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Item 1A. Risk Factors

2025-02-21 compared with 2024-02-20 · 133 added, 115 removed, 518 unchanged (32% of the section changed)

Our business is subject to various risks, including the risks listed below.

If any of these risks occur, our business, financial condition and results of operations could be materially adversely affected, and the value of our common stock could decline.

The commercial real estate markets have experienced a prolonged dislocation due to inflation and high interest rates, which has resulted in decreased real estate values, increased delinquencies and defaults, and a disruption in the capital markets.

This environment has had a material adverse effect on our business, results of operations, financial condition, and liquidity.

If this environment persists, it is likely we will continue to experience an adverse impact on our business.

The risks associated with these types of markets, and other risks related to our business, are described below.

The risk factors listed below should not be considered an all-inclusive list.

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Some of the risk factors discussed below may have different impacts on our Structured and Agency Businesses.

Additionally, you should review “Current Market Conditions, Risks and Recent Trends” located in Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the current adverse market conditions that we are currently experiencing, and may continue to experience in the future, that are having an adverse impact on our business.

Risk Factor Summary

Risks Related to Our Business.

The COVID-19 pandemic caused severe disruptions to the U.S.

and global economies and may continue to have an adverse impact on our business, results of operations and financial condition.

An economic slowdown, a lengthy or severe recession, declining real estate values, major bank failures or changes in interest rates could harm our operations, affect our ability to obtain financing on reasonable terms and have other adverse effects on us.

An economic slowdown, a lengthy or severe recession, declining real estate values, or changes in short and/or long term interest rates could harm our operations, affect our ability to obtain financing on reasonable terms and have other adverse effects on us.

If economic conditions deteriorate and/or we experience a turbulent economic environment, we will likely:

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(2) encounter difficulty estimating loan loss reserves;

and (3) experience a decline in loan repayments.

and (3) experience an increase in loan delinquencies and loan modifications.

If we are unable to invest excess capital on acceptable terms, or at all, it would likely result in a declining portfolio and would adversely affect the returns from our investments and our operating results.

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Our business is subject to risk of loss in connection with defaults on loans, failed loan deliveries to GSEs and potential requirements to repurchase loans already sold to GSEs or other issuers of securitizations for a breach of representations or warranties.

If we fail to act proactively with delinquent borrowers in an effort to avoid defaults, the number of delinquent loans could increase, which could have a material adverse effect on us.

If we fail to act proactively with delinquent borrowers in an effort to avoid defaults, the number of delinquent loans could increase, which could have a material adverse effect on our business.

We satisfy most of our restricted liquidity requirements with Fannie Mae with a letter of credit issued by one of our lenders.

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We finance a significant amount of our loans and investments through a variety of means, including CLOs, securitizations, credit facilities, equity capital, senior and convertible debt instruments, and other structured financings.

These vehicles may contain restrictive covenants and may require us to provide additional collateral or repurchase

assets if the value of pledged assets, some of which we guarantee, decline in value.

If we are unable to acquire eligible investments, find suitable replacement investments and access financing sources on favorable terms, or at all, we may not be able to obtain the level of leverage necessary to optimize our return on investment and cash available for distribution to our stockholders may decline.

These vehicles may contain restrictive covenants and may require us to provide additional collateral or repurchase assets if the value of pledged assets, some of which we guarantee, decline in value.

If we are unable to acquire eligible investments, find

suitable replacement investments and access financing sources on favorable terms, or at all, we may not be able to obtain the level of leverage necessary to optimize our return on investment and cash available for distribution to our stockholders may decline.

In certain circumstances, we employ hedging strategies to limit the effects of changes in interest rates (and in some cases credit spreads), including treasury futures, interest rate and credit default swaps, caps, floors and other derivative products.

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We are also subject to changes in laws, regulations and existing GSE and HUD program requirements, including potential increases in reserve and risk retention requirements that could increase our costs and affect the way we conduct business, which could materially and adversely affect our financial results.

The changes and effects of government regulation, including the Investment Advisors Act and our exemption from the Investment Company Act, could negatively impact the market value of loans or increase our costs, which could materially and adversely affect our financial results.

The changes and effects of government regulation, including the Investment Advisers Act and our exemption from the Investment Company Act, could negatively impact the market value of loans or increase our costs, which could materially and adversely affect our financial results.

A change to the conservatorship of Fannie Mae and Freddie Mac and related actions, along with any changes in laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and the U.S.

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(1) volatility in our stock price;

(2) major public health crisis;

(3) global economic and political conditions;

(4) major bank failures;

(5) losses of key personnel with long standing business relationships;

(6) adverse resolutions of lawsuits;

(4) future terrorist attacks;

(7) terrorist attacks;

(8) military conflict;

and (6) changes to laws and regulations, including environmental, social and governance matters.

(9) changes to laws and regulations, including environmental, social and governance matters;

and (10) the effective development of artificial intelligence ("AI").

Risks Related to Our Business

The COVID-19 pandemic caused severe disruptions to the U.S.

and global economies and to our business and may continue to have an adverse impact on our business, results of operations and financial condition.

The COVID-19 pandemic caused significant disruptions to the U.S.

and global economies.

Although vaccine availability and its usage have led to less negative short-term effects, such as travel bans, quarantines, layoffs and shutdowns, the ongoing longer-term macroeconomic effects on inflation, interest rates, capital markets, labor shortages, property values and global supply chains continue to

negatively impact many industries, including the U.S.

commercial real estate market.

In addition, new strains of COVID-19 continue to emerge, which may cause governments and businesses to re-impose aggressive measures to help slow its spread, making the future impact difficult to predict.

More particularly, the consequences of the COVID-19 pandemic that have had, and may continue to have in the future, adverse impacts on our business are as follows:

• During the course of the pandemic, we experienced, and may experience in the future:

◦ declines in the value of our assets, including our loan and securities portfolios, which could result in margin calls and other mandatory prepayments under the credit facilities we use to finance those assets;

◦ an increase in payment delinquencies from our borrowers resulting in additional credit losses;

◦ an increase in the cost to obtain financing and other adverse effects of obtaining financing under terms and conditions that are less favorable to us, and if conditions worsen, could prevent us from obtaining financing at all;

• In the event of any forced sales of the securities and other assets that secure our repurchase and other financing arrangements, such sales may be on terms less favorable to us than might otherwise be available under normal conditions, which could result in losses;

• Disruptions in the credit markets have had, and may continue to have, a negative impact on our ability to execute on securitizations, which may have an adverse effect on our liquidity and results of operations;

• To the extent conditions worsen, there may be a materially negative effect on our results of operations, and, in turn, on cash available for distribution to our stockholders, on the value of our assets and on the market price of our common stock.

To the extent that pandemics adversely affect our business, results of operations, financial condition and cash flows, they may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

An economic slowdown, a lengthy or severe recession, or declining real estate values could harm our operations.

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Declining real estate values limit our new mortgage loan originations, since borrowers often use increases in the value of their properties to support the purchase of additional properties and significantly increase the likelihood that we will incur losses on defaulted loans because the value of our collateral may be insufficient to repay the loan in full.

Borrowers may also be less able to pay principal and interest on our loans if the economy weakens.

Any sustained period of increased payment delinquencies, foreclosures and resulting losses could adversely affect our net interest income as well as our ability to originate, sell and securitize loans, which could significantly harm our results of operations, financial condition, business prospects and our ability to make distributions to stockholders.

Borrowers may also be less able

to pay principal and interest on our loans if the economy weakens.

Any sustained period of increased payment delinquencies, foreclosures and resulting losses could adversely affect our net interest income as well as our ability to originate, sell and securitize loans, which could significantly harm our results of operations, financial condition, business and our ability to make distributions to stockholders.

Prolonged disruptions in the financial markets could affect our ability to obtain financing on reasonable terms and have other adverse effects on us and the market price of our common stock.

Commercial real estate can be adversely affected by a lack of liquidity caused by a prolonged economic downturn, which may limit our ability to raise equity or debt in the capital markets or obtain other financing on favorable terms.

If we do issue equity, it may be dilutive to our existing stockholders or could result in the issuance of securities that have rights, preferences and privileges that are senior to those of our existing securities.

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These factors may also make it more difficult for our borrowers to repay our loans as they may experience difficulties in selling assets, obtaining other financing or realize increased costs of financing.

Disruptions in the financial markets also may have a material adverse effect on the market value of our common stock.

Major bank failure or sustained financial market illiquidity could adversely affect our business, financial condition and results of operations.

We face certain risks in the event of a sustained deterioration of domestic or international financial market liquidity.

We may be unable to access funds in our deposit accounts on a timely basis.

Any resulting need to access other sources of liquidity or short-term borrowing would increase our costs.

In the event of a major bank failure, we could face major risks to the recovery of our bank deposits.

Separately, although a majority of our cash is currently on deposit with major financial institutions, our balances often exceed insured limits.

While we are not currently aware of any liquidity issues directly impacting the financial institutions where we hold cash deposits or securities, if financial liquidity deteriorates, there can be no assurance we will not experience an adverse effect, which may be material, on our ability to access capital and on our business, financial condition and results of operations.

Disruptions in the financial markets also may have a material adverse effect on the market price of our common stock.

Increases in loan loss reserves and other impairments are likely if economic conditions deteriorate.

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If we do not have the opportunity to originate quality investments to replace loans that are repaid, it will likely result in reduced returns from our investments.

Changes in interest rates could have an adverse effect on our net investment income.

A significant portion of our loans and borrowings in our business are variable-rate instruments.

While some elements of our business may benefit from rising rates, in the event of a significant rising interest rate environment and/or economic downturn, defaults could increase and result in credit losses, which could adversely affect our liquidity and operating results, and such delinquencies or defaults could have an adverse effect on the spreads between interest-earning assets and interest-bearing liabilities.

In addition, as interest rates rise, it is likely that income from our investment in a residential mortgage banking business would be adversely affected, since rising rates generally decrease the demand for residential real estate loans and the number of loan originations.

The discontinuation of LIBOR and changes in banks’ inter-bank lending rate reporting practices may adversely affect the value of the financial obligations to be held or issued by us.

We are subject to risks related to the cessation of the use of LIBOR as of June 30, 2023.

The publication of USD LIBOR for certain tenors and all non-USD LIBOR tenors ceased after December 31, 2021.

Banks reporting information used to set USD LIBOR for all other tenors were required to stop doing so after June 30, 2023.

We completed our transition away from LIBOR as of June 30, 2023.

As an alternative to LIBOR, in the U.S., the Alternative Reference Rates Committee has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for U.S.

dollar-based LIBOR.

SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S.

Treasury securities and is based on directly observable U.S.

Treasury-backed repurchase transactions.

There are inherent differences between LIBOR and SOFR, which may lead to uncertainties or risks related to the general acceptance of SOFR, the value of and market for securities linked to SOFR, or result in a reduction in our interest income.

We cannot predict the consequences of these developments or other market or regulatory changes related to the phase-out of LIBOR.

Switching existing financial instruments and

hedging transactions from LIBOR to SOFR required calculation of a spread.

Industry organizations attempted to structure the spread calculation in a manner that minimizes the possibility of value transfer between counterparties, borrowers and lenders by virtue of the transition, but there is no assurance that the calculated spread will be fair and accurate or that all asset types and all types of securitization vehicles will use the same spread.

We and other market participants have less experience understanding and modeling SOFR-based assets and liabilities than LIBOR-based assets and liabilities, increasing the difficulty of investing, hedging and risk management.

More generally, any of the above changes or any other consequential changes to SOFR, or any other “benchmark,” as a result of international, national or other proposals for reform or other initiatives or investigations, or any further uncertainty in relation to the timing and manner of implementation of such changes, could have a material adverse effect on the value of and return on any securities based on or linked to a “benchmark.”

Changes in interest rates could have an adverse effect on our operating results, financial condition, business prospects and our ability to make distributions to stockholders.

Our financial performance is significantly influenced by movements in both short term and long term interest rates.

Since the vast majority of our structured loan portfolio is floating rate based on SOFR and a greater portion of our debt balances consist of fixed-rate instruments (such as convertible and senior unsecured notes), a rising interest rate environment generally has a positive impact on our net

interest income from our structured loan portfolio.

Furthermore, our earnings on escrows and cash balances also benefit from an elevated short term rate environment.

However, a prolonged period of elevated short and long term interest rates may result in:

(1) increased payment delinquencies and defaults;

(2) increased loan modifications and foreclosures;

(3) an increase in real estate owned ("REO") assets;

(4) declining real estate values of certain asset classes;

and (5) a dislocation in capital markets, all of which would adversely impact our results of operations, financial condition, business prospects and our ability to make distributions to our stockholders.

Conversely, a high long term interest rate environment would likely have an adverse impact on our fixed rate GSE/Agency business, as it will likely increase delinquencies and make it more costly for borrowers to refinance their balance sheet loans with fixed rate agency product.

We may not be able to hire and retain qualified loan originators or grow and maintain our relationships with key customers, and if we are unable to do so, our ability to implement our business and growth strategies could be limited.

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In the event of a bankruptcy of our borrower, we may not have full recourse to the assets of the borrower, or the borrower’s assets may not be sufficient to satisfy our mezzanine loan.

borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt is paid.

If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt is paid.

As a result, we may not recover some or all of our investment.

In addition, mezzanine loans may have higher loan to value ratios than mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal.

In addition, mezzanine loans

may have higher loan to value ratios than mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal.

Volatility in values of multifamily and commercial properties may adversely affect our loans and investments.

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Currently, the Agency Business originates a significant portion of its loans for sale through GSE and HUD programs.

The Agency Business is approved as a Fannie Mae DUS lender nationwide, a Freddie Mac Program Plus lender in New York, New Jersey and Connecticut, a Freddie Mac Targeted Affordable Housing, Manufactured Housing Community, Seniors Housing and SBL lender nationwide, a HUD MAP and LEAN lender nationwide, and a Ginnie Mae issuer.

The Agency Business is approved as a Fannie Mae DUS lender nationwide, a Freddie Mac Optigo ® Conventional Loan and SBL lender nationwide, a HUD MAP and LEAN lender nationwide, and a Ginnie Mae issuer.

Our status as an approved lender affords us a number of advantages but may be terminated by the applicable GSE or HUD at any time.

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While our Agency Business originates loans that meet the underwriting guidelines defined by Fannie Mae, in addition to our own internal underwriting guidelines, underwriting criteria may not always protect against loan defaults.

Other factors can lead to a to default on a loan, such as a decline in property value, cash flow, occupancy, maintenance needs and other financing obligations.

Other factors can lead to a default on a loan, such as a decline in property value, cash flow, occupancy, maintenance needs and other financing obligations.

If loan defaults increase, our risk-sharing obligation payments under the Fannie Mae DUS program may increase which could have a material adverse effect on our results of operations and liquidity.

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Our Agency Business could also be subject to a loss of its contractual servicing fee, and for its loss sharing obligations to Fannie Mae.

These events could have a negative impact on our cash flows and on the net carrying value of the MSRs on our balance sheet and could result in a charge to our earnings.

These events could have a negative impact on our cash flows and on the net carrying value of the MSRs on our balance sheet and could result in a reduction to our earnings.

As a result of the foregoing, a rise in delinquencies could have a material adverse effect on our Agency Business.

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We expect that loan servicing fees will continue to represent a significant portion of our Agency Business’ revenues.

These fees are primarily derived from loans that have been originated by us and sold through GSE and HUD programs.

These fees are primarily derived from loans that have been originated by us and sold through the GSE and HUD programs.

A decline in the number or value of loans that the Agency Business originates for these investors or terminations of its servicing engagements will decrease these fees.

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The Agency Business is also subject to losses that may arise as a result of servicing errors, such as a failure to maintain insurance, pay taxes or provide required notices.

If we fail to perform, or we breach our servicing obligations to the GSEs or HUD, our servicing engagements may be terminated.

If we fail to perform our servicing obligations, or we breach our servicing obligations to the GSEs or HUD, our servicing engagements may be terminated.

Declines in or terminations of servicing engagements or breaches of such obligations could materially and adversely affect our financial results.

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Although the Agency Business has experienced only a few failed loan deliveries in its history, none of which had a material impact on its financial condition or results of operations, we can provide no assurance that we will not experience additional failed deliveries in the future or that any losses will not be material or will be mitigated through property insurance or payment protections.

We must make certain representations and warranties concerning each loan we originate for GSE or HUD programs.

We must make certain representations and warranties concerning each loan we originate for the GSE or HUD programs.

The representations and warranties relate to our practices in the origination and servicing of the loans and the accuracy of the information being provided by us.

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We may not be able to access financing sources on favorable terms, or at all, which could adversely affect our ability to execute our business plan.

We finance our Structured Business loans and investments through a variety of means, including CLOs, securitizations, credit facilities, equity capital, senior and convertible debt instruments, and other structured financings.

We finance our Structured Business loans and investments through a variety of means, including CLOs, securitizations, credit facilities, equity capital, and senior and convertible debt instruments.

We finance our Agency Business loan originations, prior to sale to, or securitization by, an agency, through credit facilities provided by commercial banks.

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This could subject us to an increase in our recourse indebtedness and the risk that debt service on less efficient forms of financing would require a larger portion of our cash flows, thereby reducing cash available for distribution to our stockholders, funds available for operations as well as for future business opportunities.

Our credit and repurchase facilities and unsecured debt (senior and convertible notes) contain restrictive covenants relating to our operations.

Our credit and repurchase facilities and unsecured debt contain restrictive covenants relating to our operations.

Our credit and repurchase facilities and unsecured debt (senior and convertible notes) contain various financial covenants, including, but not limited to, minimum liquidity requirements, minimum net worth requirements, minimum unencumbered asset requirements, as well as certain other debt service coverage ratios, debt to equity ratios and minimum servicing portfolio tests.

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Moreover, we may be dependent upon a few lenders to provide financing under credit agreements for our origination or acquisition of loans and investments and there can be no assurance that these agreements will be renewed or extended at expiration.

Our ability to obtain financing

through CLOs is subject to conditions in the debt capital markets which are impacted by factors beyond our control that may reduce the level of investor demand for such securities.

Our ability to obtain financing through CLOs is subject to conditions in the debt capital markets which are impacted by factors beyond our control that may reduce the level of investor demand for such securities.

The debt facilities that we use to finance our investments may require us to provide additional collateral.

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Failure to obtain favorable terms with regard to these matters may adversely affect our cash flow and profitability.

We may not be able to find suitable replacement investments for CLO reinvestment periods.

We may not be able to find suitable replacement investments during CLO reinvestment periods.

CLOs have defined periods during which principal payments on assets held in the CLO can be reinvested, commonly referred to as a reinvestment period.

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Any significant repurchases or indemnification payments could adversely affect our financial condition and operating results.

Through our Private Label platform we engage in securitization transactions relating to real estate mortgage loans that expose us to potentially material risks.

Our results of operations and cash flows could be adversely affected if the reinvestment period of our CLOs expire without available capacity in existing CLOs, or the issuance of new CLOs.

CLO reinvestment periods provide us with the flexibility to manage our structured loan portfolio effectively as we are able to replace loans that have matured or paid off with newly originated loans and existing loans in our portfolio.

If our CLO reinvestment periods end without availability in other existing CLOs, or the establishment of new CLOs, we may face liquidity constraints, reduced investment opportunities, higher borrowing costs, and limited cash available for distribution to our stockholders .

Through our Private Label platform we engage in securitization transactions relating to real estate mortgage loans that expose us to potential material risks.

Securitizations and other similar transactions generally require us to incur short-term debt on a recourse basis to finance the accumulation of loans or other assets prior to securitization.

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However, depending on market conditions, fixed rate assets may become a greater portion of our new loan originations.

We may employ hedging strategies to limit the effects of changes in interest rates (and in some cases credit spreads), including treasury futures, interest rate and credit default swaps, caps, floors and other derivative products, however, no strategy can completely insulate us from the risks associated with interest rate changes.

We may employ hedging strategies to limit the effects of changes in interest rates (and in some cases credit spreads),

including treasury futures, interest rate and credit default swaps, caps, floors and other derivative products, however, no strategy can completely insulate us from the risks associated with interest rate changes.

Hedging involves certain additional risks such as counterparty risk, the legal enforceability of hedging contracts, the early repayment of hedged transactions and the risk that unanticipated and significant changes in interest rates may cause a significant loss of basis in the contract and a change in current period expense.

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Fannie Mae requires the Agency Business to maintain operational liquidity based on a formula that considers the balance of the loan and the level of credit loss exposure (level of risk sharing).

Fannie Mae also requires its DUS lenders to maintain collateral, which may include pledged securities, for their risk-sharing obligations.

Fannie Mae also requires its DUS lenders to maintain collateral,

which may include pledged securities, for their risk-sharing obligations.

The amount of collateral required under the Fannie Mae DUS program is calculated at the loan level and is based on the balance of the loan, the level of risk-sharing, the seasoning of the loans and the rating of the Fannie Mae DUS lender.

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If we were required to register as an investment company, we would become subject to regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the Act) and portfolio composition, including restrictions with respect to diversification and industry concentration and other matters.

One of our subsidiaries is required to register under the Investment Advisors Act, and is subject to regulation under that Act.

One of our subsidiaries is subject to the extensive regulation prescribed by the Investment Advisers Act of 1940 (the “Advisors Act”).

One of our subsidiaries is required to register under the Investment Advisers Act, and is subject to regulation under that Act.

One of our subsidiaries is subject to the extensive regulation prescribed by the Investment Advisers Act of 1940 (the “Advisers Act”).

The SEC oversees our activities as a registered investment adviser under this regulatory regime.

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Even if a sanction imposed against our subsidiary or its personnel involves a small monetary amount, the adverse publicity related to such sanction could harm our reputation and our relationship with our investors and impede our ability to raise additional capital.

In addition, compliance with the Advisors Act may require us to incur additional costs, and these costs may be material.

In addition, compliance with the Advisers Act may require us to incur additional costs, and these costs may be material.

The effects of government regulation could negatively impact the market value of loans.

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The conservatorships have no specified termination dates and there continues to be significant uncertainty regarding the future of the GSEs, including how long they will continue to exist in their current forms, the extent of their roles in the housing markets and whether they will continue to exist following conservatorship.

In 2014, the FHFA released its strategic plan for the GSEs, in which it changed its goal of “contraction” of the GSEs’ multifamily businesses to “maintaining” the businesses.

Housing Finance Reform

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Several of the bills require the wind down or receivership of the GSEs within a specified period of enactment and place certain restrictions on the GSEs’ activities prior to being wound down or placed into receivership.

It is unclear at this time what the Biden administration’s views are with respect to the future of the GSEs.

The Trump Administration has made recent comments indicating that housing finance reform may be on its agenda, however, it is unclear at this time what the Trump Administration’s views are with respect to the future of the GSEs.

We expect Congress will continue to consider housing finance reform, including conducting hearings and considering legislation that could alter the housing finance system, including the activities or operations of the GSEs.

We cannot predict the prospects for the enactment, timing or content of legislative proposals regarding the future status of the GSEs.

FHFA set its 2024 loan origination caps for Fannie Mae and Freddie Mac at $70 billion for each enterprise for a total opportunity of $140 billion (the “2024 Caps”), which is a decrease from its 2023 Caps of $75 billion for each enterprise.

FHFA set its 2025 loan origination caps for Fannie Mae and Freddie Mac at $73 billion for each enterprise for a total opportunity of $146 billion (the “2025 Caps”), which is an increase from its 2024 Caps of $70 billion for each enterprise.

FHFA stated they will continue to monitor the market and reserves the right to increase the 2025 Caps if warranted, however, they will not reduce the 2025 Caps if the market is smaller than initially projected.

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In addition, we could become subject to litigation from any cybersecurity breach.

We have not experienced any material misappropriation, loss or unauthorized disclosure of confidential or personally identifiable information as a result of a cybersecurity breach or other act, however, a cybersecurity breach or other act and/or disruption to our information technology systems could have a material adverse effect on our business, prospects, financial condition or results of operations.

Risks Related to Our Corporate and Ownership Structure

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ACM has approximately 6% of the voting power of our outstanding stock at December 31, 2024.

As a result of our chief executive officer’s beneficial ownership of stock held by ACM, as well as his beneficial ownership of additional shares of our common stock, our chief executive officer has approximately 7% of the voting power of our

outstanding stock at December 31, 2023.

Because of his positions with us and ACM, and his ability to effectively vote a substantial minority of our outstanding stock, our chief executive officer has significant influence over our policies and strategy.

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Our Board of Directors is divided into three classes of directors.

The current terms of the Class III, Class I and Class II directors will expire in 2024, 2025 and 2026, respectively.

The current terms of the Class I, Class II and Class III directors will expire in 2025, 2026 and 2027, respectively.

Directors of each class are chosen for three-year terms upon the expiration of their current terms, and each year one class of directors is elected by the stockholders.

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We may be unable to generate sufficient revenue from operations to pay our operating expenses and to pay dividends to our stockholders.

As a REIT, we are generally required to distribute at least 90% of our REIT-taxable income each year to our stockholders.

In order to qualify for the tax benefits afforded to REITs, we intend to declare quarterly dividends and to make distributions to our stockholders in amounts such that we distribute all or substantially all of our REIT-taxable income each year, subject to certain adjustments.

As a REIT, we are generally required to distribute at least 90% of our taxable income each year to our stockholders.

In order to qualify for the tax benefits afforded to REITs, we intend to declare quarterly dividends and to make distributions to our stockholders in amounts such that we distribute all or substantially all of our taxable income each year, subject to certain adjustments.

However, our ability to make distributions may be adversely affected by the risk factors described in this report.

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A change in any one of these factors could affect our ability to make distributions.

If we are not able to comply with the restrictive covenants and financial ratios contained in future credit facilities, our ability to make distributions to our stockholders may also be impaired.

If we are not able to comply with the restrictive covenants and financial ratios contained in credit and repurchase facilities and unsecured debt, our ability to make distributions to our stockholders may also be impaired.

We cannot assure that we will be able to make distributions to our stockholders in the future or that the level of any distributions we make will increase over time.

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Debt service on any borrowings for this purpose will reduce our cash available for distribution.

To qualify as a REIT, we must generally, among other requirements, distribute at least 90% of our REIT-taxable income, subject to certain adjustments, to our stockholders each year.

To qualify as a REIT, we must generally, among other requirements, distribute at least 90% of our taxable income, subject to certain adjustments, to our stockholders each year.

To the extent that we satisfy the distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed taxable income.

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As REITs, we and our subsidiary, ARSR are exempt from these provisions.

While such provisions may be applicable to our TRSs, we currently do not expect the IRA to have a material impact on our consolidated financial statements.

Furthermore, certain provisions of the recently enacted legislations, including the IRA, may still require guidance through the issuance of treasury regulations in order to assess their full scope and impact to us.

There may be a substantial delay before the issuance of such treasury regulations, increasing the uncertainty as to the ultimate effect of the statutory amendments on us.

There may also be further technical corrections legislation proposed with respect to the provisions of the recently enacted legislation, the effect of which cannot be predicted and may be adverse to us or our stockholders.

While such provisions may be applicable to our TRSs, as of the date of this Annual Report, we do not expect the IRA to have a material impact on our consolidated financial statements.

The Trump Administration and certain members of the U.S.

Congress have stated that one of their top legislative priorities is significant reform of the Internal Revenue Code and other federal tax laws.

Among other things, the new administration and the U.S.

Congress may pursue tax policies seeking to alter the income tax rates and brackets applicable to individuals and corporations, exempt certain types of income from taxation, eliminate clean energy subsidies enacted by the Inflation Reduction Act of 2022, provide tax incentives for domestic production and impose significant new tariffs on foreign goods.

Both the timing and the details of any such tax reform are unclear.

The impact of any potential tax reform on us and our investments is uncertain and could be adverse.

General Risks

The price of our common stock may be volatile.

The trading price of our common stock may be highly volatile and could be subject to a number of factors beyond our control, including (1) the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies, (2) our financial performance, (3) coordinated buying and selling activity by market participants, including market manipulation and short-seller reports, (4) publication of information in the media, including online blog and social media about our Company by third parties, and (5) general stock and bond market conditions.

The trading price of our common stock may be highly volatile and could be subject to a number of factors beyond our control, including:

(1) the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies;

(2) our financial performance;

(3) coordinated buying and selling activity by market participants, including market manipulation and short-seller reports;

(4) publication of information in the media, including online blog and social media about our Company by third parties;

and (5) general market conditions.

The market value of our stock is based primarily on the market’s perception of our growth potential and our current and future earnings and dividends.

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Companies that experience volatility in the market price of their stock may be subject to securities class action litigation.

We may be the target of this type of litigation in the future.

We are currently the target of this type of litigation as described in Note 15.

Securities litigation against us could result in substantial costs and divert management’s attention from other business concerns, which could also harm our business.

A major public health crisis, including a pandemic, could cause severe disruptions to the U.S.

and global economies and to our business and may have an adverse impact on our business, results of operations and financial condition.

A major public health crisis, including a pandemic, could cause significant disruptions to the U.S.

and global economies.

For example, the COVID-19 pandemic, resulted in travel bans, quarantines, layoffs and shutdowns, causing negative long-term macroeconomic effects on inflation, interest rates, capital markets, labor shortages, property values and global supply chains, which had

an adverse impact on our business, results of operations and financial condition.

Depending on the severity and duration, any such major public health crisis, including any consequential adverse macroeconomic effects, has caused, and may in the future, cause the following:

• declines in the value of our assets, including our loan and securities portfolios, which could result in margin calls and other mandatory prepayments under the credit facilities we use to finance those assets;

• increases in payment delinquencies from our borrowers resulting in additional credit losses;

• increases in loan modifications to our borrowers which could adversely impact our results of operations and financial condition;

• increases in the cost to obtain financing and other adverse effects of obtaining financing under terms and conditions that are less favorable to us, and if conditions worsen, could prevent us from obtaining financing at all;

• in the event of any forced sales of the securities and other assets that secure our credit and other financing arrangements, such sales may be on terms less favorable to us than might otherwise be available under normal conditions, which could result in losses;

• disruptions in the credit markets causing a negative impact on our ability to execute on securitizations, which may have an adverse effect on our liquidity and results of operations;

• material negative effect on our results of operations, and, in turn, on cash available for distribution to our stockholders, on the value of our assets and on the market price of our common stock.

Unfavorable global economic and political conditions could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy, the global financial markets and the global political conditions.

Such conditions could include political unrest, war, such as the ongoing war with Russia and Ukraine or the ongoing war and tensions in the Middle East, natural disasters or global pandemics.

and global economies are facing higher inflation and interest rates and potential recession.

A weak or declining economy or political disruption, including any international trade disputes, could exacerbate supply chain constraints that could ultimately harm our business.

Major bank failure or sustained financial market illiquidity could adversely affect our business, financial condition and results of operations.

We face certain risks in the event of a sustained deterioration of domestic or international financial market liquidity.

We may be unable to access funds in our deposit accounts on a timely basis.

Any resulting need to access other sources of liquidity or short-term borrowing would increase our costs.

In the event of a major bank failure, we could face major risks to the recovery of our bank deposits.

Separately, although a majority of our cash is currently on deposit with major financial institutions, our balances often exceed insured limits.

We depend on key personnel for our future success, the loss of whom could threaten our ability to operate our business successfully.

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We cannot assure their continued employment as our officers.

The loss of services of certain of our executive officers could harm our business and prospects.

The loss of services of certain of our executive officers could harm our business.

The adverse resolution of a lawsuit could have a material adverse effect on our financial condition and results of operations.

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See Note 15 for information on litigation matters.

The impact of any future terrorist attacks and the availability of terrorism insurance expose us to certain risks.

Any future terrorist attacks, the anticipation of any such attacks, and the consequences of any military or other response by the U.S.

The impact of any terrorist attacks and the availability of terrorism insurance expose us to certain risks.

Any terrorist attacks, the anticipation of any such attacks, and the consequences of any military or other response by the U.S.

and its allies may have an adverse impact on the U.S.

financial markets, real estate markets and/or the economy in general.

We cannot predict the effect that any such future events would have on our business or the credit quality of our loans and investments.

We cannot predict the effect that any such events would have on our business or the credit quality of our loans and investments.

The Terrorism Risk Insurance Act (“TRIA”) requires insurers to make terrorism insurance available under their property and casualty insurance policies in order to receive federal compensation under TRIA for insured losses.

However, this legislation does not regulate the pricing of such insurance.

However, this legislation does not regulate the

pricing of such insurance.

The absence of affordable insurance coverage may adversely affect the real estate lending market, lending volume and the market’s overall liquidity and may reduce the number of suitable investment opportunities available to us and the pace at which we are able to make investments.

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It is difficult to predict the exact nature of any future legislative or regulatory initiatives and the extent to which they may impact our business, financial condition, or results of operations.

Environmental, social and governance matters may cause us to incur additional costs, make personnel changes, and affect the attractiveness of our stock to investors.

Shareholder, public and governmental expectations and pressure have been increasing with respect to corporate responsibility, sustainability, diversity and inclusion and other environmental, social and governance (“ESG”) matters.

Environmental, social and governance matters may cause us to incur additional costs and affect the attractiveness of our stock to investors.

Shareholder, public and governmental expectations and pressure have been increasing with respect to corporate responsibility, sustainability and other environmental, social and governance (“ESG”) matters.

Shareholder advisory services and other organizations have developed and published, and others may in the future develop and publish, rating systems and other scoring and reporting mechanisms to evaluate and compare our ESG performance with that of others in our industry.

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Some legislatures, government agencies and listing exchanges have mandated or proposed, and others may in the future further mandate, certain ESG disclosure or performance.

For example, board diversity and inclusion is an ESG topic that is receiving heightened attention from lawmakers and listing exchanges.

If we are unable to recruit, attract and/or retain qualified members of our Board of Directors to maintain compliance with the diversity requirements of applicable mandates within the prescribed timelines, we could be exposed to costly fines and penalties.

In addition, the standards for tracking and reporting on ESG matters are relatively new, have not been harmonized, and continue to evolve.

The standards for tracking and reporting on ESG matters are relatively new, have not been harmonized, and continue to evolve.

In addition, there is growing anti-ESG sentiment in the U.S.

that may conflict with other regulatory requirements, resulting in regulatory uncertainty.

As a result, our selection of ESG disclosure frameworks and topics may change from time to time, may result in a lack of comparative data from period to period, or differ from the expectations of our shareholders and other stakeholders.

We may also face reputational damage in the event our corporate responsibility initiatives or objectives, including with respect to board diversity, do not meet the standards or expectations of shareholders, prospective investors, lawmakers, listing exchanges or other stakeholders, or if we are unable to achieve acceptable ESG ratings from third-party rating services.

Failure to comply with ESG-related laws, exchange policies or stakeholder expectations could materially and adversely impact the value of our stock and related cost of capital, and limit our ability to fund future growth, or result in increased investigations and litigation or threats thereof.

We may also face reputational damage in the event our corporate responsibility initiatives or objectives do not meet the standards or expectations of shareholders, prospective investors, lawmakers, listing exchanges or other stakeholders, including third party rating services.

Failure to comply with ESG-related or anti-ESG-related laws, exchange policies or stakeholder expectations could materially and adversely impact the value of our stock and related cost of capital, and limit our ability to fund future growth, or result in increased investigations and litigation or threats thereof.

Climate change could have an adverse effect on both our borrowers and our financial condition and results of operations.

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Potential adverse impacts of climate-related physical risks include:

• Declination in asset values, due to, amongst other events, the destruction or degradation of property;

• declination in asset values, due to, among other events, the destruction or degradation of property;

• reduced availability or increased cost of insurance for our borrowers;

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• damage to our reputation, including due to any perception that our business practices are contrary to the preferences of different stakeholders.

Our business could be harmed if we are unable to effectively develop artificial intelligence.

Our industry is marked by rapid technological developments and innovations, such as the use of artificial intelligence, and evolving industry standards, best practices, and related regulations.

If we are unable to remain competitive by developing and providing enhancements, new features, and integrations for our existing technology offerings and platform, our business could be harmed.

addition to competitive risks, the incorporation of artificial intelligence into our technological framework poses ethical and cybersecurity risks, as well as the regulatory risks associated with compliance with state and national laws and regulations.

We are incorporating AI into some of our computer systems, and challenges with properly managing its use and failing to effectively develop AI, could result in reputational harm, competitive harm and legal liability, and adversely affect our results of operations.

Some of our computer systems currently, and may in the future, incorporate AI solutions, including machine learning and generative AI tools that collect, aggregate, and analyze data to assist in the development of our services and products and in the use of internal tools that support our business.

AI is still in its early stages, and the introduction and incorporation of AI technologies may result in unintended consequences or other new or expanded risks and liabilities.

If the content, analyses or recommendations that AI applications assist in producing are, or are alleged to be, deficient, inaccurate or biased, such as due to limitations in AI algorithms, insufficient or biased base data or flawed training methodologies, our business, financial condition, results of operations and reputation may be adversely affected.

Furthermore, if we are unable to remain competitive by continuing to develop and provide enhancements, new features, and integrations for our existing technology offerings and platform, our business could be harmed.

Additionally, AI technology is continuously evolving, and we may incur costs to adopt and deploy AI technologies that could become obsolete earlier than expected, and there can be no assurance that we will realize the desired or anticipated benefits from AI.

Also, our competitors or other third parties may incorporate AI into their products and services more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.

In addition to competitive risks, the incorporation of AI into our technological framework poses ethical and cybersecurity risks, as well as the regulatory risks associated with compliance with state and national laws and regulations.

The technologies underlying AI are rapidly developing, and it is not possible to predict all of the legal, operational or technological risks related to the use of AI.

While new AI initiatives, laws, and regulations are emerging and evolving, what they ultimately will look like remains uncertain, and our obligation to comply with them could entail significant costs, negatively affect our business, or limit our ability to incorporate certain AI capabilities into our business.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors