BrightSpire Capital, Inc. (BRSP)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes thereto, which are included in Item 1 of this Quarterly Report, as well as the information contained in our Annual Report on Form 10-K for the year ended December 31, 2025, which is accessible on the SEC’s website at www.sec.gov.

Introduction

We are an internally-managed commercial real estate (“CRE”) credit real estate investment trust (“REIT”) focused on originating, acquiring, financing and managing a diversified portfolio consisting primarily of CRE debt investments. CRE debt investments primarily consist of senior mortgage loans, which is our primary investment strategy. Additionally, we may also selectively originate mezzanine loans and preferred equity investments, which may include profit participations. The mezzanine loans and preferred equity investments may be in conjunction with our origination of corresponding senior mortgages on the same properties.

We were organized in the state of Maryland on August 23, 2017 and maintain key offices in New York, New York and Los Angeles, California. We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, beginning with our taxable year ended December 31, 2018. We conduct all our activities and hold substantially all our assets and liabilities through our operating subsidiary, BrightSpire Capital Operating Company, LLC (the “OP”).

Our Target Assets

Our investment strategy is to originate and selectively acquire our target assets, which consist of the following:

•Senior Loans. Our primary focus is originating and selectively acquiring senior loans that are backed by CRE assets. These loans are secured by a first mortgage lien on a commercial property and provide mortgage financing to a commercial property developer or owner. The loans may vary in duration, bear interest at a fixed or floating rate and amortize, if at all, over varying periods, often with a balloon payment of principal at maturity. Senior loans may include junior participations in our originated senior loans for which we have syndicated the senior participations to other investors and retained the junior participations for our portfolio. We believe these junior participations are more like the senior loans we originate than other loan types given their credit quality and risk profile.

•Mezzanine Loans. We may originate or acquire mezzanine loans, which are structurally subordinate to senior loans, but senior to the borrower’s equity position. Generally, we will originate or acquire these loans if we believe we have the ability to protect our position and fund the first mortgage, if necessary. Mezzanine loans may be structured such that our return accrues and is added to the principal amount rather than paid on a current basis. We may also pursue equity participation opportunities in instances when the risk-reward characteristics of the investment warrant additional upside participation in the possible appreciation in value of the underlying assets securing the investment.

•Preferred Equity. We may make investments that are subordinate to senior and mezzanine loans, but senior to the common equity in the mortgage borrower. Preferred equity investments may be structured such that our return accrues and is added to the principal amount rather than paid on a current basis. We also may pursue equity participation opportunities in preferred equity investments, like such participations in mezzanine loans.

Our operating and reportable segments are Senior and Mezzanine Loans and Preferred Equity, and Net Leased and Other Real Estate and Corporate and Other.

The allocation of our capital among our target assets will depend on prevailing market conditions at the time we invest and may change over time in response to different prevailing market conditions. In addition, in the future, we may invest in assets other than our target assets or change our target assets. With respect to all our investments, we invest so as to maintain our qualification as a REIT for U.S. federal income tax purposes and our exclusion or exemption from regulation under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

We believe that events in the financial markets from time to time have created and will continue to create dislocation between price and intrinsic value in certain asset classes as well as a supply and demand imbalance of available credit to finance these assets. We believe that our in-depth understanding of CRE and real estate-related investments, in-house underwriting, asset management, special servicing and resolution capabilities, provides an extensive platform to regularly evaluate our investments and determine primary, secondary or alternative disposition strategies. This includes intermediate servicing and negotiating, restructuring of non-performing investments, foreclosure considerations, management or development of owned real estate, in each case to reposition and achieve optimal value realization for us and our stockholders. Depending on the nature of the underlying investment, we may pursue repositioning strategies through judicious capital investment in order to extract

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maximum value from the investment or recognize unanticipated losses to reinvest resulting liquidity in higher-yielding performing investments.

Our Business Segments

We present our business through three operating and reportable segments:

•Senior and Mezzanine Loans and Preferred Equity—CRE debt investments including senior and mezzanine loans, and preferred equity interests as well as participations in such loans.

•Net Leased and Other Real Estate—direct investments in commercial real estate with long-term leases to tenants on a net lease basis, where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance, capital expenditures and real estate taxes. It also includes other real estate, currently consisting of one investment with direct ownership in commercial real estate, four additional properties that we acquired through foreclosure or deed-in-lieu of foreclosure and two properties that we consolidate as the primary beneficiary.

•Corporate and Other—includes corporate-level asset management and other fees including expenses related to our secured revolving credit facility (the “Bank Credit Facility”) and compensation and benefits. It also includes money market income on our cash balances and a sub-portfolio of private equity funds.

Significant Developments

During the three months ended June 30, 2026, and through July 28, 2026, significant developments affecting our business and results of operations of our portfolio included the following:

Capital Resources

•Declared and paid a second quarter dividend of $0.16 per share on July 15, 2026;

•Under our Stock Repurchase Program, we have repurchased 3.8 million shares of our Class A common stock at an aggregate cost of $21.0 million; and

•Extended our Bank 1 Master Repurchase Facility to October 2028.

Our Portfolio

•We originated 13 senior mortgage loans for a total commitment of $435.7 million;

•We received loan repayment proceeds of $150.7 million from eight loans;

•We continued to make progress resolving our watchlist (loans with a risk ranking of 4 or 5):

◦Received total repayment proceeds of $97.5 million related to three risk ranked 5 loans;

•As of July 28, 2026, our watchlist (loans with a risk ranking of 4 or 5) consisted of the following (refer to “Our Portfolio” for further discussion):

◦Four loans with a risk ranking of 4 and total carrying value of $135.9 million;

•Our general CECL reserve increased by $12.5 million from March 31, 2026 to June 30, 2026. At June 30, 2026, our general CECL reserve for our outstanding loans and future loan funding commitments is $99.7 million, which is 3.27% of the aggregate commitment amount of our loan portfolio;

•We recorded specific CECL reserves of $1.0 million related to three multifamily loans that were also charged off during the three months ended June 30, 2026 following repayment of each loan. At June 30, 2026, there were no specific CECL reserves on our consolidated balance sheets;

•Classified one industrial portfolio with a carry value of $223.1 million as real estate held for sale; we also classified one multifamily property with a carry value of $25.3 million as real estate held for sale and recorded our share of GAAP impairment of $3.8 million. Purchase and sale agreements have been executed on both properties and we expect both sales to close in the third quarter of 2026;

•In July 2026, executed a purchase and sale agreement to sell the Fort Worth, Texas multifamily property that is expected to close in the third quarter of 2026 and generate gross proceeds of $32.5 million; and

•Recorded total GAAP impairment at our share of $5.5 million on two retail properties, while deconsolidating the assets and liabilities of one following the loss of control. We previously recorded non-GAAP impairment on these properties; therefore, the undepreciated book value impact of the impairment was immaterial. Refer to “Non-GAAP Supplemental Measures” for further discussion.

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Financial Results

•Generated GAAP net loss of $18.3 million, or $(0.15) per basic and diluted share, Distributable Earnings of $15.8 million or $0.12 per share and Adjusted Distributable Earnings of $16.8 million or $0.13 per share for the three months ended June 30, 2026. Distributable Earnings and Adjusted Distributable Earnings are non-GAAP financial measures. A reconciliation of these measures to net loss attributable to the Company’s common stockholders is in the section “Non-GAAP Supplemental Financial Measures” below.

Trends Affecting Our Business

Global Markets

Commercial real estate markets continue to be influenced by elevated interest rates, reduced transaction activity, uncertainty from the Administration’s tariff initiative and trade policy, ongoing geopolitical conflict in the Middle East, and renewed inflationary pressure, particularly in energy prices. The Federal Reserve held the federal funds rate steady at its June 2026 meeting, marking its fourth consecutive meeting without a change, and removed language from prior policy statements that had signaled a bias toward future rate cuts. Certain Federal Reserve officials have indicated that further increases in the federal funds rate are possible later in 2026 if inflationary pressures persist, while other officials continue to anticipate the potential for rate reductions; it is uncertain as to if, when, in which direction, how many and by how much any subsequent changes in the federal funds rate will occur. Higher borrowing costs and conservative lending practices have pressured property valuations and refinancing activity, particularly for loans originated in prior low‑rate environments. To the extent certain of our borrowers are experiencing significant financial dislocation as a result of economic conditions, we have and may continue to use interest and other reserves and/or replenishment obligations of the borrower and/or guarantors to meet current interest payment obligations for a limited period.

Property fundamentals remain mixed by sector and geography. Multifamily and industrial assets have generally demonstrated more resilient performance, though rent growth has moderated in select markets. Other than in select cities such as Manhattan, NY, Dallas, TX and San Francisco, CA, office properties continue to face structural and demand‑related challenges, which may adversely affect occupancy, cash flows, and valuations, particularly for older or less competitive assets. Given the continuing uncertainty in the office market, there is risk of future v

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Introduction

We are an internally-managed commercial real estate (“CRE”) credit real estate investment trust (“REIT”) focused on originating, acquiring, financing and managing a diversified portfolio consisting primarily of CRE debt investments and net leased properties. CRE debt investments primarily consist of senior mortgage loans, which is our primary investment strategy. Additionally, we may also selectively originate mezzanine loans and preferred equity investments, which may include profit participations. The mezzanine loans and preferred equity investments may be in conjunction with our origination of corresponding senior mortgages on the same properties. Net leased properties consist of CRE properties with long-term leases to tenants on a net-lease basis, where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance capital expenditures and real estate taxes.

We were organized in the state of Maryland on August 23, 2017 and maintain key offices in New York, New York and Los Angeles, California. We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, beginning with our taxable year ended December 31, 2018. We conduct all our activities and hold substantially all our assets and liabilities through our operating subsidiary, BrightSpire Capital Operating Company, LLC (the “OP”).

Our Target Assets

Our investment strategy is to originate and selectively acquire our target assets, which consist of the following:

•Senior Loans. Our primary focus is originating and selectively acquiring senior loans that are backed by CRE assets. These loans are secured by a first mortgage lien on a commercial property and provide mortgage financing to a commercial property developer or owner. The loans may vary in duration, bear interest at a fixed or floating rate and amortize, if at all, over varying periods, often with a balloon payment of principal at maturity. Senior loans may include junior participations in our originated senior loans for which we have syndicated the senior participations to other investors and retained the junior participations for our portfolio. We believe these junior participations are more like the senior loans we originate than other loan types given their credit quality and risk profile.

•Mezzanine Loans. We may originate or acquire mezzanine loans, which are structurally subordinate to senior loans, but senior to the borrower’s equity position. Generally, we will originate or acquire these loans if we believe we have the ability to protect our position and fund the first mortgage, if necessary. Mezzanine loans may be structured such that our return accrues and is added to the principal amount rather than paid on a current basis. We may also pursue equity participation opportunities in instances when the risk-reward characteristics of the investment warrant additional upside participation in the possible appreciation in value of the underlying assets securing the investment.

•Preferred Equity. We may make investments that are subordinate to senior and mezzanine loans, but senior to the common equity in the mortgage borrower. Preferred equity investments may be structured such that our return accrues and is added to the principal amount rather than paid on a current basis. We also may pursue equity participation opportunities in preferred equity investments, like such participations in mezzanine loans.

•Net Leased and Other Real Estate. We may occasionally invest directly in well-located commercial real estate with long-term leases to tenants on a net lease basis, where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance capital expenditures and real estate taxes. In addition, tenants of our properties typically pay rent increases based on fixed increases or additional rent calculated as a percentage of the tenants’ gross sales above a specified level. We believe that a portfolio of properties under long-term, net lease agreements generally produces a more predictable income stream than many other types of real estate portfolios, while continuing to offer the potential for growth in rental income.

Our operating and reportable segments are Senior and Mezzanine Loans and Preferred Equity and Net Leased and Other Real Estate, both of which are included in our target assets, and Corporate and Other.

The allocation of our capital among our target assets will depend on prevailing market conditions at the time we invest and may change over time in response to different prevailing market conditions. In addition, in the future, we may invest in assets other

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than our target assets or change our target assets. With respect to all our investments, we invest so as to maintain our qualification as a REIT for U.S. federal income tax purposes and our exclusion or exemption from regulation under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

We believe that events in the financial markets from time to time have created and will continue to create dislocation between price and intrinsic value in certain asset classes as well as a supply and demand imbalance of available credit to finance these assets. We believe that our in-depth understanding of CRE and real estate-related investments, in-house underwriting, asset management, special servicing and resolution capabilities, provides an extensive platform to regularly evaluate our investments and determine primary, secondary or alternative disposition strategies. This includes intermediate servicing and negotiating, restructuring of non-performing investments, foreclosure considerations, management or development of owned real estate, in each case to reposition and achieve optimal value realization for us and our stockholders. Depending on the nature of the underlying investment, we may pursue repositioning strategies through judicious capital investment in order to extract maximum value from the investment or recognize unanticipated losses to reinvest resulting liquidity in higher-yielding performing investments.

Our Business Segments

We present our business through three operating and reportable segments:

•Senior and Mezzanine Loans and Preferred Equity—CRE debt investments including senior and mezzanine loans, and preferred equity interests as well as participations in such loans.

•Net Leased and Other Real Estate—direct investments in commercial real estate with long-term leases to tenants on a net lease basis, where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance, capital expenditures and real estate taxes. It also includes other real estate, currently consisting of one investment with direct ownership in commercial real estate, five additional properties that we acquired through foreclosure or deed-in-lieu of foreclosure and two properties that we consolidate as the primary beneficiary.

•Corporate and Other—includes corporate-level asset management and other fees including expenses related to our secured revolving credit facility (the “Bank Credit Facility”) and compensation and benefits. It also includes money market income on our cash balances and a sub-portfolio of private equity funds.

Significant Developments

During the three months ended December 31, 2025, and through February 17, 2026, significant developments affecting our business and results of operations of our portfolio included the following:

Capital Resources

•On February 17, 2026, we closed a $955.0 million CLO transaction, BRSP 2026-FL3. We placed approximately $833.2 million of investment grade securities with institutional investors providing term financing on a non-mark-to-market, non-recourse basis. BRSP 2026-FL3 is collateralized by interests in 29 first-lien floating rate mortgages secured by 30 properties, with an 87.25% initial advance rate at a weighted average coupon at issuance of Term SOFR + 1.69%, before transaction costs. We also expect to redeem BRSP 2021-FL1 in February 2026 as part of the transaction. (See “Liquidity and Capital Resources” for more information);

•Amended our Bank Credit Facility with aggregate lender commitments of $120 million (See “Liquidity and Capital Resources” for more information);

•Amended our Bank 3 Master Repurchase Facility to increase the lender’s commitment from $400 million to $500 million (See “Liquidity and Capital Resources” for more information);

•Under our Stock Repurchase Program, we have repurchased 1.1 million shares of our Class A common stock for an aggregate cost of $6.0 million; and

•Declared and paid a fourth quarter dividend of $0.16 per share on January 15, 2026.

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Our Portfolio

•We originated 16 senior mortgage loans for a total commitment of $533.8 million;

•Received loan repayment proceeds of $170.8 million from nine loans;

•We made significant progress resolving our watchlist (loans with a risk ranking of 4 or 5) and real estate owned properties:

◦Acquired one multifamily property through foreclosure;

◦Sold two office properties and generated aggregate gross proceeds of $44.0 million. We recognized a gain of $1.7 million and GAAP impairment of $6.3 million resulting from the sales; and

◦Executed a purchase and sale agreement to sell one office property that is expected to close in the first quarter of 2026 and expected to generate gross proceeds of approximately $28.0 million;

•As of February 17, 2026, our watchlist (loans with a risk ranking of 4 or 5) consisted of the following (refer to “Our Portfolio” for further discussion):

◦Two loans with a risk ranking of 5 and a total carrying value of $66.9 million are expected to be repaid in the first half of 2026, as the underlying collateral is under an executed purchase and sale agreement for one loan and under a letter of intent for one loan;

◦Two loans with a risk ranking of 4 with an aggregate unpaid principal balance of $66.2 million;

•As a result of our watchlist resolutions, we recorded $54.9 million in specific CECL reserves related to five senior loans that were charged off during the three months ended December 31, 2025. At December 31, 2025, there were no specific CECL reserves on our consolidated balance sheets; and

•Our general CECL reserve decreased by $39.4 million from September 30, 2025 to December 31, 2025. At December 31, 2025, our general CECL reserve for our outstanding loans and future loan funding commitments is $88.1 million, which is 3.15% of the aggregate commitment amount of our loan portfolio.

Financial Results

•Generated GAAP net loss of $14.4 million, or $(0.12) per basic and diluted share, Distributable Earnings (Loss) of $(35.5) million or $(0.28) per share and Adjusted Distributable Earnings of $19.3 million or $0.15 per share for the year ended December 31, 2025. Distributable Earnings and Adjusted Distributable Earnings are non-GAAP financial measures. A reconciliation of these measures to net income/(loss) attributable to the Company’s common stockholders is in the section “Non-GAAP Supplemental Financial Measures” below.

For the year ended December 31, 2025, and through February 17, 2026, significant developments affecting our business and results of operations of our portfolio included the following:

Capital Resources

•On February 17, 2026, we closed a $955.0 million CLO transaction, BRSP 2026-FL3. We placed approximately $833.2 million of investment grade securities with institutional investors providing term financing on a non-mark-to-market, non-recourse basis. We also expect to redeem BRSP 2021-FL1 in February 2026 as part of the transaction. (See “Liquidity and Capital Resources” for more information);

•Amended our Bank Credit Facility with aggregate lender commitments of $120 million (See “Liquidity and Capital Resources” for more information);

•Amended our Bank 3 Master Repurchase Facility to increase the lender’s commitment from $400 million to $500 million (See “Liquidity and Capital Resources” for more information);

•Under our Stock Repurchase Program, we have repurchased 2.0 million shares of our Class A common stock for an aggregate cost of $11.0 million; and

•Declared total quarterly dividends of $0.64 per share during the year ended December 31, 2025.

Our Portfolio

•Originated 29 senior mortgage loans for a total commitment of $873.9 million;

•Received loan repayment proceeds of $405.1 million from 28 loans;

•Our CECL reserves decreased by $78.1 million and our general CECL reserve for our outstanding loans and future loan funding commitments is $88.1 million, which is 3.15% of the aggregate commitment amount of our loan portfolio (refer to “Results of Operations” for further discussion);

•Acquired four properties through foreclosure or deeds-in-lieu of foreclosure;

•Sold four properties that we previously acquired through foreclosure or deeds-in-lieu of foreclosure and generated aggregate gross proceeds of $85.6 million. We recognized a net gain of $1.1 million and GAAP impairment of $6.3 million resulting from the sales; and

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•Deconsolidated the assets and liabilities of two office properties following the loss of control over two subsidiaries holding these investments. As a result, we recorded our share of GAAP impairment of $53.2 million and reversed our share of non-GAAP impairment of $94.7 million.

Financial Results

•Generated GAAP net loss of $31.1 million, or $(0.26) per basic and diluted share, Distributable Earnings (Loss) of $(17.5) million or $(0.13) per share and Adjusted Distributable Earnings of $83.6 million or $0.64 per share for the year ended December 31, 2025. Distributable Earnings and Adjusted Distributable Earnings are non-GAAP financial measures. A reconciliation of these measures to net income/(loss) attributable to the Company’s common stockholders is in the section “Non-GAAP Supplemental Financial Measures” below.

Trends Affecting Our Business

Global Markets

Global markets pressure and uncertainties coming from the Administration’s tariff initiative, inflationary worries and geopolitical unrest continue to contribute to market volatility and impact CRE valuations. Additionally, high interest rates continue to negatively impact transaction activity in the real estate market and correspondingly the loan financing and refinancing opportunities. While the Federal Reserve lowered interest rates three times in 2025, it is uncertain as to if, when, how many and by how much subsequent interest rate cuts will be made in 2026. To the extent certain of our borrowers are experiencing significant financial dislocation as a result of economic conditions, we have and may continue to use interest and other reserves and/or replenishment obligations of the borrower and/or guarantors to meet current interest payment obligations for a limited period. The market for office properties was particularly negatively impacted by the COVID-19 pandemic and continues to experience headwinds driven by the normalization of work from home and hybrid work arrangements and elevated costs to operate or reconfigure office properties. Other than in select cities such as Manhattan, NY, Dallas, TX, and more recently, San Francisco, CA, the demand for office space generally remains lower than pre-COVID-19 pandemic levels and has driven rising vacancy rates. Given the continuing uncertainty in the office market, there is risk of future valuation impairment or investment loss on our loans secured by office properties. Similarly, these trends may impact our ability to manage debt covenant tests, maturity dates and/or seek suitable refinancing opportunities on certain of our office property equity investments, which may adversely impact valuation assessments and cash flow generated by such investments.

While macroeconomic conditions continue to be challenged, we cannot predict whether they will in fact improve or even intensify. Due to the inherent uncertainty of these conditions, their impact on our business is difficult to predict and quantify.

Factors Impacting Our Operating Results

Our results of operations are affected by a number of factors and depend primarily on, among other things, the ability of the borrowers of our assets to service our debt as it is due and payable, the ability of our tenants to pay rent and other amounts due under their leases, our ability to actively and effectively service any sub-performing and non-performing loans and other assets we may have from time to time in our portfolio, the market value of our assets and the supply of, and demand for, CRE senior loans, mezzanine loans, preferred equity, net leased properties and our other assets, and the level of our net operating income (“NOI”). Our net interest income, which includes the amortization of origination and exit fees, varies primarily as a result of changes in market interest rates, prepayment rates and frequency on our CRE loans and the ability of our borrowers to make scheduled interest payments. Interest rates and prepayment rates vary according to the type of investment, conditions in the financial markets, creditworthiness of our borrowers, competition and other factors, none of which can be predicted with any certainty. Our net property operating income depends on our ability to maintain the historical occupancy rates of our real estate equity investments, lease currently available space and continue to attract new tenants.

Changes in fair value of our assets

We consider and treat our assets as long-term investments. As a result, we do not expect that changes in market value will impact our operating results. However, at least on a quarterly basis, we assess both our ability and intent to hold such assets for the long-term. As part of this process, we monitor our assets for impairment. In addition, we maintain an allowance for credit losses on our financial assets in accordance with the CECL methodology, which requires us to estimate expected credit losses over the life of our loans and recognize provisions for loan losses earlier in the lending cycle. A change in our ability and/or intent to continue to hold any of our assets, which includes the inability to modify, extend or refinance existing mortgage debt on our real estate portfolio, may result in our recognizing an impairment charge, an increase in our CECL reserves or realizing losses upon the sale of such investments.

Changes in market interest rates

With respect to our business operations, increases in interest rates, in general, may over time cause:

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•the value of our fixed-rate investments to decrease;

•prepayments on certain assets in our portfolio to slow, thereby slowing the amortization of origination and exit fees;

•coupons on our floating and adjustable-rate mortgage loans to reset, although on a delayed basis, to higher interest rates;

•interest rate caps required by our borrowers to increase in cost;

•borrowers’ unwillingness to purchase new interest rate caps at loan maturity to qualify for an extension;

•financial hardship to our borrowers, whose ability to service their debt as it is due and payable and to pass maturity extension tests may be materially adversely impacted, resulting in foreclosures;

•to the extent we use leverage to finance our assets, the interest expense associated with our borrowings to increase; and

•to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase.

Conversely, decreases in interest rates, in general, may over time cause:

•the value of the fixed-rate assets in our portfolio to increase;

•prepayments on certain assets in our portfolio to increase, thereby accelerating the amortization of origination and exit fees;

•to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to decrease;

•coupons on our floating and adjustable-rate mortgage loans to reset, although on a delayed basis, to lower interest rates; and

•to the extent we use leverage to finance our assets, the interest expense associated with our borrowings to decrease.

Credit risk

We are subject to varying degrees of credit risk in connection with our target assets. We seek to mitigate this risk by seeking to acquire high quality assets, at appropriate prices given anticipated and unanticipated losses and by employing a comprehensive review and asset selection process and by careful ongoing monitoring of acquired assets. Nevertheless, unanticipated credit losses could occur, which could adversely impact our operating results.

Size of investment portfolio

The size of our portfolio, as measured by the aggregate principal balance of our commercial mortgage loans, other commercial real estate-related debt investments and the other assets we own, is also a key revenue driver. Generally, as the size of our portfolio grows, the amount of interest income we earn increases. However, a larger portfolio may result in increased expenses to the extent that we incur additional interest expense to finance our assets.

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Our Portfolio

As of December 31, 2025, our portfolio consisted of 113 investments representing approximately $3.4 billion in carrying value (based on our share of ownership and excluding cash, cash equivalents and certain other assets). Our senior and mezzanine loans and preferred equity consisted of 98 investments with a weighted average cash coupon of 3.4% and a weighted average all-in unlevered yield of 7.3%. Our net leased and other real estate consisted of approximately 4.8 million total square feet of space and total 2025 NOI of that portfolio was approximately $46.0 million. Refer to “Non-GAAP Supplemental Financial Measures” below for further information on NOI.

As of December 31, 2025, our portfolio consisted of the following investments (dollars in thousands):

________________________________________

(1)Count for net leased real estate and other real estate represents number of investments.

(2)Carrying value at our share represents the proportionate carrying value based on ownership by asset as of December 31, 2025.

(3)Net carrying value represents carrying value less any associated financing as of December 31, 2025.

(4)Net carrying value at our share represents the proportionate carrying value based on asset ownership less any associated financing based on ownership as of December 31, 2025.

Underwriting Process

We use an investment and underwriting process that has been developed by our senior management team leveraging their extensive commercial real estate expertise over many years and real estate cycles. The underwriting process focuses on some or all of the following factors designed to ensure each investment is evaluated appropriately: (i) macroeconomic conditions that may influence operating performance; (ii) fundamental analysis of underlying real estate, including tenant rosters, lease terms, zoning, necessary licensing, operating costs and the asset’s overall competitive position in its market; (iii) real estate market factors that may influence the economic performance of the investment, including leasing conditions and overall competition; (iv) the operating expertise and financial strength and reputation of a tenant, operator, partner or borrower; (v) the cash flow in place and projected to be in place over the term of the investment and potential return; (vi) the appropriateness of the business plan and estimated costs associated with tenant buildout, repositioning or capital improvements; (vii) an internal and third-party valuation of a property, investment basis relative to the competitive set and the ability to liquidate an investment through a sale or refinancing; (viii) review of third-party reports including appraisals, engineering and environmental reports; (ix) physical inspections of properties and markets; (x) the overall legal structure of the investment, contractual implications and the lenders’ rights; and (xi) the tax and accounting impact.

Loan Risk Rankings

In connection with developing the CECL reserve for our loans and preferred equity held for investment, we determine the risk ranking of each loan and preferred equity investment as a key credit quality indicator. The risk rankings are based on a variety of factors, including, without limitation, underlying real estate performance and asset value, values of comparable properties, durability and quality of property cash flows, borrower/sponsor experience and financial wherewithal, and the existence of a risk-mitigating loan structure. Additional key considerations include loan-to-value ratios, debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, our loans and preferred equity held for investment are rated “1” through “5,” from less risk to greater risk, and the ratings are updated quarterly. At the time of origination or purchase, loans and preferred equity held for investment are ranked as a “3” and will move accordingly going forward based on the ratings which are defined as follows:

1.Very Low Risk

2.Low Risk

3.Medium Risk

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4.High Risk/Potential for Loss—A loan that has a high risk of realizing a principal loss.

5.Impaired/Loss Likely—A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss.

At December 31, 2025, our weighted average risk ranking remained unchanged at 3.1 compared to at September 30, 2025. During the fourth quarter of 2025, we had the following risk ranking activity for risk ranked 4 and 5 assets:

•The following loans were downgraded to a risk ranking of 5;

◦One multifamily that was resolved in the first quarter of 2026 when the property was acquired through a foreclosure and reclassified to real estate;

◦One multifamily loan and one industrial loan that were both resolved in the first quarter of 2026 following repayment;

◦Two multifamily loans that are expected to repay in the first half of 2026, as the underlying collateral is under an executed purchase and sale agreement for one loan and a letter of intent for one loan.

•No loans were downgraded to a risk ranking of 4.

Senior and Mezzanine Loans

The following tables provide a summary of our senior and mezzanine loans based on our internal risk rankings, collateral property type and geographic distribution as of December 31, 2025 (dollars in thousands):

_________________________________________

(1)Carrying value at our share represents the proportionate carrying value based on ownership by asset as of December 31, 2025.

(2)Subsequent to December 31, 2025, three risk ranked 5 loans totaling $86.8 million of carrying value at our share were resolved.

_________________________________________

(1)Carrying value at our share represents the proportionate carrying value based on ownership by asset as of December 31, 2025.

(2)Other includes commercial and residential development assets.

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(1)Carrying value at our share represents the proportionate carrying value based on ownership by asset as of December 31, 2025.

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The following table provides asset level detail for our senior and mezzanine loans as of December 31, 2025 (dollars in thousands):

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(1)Represents carrying values at our share as of December 31, 2025 and excludes general CECL reserves.

(2)Represents the stated coupon rate for loans; for floating rate loans, does not include Secured Overnight Financing Rate (“SOFR”), which was 3.69% as of December 31, 2025.

(3)In addition to the stated cash coupon rate, unlevered all-in yield includes non-cash payment-in-kind interest income and the accrual of origination and exit fees. Unlevered all-in yield for the loan portfolio assumes the applicable floating benchmark rate as of December 31, 2025 for weighted average calculations.

(4)Except for construction loans, senior loans reflect the initial loan amount divided by the as-is value as of the date the loan was originated, or the principal amount divided by the appraised value for the in place collateral as of the date of the most recent as-is appraisal. Mezzanine loans include attachment loan-to-value and detachment loan-to-value, respectively. Attachment loan-to-value reflects initial funding of loans senior to our position divided by the as-is value as of the date the loan was originated, or the principal amount divided by the appraised value for the in place collateral as of the date of the most recent appraisal. Detachment loan-to-value reflects the cumulative initial funding of our loan and the loans senior to our position divided by the as-is value as of the date the loan was originated, or the cumulative principal amount divided by the appraised value for the in place collateral as of the date of the most recent appraisal.

(5)On a quarterly basis, our senior and mezzanine loans are rated “1” through “5,” from less risk to greater risk. Represents risk ranking as of December 31, 2025.

(6)Subsequent to December 31, 2025, Loan 6 was resolved when the property was acquired through a foreclosure and reclassified to real estate.

(7)Loans 64-69 have payment-in-kind provisions and accrue interest at 14%.

(8)Subsequent to December 31, 2025, Loan 85 was resolved following repayment.

(9)Loan 88 was placed on nonaccrual status in April 2024; as such, no income is being recognized.

(10)Loan 90 has a payment-in-kind provision and accrues interest at 15%.

(11)Loan 91 has a payment-in-kind provision and accrues interest at 20%.

(12)Loan 98 was placed on nonaccrual status in September 2025; as such, no income is being recognized. Subsequent to December 31, 2025, Loan 98 was resolved following repayment.

At December 31, 2025, our general CECL reserve for our outstanding loans and future loan funding commitments is $88.1 million, which is 3.15% of the aggregate commitment amount of our loan portfolio. This represents a decrease of $39.4 million from $127.5 million or 5.17% of the aggregate commitment amount of our loan portfolio at September 30, 2025. The decrease in our general CECL reserves was driven by the charge-off of reserves related to five senior loans. As a result, we have no specific CECL reserves at December 31, 2025.

Net Leased and Other Real Estate

Our net leased real estate investment strategy focuses on direct ownership in commercial real estate with an emphasis on properties with stable cash flow, which may be structurally senior to a third-party partner’s equity. As part of our net leased real

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estate strategy, we explore a variety of real estate investments including multi-tenant office, multifamily and industrial. Additionally, we have one other real estate investment through a joint venture with one partner. We also own four properties included in other real estate that were acquired through deeds-in-lieu of foreclosure and foreclosure and consolidated two properties after being deemed the primary beneficiary of the variable interest entity holding it.

As of December 31, 2025, $702.6 million or 20.8% of our assets were invested in net leased and other real estate properties and these properties were 79.3% occupied. The following table presents our net leased and other real estate investments as of December 31, 2025 (dollars in thousands):

________________________________________

(1)Count represents the number of investments.

(2)Represents carrying values at our share as of December 31, 2025; includes real estate tangible assets, deferred leasing costs and other intangible assets less intangible liabilities.

(3)Refer to “Non-GAAP Supplemental Financial Measures” for further information on NOI.

(4)NOI excludes $15.3 million related to four properties that were sold and two properties that were deconsolidated during the year ended December 31, 2025.

The following table provides asset-level detail of our net leased and other real estate as of December 31, 2025:

_________________________________________

(1)Rentable square feet based on carrying value at our share as of December 31, 2025.

(2)Represents the percent leased as of December 31, 2025. Weighted average calculation based on carrying value at our share as of December 31, 2025.

(3)Based on in-place leases (defined as occupied and paying leases) as of December 31, 2025, and assumes that no renewal options are exercised. Weighted average calculation based on carrying value at our share as of December 31, 2025.

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(4)Represents undepreciated book value at our share net of associated principal amounts of debt at our share as of December 31, 2025. Undepreciated book value per share is a non-GAAP financial measure. Refer to “Undepreciated Book Value Per Share” in “Non-GAAP Supplemental Measures” for further information.

(5)Represents principal amount of debt at our share as of December 31, 2025.

(6)Represents a property where we recorded impairment during the year ended December 31, 2025 or year ended December 31, 2024. For Net lease 4, three individual properties were impaired.

(7)Net lease 4 consists of two separate mortgage notes.

(8)Property was acquired through foreclosure or deed-in-lieu of foreclosure.

(9)The current maturity date is December 2027, with a one-year extension available, subject to satisfaction of certain customary conditions set forth in the governing documents.

(10)Represents a multifamily construction/development project.

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Results of Operations

The following table summarizes our portfolio results of operations for the years ended December 31, 2025 and 2024 (dollars in thousands):

Comparison of Year Ended December 31, 2025 and Year Ended December 31, 2024

Net Interest Income

Interest income

Interest income decreased by $49.9 million to $194.9 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The decrease was primarily due to $34.4 million related to loan repayments, $16.3 million related to loans that were consolidated as real estate after acquiring legal title, $16.9 million due to a decrease in interest rates and $5.5 million related to two properties that were consolidated as real estate as the Company was deemed the primary beneficiary. The income associated with these two properties is now classified as property operating income. This was partially offset by $25.1 million related to loan originations.

Interest expense

Interest expense decreased by $26.6 million to $127.3 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The decrease was primarily due to $20.2 million due to paydowns on financings, $6.2 million from the net impact of the BRSP 2024-FL2 issuance and the unwinding of the CLNC 2019-FL1 securitization trust following the redemption of all outstanding securities thereunder and $14.4 million from proceeds from loan repayments that were used to amortize the securitization bonds in accordance with the securitization priority of repayments on BRSP 2021-FL1. This was partially offset by $12.9 million relating to draws on our master repurchase facilities.

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Property and other income

Property operating income

Property operating income increased by $25.2 million to $127.6 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was primarily driven by $46.2 million from 2024 and 2025 property acquisitions, partially offset by $16.3 million related to two deconsolidated subsidiaries and $3.5 million related to properties sold during 2024 and 2025.

Other income

Other income decreased by $3.5 million to $8.0 million during the year ended December 31, 2025, as compared to the year ended December 31, 2024. The decrease was primarily driven by lower money market income of $4.6 million partially offset by a tax refund of $0.7 million.

Expenses

Property operating expense

Property operating expense increased by $32.0 million to $65.9 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was primarily driven by $39.1 million from 2024 and 2025 property acquisitions, partially offset by $3.8 million related to properties sold during 2024 and 2025 and $2.9 million related to two deconsolidated subsidiaries.

Transaction, investment and servicing expense

Transaction, investment and servicing expense increased by $1.1 million to $2.7 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was primarily due to higher deal-level expenses incurred during the year ended December 31, 2025.

Interest expense on real estate

Interest expense on real estate decreased by $3.3 million to $23.7 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. This decrease was primarily driven by $4.5 million related to two deconsolidated subsidiaries, partially offset by $0.9 million related to 2024 and 2025 property acquisitions.

Depreciation and amortization

Depreciation and amortization expense decreased by $4.2 million to $36.3 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The decrease was primarily driven by $6.0 million related to two deconsolidated subsidiaries and $3.1 million related to properties sold during 2025, partially offset by $6.7 million from 2024 and 2025 property acquisitions.

Increase of current expected credit loss reserve

During the year ended December 31, 2025, we recorded a net increase in CECL reserves of $24.0 million. The increase was primarily driven by a net increase in specific CECL reserves of $101.0 million partially offset by a net decrease in general reserves of $77.0 million. The increase in specific CECL reserves was attributable to five multifamily loans, three office loans, one hotel loan and one industrial loan, all of which were charged off during the year ended December 31, 2025.

During the year ended December 31, 2024, we recorded a net increase in CECL reserves of $135.8 million, which is comprised of $97.8 million of general reserves and $38.0 million of specific reserves. The increase in our general CECL reserve was primarily driven by the macroeconomic conditions, as well as specific inputs utilized in our general CECL model, such as net operating income, occupancy and collateral value. The increase in specific CECL reserves was attributable to three multifamily loans, two office loans and a development mezzanine loan, all of which were charged off during the year ended December 31, 2024.

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Impairment of operating real estate

During the year ended December 31, 2025, we recorded total impairment of $61.6 million. This included $53.6 million of impairment related to the deconsolidation of our Norwegian net lease office campus and our Pennsylvania office property. We recorded impairment of $6.3 million related to the sale of one office property during the fourth quarter of 2025 and we also recorded an impairment charge of $1.6 million related to one office property following the execution of a purchase and sale agreement in January 2026. The impairment charge was based on the expected proceeds to be received from the sale.

During the year ended December 31, 2024, we recorded impairment of $54.2 million on four office properties following a reduction in the current expected holding period in connection with the review and preparation of our quarterly financials.

Compensation and benefits

Compensation and benefits increased by $0.3 million to $35.0 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was driven by $1.2 million of increased stock compensation expense following a one-time vesting event in March 2025, offset by lower compensation costs of $1.1 million.

Operating expense

Operating expense increased by $0.2 million to $12.1 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. primarily due to higher third-party costs incurred during the year ended December 31, 2025.

Other income (loss)

Other gain (loss), net

We recorded other loss, net of $2.3 million for the year ended December 31, 2025, as compared to other gain, net of $0.2 million for the year ended December 31, 2024. The loss is related to reclassification of $22.0 million of foreign currency translation loss offset by $18.6 million of designated hedge gains from accumulated other comprehensive income following the resolution of our Norwegian net lease office campus in the second quarter of 2025.

Income tax benefit (expense)

Income tax expense decreased by $22.6 million to a benefit of $21.5 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. This increase is related to a $22.3 million deferred tax liability write-off when an investment subsidiary reached a maturity default on its bond financing collateralized by our Norwegian net lease office campus. Following the maturity default, the lenders exercised remedies and took control by equity pledge of the underlying investment subsidiary.

Comparison of Year Ended December 31, 2024 and Year Ended December 31, 2023

The comparison of our results of operations for the years ended December 31, 2024 and 2023 can be found in our annual report on Form 10-K for the year ended December 31, 2024 located within “Results of Operations” in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition, which is incorporated by reference herein.

Non-GAAP Supplemental Financial Measures

Distributable Earnings

We present Distributable Earnings, which is a non-GAAP supplemental financial measure of our performance. We believe that Distributable Earnings provides meaningful information to consider in addition to our net income and cash flow from operating activities determined in accordance with GAAP, and this metric is a useful indicator for investors in evaluating and comparing our operating performance to our peers and our ability to pay dividends. We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, beginning with our taxable year ended December 31, 2018. As a REIT, we are required to distribute substantially all of our taxable income and we believe that dividends are one of the principal reasons investors invest in credit or commercial mortgage REITs such as our company. Over time, Distributable Earnings has been a useful indicator of our dividends per share and we consider that measure in determining the dividend, if any, to be paid. This supplemental financial measure also helps us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current portfolio and operations.

We define Distributable Earnings as GAAP net income (loss) attributable to our common stockholders (or, without duplication, the owners of the common equity of our direct subsidiaries, such as our OP) and excluding (i) non-cash equity compensation expense, (ii) the expenses incurred in connection with our formation or other strategic transactions, (iii) acquisition costs from successful acquisitions, (iv) gains or losses from sales of real estate property and impairment write-downs of depreciable real

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estate, including unconsolidated joint ventures and preferred equity investments, (v) general CECL reserves, (vi) depreciation and amortization, (vii) any unrealized gains or losses or other similar non-cash items that are included in net income for the current quarter, regardless of whether such items are included in other comprehensive income or loss, or in net income, (viii) one-time events pursuant to changes in GAAP and (ix) certain material non-cash income or expense items that in the judgment of management should not be included in Distributable Earnings. For clauses (viii) and (ix), such exclusions shall only be applied after approval by a majority of our independent directors. Distributable Earnings include specific CECL reserves.

Additionally, we define Adjusted Distributable Earnings as Distributable Earnings excluding (i) realized gains and losses on asset sales, (ii) fair value adjustments, which represent mark-to-market adjustments to investments in unconsolidated ventures based on an exit price, defined as the estimated price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants, (iii) unrealized gains or losses, (iv) specific CECL reserves and (v) one-time gains or losses that in the judgement of management should not be included in Adjusted Distributable Earnings. We believe Adjusted Distributable Earnings is a useful indicator for investors to further evaluate and compare our operating performance to our peers and our ability to pay dividends, net of the impact of any gains or losses on assets sales or fair value adjustments, as described above.

Distributable Earnings and Adjusted Distributable Earnings do not represent net income or cash generated from operating activities and should not be considered as an alternative to GAAP net income or an indication of our cash flows from operating activities determined in accordance with GAAP, a measure of our liquidity, or an indication of funds available to fund our cash needs. In addition, our methodology for calculating Distributable Earnings and Adjusted Distributable Earnings may differ from methodologies employed by other companies to calculate the same or similar non-GAAP supplemental financial measures, and accordingly, our reported Distributable Earnings and Adjusted Distributable Earnings may not be comparable to the Distributable Earnings and Adjusted Distributable Earnings reported by other companies.

The following tables present a reconciliation of net income (loss) attributable to our common stockholders to Distributable Earnings and Adjusted Distributable Earnings attributable to our common stockholders (dollars and share amounts in thousands, except per share data) for the years ended December 31, 2025, 2024 and 2023:

________________________________________

(1)We calculate Distributable Earnings (Loss) per share, and Adjusted Distributable Earnings per share, non-GAAP financial measures, based on a weighted-average number of common shares.

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Undepreciated Book Value Per Share

We believe that presenting Undepreciated Book Value per share is a more useful and consistent measure of the value of our current portfolio and operations for our investors as it enhances the comparability to our peers who do not hold similar real estate investments. Undepreciated Book Value per share excludes our share of accumulated depreciation and amortization on real estate investments (including related intangible assets and liabilities) and as of the quarter ended June 30, 2024, includes non-GAAP impairment of real estate and any related foreign currency translation. Non-GAAP impairment of real estate is a non-GAAP measure that reflects our share of a property’s carrying value on certain net leased and other real estate office properties whose non-recourse mortgages have matured or who have been placed in a cash flow sweep by their lender. Our ability to refinance at their maturity dates is burdened by the current interest rate environment, lenders’ aversion to finance or refinance office properties and/or associated improvements or paydowns potentially demanded at such properties. Loan maturity defaults can and have led to foreclosures. Cash flow sweeps restrict our ability to utilize earnings generated by a property. As such, we believe it is prudent to recognize impairments and exclude our share of the carrying value related to these properties.

The following table calculates our GAAP book value per share and Undepreciated Book Value per share ($ in thousands, except per share data):

________________________________________

(1)Per share data may differ due to rounding.

NOI

We believe NOI to be a useful measure of operating performance of our net leased and other real estate portfolios as they are more closely linked to the direct results of operations at the property level. NOI excludes historical cost depreciation and amortization, which are based on different useful life estimates depending on the age of the properties, as well as adjustments for the effects of real estate impairment and gains or losses on sales of depreciated properties, which eliminate differences arising from investment and disposition decisions. Additionally, by excluding corporate level expenses or benefits such as interest expense, any gain or loss on early extinguishment of debt and income taxes, which are incurred by the parent entity and are not directly linked to the operating performance of the Company’s properties, NOI provides a measure of operating performance independent of the Company’s capital structure and indebtedness. However, the exclusion of these items as well as

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others, such as capital expenditures and leasing costs, which are necessary to maintain the operating performance of the Company’s properties, and transaction costs and administrative costs, may limit the usefulness of NOI. NOI may fail to capture significant trends in these components of GAAP net income (loss) which further limits its usefulness.

NOI should not be considered as an alternative to net income (loss), determined in accordance with GAAP, as an indicator of operating performance. In addition, our methodology for calculating NOI involves subjective judgment and discretion and may differ from the methodologies used by other companies, when calculating the same or similar supplemental financial measures and may not be comparable with other companies.

The following tables present a reconciliation of net income (loss) on our net leased and other real estate portfolios attributable to our common stockholders to NOI attributable to our common stockholders (dollars in thousands) for the years ended December 31, 2025, 2024 and 2023:

________________________________________

(1)Net (income) loss attributable to non-net leased and other real estate portfolios includes net (income) loss on our senior and mezzanine loans and preferred equity and corporate and other business segments.

Liquidity and Capital Resources

Overview

Our material cash commitments include commitments to repay borrowings, finance our assets and operations, meet future funding obligations, make distributions to our stockholders and fund other general business needs. We use significant cash to make investments, meet commitments to existing investments, repay the principal of and interest on our borrowings and pay other financing costs, make distributions to our stockholders and fund our operations.

Our primary sources of liquidity include cash on hand, cash generated from our operating activities and cash generated from asset sales and investment maturities. However, subject to maintaining our qualification as a REIT and our Investment Company Act exclusion, we may use several sources to finance our business, including bank credit facilities (including term loans and revolving facilities), Master Repurchase Facilities and securitizations, as described below. In addition to our current sources of liquidity, there may be opportunities from time to time to access liquidity through public offerings of debt and equity securities. We have sufficient sources of liquidity to meet our material cash commitments for the next 12 months and the foreseeable future.

Financing Strategy

We have a multi-pronged financing strategy that includes an up to $120.0 million secured revolving credit facility, up to approximately $2.1 billion in secured revolving repurchase facilities, $982.1 million in non-recourse securitization financing,

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$382.2 million in commercial mortgages and $34.1 million in other asset-level financing structures, in each case, as of December 31, 2025.

In addition, we may use other forms of financing, including warehouse facilities, public and private secured and unsecured debt issuances and equity or equity-related securities issuances by us or our subsidiaries. We may also finance a portion of our investments through the syndication of one or more interests in a whole loan. We will seek to match the nature and duration of the financing with the underlying asset’s cash flow, including using hedges, as appropriate.

Debt-to-Equity Ratio

The following table presents our debt-to-equity ratio:

_________________________________________

(1)Represents (i) total consolidated outstanding secured debt less cash and cash equivalents of $66.8 million and $302.2 million at December 31, 2025 and December 31, 2024, respectively to (ii) total equity, in each case, at period end.

Potential Sources of Liquidity

As discussed in greater detail above under “Trends Affecting our Business,” and “Factors Impacting Our Operating Results” overall market uncertainty coupled with rising inflation and high interest rates have tempered the loan financing markets recently. A high interest rate environment will result in increased interest expense on our variable rate debt that is not hedged and may result in disruptions to our borrowers’ and tenants’ ability to finance their activities, which would similarly adversely impact their ability to make their monthly mortgage payments and meet their loan obligations. Additionally, due to the current market conditions, warehouse lenders may take a more conservative stance by increasing funding costs, which may lead to margin calls.

Our primary sources of liquidity include borrowings available under our credit facilities, Master Repurchase Facilities and monthly mortgage payments from our borrowers.

Bank Credit Facilities

We use bank credit facilities (including term loans and revolving facilities) to finance our business. These financings may be collateralized or non-collateralized and may involve one or more lenders. Credit facilities typically have maturities ranging from two to five years and may accrue interest at either fixed or floating rates.

On January 28, 2022, the OP (together with certain subsidiaries of the OP from time to time party thereto as borrowers, collectively, the “Borrowers”) entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and the several lenders from time to time party thereto (the “Lenders”), pursuant to which the Lenders agreed to provide a revolving credit facility in the aggregate principal amount of up to $165.0 million, of which up to $25.0 million is available as letters of credit.

On December 9, 2025, the OP (together with certain subsidiaries of the OP from time to time party thereto as borrowers, collectively, the “Borrowers”) entered into an Amendment No. 1 to the Credit Agreement (the Credit Agreement, as amended, the “Amended Credit Agreement”), and reduced the aggregate principal amount to $120.0 million. Loans under the Amended Credit Agreement may be advanced in U.S. dollars and certain foreign currencies, including euros, pounds sterling and Swiss francs.

The Amended Credit Agreement also includes an option for the Borrowers to increase the maximum available principal amount to up to $180.0 million, subject to one or more new or existing Lenders agreeing to provide such additional loan commitments and satisfaction of other customary conditions.

Advances under the Amended Credit Agreement accrue interest at a per annum rate equal to, at the applicable Borrower’s election, either (x) a Term SOFR rate plus a margin of 2.25%, or (y) a base rate equal to the highest of (i) the Wall Street Journal’s prime rate, (ii) the federal funds rate plus 0.50% and (iii) the Term SOFR rate plus 1.00%, plus a margin of 1.25%. An unused commitment fee at a rate of 0.25% or 0.35%, per annum, depending on the amount of facility utilization, applies to unutilized borrowing capacity under the Amended Credit Agreement. Amounts owed under the Amended Credit Agreement may be prepaid at any time without premium or penalty, subject to customary breakage costs in the case of borrowings with respect to which a Term SOFR rate election is in effect.

The maximum amount available for borrowing at any time under the Amended Credit Agreement is limited to a borrowing base valuation of certain investment assets, with the valuation of such investment assets generally determined according to a percentage of adjusted net book value. As of December 31, 2025, the borrowing base valuation is sufficient to permit

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borrowings of up to the entire $120.0 million commitment. If any borrowing is outstanding for more than 180 days after its initial draw, the borrowing base valuation will be reduced by 50% until all outstanding borrowings are repaid in full. The ability to borrow new amounts under the Amended Credit Agreement terminates and any outstanding revolving loans will mature on December 8, 2028.

The obligations of the Borrowers under the Amended Credit Agreement are guaranteed pursuant to a Guarantee and Collateral Agreement by substantially all material wholly owned subsidiaries of the OP (the “Guarantors”) in favor of the Administrative Agent (the “Guarantee and Collateral Agreement”) and, subject to certain exceptions, secured by a pledge of substantially all equity interests owned by the Borrowers and the Guarantors, as well as by a security interest in deposit accounts of the Borrowers and the Guarantors (as such terms are defined in the Guarantee and Collateral Agreement) in which the proceeds of investment asset distributions are maintained.

The Amended Credit Agreement contains various affirmative and negative covenants, including, among other things, the obligation of the Company to maintain REIT status and be listed on the New York Stock Exchange or any other U.S. national or international securities exchange, and limitations on debt, liens and restricted payments. In addition, the Amended Credit Agreement includes the following financial covenants applicable to the OP and its consolidated subsidiaries: (a) minimum consolidated tangible net worth of the OP to be greater than or equal to the sum of (i) $900,000,000 and (ii) 70% of the net cash proceeds received by the OP from any offering of its common equity after December 9, 2025 and of the net cash proceeds from any offering by the Company of its common equity to the extent such proceeds are contributed to the OP, excluding any such proceeds that are contributed to the OP within ninety (90) days of receipt and applied to acquire capital stock of the OP; (b) the OP’s EBITDA plus lease expenses to fixed charges for any period of four consecutive fiscal quarters not less than 1.40 to 1.00; (c) the OP’s minimum interest coverage ratio to be not less than 3.00 to 1.00; and (d) the OP’s ratio of consolidated total debt to consolidated total assets must not exceed 0.80 to 1.00. The Amended Credit Agreement also includes customary events of default, including, among other things, failure to make payments when due, breach of covenants or representations, cross default to material indebtedness, material judgment defaults, bankruptcy matters involving any Borrower or any Guarantor and certain change of control events. The occurrence of an event of default will limit the ability of the OP and its subsidiaries to make distributions and may result in the termination of the credit facility, acceleration of repayment obligations and the exercise of remedies by the Lenders with respect to the collateral.

As of December 31, 2025, the Company was in compliance with all of its financial covenants under the Amended Credit Agreement.

Master Repurchase Facilities

Currently, our primary sources of financing the origination of first mortgage loans and senior loan participations secured by senior loan investments are our repurchase agreements with multiple global financial institutions (each, a “Master Repurchase Facility” and collectively, the “Master Repurchase Facilities”). The Master Repurchase Facilities, effectively allow us to borrow against loans that we own in an amount generally equal to (i) the market value of such loans multiplied by (ii) the applicable advance rate. Under these agreements, we sell our loans to a counterparty and agree to repurchase the same loans from the counterparty at a price equal to the original sales price plus an interest factor. During the term of a repurchase agreement, we receive the principal and interest on the related loans and pay interest to the lender under the master repurchase agreement. We intend to maintain formal relationships with multiple counterparties to obtain master repurchase financing.

The following table presents a summary of our Master Repurchase Facilities and Bank Credit Facility as of December 31, 2025 (dollars in thousands):

_________________________________________

(1)All facilities utilize Term SOFR at December 31, 2025.

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The following table presents the quarterly average unpaid principal balance (“UPB”), end of period UPB and the maximum UPB at any month-end related to our Master Repurchase Facilities and Bank Credit Facility (dollars in thousands):

The increase in our end of period UPB from September 30, 2025 to December 31, 2025 was driven by financing draws during the period.

Securitizations

We may seek to utilize non-recourse long-term securitizations of our investments in mortgage loans, especially loan originations, to the extent consistent with the maintenance of our REIT qualification and exclusion from the Investment Company Act in order to generate cash for funding new investments. This would involve conveying a pool of assets to a special purpose vehicle (or the issuing entity), which would issue one or more classes of non-recourse notes pursuant to the terms of an indenture. The notes would be secured by the pool of assets. In exchange for the transfer of assets to the issuing entity, we would receive the cash proceeds on the sale of non-recourse notes and a 100% interest in the equity of the issuing entity. The securitization of our portfolio investments might magnify our exposure to losses on those portfolio investments because any equity interest we retain in the issuing entity would be subordinate to the notes issued to investors and we would, therefore, absorb all of the losses sustained with respect to a securitized pool of assets before the owners of the notes experience any losses.

BRSP 2021-FL1

In July 2021, we executed a securitization transaction through our subsidiaries, BRSP 2021-FL1, Ltd. and BRSP 2021-FL1, LLC, which resulted in the sale of $670.0 million of investment grade notes.

BRSP 2021-FL1 included a two-year reinvestment feature that allowed us to contribute existing or newly originated loan investments in exchange for proceeds from repayments or repurchases of loans held in BRSP 2021-FL1, subject to the satisfaction of certain conditions set forth in the indenture. The reinvestment period for BRSP 2021-FL1 expired on July 20, 2023. At December 31, 2025, we had $528.2 million of unpaid principal balance of CRE debt investments financed with BRSP 2021-FL1. As of December 31, 2025, the securitization reflects an advance rate of 75.4% at a weighted average cost of funds of Term SOFR plus 1.72% (before transaction costs), and is collateralized by a pool of 19 senior loan investments.

Additionally, BRSP 2021-FL1 contains note protection tests that can be triggered as a result of contributed loan defaults, losses, and certain other events outlined in the indenture, beyond established thresholds. A note protection test failure that is not remedied can result in the redirection of interest proceeds from the below investment grade tranches to amortize the most senior outstanding tranche. We did not fail any note protection tests during the year ended December 31, 2025 and December 31, 2024. While we continue to closely monitor all loan investments contributed to BRSP 2021-FL1, a deterioration in the performance of an underlying loan could negatively impact our liquidity position.

We expect to redeem BRSP 2021-FL1 in February 2026.

BRSP 2024-FL2

In August 2024, we executed a $675.0 million securitization transaction through wholly-owned subsidiaries, BRSP 2024-FL2, Ltd. and BRSP 2024-FL2, LLC (collectively, “BRSP 2024-FL2”), which resulted in the sale of $583.9 million of the 2024-FL2 Notes.

BRSP 2024-FL2 included a six-month ramp-up acquisition period that allowed us to contribute existing or newly originated loan investments in exchange for $84.8 million in unused proceeds held in BRSP 2024-FL2, subject to the satisfaction of certain conditions set forth in the indenture. BRSP 2024-FL2 also includes a two-year reinvestment feature that allows us to contribute existing or newly originated loan investments in exchange for proceeds from repayments of loans held in BRSP

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2024-FL2, subject to the satisfaction of certain conditions set forth in the indenture. As of December 31, 2025, the securitization reflects an advance rate of 86.6% at a weighted average cost of funds of Term SOFR plus 2.47% (before transaction costs), and is collateralized by a pool of 27 senior loan investments. During the year ended December 31, 2025, we contributed existing or newly originated loan investments totaling $113.1 million, in exchange for a combination of reinvestment and unused proceeds. At December 31, 2025, the unused proceeds have been fully utilized and we had $674.5 million of unpaid principal balance of CRE debt investments financed with BRSP 2024-FL2.

Additionally, BRSP 2024-FL2 contains note protection tests that can be triggered as a result of contributed loan defaults, losses, and certain other events outlined in the indenture, beyond established thresholds. A note protection test failure that is not remedied can result in the redirection of interest proceeds from the below investment grade tranches to amortize the most senior outstanding tranche. We did not fail any note protection tests during the year ended December 31, 2025. While we continue to closely monitor all loan investments contributed to BRSP 2024-FL2, a deterioration in the performance of an underlying loan could negatively impact our liquidity position.

BRSP 2026-FL3

On February 17, 2026, we closed a $955.0 million CLO transaction, BRSP 2026-FL3. We placed approximately $833.2 million of investment grade securities with institutional investors providing term financing on a non-mark-to-market, non-recourse basis. BRSP 2026-FL3 is collateralized by interests in 29 first-lien floating rate mortgages secured by 30 properties, with an 87.25% initial advance rate at a weighted average coupon at issuance of Term SOFR + 1.69%, before transaction costs. We also expect to redeem BRSP 2021-FL1 in February 2026 with proceeds from the transaction.

Other potential sources of financing

In the future, we may also use other sources of financing to fund the acquisition of our target assets, including secured and unsecured forms of borrowing and selective wind-down and dispositions of assets. We may also seek to raise equity capital or issue debt securities in order to fund our future investments.

Liquidity Needs

In addition to our loan origination activity and general operating expenses, our primary liquidity needs include interest and principal payments under our Bank Credit Facility, securitization bonds, and secured debt. Information concerning our contractual obligations and commitments to make future payments, including our commitments to repay borrowings, is included in the following table as of December 31, 2025. This table excludes our obligations that are not fixed and determinable (dollars in thousands):

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(1)Future interest payments were estimated based on the applicable index at December 31, 2025 and unused commitment fee of 0.25% per annum, assuming principal is repaid on the current maturity date of January 2027.

(2)Amounts include minimum principal and interest obligations through the initial maturity date of the collateral assets. Interest on floating rate debt was determined based on Term SOFR at December 31, 2025.

(3)The timing of future principal payments was estimated based on expected future cash flows of underlying collateral loans. Repayments are estimated to be earlier than contractual maturity only if proceeds from underlying loans are repaid by the borrowers.

(4)The amounts represent minimum future base rent commitments through initial expiration dates of the respective noncancellable operating ground leases, excluding any contingent rent payments. Rents paid under ground leases are recoverable from tenants.

(5)Future lending commitments may be subject to certain conditions that borrowers must meet to qualify for such fundings. Commitment amount assumes future fundings meet the terms to qualify for such fundings.

Share Repurchases

In April 2025, our board of directors authorized a stock repurchase program (“Stock Repurchase Program”) under which we may repurchase up to $50.0 million of our outstanding Class A common stock until April 30, 2026. The Stock Repurchase Program replaces the prior stock repurchase program authorization which expired on April 30, 2025. Under the Stock

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Repurchase Program, we may repurchase shares in open market purchases, in privately negotiated transactions or otherwise. We have a written trading plan as part of the Share Repurchase Program that provides for share repurchases in open market transactions that is intended to comply with Rule 10b-18 under the Exchange Act. The Stock Repurchase Program will be utilized at our discretion and in accordance with the requirements of the SEC. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate requirements and other conditions.

During the year ended December 31, 2025, the Company repurchased 2.0 million shares of Class A common stock at a weighted average price of $5.35 per share for an aggregate cost of $10.9 million.

As of December 31, 2025, there is $40.2 million remaining available to make repurchases under the Stock Repurchase Program.

Cash Flows

The following presents a summary of our consolidated statements of cash flows for the year ended December 31, 2025, 2024 and 2023 (dollars in thousands):

Operating Activities

Cash inflows from operating activities are generated primarily through interest received from loans and preferred equity held for investment, and property operating income from our real estate portfolio. This is partially offset by payment of interest expenses for master repurchase and credit facilities and mortgages payable, and operating expenses supporting our various lines of business, including property management and operations, loan servicing and workout of loans in default, investment transaction costs, as well as general administrative costs.

Our operating activities provided net cash inflows of $73.0 million and $103.4 million for the year ended December 31, 2025 and 2024, respectively. Net cash provided by operating activities decreased for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to lower net interest income recorded during the year ended December 31, 2025.

Our operating activities provided net cash inflows of $103.4 million and $137.6 million for the year ended December 31, 2024 and 2023, respectively. Net cash provided by operating activities decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to lower net interest income recorded during the year ended December 31, 2024.

We believe cash flows from operations, available cash balances and our ability to generate cash through short and long-term borrowings are sufficient to fund our operating liquidity needs.

Investing Activities

Investing activities include cash outlays for disbursements on new and/or existing loans, which are partially offset by repayments of loans held for investment.

Investing activities used net cash of $419.9 million for the year ended December 31, 2025. Net cash used in investing activities during the year ended December 31, 2025 resulted primarily from origination and fundings on our loans and preferred equity held for investment, net of $769.1 million, partially offset by repayments on loans and preferred equity held for investment, net of $284.1 million and proceeds from the sale of real estate $80.8 million.

Investing activities generated net cash inflows of $313.1 million for the year ended December 31, 2024. Net cash provided by investing activities during the year ended December 31, 2024 resulted primarily from repayments on loans and preferred equity held for investment, net of $420.9 million partially offset by the origination and fundings on our loans and preferred equity held for investment, net of $114.3 million.

Investing activities generated net cash inflows of $384.2 million for the year ended December 31, 2023. Net cash provided by investing activities during the year ended December 31, 2023 resulted primarily from repayments on loans and preferred equity held for investment, net of $455.9 million partially offset by origination and fundings on our loans and preferred equity held for investment, net of $77.2 million.

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Financing Activities

We finance our investing activities largely through borrowings secured by our investments along with capital from third party investors. We also have the ability to raise capital in the public markets through issuances of common stock, as well as draws upon our corporate credit facility and master repurchase facilities, to finance our investing and operating activities. Accordingly, we incur cash outlays for payments on third party debt and dividends to our common stockholders.

Financing activities generated net cash of $68.9 million for the year ended December 31, 2025, which resulted primarily from borrowings from master repurchase and credit facilities of $615.0 million partially offset by repayment of master repurchase and credit facilities of $322.1 million, repayment of securitization bonds of $112.3 million and distributions paid on common stock of $83.0 million.

Financing activities used net cash of $327.9 million for the year ended December 31, 2024, which resulted primarily from repayment of master repurchase and credit facilities of $665.4 million, repayment of securitization bonds of $403.4 million and distributions paid on common stock of $99.1 million partially offset by borrowings from securitization bonds of $582.6 million and borrowings from master repurchase and credit facilities $297.6 million.

Financing activities used net cash of $558.6 million for the year ended December 31, 2023, which resulted primarily from repayment of master repurchase and credit facilities of $320.6 million, repayment of securitization bonds of $258.8 million and distributions paid on common stock of $104.0 million partially offset by borrowings from master repurchase and credit facilities of $133.1 million.

Underwriting, Asset and Risk Management

We closely monitor our portfolio and actively manage risks associated with, among other things, our assets and interest rates. Prior to investing in any particular asset, the underwriting team, in conjunction with third party providers, undertakes a rigorous asset-level due diligence process, involving intensive data collection and analysis, to ensure that we understand fully the state of the market and the risk-reward profile of the asset. Beginning in 2021, our investment and portfolio management and risk assessment practices diligence the sustainability and other standards of our business counterparties, including borrowers, sponsors and that of our investment assets and underlying collateral, which may include sustainability initiatives, recycling, energy efficiency and water management, volunteer and charitable efforts, anti-money laundering and know-your-client policies, and engagement and belonging practices in workforce leadership, composition and hiring practices. Prior to making a final investment decision, we focus on portfolio diversification to determine whether a target asset will cause our portfolio to be too heavily concentrated with, or cause too much risk exposure to, any one borrower, real estate sector, geographic region, source of cash flow for payment or other geopolitical issues. If we determine that a proposed acquisition presents excessive concentration risk, we may determine not to acquire an otherwise attractive asset.

For each asset that we acquire, our asset management team engages in active management of the asset, the intensity of which depends on the attendant risks. The asset manager works collaboratively with the underwriting team to formulate a strategic plan for the particular asset, which includes evaluating the underlying collateral and updating valuation assumptions to reflect changes in the real estate market and the general economy. This plan also generally outlines several strategies for the asset to extract the maximum amount of value from each asset under a variety of market conditions. Such strategies may vary depending on the type of asset, the availability of refinancing options, recourse and maturity, but may include, among others, the restructuring of non-performing or sub-performing loans, the negotiation of discounted payoffs or other modification of the terms governing a loan, and the foreclosure and management of assets underlying non-performing loans in order to reposition them for profitable disposition. We continuously track the progress of an asset against the original business plan to ensure that the attendant risks of continuing to own the asset do not outweigh the associated rewards. Under these circumstances, certain assets will require intensified asset management in order to achieve optimal value realization.

Our asset management team engages in a proactive and comprehensive on-going review of the credit quality of each asset it manages. In particular, for debt investments on at least an annual basis, the asset management team will evaluate the financial wherewithal of individual borrowers to meet contractual obligations as well as review the financial stability of the assets securing such debt investments. Further, there is ongoing review of borrower covenant compliance including the ability of borrowers to meet certain negotiated debt service coverage ratios and debt yield tests. For equity investments, the asset management team, with the assistance of third-party property managers, monitors and reviews key metrics such as occupancy, same-store sales, tenant payment rates, property budgets and capital expenditures. If through this analysis of credit quality, the asset management team encounters declines in credit quality not in accordance with the original business plan, the team evaluates the risks and determines what changes, if any, are required to the business plan to ensure that the attendant risks of continuing to hold the investment do not outweigh the associated rewards.

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In addition, the audit committee of our board of directors, in consultation with management, periodically reviews our policies with respect to risk assessment and risk management, including key risks to which we are subject, including credit risk, liquidity risk and market risk, and the steps that management has taken to monitor and control such risks.

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance significantly more than inflation does. A change in interest rates may correlate with the inflation rate. Substantially all of the leases at our multifamily properties allow for monthly or annual rent increases which provide us with the opportunity to achieve increases, where justified by the market, as each lease matures. Such types of leases generally minimize the risks of inflation on our multifamily properties.

Refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” for additional details.

Critical Accounting Estimates

Preparation of financial statements in accordance with U.S. generally accepted accounting principles requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

During 2025, we reviewed and evaluated our critical accounting estimates and we believe they are appropriate. The following is a list of our accounting policies that may require more significant estimates and judgments: 1) Current Expected Credit Loss (“CECL” Reserve) and 2) Real Estate Impairment. We have included a summary of these areas below. For more information on our critical accounting policies and other significant accounting policies, refer to the Note titled “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

CECL Reserve

The CECL reserve for our financial instruments carried at amortized cost and off-balance sheet credit exposures, such as loans, loan commitments and trade receivables, represents a lifetime estimate of expected credit losses. Factors considered by us when determining the CECL reserve include loan-specific characteristics such as loan-to-value (“LTV”) ratio, vintage year, loan term, property type, occupancy and geographic location, financial performance of the borrower, expected payments of principal and interest, as well as internal or external information relating to past events, current conditions and reasonable and supportable forecasts.

The CECL reserve is measured on a collective (pool) basis when similar risk characteristics exist for multiple financial instruments. If similar risk characteristics do not exist, we measure the CECL reserve on an individual instrument basis. The determination of whether a particular financial instrument should be included in a pool can change over time. If a financial asset’s risk characteristics change, we evaluate whether it is appropriate to continue to keep the financial instrument in its existing pool or evaluate it individually.

In measuring the CECL reserve for financial instruments that share similar risk characteristics, we primarily apply a probability of default (“PD”)/loss given default (“LGD”) model for instruments that are collectively assessed, whereby the CECL reserve is calculated as the product of PD, LGD and exposure at default. Our model principally utilizes historical loss rates derived from a commercial mortgage-backed securities database with historical losses from 1998 through December 2025 provided by a third party, Trepp LLC, forecasting the loss parameters using a scenario-based statistical approach over a reasonable and supportable forecast period of twelve months, followed by a straight-line reversion period of twelve-months back to average historical losses. Where management has determined that the credit loss model does not fully capture certain external factors, including portfolio trends or loan specific factors, a qualitative adjustment to the reserve may be recorded.

For loans that do not share similar risk characteristics, we evaluate the CECL reserve on an individual basis. We consider loans to be collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral or foreclosure is probable. For such loans, we estimate the CECL reserve based on the difference between the fair value of the underlying collateral and the amortized cost basis of the loan.

We apply broadly accepted and standard real estate valuation techniques, such as a discounted cash flow (“DCF”), direct capitalization methodology or sales comparables, to determine the fair value of the collateral. Determining fair value of the collateral, including utilization of a practical expedient, may take into account a number of assumptions including, but not limited to, market rents and cash flow projections, market capitalization rates, discount rates and sales comps. Such assumptions are generally based on current market conditions and are subject to economic and market uncertainties.

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Management only expects to charge-off the CECL reserves in the consolidated financial statements if and when such amounts are deemed non-recoverable. This is generally the time a loan is repaid or foreclosed. However, non-recoverability may also be concluded if, management determines, it is nearly certain that all amounts will not be collected.

In connection with developing the CECL reserve for our loans and preferred equity held for investment, we determine the risk ranking of each loan and preferred equity investment as a key credit quality indicator. The risk rankings are based on a variety of factors, including, without limitation, underlying real estate performance and asset value, values of comparable properties, durability and quality of property cash flows, sponsor experience and financial wherewithal, and the existence of a risk-mitigating loan structure. Additional key considerations include loan-to-value ratios, debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, our loans and preferred equity held for investment are rated “1” through “5,” from less risk to greater risk, and the ratings are updated quarterly. At the time of origination or purchase, loans and preferred equity held for investment are ranked as a “3” and will move accordingly going forward based on the ratings.

We also consider qualitative factors, including, but not limited to, economic and business conditions, borrower actions, nature and volume of the loan portfolio, lending terms, volume and severity of past due loans, concentration of credit and changes in the level of such concentrations in its determination of the CECL reserve.

Changes in the CECL reserve for our financial instruments are recorded in increase/decrease in current expected credit loss reserve on the consolidated statement of operations with a corresponding offset to the loans held for investment or as a component of other liabilities for future loan fundings recorded on our consolidated balance sheets.

Real Estate Impairment

We evaluate real estate held for investment for impairment periodically or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. We evaluate real estate for impairment on the lowest level of identifiable cash flows, which is generally on an individual property basis. If an impairment indicator exists, we evaluate the undiscounted future net cash flows that are expected to be generated by the property, including any estimated proceeds from the eventual disposition of the property. If multiple outcomes are under consideration, we may apply a probability-weighted approach to the impairment analysis. Another key consideration in this assessment is the assumptions about the highest and best use of its real estate investments and its intent and ability to hold them for a reasonable period that would allow for the recovery of their carrying values. If such assumptions change and we shorten our expected hold period, this may result in the recognition of impairment losses. Based upon the analysis, if the carrying value of a property exceeds its undiscounted future net cash flows, an impairment loss is recognized for the excess of the carrying value of the property over the estimated fair value of the property. In evaluating and/or measuring impairment, we consider, among other things, current and estimated future cash flows associated with each property, market information for each sub-market, including, where applicable, capitalization rates, discount rates, leasing trends, occupancy trends, lease or room rates, and the market prices of similar properties recently sold or currently being offered for sale, and other quantitative and qualitative factors.