Interest-earning assets include our 100% loan investment portfolio. At September 30, 2025, our loan portfolio was comprised of 44 investments, of which 43 were senior first mortgage loans totaling $1.8 billion of commitments with an unpaid principal balance of $1.7 billion, and one subordinate loan totaling $13.0 million in commitments and unpaid principal balance. At September 30, 2025, the weighted average risk rating of our loan portfolio was 2.8 as compared to 3.1 at December 31, 2024, weighted by total unpaid principal balance.
We may hold REO as a result of taking title to a loan's collateral. As of September 30, 2025, we held two REO office properties with an aggregate carrying value of $105.5 million, inclusive of $10.0 million of intangible assets included in other assets and $(0.2) million of unfavorable lease liabilities in our Condensed Consolidated Balance Sheets.
During the three months ended September 30, 2025, we funded $12.7 million under existing loan commitments and loan upsizes. We realized $(109.7) million in aggregate reductions in portfolio unpaid principal balance from loan repayments, paydowns, amortization and resolutions. See Note 3 - Loans Held-for-Investment, Net of Allowance for Credit Lossesto our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further detail.
The following table details our loan activity by unpaid principal balance for the three months ended September 30, 2025, and 2024:
| Three Months Ended September 30, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Other loan fundings | $ | 12,236 | $ | 9,803 | |||||||
| Deferred interest capitalized | 417 | 91 | |||||||||
|
Transfers in from loan related receivables(1)
|
413 | - | |||||||||
| Loan repayments | (102,989) | (240,145) | |||||||||
| Loan write-offs | (19,786) | (44,580) | |||||||||
| Total loan activity, net | $ | (109,709) | $ | (274,831) | |||||||
______________________
(1)Transfers in from loan related receivables of $0.4 million included in loan write-offs during the three months ended September 30, 2025.
The following table details overall statistics for our loan portfolio as of September 30, 2025:
| (dollars in thousands) | |||||
| Loan Portfolio Summary | |||||
|
Number of loans
|
44 | ||||
|
Total loan commitments
|
$ | 1,795,823 | |||
| Unpaid principal balance | $ | 1,720,198 | |||
|
Unfunded loan commitments
|
$ | 75,625 | |||
| Carrying value | $ | 1,582,675 | |||
|
Weighted-average cash coupon(1)
|
S+3.61% | ||||
|
Weighted-average all-in yield(2)
|
S+3.92% | ||||
|
Stabilized LTV(3)
|
65.0 | % | |||
______________________
(1)Cash coupon does not include origination or exit fees. Weighted average cash coupon excludes fixed rate loans and impact of loans placed on nonaccrual status.
(2)Yield includes net origination fees and exit fees, but does not include future fundings, and is expressed as a monthly equivalent. Weighted average yield excludes fixed rate loans and impact of loans on nonaccrual status.
(3)Stabilized loan-to-value ratio at origination, or stabilized LTV, is calculated as the fully funded loan amount (plus any financing that is pari passuwith or senior to such loan), including all contractually provided for future fundings, divided by the as stabilized value (as determined in conformance with USPAP) set forth in the original appraisal. As stabilized value may be based on certain assumptions, such as future construction completion, projected re-tenanting, payment of tenant improvement or leasing commissions allowances or free or abated rent periods, or increased tenant occupancies.
The following table provides detail of our loan portfolio as of September 30, 2025:
| (dollars in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Type(1)
|
Origination/ Acquisition Date | Maximum Loan Commitment | Principal Balance | Carrying Value |
Cash
Coupon(2)
|
All-in Yield at Origination(3)
|
Original Term (Years)(4)
|
State | Property Type |
Initial LTV(5)
|
Stabilized LTV(6)
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans Held-For-Investment | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 12/19 | $109.8 | $107.9 | $107.6 | S+2.80% | S+3.23% | 3.0 | IL | Multifamily | 76.5% | 73.0% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior
|
10/19 | 95.0 | 89.3 | 89.3 | S+2.60% | S+3.05% | 3.0 | TN | Office | 70.2% | 74.2% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior(7)(10)
|
08/19 | 93.1 | 93.1 | 93.2 | S+2.80% | S+3.26% | 3.0 | MN | Office | 73.1% | 71.2% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior
|
12/18 | 78.0 | 70.5 | 70.6 | S+3.90% | S+3.44% | 3.0 | TX | Office | 68.5% | 66.7% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior
|
10/22 | 77.3 | 77.3 | 77.2 | S+4.50% | S+4.61% | 2.0 | CA | Retail | 47.7% | 36.6% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 06/19 | 76.8 | 76.5 | 76.2 | S+3.29% | S+3.05% | 3.0 | TX | Mixed-Use | 71.7% | 72.2% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior(7)(10)
|
07/19 | 76.3 | 76.3 | 76.1 | S+3.74% | S+4.32% | 3.0 | IL | Retail | 70.0% | 64.4% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior(9)
|
12/19 | 70.9 | 70.4 | 70.4 | S+3.50% | S+3.28% | 3.0 | NY | Office | 68.8% | 59.3% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior
|
12/23 | 66.3 | 60.8 | 60.6 | S+5.50% | S+5.65% | 2.0 | CA | Office | 80.0% | 79.2% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior
|
07/22 | 54.1 | 51.6 | 51.0 | S+2.78% | S+4.25% | 3.0 | GA | Multifamily | 74.5% | 68.2% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 06/21 | 53.0 | 47.8 | 47.7 | S+4.38% | S+4.75% | 3.0 | GA | Office | 68.0% | 69.4% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior
|
04/22 | 48.7 | 46.9 | 46.3 | S+3.41% | S+3.78% | 3.0 | TX | Multifamily | 74.4% | 64.0% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 03/22 | 46.9 | 46.9 | 46.7 | S+3.25% | S+3.64% | 3.0 | MA | Industrial | 67.3% | 60.8% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior
|
07/21 | 46.4 | 46.4 | 46.2 | S+3.72% | S+4.19% | 3.0 | CT | Office | 68.3% | 63.5% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 08/21 | 45.8 | 45.4 | 45.2 | S+3.21% | S+3.53% | 3.0 | TX | Multifamily | 77.8% | 75.2% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior
|
09/21 | 44.3 | 43.2 | 43.1 | S+3.36% | S+3.72% | 3.0 | CA | Office | 62.4% | 66.1% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 02/22 | 42.4 | 42.4 | 42.3 | S+3.05% | S+3.40% | 3.0 | NJ | Industrial | 75.0% | 59.5% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior(8)
|
11/21 | 39.0 | 33.7 | 32.4 | 5.75% | 3.82% | 3.0 | PA | Mixed-Use | 62.0% | 63.5% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 07/16 | 38.7 | 38.0 | 37.9 | S+5.05% | S+4.99% | 4.0 | VA | Office | 62.8% | 61.5% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior
|
09/21 | 37.5 | 37.5 | 37.5 | S+5.00% | S+5.12% | 3.0 | MN | Hotel | 68.4% | 57.8% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 04/22 | 36.3 | 35.1 | 34.0 | S+3.00% | S+4.87% | 3.0 | NY | Other | 66.7% | 61.8% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 03/20 | 34.9 | 24.4 | 24.3 | S+5.04% | S+4.66% | 3.0 | GA | Office | 63.2% | 64.6% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior
|
11/21 | 33.1 | 33.0 | 33.0 | S+3.13% | S+3.52% | 3.0 | AL | Multifamily | 77.9% | 68.1% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior
|
08/19 | 32.9 | 31.3 | 31.2 | S+2.96% | S+3.38% | 3.0 | TX | Multifamily | 79.3% | 72.5% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 11/19 | 32.9 | 32.7 | 32.6 | S+3.73% | S+3.14% | 3.0 | NC | Multifamily | 80.0% | 72.8% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 03/19 | 29.9 | 29.5 | 29.5 | S+2.97% | S+3.42% | 3.0 | NY | Office | 53.8% | 48.5% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 04/22 | 29.1 | 27.6 | 27.5 | S+3.22% | S+3.55% | 3.0 | TX | Multifamily | 73.3% | 63.9% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior(7)
|
01/18 | 28.9 | 26.9 | 26.9 | S+5.18% | S+5.58% | 3.0 | AZ | Hotel | 65.8% | 61.3% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 03/22 | 27.2 | 26.7 | 26.6 | S+4.14% | S+4.89% | 3.0 | NC | Office | 47.4% | 53.5% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 10/21 | 25.7 | 25.7 | 25.6 | S+3.20% | S+3.43% | 4.0 | GA | Industrial | 67.5% | 64.5% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 12/21 | 24.7 | 17.1 | 17.0 | S+3.36% | S+3.59% | 3.0 | CA | Office | 72.9% | 68.3% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 09/21 | 24.4 | 23.6 | 23.4 | S+3.23% | S+3.61% | 3.0 | CA | Multifamily | 71.9% | 57.8% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior(10)
|
05/21 | 23.3 | 20.4 | 20.4 | S+3.55% | S+4.09% | 3.0 | LA | Multifamily | 68.0% | 69.6% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 02/20 | 21.9 | 21.9 | 21.8 | S+4.00% | S+3.75% | 3.0 | TN | Hotel | 69.1% | 54.2% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Senior
|
06/19 | 21.0 | 20.4 | 20.4 | S+3.25% | S+4.24% | 3.0 | GA | Mixed-Use | 60.6% | 67.4% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 05/21 | 18.8 | 18.8 | 18.7 | S+4.05% | S+4.41% | 3.0 | FL | Multifamily | 69.8% | 62.8% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 06/21 | 16.7 | 14.2 | 14.2 | S+3.41% | S+3.82% | 4.0 | IN | Multifamily | 67.0% | 66.4% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 07/19 | 15.6 | 13.5 | 13.5 | S+3.07% | S+3.60% | 3.0 | OH | Office | 63.1% | 66.1% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 10/18 | 15.5 | 15.5 | 15.5 | S+6.21% | S+5.16% | 3.0 | CT | Hotel | 75.4% | 66.9% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 08/17 | 15.4 | 15.4 | 15.3 | S+5.25% | S+5.49% | 3.0 | PA | Office | 66.7% | 67.3% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 08/21 | 14.5 | 14.0 | 14.1 | S+3.70% | S+3.88% | 3.0 | CO | Office | 72.0% | 63.7% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mezzanine | 01/17 | 13.0 | 13.0 | 13.0 | 8.00% | 8.11% | 10.0 | HI | Hotel | 41.4% | 36.2% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 06/19 | 11.4 | 10.8 | 10.8 | S+2.75% | S+4.69% | 3.0 | NY | Office | 40.7% | 60.0% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior | 01/18 | 8.4 | 6.8 | 6.8 | S+5.25% | S+5.50% | 3.0 | PA | Office | 66.8% | 67.3% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | $(130.9) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total/Weighted Average Loans | $1,795.8 | $1,720.2 | $1,582.7 |
S+3.61%
|
S+3.92%
|
3.0 | 68.9% | 65.0% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
______________________
(1)"Senior" means a loan primarily secured by a first priority lien on commercial real property and related personal property and also includes, when applicable, any companion subordinate loans.
(2)Cash coupon does not include origination or exit fees. Weighted average cash coupon excludes fixed rate loans and impact of loans placed on nonaccrual status.
(3)Yield includes net origination fees and exit fees, but does not include future fundings, and is expressed as a monthly equivalent. Weighted average yield excludes fixed rate loans and impact of loans placed on nonaccrual status.
(4)Original term (years) is the initial maturity date at origination and does not include any extension options and has not been updated to reflect any subsequent extensions or modifications, if applicable.
(5)Initial loan-to-value ratio, or initial LTV at origination, is calculated as the initial loan amount (plus any financing that is pari passuwith or senior to such loan) divided by the as is appraised value (as determined in conformance with the Uniform Standards of Professional Appraisal Practice, or USPAP) as of the date of the loan was originated set forth in the original appraisal.
(6)Stabilized LTV is calculated as the fully funded loan amount (plus any financing that is pari passuwith or senior to such loan), including all contractually provided for future fundings, divided by the as stabilized value (as determined in conformance with USPAP) set forth in the original appraisal. As stabilized value may be based on certain assumptions, such as future construction completion, projected re-tenanting, payment of tenant improvement or leasing commissions allowances or free or abated rent periods, or increased tenant occupancies.
(7)Loan was held on nonaccrual status as of September 30, 2025.
(8)Completed a modification with an effective date of July 12, 2024, that included an adjustment in rate to a fixed rate coupon rate of 5.75%, adjusted from a floating rate coupon of S+3.40%.
(9)Includes a $1.7 million unsecured note advanced to an existing borrower.
(10)As of September 30, 2025, the loan was in maturity default.
Most of our loans are structured with an initial maturity term, typically three years, and one or more (typically two) one-year extension options, which can be exercised by the borrower subject to meeting various extension conditions in accordance with the terms of the loan agreement. As part of our overall asset management strategy, we have in the past entered into, and may in the future enter into, loan modifications with some of our borrowers. These amendments may include, among other things, modifying or waiving certain performance or extension conditions as part of the overall agreement.
The map and charts below, weighted by carrying value, illustrate the geographic distribution and types of properties securing our loan portfolio as of September 30, 2025:
Portfolio Management and Credit Quality
We actively manage each loan investment from closing and initial funding through final repayment and assess the risk of credit deterioration by quarterly evaluating the performance of the underlying collateral properties. We also evaluate the macroeconomic environment, prevailing real estate fundamentals and local property market dynamics. Typically, our loan documents allow us, among other things, to receive regular property, borrower and guarantor financial statements; approve annual budgets and major tenant leases; and enforce loan covenants and remedies. In addition, we work with a leading commercial real estate loan servicer, which provides us with a fully-dedicated and experienced team to increase efficiency and
leverage our internal resources in servicing and asset managing our loan investments. Our internal team retains authority on all asset management decisions.
We maintain strong relationships and an active asset management dialogue with our borrowers. We have leveraged those relationships along with our team's experience to maximize the performance of our portfolio, including during periods of real estate market and economic uncertainty and volatility. While we generally believe that the principal amount of our loans is sufficiently protected by the underlying collateral value, there is a risk that we will not realize the entire principal amount of certain of our loan investments.
In addition to ongoing asset management, we review our entire portfolio quarterly, assess the performance of each loan and assign it a risk rating on a scale between "1" and "5," from least risk to greatest risk, respectively. The risk ratings are based on many factors, which include, but are not limited to, property type, geographic and local market dynamics, physical condition, leasing and tenant profile, projected cash flow, collateral performance, loan structure and exit plan, origination LTV, project sponsorship and other factors deemed appropriate. We evaluate these factors with respect to each loan investment on a case-by-case basis taking into consideration such loan's facts and circumstances at the time. The risk factors may be given different weightings depending on the specifics of each loan. See Note 3 - Loans Held-for-Investment, Net of Allowance for Credit Lossesto our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a discussion regarding the risk rating methodology we use for our portfolio.
The following table allocates the unpaid principal balance and the carrying value balances based on our internal risk ratings as of September 30, 2025, and December 31, 2024:
| (dollars in thousands) | September 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||
| Risk Rating | Number of Loans | Unpaid Principal Balance | Carrying Value | Number of Loans | Unpaid Principal Balance | Carrying Value | ||||||||||||||||||||||||||||||||
| 1 | 6 | $ | 227,420 | $ | 225,999 | 6 | $ | 153,954 | $ | 152,382 | ||||||||||||||||||||||||||||
| 2 | 12 | 424,760 | 420,745 | 17 | 652,450 | 645,333 | ||||||||||||||||||||||||||||||||
| 3 | 20 | 720,218 | 688,405 | 20 | 676,745 | 645,811 | ||||||||||||||||||||||||||||||||
| 4 | 3 | 151,535 | 137,793 | 4 | 169,867 | 155,757 | ||||||||||||||||||||||||||||||||
| 5 | 3 | 196,265 | 109,733 | 7 | 453,318 | 298,365 | ||||||||||||||||||||||||||||||||
| Total | 44 | $ | 1,720,198 | $ | 1,582,675 | 54 | $ | 2,106,334 | $ | 1,897,648 | ||||||||||||||||||||||||||||
As of September 30, 2025, the weighted average risk rating of our loan portfolio was 2.8, versus 3.1 as of December 31, 2024, weighted by unpaid principal balance. The change in the weighted average portfolio risk rating versus December 31, 2024, is mainly a result of resolutions of two previously risk-rated "5" loans.
Risk-Rated "5" Loans
During the three months ended September 30, 2025, as part of our quarterly risk rating process, we downgraded one first mortgage loan with an aggregate outstanding principal balance of $26.9 million and secured by a hotel property to a risk rating of "5." The loan is considered collateral dependent and has been placed on nonaccrual status as of September 30, 2025.
As of September 30, 2025, we had three loans that had a risk rating of "5" with an aggregate principal balance of $196.3 million, for which we recorded an allowance for credit losses of $86.5 million. These three loans were on nonaccrual status as of September 30, 2025. The performance of these assets, which include one office building, one retail property, and one hotel property, has been adversely affected to varying degrees by many factors, such as slower pace in leasing activity for office properties and other submarket dynamics, combined with a significant rise in interest rates contributing to a meaningful reduction in real estate transaction activity, capital markets volatility and limited market liquidity affecting property values and these borrowers' ability to either sell or refinance their loans, and other property specific factors. These loans are considered collateral-dependent and have been placed on nonaccrual status as of September 30, 2025.
Other Portfolio Developments
During the three months ended September 30, 2025, we resolved a senior loan secured by a multifamily student housing property located in Louisville, KY, via a property sale. The loan was on nonaccrual status with an unpaid principal balance of $50.0 million and a risk-rating of "5." As a result of the property sale, we recognized a write-off of $(19.4) million, which had been reserved for through a previously recorded allowance for credit losses of $22.6 million, resulting in a benefit from credit losses of $3.2 million.
During the three months ended September 30, 2025, we recognized a $3.4 million partial paydown on a nonaccrual loan secured by an office and retail property in Chicago, IL. The office portion of the property was sold, and the net sale proceeds were applied to the outstanding principal balance of the loan, which is now secured by the retail portion of the property. As of September 30, 2025, as a result of the partial paydown, we have reclassified the loan from office to retail, and the loan remained on nonaccrual status with a risk-rating of "5" and an unpaid principal balance of $76.3 million.
Loan Modification Activity
Loan modifications and amendments are commonplace in the transitional lending business. We may amend or modify a loan depending on the loan's specific facts and circumstances. These loan modifications may include additional time for the borrower to refinance or sell the collateral property, adjustment or waiver of performance tests that are prerequisite to the extension of a loan's maturity date, and/or deferral of scheduled payments. In exchange for a modification, we often receive a partial repayment of principal, an accrual of deferral interest for a portion of interest due, a cash infusion to replenish interest or capital improvement reserves, termination of all or a portion of the remaining unfunded loan commitment, additional call protection, and/or an increase in the loan coupon or additional loan fees.
During the three months ended September 30, 2025, we completed the modification of a senior loan secured by a hotel property located in Tempe, AZ. As of September 30, 2025, and December 31, 2024, the loan had a principal balance of $26.9 million and $25.2 million, respectively, and an amortized cost of $26.9 million and $25.1 million, respectively. The terms of the modification included, among other things, (i) a 2-month extension of the fully-extended maturity date to November 9, 2025, with one 6-month option to extend to May 9, 2026; and (ii) a $2.5 million upsizing of the total commitment of the loan, resulting in an aggregate $3.7 million upsizing of the total commitment when considering other modifications occurring during the twelve months ended September 30, 2025. Due to the uncertainty with respect to the collection of future principal and interest, the loan was deemed collateral dependent, assigned a risk rating of "5" and was placed on nonaccrual status. The senior loan was performing pursuant to its modified contractual terms as of September 30, 2025.
During the twelve months ended September 30, 2025, we completed the modification of a senior loan secured by a hotel property located in Minneapolis, MN. As of September 30, 2025, and December 31, 2024, the loan had a principal balance of $37.5 million and $52.6 million, respectively, and an amortized cost of $37.5 million and $52.7 million, respectively. The terms of the modification included, among other things, (i) a 3-year extension of the fully-extended maturity date to May 9, 2028, with one 12-month option to extend to May 9, 2029; (ii) a restructuring of the loan into a $37.0 million senior note and a subordinate note that was immediately charged off; and (iii) an accrued pay spread. As a result of the modification, we recognized a write-off of approximately $(15.4) million, which had been reserved for through a previously recorded allowance for credit losses. The senior note was performing pursuant to its modified contractual terms as of September 30, 2025.
Portfolio Financing
As of September 30, 2025, our portfolio financing consisted of repurchase and secured credit facilities collateralized by loans held-for-investment and securitized debt obligations collateralized by pools of loans held-for-investment issued in CRE CLOs. Our non-mark-to-market financing sources accounted for approximately 63.3% of portfolio loan-level financing as of September 30, 2025.
The following table details our portfolio loan-level financing as of September 30, 2025, and December 31, 2024:
| (in thousands) |
September 30, 2025 |
December 31, 2024 |
|||||||||
| CRE CLOs | $ | 677,084 | $ | 788,313 | |||||||
| Secured credit facility | 79,274 | 86,774 | |||||||||
| Total non-mark-to-market financing | 756,358 | 875,087 | |||||||||
| Secured repurchase agreements (mark-to-market) | 438,121 | 597,874 | |||||||||
| Total portfolio financing | $ | 1,194,479 | $ | 1,472,961 | |||||||
The following table summarizes assets at carrying values that served as collateral for the future payment obligations of the repurchase facilities, the asset-specific financing facility, the term financing facility, the secured credit facility and the CRE CLOs as of September 30, 2025, and December 31, 2024:
| (in thousands) |
September 30, 2025 |
December 31, 2024 |
|||||||||
| Loans held-for-investment | $ | 1,530,482 | $ | 1,856,321 | |||||||
|
Real Estate Owned, net(1)
|
105,506 | - | |||||||||
| Restricted cash | - | 8,018 | |||||||||
| Total | $ | 1,635,988 | $ | 1,864,339 | |||||||
______________________
(1)As of September 30, 2025, real estate owned, net included $7.2 million in other assets and liabilities related to acquired leases.
Secured Repurchase Agreements
As of September 30, 2025, we had repurchase facilities in place with three counterparties with aggregate outstanding borrowings of $0.4 billion, which financed a portion of our loans held-for-investment and real estate owned. As of September 30, 2025, the weighted average borrowing rate on our repurchase facilities was 7.0%, the weighted average advance rate was 57.7%, and the term to maturity ranged from 60 days to approximately 1.0 year, with a weighted average remaining maturity of 0.8 years.
The table below details our secured repurchase facilities as of September 30, 2025:
| September 30, 2025 | |||||||||||||||||||||||||||||
| (in thousands) |
Maturity Date(1)
|
Committed | Amount Outstanding |
Unused Capacity(2)
|
Total Capacity | ||||||||||||||||||||||||
| Repurchase facilities: | |||||||||||||||||||||||||||||
|
Morgan Stanley Bank(3)
|
June 28, 2026 | No | $ | 52,464 | $ | 197,536 | $ | 250,000 | |||||||||||||||||||||
|
JPMorgan Chase Bank(4)
|
July 28, 2026 | No | 313,170 | 133,821 | 446,991 | ||||||||||||||||||||||||
| Citibank | April 27, 2026 | No | 72,487 | 177,513 | 250,000 | ||||||||||||||||||||||||
| Total | $ | 438,121 | $ | 508,870 | $ | 946,991 | |||||||||||||||||||||||
______________________
(1)The facilities are set to mature on the stated maturity date, unless extended pursuant to their terms.
(2)Unused capacity is not committed as of September 30, 2025.
(3)Collateral value includes real estate owned with a carrying value of $70.7 million.
(4)Collateral value includes real estate owned with a carrying value of $34.8 million.
Under our existing repurchase facilities, our counterparties may make margin calls as a result of a perceived decline in the value of our assets collateralizing the given facility due to a credit event or, under a limited number of our repurchase facilities, due to market events. To cover a margin call, we may transfer cash or other collateral to such a counterparty. Should the value of our assets suddenly decrease, significant margin calls on our mark-to-market repurchase facilities could result, causing an adverse change in our liquidity position.
Commercial Real Estate Collateralized Loan Obligations
We have financed certain pools of our loans through the issuance of CRE CLOs. At September 30, 2025, we held two CRE CLOs outstanding: GPMT 2021-FL4 and GPMT 2021-FL3, totaling $0.7 billion of outstanding borrowings, financing 26 of our existing senior loan investments with an aggregate principal balance, inclusive of restricted cash, totaling $0.9 billion. As of September 30, 2025, our CRE CLOs financed 50.0% of our total loan portfolio principal balance on a term-matched, non-recourse and non-mark-to-market basis with attractive cost of funds.
The following table details our CRE CLO securitized debt obligations as of September 30, 2025:
| (dollars in thousands) | September 30, 2025 | |||||||||||||||||||
| Securitized Debt Obligations | Principal Balance | Carrying Value |
Wtd. Avg. Yield/Cost (1)
|
|||||||||||||||||
| GPMT 2021-FL4 CRE CLO | ||||||||||||||||||||
|
Collateral assets(2)
|
$ | 464,927 | $ | 449,885 |
S+3.9%
|
|||||||||||||||
| Financing provided | 359,163 | 358,716 |
S+1.9%
|
|||||||||||||||||
| GPMT 2021-FL3 CRE CLO | ||||||||||||||||||||
|
Collateral assets(3)
|
394,703 | 387,140 |
S+3.5%
|
|||||||||||||||||
| Financing provided | 318,368 | 318,368 |
S+2.5%
|
|||||||||||||||||
| Total | ||||||||||||||||||||
|
Collateral assets(4)
|
$ | 859,630 | $ | 837,025 |
S+3.7%
|
|||||||||||||||
| Financing provided | $ | 677,531 | $ | 677,084 |
S+2.2%
|
|||||||||||||||
______________________
(1)Calculations of all in yield on collateral assets at origination are based on a number of assumptions (some or all of which may not occur) and are expressed as monthly equivalent yields that include net origination fees and exit fees and exclude future fundings and any potential or completed loan amendments or modifications. Calculations of cost of funds is the weighted average coupon of the CRE CLO, exclusive of any CRE CLO issuance costs.
(2)No restricted cash is included as of September 30, 2025.
(3)No restricted cash is included as of September 30, 2025.
(4)No restricted cash is included as of September 30, 2025.
Secured Credit Facility
In December 2022, we entered into a secured credit facility with a maximum borrowing capacity of $100.0 million. The facility had aggregate outstanding borrowings of $79.3 million as of September 30, 2025, which financed a portion of our loans held for investment on a non-mark-to-market basis. The facility matures on December 21, 2026.
The following table details the outstanding borrowings under our secured credit facility as of September 30, 2025:
| (dollars in thousands) | September 30, 2025 | |||||||||||||||||||
| Secured Credit Facility | Principal Balance | Carrying Value |
Wtd. Avg. Yield/Cost (1)
|
|||||||||||||||||
| Collateral assets | $ | 153,906 | $ | 98,864 |
S+4.2%
|
|||||||||||||||
| Borrowings outstanding | 79,274 | 79,274 |
S+5.8%
|
|||||||||||||||||
______________________
(1)Calculations of all in yield on collateral assets at origination are based on a number of assumptions (some or all of which may not occur) and are expressed as monthly equivalent yields that include net origination fees and exit fees and exclude future fundings and any potential or completed loan amendments or modifications. Calculations of all in weighted average yield at origination exclude fixed rate loans. Calculations of cost of funds is the initial weighted average coupon of the secured credit facility, exclusive of any secured credit facility issuance costs.
Financial Covenants
We are subject to a variety of financial covenants under our secured financing arrangements. The following represent the most restrictive financial covenants to which we are subject across our secured finance arrangements:
|
Financial Covenant
|
Description
|
Value as of September 30, 2025
|
||||||
|
Cash Liquidity
|
Unrestricted cash liquidity of no less than the greater of $30.0 million and 5.0% of recourse indebtedness, which was $6.9 million.
|
Unrestricted cash of $62.7 million
|
||||||
|
Tangible Net Worth
|
Tangible net worth greater than the sum of (i) $0.6 billion and (ii) 75.0% of net cash proceeds of equity issuances after September 30, 2024. As the Company has not had any equity issuances after September 30, 2024, tangible net worth must be greater than $0.6 billion.
|
Tangible net worth of $0.7 billion
|
||||||
|
Leverage Ratios
|
Target asset leverage ratio cannot exceed 77.5% and total leverage ratio cannot exceed 80.0%.
|
Target asset leverage ratio of 69.5%; Total leverage ratio of 63.0%
|
||||||
| Interest Coverage |
Minimum interest coverage of no less than 1.2:1.0 from April 1, 2025, until and including December 31, 2025, and 1.3:1.0 thereafter.
|
Interest coverage of 1.3:1.0
|
||||||
We were in compliance with these financial covenants as of September 30, 2025.
Leverage Ratios
As of September 30, 2025, the total debt-to-equity ratio with respect to our loans held-for-investment was 1.9:1.0, and our recourse leverage ratio was 0.8:1.0. The following table represents our recourse leverage ratio and total leverage ratio as of September 30, 2025, and December 31, 2024. The period-over-period decrease in our leverage ratios was mainly related to lower borrowings due to loan repayments and paydowns.
| September 30, 2025 | December 31, 2024 | ||||||||||
|
Recourse leverage ratio(1)
|
0.8 | 1.0 | |||||||||
|
Total leverage ratio(2)
|
1.9 | 2.2 | |||||||||
______________________
(1)The debt-to-equity ratio with respect to our loans held-for-investment, defined as recourse debt, net of cash, divided by total equity.
(2)The total debt-to-equity ratio with respect to our loans held-for-investment, defined as total debt, net of cash, divided by total equity.
Floating Rate Portfolio
Our business strategy seeks to minimize our exposure to changes in interest rates by matching benchmark indices on our assets with those on our asset level borrowings. Accordingly, our business model is such that, in general, rising interest rates will increase our net interest income, while declining interest rates will decrease our net interest income, subject to the impact of interest rate floors on our floating rate assets and certain liabilities. As of September 30, 2025, 97.3% of our loan investments by principal balance earned a floating rate of interest and were financed with liabilities that pay interest on a floating rate basis, which resulted in an amount of net floating rate exposure, subject to the impact of interest rate floors on certain of our floating rate loan investments, of $0.5 billion. As of September 30, 2025, 2.7% of our loan investments by principal balance earned a fixed rate of interest and were financed with liabilities that pay interest on a floating rate basis, which resulted in a negative correlation to elevated interest rates on that amount of our financing.
The following table details our loan portfolio's net floating rate exposure as of September 30, 2025:
| (in thousands) |
Net Exposure
|
||||
|
Floating rate assets(1)(2)
|
$ | 1,673,519 | |||
|
Floating rate liabilities(1)(3)
|
1,194,926 | ||||
|
Net floating rate exposure
|
$ | 478,593 | |||
______________________
(1)As of September 30, 2025, all of our floating rate assets and liabilities were indexed to SOFR.
(2)Includes loans on nonaccrual status as of September 30, 2025.
(3)Floating rate liabilities include our outstanding repurchase facilities, secured credit facility and CRE CLOs.
Interest-Earning Assets and Interest-Bearing Liabilities
The following tables present the components of interest income and average annualized net asset yield earned by asset type, the components of interest expense and average annualized cost of funds on borrowings incurred by collateral type and net interest income and average annualized net interest rate spread for the three and nine months ended September 30, 2025, and 2024. The net asset yield reflects the impact of loans held on nonaccrual status.
| Three Months Ended September 30, 2025 | Nine Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Average Balance |
Interest Income/Expense(1)
|
Net Yield/Cost of Funds | Average Balance |
Interest Income/Expense(1)
|
Net Yield/Cost of Funds | |||||||||||||||||||||||||||||
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Interest-earning assets(2)
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Loans held-for-investment
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Senior loans(3)
|
$ | 1,744,602 | $ | 32,739 | 7.5 | % | $ | 1,866,782 | $ | 99,561 | 7.1 | % | |||||||||||||||||||||||
|
Subordinated loans
|
13,047 | 267 | 8.2 | % | 13,119 | 796 | 8.1 | % | |||||||||||||||||||||||||||
|
Total loan interest income/net asset yield
|
$ | 1,757,649 | $ | 33,006 | 7.5 | % | $ | 1,879,901 | $ | 100,357 | 7.1 | % | |||||||||||||||||||||||
|
Other - Interest on cash and cash equivalents
|
714 | 2,310 | |||||||||||||||||||||||||||||||||
|
Total interest income
|
$ | 33,720 | $ | 102,667 | |||||||||||||||||||||||||||||||
|
Interest-bearing liabilities
|
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Borrowings collateralized by:
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Loans held-for-investment
|
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Senior loans(3)
|
$ | 1,199,831 | $ | 22,543 | 7.5 | % | $ | 1,299,133 | $ | 73,826 | 7.6 | % | |||||||||||||||||||||||
|
Subordinated loans
|
9,077 | 192 | 8.5 | % | 10,488 | 712 | 9.1 | % | |||||||||||||||||||||||||||
| Real estate owned | 33,491 | 689 | 8.2 | % | 27,218 | 1,748 | 8.6 | % | |||||||||||||||||||||||||||
|
Total interest expense/cost of funds
|
$ | 1,242,399 | $ | 23,424 | 7.5 | % | $ | 1,336,839 | $ | 76,286 | 7.6 | % | |||||||||||||||||||||||
|
Net interest income/spread
|
$ | 10,296 | - | % | $ | 26,381 | (0.5 | %) | |||||||||||||||||||||||||||
| Three Months Ended September 30, 2024 | Nine Months Ended September 30, 2024 | ||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Average Balance |
Interest Income/Expense(1)
|
Net Yield/Cost of Funds | Average Balance |
Interest Income/Expense(1)
|
Net Yield/Cost of Funds | |||||||||||||||||||||||||||||
|
Interest-earning assets(2)
|
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Loans held-for-investment
|
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Senior loans(3)
|
$ | 2,449,251 | $ | 42,758 | 7.0 | % | $ | 2,606,893 | $ | 141,062 | 7.2 | % | |||||||||||||||||||||||
|
Subordinated loans
|
13,330 | 273 | 8.2 | % | 13,398 | 816 | 8.1 | % | |||||||||||||||||||||||||||
|
Total loan interest income/net asset yield
|
$ | 2,462,581 | $ | 43,031 | 7.0 | % | $ | 2,620,291 | $ | 141,878 | 7.2 | % | |||||||||||||||||||||||
|
Other - Interest on cash and cash equivalents
|
$ | 1,266 | 4,953 | ||||||||||||||||||||||||||||||||
|
Total interest income
|
$ | 44,297 | $ | 146,831 | |||||||||||||||||||||||||||||||
|
Interest-bearing liabilities
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Borrowings collateralized by:
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Loans held-for-investment
|
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Senior loans(3)
|
$ | 1,687,347 | $ | 36,341 | 8.6 | % | $ | 1,827,853 | $ | 117,626 | 8.6 | % | |||||||||||||||||||||||
|
Subordinated loans
|
11,358 | 298 | 10.5 | % | 11,415 | 893 | 10.4 | % | |||||||||||||||||||||||||||
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Total interest expense/cost of funds
|
$ | 1,698,705 | $ | 36,639 | 8.6 | % | $ | 1,839,268 | $ | 118,519 | 8.6 | % | |||||||||||||||||||||||
|
Net interest income/spread
|
$ | 7,658 | (1.6) | % | $ | 28,312 | (1.4 | %) | |||||||||||||||||||||||||||
______________________
(1)Includes amortization of deferred debt issuance costs.
(2)Average balance represents average amortized cost on loans held-for-investment.
(3)Loans primarily secured by a first priority lien on commercial real property and related personal property and also includes, when applicable, any companion subordinate loans.
Factors Affecting Our Operating Results
The results of our operations are affected by a number of factors and primarily depend on, among other things, the level of our net interest income, the availability and our cost of financing, the market value of our assets, the credit performance of our assets and the supply of, and demand for, commercial real estate loans, other commercial real estate debt instruments and other financial assets available for investment in the market and available as a source of refinancing of our assets. Our interest income, which reflects the amortization of origination fees and direct costs, is recognized based on the contractual rate and the outstanding principal balance of the loans we originate. The objective of the interest method is to arrive at a periodic interest income that yields a level rate of return over the loan term. Interest rates vary according to the type of loan or security, conditions in the financial markets, creditworthiness of our borrowers, competition and other factors, none of which can be predicted with any certainty. Our operating results may also be impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by our borrowers. We continue to monitor the effects on each of these factors in light of the continued volatility in global markets, driven by investor concerns over inflation, elevated interest rates and geopolitical uncertainty, and how they will affect our operating results.
Loan Originations
Our business model is mainly focused on directly originating, investing in and managing senior floating-rate commercial mortgage loans and other debt and debt-like commercial real estate investments. As a result of this strategy, our operating performance is subject to overall market demand for commercial real estate loan products and other debt and debt-like commercial real estate investments. We manage originations and acquisitions of our target investments by diversifying our investment portfolio across geographical regions, local markets, property types, borrower types and loan structures. We do not limit our investments to any number of geographical areas or property types for our originations so that we develop a well-diversified investment portfolio. Additionally, our team has extensive experience originating and acquiring commercial real estate loans and other debt and debt-like commercial real estate investments, through a network of long-standing relationships with borrowers, sponsors and industry brokers. Investor concerns over inflation, elevated interest rates and geopolitical uncertainty have resulted in significant disruptions and volatility in financial markets, uncertainty about the overall macroeconomic outlook and a dislocation in the commercial real estate sector, including reduced borrower demand, wider credit spreads, higher lending rates, increased capitalization rates on properties and significantly lower transaction volume. This dislocation in capital markets and decline in real estate sale transaction and refinancing activities have negatively impacted, and will likely continue to negatively impact, the volume of loan repayments and prepayments on select property types (which are a significant source of our overall liquidity) and the volume of our originations of new loan investments.
Financing Availability
We are subject to the availability and cost of financing to successfully execute on our business strategy and generate attractive risk-adjusted returns to our stockholders. Much of our financing is in the form of repurchase agreements or other types of credit facilities provided to us by our lender counterparties. We mitigate this counterparty risk by seeking to diversify our lending partners, focusing on establishing borrowing relationships with strong counterparties and continuously monitoring them through a thoughtful approach to counterparty risk oversight. Additionally, as part of our broader risk management strategy, and to the extent available in the market, we finance our business through other means, which may include, but are not to be limited to, securitizations, note sales and issuance of secured and unsecured debt and equity instruments. We continue to actively explore additional types of funding facilities in order to further diversify our financing sources. Investor concerns over inflation trends, elevated interest rates and geopolitical uncertainty have resulted in significant disruptions and volatility in financial markets and uncertainty about the overall macroeconomic and capital markets outlook. These conditions have negatively impacted, and may continue to negatively impact, real estate and real estate capital markets, which could make it more difficult for us to obtain or maintain financing.
We finance pools of our commercial real estate loans through CRE CLOs, retaining subordinate securities in our investment portfolio. Our CRE CLOs are accounted for as financings with the non-retained securitized debt obligations recognized on our condensed consolidated balance sheets.
Credit Risk
We are subject to varying degrees of credit risk in connection with our target investments. The performance and value of our investments depend upon sponsors' ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. In addition, we are exposed to the risks generally associated with the commercial real estate market, including variances in occupancy rates, capitalization rates, absorption rates and other macroeconomic factors beyond our control such as the level of market interest rates. We try to mitigate these risks by seeking to originate or acquire assets of higher quality at appropriate rates of return given anticipated and unanticipated losses, by employing a comprehensive review and selection process and by proactively monitoring our investment portfolio. Nevertheless, unanticipated credit losses, including as a result of inflation, high interest rates, capital markets volatility and geopolitical uncertainty, could occur that could adversely impact our operating results. Volatility in market interest rates may result in fluctuations in cash flows and values of properties securing our loans. As a result, there may exist the risk of non-performance on our floating-rate loans, and in the case of a significant increase in interest rates, the cash flows of the collateral properties
may not sufficiently cover debt service due under our loans, which may contribute to loan non-performance or, in certain cases, loan default.
The environmental, social and governance, or ESG, factors associated with our potential collateral and borrowers could also pose credit risks to us. We try to mitigate these risks by incorporating diligence practices into our investment process to identify significant ESG concerns related to a given investment. The nature and scope of our ESG diligence will vary based on the investment but may include a review of, among other things, energy management, pollution and contamination, accounting standards, bribery and corruption.
We employ a long-term, fundamental value-oriented investment strategy and we aim to, on a loan-by-loan basis, construct an investment portfolio that is well-diversified across property types, geographies and sponsors.
Operating Expenses
Our operating expenses, such as compensation costs and expenses related to managing our investment portfolio, may vary over time and are subject to a variety of factors, including overall economic and market environment, competitive market forces driving employee-related costs and other related factors.
Allowance for Credit Losses
Our operating results are also impacted by the allowance for credit losses we record for loans held-for-investment using the CECL methodology pursuant to ASU 2016-13.
Changes in the Fair Value of Our Investments
We intend to hold our target investments for the long-term and, as such, they are carried at an amortized cost on our condensed consolidated balance sheets.
Although we intend to hold our target investments for the long-term, we may occasionally invest in debt securities and classify them as available-for-sale, or AFS. Investments classified as AFS are carried at their fair value, with changes in fair value recorded through accumulated other comprehensive income, a component of stockholders' equity, rather than through earnings. We do not intend to hold any of our investments for trading purposes.
Changes in Market Interest Rates
Our primary interest rate exposures relate to the yield on our loans and other investments and the financing cost of our borrowings. Changes in interest rates have affected, and may continue to affect, our net interest income from loans and other investments. Interest rate fluctuations resulting in our interest and related expense exceeding interest and related income would result in operating losses for us. For further discussion of the potential impacts of changes in interest rates, see "Quantitative and Qualitative Disclosures about Market Risk - Interest Rate Risk" in Part I, Item 3 of this Quarterly Report on Form 10-Q.
U.S. Trade Policy
Changes in U.S. trade policy may affect our financial performance due to capital market uncertainty, rising construction, operational, and borrowing costs and changes in tenant and investor demands. Certain changes to U.S. trade policy may result in higher inflation, which could cause the Federal Reserve to pause further interest rate cuts or even consider interest rate increases. Static or increasing interest rates may negatively impact our portfolio investments and the financing of our assets. As a result, under certain market disruption scenarios, we may earn lower net interest income and revenues from real estate owned, incur higher operating expenses, and the cash flows of the collateral properties may not sufficiently cover debt service due under our loans, which may contribute to loan non-performance or, in certain instances, loan defaults.
Summary of Results of Operations and Financial Condition
Comparison of the Three Months Ended September 30, 2025, and June 30, 2025
Net Interest Income
The following table presents the components of interest income and interest expense for the three months ended September 30, 2025, and June 30, 2025:
| (in thousands) | Three Months Ended | |||||||||||||||||||
| Income Statement Data: | September 30, 2025 | June 30, 2025 |
Q3'25 vs Q2'25
|
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| Interest income: | (unaudited) | |||||||||||||||||||
| Loans held-for-investment | $ | 33,006 | $ | 33,024 | $ | (18) | ||||||||||||||
| Cash and cash equivalents | 714 | 779 | (65) | |||||||||||||||||
| Total interest income | $ | 33,720 | $ | 33,803 | $ | (83) | ||||||||||||||
| Interest expense: | ||||||||||||||||||||
| Repurchase facilities | $ | 8,852 | $ | 10,590 | $ | (1,738) | ||||||||||||||
| Securitized debt obligations | 12,178 | 12,604 | (426) | |||||||||||||||||
| Secured credit facility | 2,394 | 2,564 | (170) | |||||||||||||||||
| Total interest expense | 23,424 | 25,758 | (2,334) | |||||||||||||||||
| Net interest income | $ | 10,296 | $ | 8,045 | $ | 2,251 | ||||||||||||||
The majority of our interest-earning assets and liabilities have floating rates based on an index (e.g., one-month SOFR) plus a credit spread. As a result, our asset yields and cost of funds are impacted by changes in benchmark market short-term interest rates and credit spreads on investments and borrowings, as well as changes in the mix of our investment portfolio credit spreads due to new originations, loan amendments, additional fundings, upsizing transactions, repayments and when certain loans are placed on nonaccrual status.
Interest Income
Interest income for the three months ended September 30, 2025, decreased to $33.7 million from $33.8 million for the three months ended June 30, 2025, mainly due to a lower average balance of our interest-earning assets as a result of loan repayments.
Interest Expense
Interest expense for the three months ended September 30, 2025, decreased to $23.4 million from $25.8 million for the three months ended June 30, 2025, mainly due to a lower average balance of our interest-bearing liabilities as a result of loan repayments and nonaccrual loan resolutions.
Benefit from (Provision for) Credit Losses
The following table presents the components of benefit from (provision for) credit losses for the three months ended September 30, 2025, and June 30, 2025:
| (in thousands) | Three Months Ended | ||||||||||
|
Benefit from (provision for) credit losses on:
|
September 30, 2025 | June 30, 2025 | |||||||||
| Loans held-for-investment | $ | 1,274 | $ | (10,760) | |||||||
| Other liabilities | 369 | (224) | |||||||||
|
Total benefit from (provision for) credit losses
|
$ | 1,643 | $ | (10,984) | |||||||
During the three months ended September 30, 2025, we recorded a benefit from credit losses of $1.6 million as compared to a provision for credit losses of $(11.0) million for the three months ended June 30, 2025. The decrease in the provision for credit losses was primarily driven by favorable changes to the macroeconomic assumptions employed in estimating the general CECL reserve.
Expenses
The following table presents the components of expenses for the three months ended September 30, 2025, and June 30, 2025:
| Three Months Ended | |||||||||||
| (dollars in thousands) | September 30, 2025 | June 30, 2025 | |||||||||
|
Compensation and benefits
|
$ | 4,067 | $ | 5,718 | |||||||
|
Servicing expenses
|
862 | 817 | |||||||||
| Expenses from real estate owned operations | 5,776 | 5,227 | |||||||||
| Other operating expenses | 1,757 | 2,717 | |||||||||
| Total operating expenses | $ | 12,462 | $ | 14,479 | |||||||
|
Annualized total operating expenses, excluding expenses from real estate owned operations, as a percentage of average total equity, excluding non-controlling interest
|
4.6 | % | 6.2 | % | |||||||
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Annualized total operating expenses, excluding non-cash equity compensation and expenses from real estate owned operations, as a percentage of average total equity, excluding non-controlling interest
|
4.0 | % | 4.7 | % | |||||||
We incur compensation and benefits expenses, servicing expenses related to the servicing of commercial real estate loans, expenses from REO operations and other operating expenses. Compensation and benefits expenses for the three months ended September 30, 2025, decreased primarily due to lower non-cash equity compensation expense amortization as compared to the three months ended June 30, 2025. Servicing expenses for the three months ended September 30, 2025, modestly increased as compared to the three months ended June 30, 2025. Expenses from REO operations for the three months ended September 30, 2025, increased primarily due to a full quarter of operations on the REO assets held, as compared to the prior quarter. Other operating expenses decreased as compared to the prior quarter mainly due to lower diligence and legal fees. Our operating expense ratio, excluding REO, decreased during the three months ended September 30, 2025, as compared to the three months ended June 30, 2025, mainly due to lower average equity and lower total operating expenses during the three months ended September 30, 2025.
Our GAAP net (loss) attributable to common stockholders was $(0.6) million (or $(0.01) per basic weighted average share) for the three months ended September 30, 2025, as compared to GAAP net (loss) attributable to common stockholders of $(17.0) million (or $(0.35) per basic weighted average share) for the three months ended June 30, 2025. The increase in GAAP results was primarily due to a benefit from credit losses of $1.6 million during the three months ended September 30, 2025, compared to a provision for credit losses of $(11.0) million during the three months ended June 30, 2025.
Comparison of the Nine Months Ended September 30, 2025, and September 30, 2024
Net Interest Income
The following table presents the components of interest income and interest expense for the nine months ended September 30, 2025, and September 30, 2024:
| (in thousands) | Nine Months Ended September 30, | |||||||||||||||||||
| Income Statement Data: | 2025 | 2024 |
Q3'25 vs Q3'24
|
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| Interest income: | ||||||||||||||||||||
| Loans held-for-investment | $ | 100,357 | $ | 141,878 | $ | (41,521) | ||||||||||||||
| Cash and cash equivalents | 2,310 | 4,953 | (2,643) | |||||||||||||||||
| Total interest income | $ | 102,667 | $ | 146,831 | $ | (44,164) | ||||||||||||||
| Interest expense: | ||||||||||||||||||||
| Repurchase facilities | $ | 31,327 | $ | 57,424 | $ | (26,097) | ||||||||||||||
| Securitized debt obligations | 37,462 | 52,939 | (15,477) | |||||||||||||||||
| Secured credit facility | 7,497 | 8,156 | (659) | |||||||||||||||||
| Total interest expense | $ | 76,286 | $ | 118,519 | $ | (42,233) | ||||||||||||||
| Net interest income | $ | 26,381 | $ | 28,312 | $ | (1,931) | ||||||||||||||
The majority of our interest-earning assets and liabilities have floating rates based on an index (e.g., one-month SOFR) plus a credit spread. As a result, our asset yields and cost of funds are impacted by changes in benchmark market interest rates and credit spreads on investments and borrowings, as well as changes in the mix of our investment portfolio credit spreads due to new originations, loan amendments, additional fundings, upsizing transactions and repayments.
Interest Income
Interest income for the nine months ended September 30, 2025, decreased to $102.7 million from $146.8 million for the nine months ended September 30, 2024, mainly due to a lower average balance of our interest-earning assets and a decline in short-term interest rates.
Interest Expense
Interest expense for the nine months ended September 30, 2025, decreased to $76.3 million from $118.5 million for the nine months ended September 30, 2024, mainly due to a lower average balance on portfolio level financing and a decline in short-term interest rates.
Provision for Credit Losses
The following table presents the components of (provision for) benefit from credit losses for the nine months ended September 30, 2025, and September 30, 2024:
| Nine Months Ended September 30, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| (Provision for) benefit from credit losses on: | |||||||||||
| Loans held-for-investment | (11,679) | (164,436) | |||||||||
| Other liabilities | (1,432) | 217 | |||||||||
| Total (provision for) benefit from credit losses | $ | (13,111) | $ | (164,219) | |||||||
During the nine months ended September 30, 2025, we recorded a provision for credit losses of $(13.1) million as compared to $(164.2) million during the nine months ended September 30, 2024. The decrease in the provision for credit losses was primarily driven by lower balances on nonaccrual loans that were individually assessed in accordance with ASU 2016-13 during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024.
Expenses
The following table presents the components of expenses for the nine months ended September 30, 2025, and September 30, 2024:
| Nine Months Ended September 30, | |||||||||||
| (dollars in thousands) | 2025 | 2024 | |||||||||
|
Compensation and benefits
|
$ | 15,556 | $ | 16,083 | |||||||
|
Servicing expenses
|
2,710 | 3,971 | |||||||||
| Expenses from real estate owned operations | 15,507 | 8,822 | |||||||||
| Other operating expenses | 7,477 | 8,695 | |||||||||
| Total operating expenses | $ | 41,250 | $ | 37,571 | |||||||
|
Annualized total operating expenses, excluding expenses from real estate owned operations, as a percentage of average total equity, excluding non-controlling interest
|
5.7 | % | 5.0 | % | |||||||
|
Annualized total operating expenses, excluding non-cash equity compensation and expenses from real estate owned operations, as a percentage of average total equity, excluding non-controlling interest
|
4.5 | % | 3.9 | % | |||||||
We incur compensation and benefits expenses, servicing expenses related to the servicing of commercial real estate loans, expenses from REO operations and other operating expenses. Compensation and benefits and servicing expenses for the nine months ended September 30, 2025, decreased primarily due to lower non-cash equity compensation expense amortization as compared to the nine months ended September 30, 2024. Servicing expenses for the nine months ended September 30, 2025, decreased primarily due to a lower portfolio balance as compared to the nine months ended September 30, 2024. Expenses from real estate owned operations increased due to a higher average balance of REO assets held during the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. Other operating expenses decreased as compared to the nine months ended September 30, 2024, mainly due to lower expenses related to diligence fees, professional services and legal fees. Our operating expense ratio, excluding REO, increased during the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, mainly due to lower average equity.
Liquidity and Capital Resources
Capitalization
To date, we have capitalized our business primarily through the issuance and sale of shares of our common and preferred stock, borrowings under our senior secured term loan facilities, secured financing facilities, issuance of CRE CLOs and the issuance and sale of convertible notes. As of September 30, 2025, our capitalization included $1.2 billion of loan-level financing. Our loan-level financing as of September 30, 2025, is generally term-matched or matures in 2026, and includes $0.4 billion of secured repurchase agreements, $0.7 billion of CRE CLO securitizations, which are term-matched to the underlying assets, non-recourse and non-mark-to-market, and a $79.3 million term-matched and non-mark-to-market secured credit facility.
See Note 5 - Variable Interest Entities and Securitized Debt Obligationsand Note 6 - Secured Financing Agreements to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional details regarding our securitized debt obligations and our secured financing facilities, respectively.
Leverage
From December 31, 2024, to September 30, 2025, our debt-to-equity ratio, defined as total debt, net of cash, divided by total equity, decreased from 2.2:1.0 to 1.9:1.0 mainly due to a reduction in outstanding debt. As part of our investment strategy, we plan to finance our target assets with a moderate amount of leverage, the level of which may vary based upon the particular characteristics of our portfolio and market conditions. To that end, subject to maintaining our qualification as a REIT and our exclusion from registration under the Investment Company Act, we intend to use borrowings to fund the origination or acquisition of our target investments. Given our focus on senior floating-rate mortgage loans, we currently expect that such leverage will be, on a total debt-to-equity ratio basis, within a range of 3.0:1.0 and 3.5:1.0; however, our leverage may vary and differ from our expectations depending on market conditions and any steps we may take to strengthen our balance sheet and enhance our liquidity position. The amount of leverage we deploy for our target investments depends upon our assessment of a variety of factors, which may include the anticipated liquidity and any changes in value of the investments in our portfolio, the potential for losses in our portfolio, the gap between the maturities of our assets and liabilities, the availability and cost of financing our investments, our opinion of the creditworthiness of our financing counterparties, the health of the U.S. economy and commercial real estate financing markets, our outlook for the level and volatility of interest rates, the slope of the yield curve, the credit quality of our investments, the collateral underlying our investments and our outlook for investment credit spreads relative to SOFR.
Sources of Liquidity
Our primary sources of liquidity include cash and cash equivalents on our condensed consolidated balance sheets, any approved but unused borrowing capacity under our financing facilities, the net proceeds of future public and private equity and debt offerings, payments of principal, including loan repayments and prepayments, loan sales, interest we receive on our portfolio of assets and cash generated from our operating results.
The following table sets forth our immediately available sources of liquidity as of September 30, 2025:
| (in thousands) | September 30, 2025 | |||||||
| Cash and cash equivalents | $ | 62,690 | ||||||
| Approved but unused borrowing capacity on financing facilities | - | |||||||
| Total | $ | 62,690 | ||||||
We have access to liquidity through public offerings of debt and equity securities, subject to market and other conditions. To facilitate such offerings, in August 2024, we filed a shelf registration statement with the SEC that is effective for a term of three years and expires in August 2027. The amount of securities to be issued pursuant to this shelf registration statement was not specified when it was filed. The securities covered by this registration statement include: (i) common stock, (ii) preferred stock, (iii) depositary shares, (iv) debt securities, (v) purchase contracts, and (vi) purchase units. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering. At any time, and from time to time, we may be evaluating or pursuing one or more liquidity enhancing transactions, but we cannot provide any assurance if or when we will consummate any such transaction, or the terms thereof.
Although we generally intend to hold our target investments as long-term investments, we have opportunistically sold, and may again in the future sell, certain of our assets in order to manage our liquidity needs, to meet other operating objectives and to adapt to market conditions. We cannot predict the timing and impact of future sales of our assets, if any. Since many of our assets are financed with secured financing facilities and/or CRE CLOs, a significant portion of the proceeds from sales of our assets, prepayments and scheduled amortization would be used to repay balances under these financing arrangements.
We remain focused on actively managing our balance sheet and liquidity to best position us for the market environment, to satisfy our loan future funding and financing obligations and to make new investments, which we expect will cause us to take, and in some instances has already caused us to take, some or all of the following actions: raise capital from offerings of equity
and/or debt securities, on a public or private basis; borrow additional capital; post additional collateral; sell assets; and/or change our dividend practices, which we will continue to evaluate in respect of future quarters based upon customary considerations, including market conditions and distribution requirements to maintain our REIT status. At any given time and from time to time we may be evaluating or pursuing one or more transactions, including, but not limited to, loan sales, capital markets activities and other sources of funding, to improve our liquidity or to refinance our debt or may otherwise seek transactions to reduce our interest expense or leverage and extend our debt maturities, which transactions, depending on market conditions and other factors, could result in actual losses and/or otherwise negatively impact our results of operations in one or more periods.
Liquidity Needs
In addition to our loan origination activities and general operating expenses, our primary liquidity needs include interest and principal payments under our $1.2 billion of outstanding borrowings under our repurchase facilities, CRE CLOs, and secured credit facility; $75.6 million of unfunded loan commitments; and dividend distributions to our preferred and common stockholders, which are at the discretion of our board of directors.
Financing Availability
We are subject to the availability and cost of financing to successfully execute on our business strategy and generate attractive risk-adjusted returns to our stockholders. Much of our financing is in the form of repurchase facilities or other types of credit facilities provided to us by our lender counterparties. We mitigate this counterparty risk by seeking to diversify our lending partners, focusing on establishing borrowing relationships with strong counterparties and continuously monitoring them through a thoughtful approach to counterparty risk oversight. Additionally, as part of our broader risk management strategy, and to the extent available in the market, we finance our business through other means which may include, but not be limited to, CRE CLOs, note sales and the issuance of unsecured debt and equity instruments. We continue to actively explore additional types of funding facilities in order to further diversify our financing sources. Investor concerns over inflation trends, elevated interest rates and geopolitical uncertainty have resulted in significant disruptions in financial markets and uncertainty about the overall macroeconomic and capital markets outlook. These conditions have negatively impacted, and may continue to negatively impact, real estate fundamentals and real estate capital markets, which could make it more difficult for us to obtain or maintain financing.
The following table provides the maturities of our repurchase facilities, secured credit facility and securitized debt obligations, as of September 30, 2025, and December 31, 2024:
| (in thousands) |
September 30, 2025 |
December 31, 2024 |
|||||||||
| Within one year | $ | 1,176,651 | $ | 1,279,702 | |||||||
| One to three years | 17,828 | 156,607 | |||||||||
| Three to five years | - | 36,652 | |||||||||
| Total | $ | 1,194,479 | $ | 1,472,961 | |||||||
Cash Flows
For the nine months ended September 30, 2025, our restricted and unrestricted cash and cash equivalents balance decreased approximately $40.6 million, to $73.9 million. The cash movements can be summarized by the following:
•Cash flows from operating activities. For the nine months ended September 30, 2025, operating activities decreased our cash balances by approximately $0.5 million, primarily driven by net interest income and REO revenues, partially offset by operating expenses and REO expenses.
•Cash flows from investing activities. For the nine months ended September 30, 2025, investing activities increased our cash balances by approximately $266.0 million, primarily driven by repayments of loans held-for-investment.
•Cash flows from financing activities. For the nine months ended September 30, 2025, financing activities decreased our cash balances by approximately $306.1 million, primarily driven by principal payments on repurchase facilities and securitized debt obligations.
Dividends
We generally intend to distribute substantially all of our taxable income each year (which does not necessarily equal net income as calculated in accordance with GAAP) to our stockholders to comply with the REIT provisions of the Code. In addition, our dividend practices may change. All distributions will be made at the discretion of our board of directors and will depend upon, among other things, our actual results of operations and liquidity. These results, and our ability to pay distributions, will be affected by various factors, including our taxable income, our financial condition, our maintenance of REIT status, restrictions related to our financing facilities, applicable law and other factors that our board of directors deems relevant.
Inflation
Nearly all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors typically influence our performance more than inflation does. However, changes in interest rates may correlate with inflation rates or changes in inflation rates. In response to the inflationary pressures, in 2022 and 2023, the Federal Reserve increased its benchmark overnight interest rates. While the Federal Reserve reduced its benchmark overnight interest rates in the second half of 2024 and the third quarter of 2025, they remain at elevated levels. Our condensed consolidated financial statements are prepared in accordance with GAAP and our distributions will be determined by our board of directors consistent with our obligation to distribute to our stockholders at least 90% of our REIT taxable income on an annual basis in order to maintain our REIT qualification; in each case, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.
Granite Point Mortgage Trust Inc. published this content on November 05, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 05, 2025 at 21:42 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]