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Item 7. Management’s Discussion and Analysis

2021-03-11 compared with 2020-03-17 · 485 added, 503 removed, 423 unchanged (70% of the section changed)

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Actual results and timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections of this Annual Report entitled “Risk Factors” and “Forward-Looking Statements.”

We were incorporated in Maryland in November 2012 and commenced our business activities in May 2013.

We have conducted our operations to qualify as a REIT for U.S.

We were incorporated in Maryland on November 15, 2012 and have conducted our operations to qualify as a REIT for U.S.

federal income tax purposes beginning with our taxable year ended December 31, 2013.

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federal, state and local income taxes.

We commenced business in May 2013.

We primarily originate, acquire and manage a diversified portfolio of commercial real estate debt investments secured by properties located within and outside of the United States.

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The Company has no direct employees.

We are managed by our Advisor pursuant to the Advisory Agreement.

We are managed by our Advisor pursuant to an Amended and Restated Advisory Agreement, dated January 19, 2018 (the "Advisory Agreement").

Our Advisor manages our affairs on a day-to-day basis.

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These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass the Advisor’s robust platform.

Our Advisor is a wholly-owned subsidiary of Franklin Resources, Inc., which, together with its various subsidiaries, operates as Franklin Templeton.

On February 1, 2019, Franklin Resources, Inc.

and Templeton International, Inc.

(collectively, “Franklin Templeton”) acquired the Advisor (the “Transaction”).

The Transaction did not impact the terms of the Advisory Agreement and the Transaction did not result in any changes to the executive officers of the Company.

The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans.

The Company also originates conduit loans which the Company intends to sell through its TRS into CMBS securitization transactions at a profit.

The Company also owns real estate which it acquires through foreclosure and deed in lieu of foreclosure, and which it purchases for investment, typically subject to triple net leases.

The Company also invests in commercial real estate securities.

Real estate securities may include CMBS, senior unsecured debt of publicly traded REITs, debt or equity securities of other publicly traded real estate companies and CDOs.

COVID-19 Pandemic

Since December 2019, COVID-19 has spread globally, including to every state in the United States.

In March 2020, the World Health Organization declared COVID-19 a pandemic, and subsequently, the United States declared a national emergency.

The COVID-19 pandemic has had significant repercussions across domestic and global economies and financial markets, including the industries in which our borrowers operate.

The global impact of the COVID-19 outbreak evolved rapidly and many governmental authorities, including state and local governments in regions in which our borrowers own properties, have reacted by instituting government restrictions, border closings, quarantines, “shelter-in-place” orders and “social distancing” guidelines which have forced many of our borrowers to suspend or significantly restrict their business activities.

The effects of the pandemic have resulted in a dramatic increase in national unemployment and numerous corporate bankruptcies.

The COVID-19 pandemic has had and is continuing to have a negative impact on our operations, however during the second half of 2020 the impact was less significant:

Impact on Operating Results.

With respect to our operating results for the year ended December 31, 2020, the COVID-19 pandemic drove a significant increase in our allowance for credit loss provision on our loan portfolio and an increase in the realized loss on our securities portfolio.

Specifically, for the year ended December 31, 2020, we experienced an increase in our provision for expected credit losses on our loan portfolio, primarily driven by the decline in the overall economic outlook as a result of the COVID-19 pandemic.

Additionally, we had realized losses of $10.1 million on our real estate securities portfolio, the majority of which occurred during the first half of 2020.

This was a result of dislocation in the broader capital markets and uncertainty due to COVID-19 and its expected impact on values of properties underlying our real-estate debt assets.

Due primarily to changes in market conditions associated with the COVID-19 pandemic, the weighted average risk rating of our loan portfolio increased from 2.1 as of December 31, 2019 to 2.2 as of December 31, 2020, and the amortized cost basis of our loans past due increased by $37.8 million to $94.9 million over this period.

In the second and third quarters of 2020, we made limited modifications to certain loans to assist borrowers during the COVID-19 pandemic, but none of these modifications qualify as troubled debt restructurings ("TDRs").

Impact on Liquidity .

During the year ended December 31, 2020, there were significant disruptions in the financial markets that impacted our real estate securities portfolio.

This resulted in decreases in market value for these assets due to volatility and lack of liquidity.

During the second quarter of 2020, we received margin calls from certain of our lenders due to the decline in pricing, which we satisfied through the contribution of additional cash, thereby reducing our liquidity position and substantially reducing our levered returns on this portfolio of assets.

As of December 31, 2020 the Company has significantly reduced its real estate securities portfolio, further reducing mark to market exposure and the associated liquidity risk from counterparty margin calls on real estate securities repurchase agreements compared to prior quarters.

In addition, the financial market dislocations created by the COVID-19 pandemic have currently made financing through CDO or CLO securitizations more difficult.

The extent to which the COVID-19 pandemic impacts our future operating results and liquidity will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, including any resurgences, or mutations of the virus, the direct and indirect economic effects of the pandemic and containment measures, and the effectiveness of vaccines and treatment therapies and the distribution thereof.

The inability of our borrowers to meet their loan obligations and/or borrowers filing for bankruptcy protection would reduce our cash flows, which would impact our ability to pay dividends to our stockholders.

As a result of the adverse effects of the COVID-19 pandemic, starting the second quarter of 2020 our board of directors reduced the amount of our regular common stock dividend.

The board may reduce or eliminate the dividend in the future in the event of further economic deterioration or dislocations in the capital markets.

Estimated Per Share NAV

On November 12, 2019, the board of directors, upon the recommendation of the Advisor, unanimously approved and established an estimated net asset value ("NAV") per share of the Company’s common stock of $18.57 .

On November 2, 2020, the board of directors, upon the recommendation of the Audit Committee of the board, unanimously approved and established the estimated net asset value ("NAV") per share of the Company’s common stock proposed by the Advisor of $17.88.

The estimated per share NAV is based upon the estimated value of the Company’s assets less the Company’s liabilities as of September 30, 2020 (the “Valuation Date”).

This valuation was performed in accordance with the provisions of Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Investment Program Association in April 2013, including the use of an independent third-party valuation firm to estimate the fair value of our commercial real estate debt investments and commercial mortgage backed securities.

With the unanimous approval of our board of directors, we engaged an independent third-party valuation firm to estimate the fair value of our loans.

The valuation firm estimated the value of our loan portfolio by applying a discounted cash flow analysis to each loan to determine a range of estimated valuations.

To estimate the Company’s NAV, the Advisor adjusted the loan portfolio valuation prepared by the valuation advisor by adding the amounts of cash and other tangible assets reflected on our balance sheet (as computed in accordance with GAAP) and subtracting our liabilities as reflected on our balance sheet (computed in accordance with GAAP).

Based in part on these valuation ranges, the Advisor estimated that the Company’s NAV as of September 30, 2019 is $18.57 which falls within the valuation range of $18.07 to $19.15.

This valuation was performed in a manner consistent with the provisions of Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Investment Program Association in April 2013, including the use of independent third-party valuation firms to estimate the fair value of our loan portfolio, securities portfolio and real estate owned portfolio.

These valuation firms estimated the value of our loan portfolio using customary valuation methods, including a discounted cash flow analysis with respect to our loan portfolio, available market pricing information with respect to our securities portfolio, and real estate appraisals with respect to our real estate owned portfolio.

Based on these methodologies these firms determined a range of estimated valuations.

To estimate the Company’s NAV, the Advisor added the amounts of cash and other tangible assets reflected on our balance sheet (as computed in accordance with GAAP) and subtracted our liabilities as reflected on our balance sheet (computed in accordance with GAAP).

Based on this the Advisor estimated that the Company’s NAV as of September 30, 2020 is $17.88 which is the midpoint of the valuation range of $17.14 to $18.62.

The Advisor recommended our board of directors approve the estimated per share NAV of $17.88.

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We believe that the method used to determine the estimated per share NAV of the Company’s common stock is the methodology most commonly used by public, non-listed REITs to estimate per share NAV.

The estimated per share NAV does not represent the per share amount a third party would pay to acquire us, or the price at which our common stock would trade in

the event we were listed on a national securities exchange.

The estimated per share NAV does not represent the per share amount a third party would pay to acquire us, or the price at which our common stock would trade in the event we were listed on a national securities exchange.

For example, the estimated per share NAV of the Company’s common stock does not reflect a liquidity discount for the fact that the shares are not currently traded on a national securities exchange and other costs that may be incurred in connection with a liquidity event.

Our estimated per share NAV does not reflect the conversion of any Series A or Series C Preferred Stock.

Our estimated per share NAV does not reflect the conversion of any of our Series A convertible preferred stock ("Series A Preferred Stock") or Series C convertible preferred stock (“Series C Preferred Stock,” and with the Series A Preferred Stock, the “Preferred Stock”).

The estimated per share NAV was determined at a moment in time and as of the Valuation Date and the values of our assets and liabilities will change over time as a result of changes relating to the individual loans in our portfolio as well as changes and developments in the real estate and capital markets generally, including changes in interest rates.

Stockholders should not rely on the estimated per share NAV in making a decision to buy or sell shares of our common stock.

For example, material adverse developments in the real estate or credit markets related to the COVID-19 pandemic after September 30, 2020 would have a significant impact on our estimated per share NAV.

Therefore, stockholders should not rely on the estimated per share NAV in making a decision to buy or sell shares of our common stock.

Significant Accounting Estimates and Critical Accounting Policies

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Commercial mortgage loans that are held for investment purposes and are anticipated to be held until maturity, are carried at cost, net of unamortized acquisition expenses, discounts or premiums and unfunded commitments.

Commercial mortgage loans, held for investment purposes, that are deemed to be impaired will be carried at amortized cost less a specific allowance for loan losses.

Commercial mortgage loans, held for investment purposes, will be carried at amortized cost less a specific allowance for credit loss.

Interest income is recorded on the accrual basis and related discounts, premiums and acquisition expenses on investments are amortized over the life of the investment using the effective interest method.

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Acquisition expenses on originating these investments are expensed when incurred.

Allowance for Loan Losses

The allowance for loan losses reflects management's estimate of loan losses inherent in the loan portfolio as of the balance sheet date.

The reserve is increased through the loan loss provision on the Company's consolidated statement of operations and is decreased by charge-offs when losses are confirmed through the receipt of assets, such as cash in a pre-foreclosure sale or upon ownership control of the underlying collateral in full satisfaction of the loan upon foreclosure or when significant collection efforts have ceased.

The Company uses a uniform process for determining its allowance for loan losses.

The allowance for loan losses includes a general, formula-based component and an asset-specific component.

General reserves are recorded when (i) available information as of each balance sheet date indicates that it is probable a loss has occurred in the portfolio and (ii) the amount of the loss can be reasonably estimated.

The Company currently estimates loss rates based on historical realized losses experienced in the industry and takes into account current collateral and economic conditions affecting the probability and severity of losses when establishing the allowance for loan losses.

The Company performs a comprehensive analysis of its loan portfolio and assigns risk ratings to loans that incorporate management's current judgments about their credit quality based on all known and relevant internal and external factors that may affect collectability.

The Company considers, among other things, payment status, lien position, borrower financial resources and investment in collateral, collateral type, project economics and geographic location as well as national and regional economic factors.

Real Estate Owned

Real estate owned assets are carried at their estimated fair value at acquisition and presented net of accumulated depreciation and impairment charges.

The Company allocates the purchase price of acquired real estate assets based on the fair value of the acquired land, building, furniture, fixtures and equipment.

Real estate owned assets are depreciated using the straight-line method over estimated useful lives of up to 40 years for buildings and improvements and up to 15 years for furniture, fixtures and equipment.

Renovations and/or replacements that improve or extend the life of the real estate owned assets are capitalized and depreciated over their estimated useful lives.

Real estate owned revenue is recognized when the Company satisfies a performance obligation by transferring a promised good or service to a customer.

The Company is considered to have satisfied all performance obligation at a point in time.

Real estate owned assets that are probable to be sold within one year are reported as held-for-sale.

Real estate owned assets classified as held-for-sale shall be measured at the lower of its carrying amount or fair value less cost to sell.

Real estate owned assets shall not be depreciated or amortized while it is classified as held-for-sale.

Interest and other expenses attributable to the liabilities of a disposal group classified as held-for-sale shall continue to be accrued.

Upon the disposition of a real estate owned asset, the Company calculates realized gains and losses as net proceeds received less the carrying value of the real estate owned asset.

Net proceeds received are net of direct selling costs associated with the disposition of the real estate owned asset.

Credit Losses

The allowance for credit losses for the Company’s financial instruments carried at amortized cost and off-balance sheet credit exposures, such as loans held for investment and unfunded loan commitments represents a lifetime estimate of expected credit losses.

Factors considered by the Company when determining the allowance for credit losses 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 allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist for multiple financial instruments.

If similar risk characteristics do not exist, the Company measures the allowance for credit losses 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, the Company evaluates whether it is appropriate to continue to keep the financial instrument in its existing pool or evaluate it individually.

In measuring the allowance for credit losses for financial instruments including our unfunded loan commitments that share similar risk characteristics, the Company primarily applies a probability of default (“PD”)/loss given default (“LGD”) model for instruments that are collectively assessed, whereby the allowance for credit losses is calculated as the product of PD, LGD and exposure at default (“EAD”).

The Company’s model principally utilizes historical loss rates derived from a commercial mortgage backed securities database with historical losses from 1998 to 2020 provided by a reputable third party, forecasting the loss parameters using a scenario-based statistical approach over a reasonable and supportable forecast period of twelve months, followed by an immediate reversion to average historical losses.

For financial instruments assessed on an individual basis, including when it is probable that the Company will be unable to collect the full payment of principal and interest on the instrument, the Company applies a discounted cash flow (“DCF”) methodology.

For financial instruments where the borrower is experiencing financial difficulty based on the Company’s assessment at the reporting date and the repayment is expected to be provided substantially through the operation or sale of the collateral, the Company may elect to use as a practical expedient the fair value of the collateral at the reporting date when determining the allowance for credit losses.

In developing the allowance for credit losses for its loans held for investment, the Company performs a comprehensive analysis of its loan portfolio and assigns risk ratings to loans that incorporate management's current judgments about their credit quality based on all known and relevant internal and external factors that may affect collectability, using similar factors as those in developing the allowance for credit losses.

This methodology results in loans being segmented by risk classification into risk rating categories that are associated with estimated probabilities of default and principal loss.

Risk rating categories range from "1" to "5" with "1" representing the lowest risk of loss and "5" representing the highest risk of loss.

The asset-specific reserve component relates to reserves for losses on individual impaired loans.

The Company considers a loan to be impaired when, based upon current information and events, it believes that it is probable that the Company will be unable to collect all amounts due under the contractual terms of the loan agreement.

This assessment is made on an individual loan basis each quarter based on such factors as payment status, lien position, borrower financial resources and investment in collateral, collateral type, project economics and geographical location as well as national and regional economic factors.

A reserve is established for an impaired loan when the present value of payments expected to be received, observable market prices or the estimated fair value of the collateral (for loans that are dependent on the collateral for repayment) is lower than the carrying value of that loan.

For collateral dependent impaired loans, impairment is measured using the estimated fair value of collateral less the estimated cost to sell.

Valuations are performed or obtained at the time a loan is determined to be impaired and designated non-performing, and they are updated if circumstances indicate that a significant change in value has occurred.

The Advisor generally will use the income approach through internally developed valuation models to estimate the fair value of the collateral for such loans.

In more limited cases, the Advisor will obtain external "as is" appraisals for loan collateral.

A loan is also considered impaired if its terms are modified in a troubled debt restructuring ("TDR").

A TDR occurs when a concession is granted and the debtor is experiencing financial difficulties.

Impairments on TDR loans are generally measured based on the present value of expected future cash flows discounted at the effective interest rate of the original loans.

The Company designates non-performing loans at such time as (i) loan payments become 90-days past due;

(ii) the loan has a maturity default;

or (iii) in the opinion of the Company, it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan.

Income recognition will be suspended when a loan is designated non-performing and resumed only when the suspended loan becomes contractually current and performance is demonstrated to have resumed.

A loan will be written off when it is no longer realizable and legally discharged.

Risk rating categories range from "1" to "5" with "1" representing the lowest risk of loss and "5" representing the highest risk of loss with the ratings updated quarterly.

Loans are placed on nonaccrual status and considered non-performing when full payment of principal and interest is unpaid for 90 days or more or where reasonable doubt exists as to timely collection, unless the loan is both well secured and in the process of collection.

Interest received on nonaccrual status loans are accounted for under the cost-recovery method, until qualifying for return to accrual.

Upon restructuring the nonaccrual loan, the Company may return a loan to accrual status when repayment of principal and interest is reasonably assured.

Real Estate Securities

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Amortization is reflected as an adjustment to interest income in the consolidated statements of operations.

Impairment Analysis of Real Estate Securities

Commercial real estate securities for which the fair value option has not been elected will be periodically evaluated for other-than-temporary impairment.

If the fair value of a security is less than its amortized cost, the security is considered impaired.

Impairment of a security will be considered to be other-than-temporary when (i) the Advisor has the intent to sell the impaired security;

(ii) it is more likely than not we will be required to sell the security;

or (iii) the Advisor does not expect to recover the entire amortized cost of the security.

If the Advisor determines that an other-than-temporary impairment exists and a sale is likely, the impairment charge will be recognized as an impairment of assets on our consolidated statements of operations.

If a sale is not expected, the portion of the impairment charge related to credit factors will be recorded as an impairment of assets on our consolidated statements of operations with the remainder recorded as an unrealized gain or loss on investments reported as a component of accumulated other comprehensive income or loss.

Credit Impairment Analysis of Real Estate Securities

Commercial real estate securities for which the fair value option has not been elected will be periodically evaluated for credit impairment.

AFS real estate securities which have experienced a decline in the fair value below their amortized cost basis (i.e., impairment) are evaluated each reporting period to determine whether the decline in fair value is due to credit-related factors.

Any impairment that is not credit-related is recognized in other comprehensive income, while credit-related impairment is recognized as an allowance on the consolidated balance sheets with a corresponding adjustment on the consolidated statements of operations.

If the Company intends to sell an impaired real estate security or more likely than not will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount is recognized in the consolidated statements of operations with a corresponding adjustment to the security’s amortized cost basis.

The Company analyzes the AFS security portfolio on a periodic basis for credit losses at the individual security level using the same criteria described above for those amortized cost financial assets subject to an allowance for credit losses including but not limited to;

performance of the underlying assets in the security, borrower financial resources and investment in collateral, collateral type, credit ratings, project economics and geographic location as well as national and regional economic factors.

The non-credit loss component of the unrealized loss within the Company’s AFS portfolio is recognized as an adjustment to the individual security’s asset balance with an offsetting entry to other comprehensive income in the consolidated balance sheets.

Commercial real estate securities for which the fair value option has been elected will not be evaluated for other-than-temporary impairment as changes in fair value are recorded in our consolidated statement of operations.

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The Company conducts its business through the following segments:

The real estate debt business focuses on originating, acquiring and asset managing commercial real estate debt investments, including first mortgage loans, subordinate mortgages, mezzanine loans and participations in such loans.

• The real estate debt business focuses on originating, acquiring and asset managing commercial real estate debt investments, including first mortgages, subordinate mortgages, mezzanine loans and participations in such loans.

• The real estate securities business focuses on investing in and asset managing commercial real estate securities primarily consisting of CMBS and may include unsecured REIT debt, CDO notes and other securities.

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Real estate securities 351,859 10,854 3.1 % 153,484 6,149 4.0 %

Total $ 3,041,558 $ 179,872 5.9 % $ 2,768,472 $ 195,299 7.1 %

Interest-bearing Liabilities:

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Collateralized loan obligations 1,706,207 41,095 2.4 % 1,641,740 67,927 4.1 %

Derivative instruments, at fair value

Derivative instruments — — N/A — 334 N/A

Total $ 2,285,427 $ 66,556 2.9 % $ 2,065,831 $ 90,419 4.4 %

Net interest income/spread $ 113,316 3.0 % $ 104,880 2.7 %

Average leverage % (4)

75.1 % 74.6 %

Weighted average levered yield (5)

15.0 % 14.9 %

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(1) Based on amortized cost for real estate debt and real estate securities and principal amount for repurchase agreements.

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(4) Calculated by dividing total average interest-bearing liabilities by total average interest-earning assets.

(5) Calculated by dividing net interest income/spread by the net average interest-earning assets and average interest-bearing liabilities.

(5) Calculated by dividing net interest income/spread by the average interest-earning assets less average interest-bearing liabilities.

Interest income

Interest income for the years ended December 31, 2019 and December 31, 2018 totaled $195.3 million and $152.3 million , respectively.

As of December 31, 2019 , our portfolio consisted of 122 commercial mortgage loans, seven commercial mortgage loans, held-for-sale, measured at fair value and 21 investments in CMBS.

The main driver in the increase in interest income was an increase of $769.4 million in the average carrying value of our interest-earning assets.

Interest income for the years ended December 31, 2020 and 2019 totaled $179.9 million and $195.3 million, respectively.

As of December 31, 2020, our portfolio consisted of 130 commercial mortgage loans, three commercial mortgage loans, held-for-sale, measured at fair value and nine investments in CMBS.

The main driver in the decrease in interest income was due to a decrease in the one-month LIBOR, the benchmark index for our loans.

The decrease in the one-month LIBOR was partially offset by the index floors we have on our loans and a higher average carrying value of interest-earning assets in the year ended December 31, 2020.

Interest expense

Interest expense for the year ended December 31, 2019 increased to $90.4 million compared to interest expense for the year ended December 31, 2018 of $70.0 million .

The increase in interest expense was due to an increase of $624.7 million in the average carrying value of our interest-bearing liabilities.

Interest expense for the year ended December 31, 2020 decreased to $66.6 million compared to interest expense for the year ended December 31, 2019 of $90.4 million.

Similar to our interest income, the decrease in interest expense was due to a decrease in the one-month LIBOR, the benchmark index for our financing lines.

Realized Gain/Loss on Commercial Mortgage Loans Held-for-Sale

Realized gain on commercial mortgage loans held-for-sale, measured at fair value at the TRS for the year ended December 31, 2020 was $15.9 million compared to $37.8 million for the year ended December 31, 2019.

The $26.5 million increase in realized gain was due to total proceeds of $1,013.1 million from the sale of fixed-rate commercial real estate loans into the CMBS securitization market during the year ended December 31, 2019 versus transactions of total proceeds of $567.4 million for the year ended December 31, 2018 .

The $21.9 million decrease in realized gain was due to lower sales volumes with total proceeds of $328.1 million from the sale of fixed-rate commercial real estate loans into the CMBS securitization market during the year ended December 31, 2020 versus transactions of total proceeds of $1,013.1 million for the year ended December 31, 2019.

Realized Gain/Loss on Real Estate Securities Available for Sale

For the year ended December 31, 2020 our real estate securities, available for sale, measured at fair value had a realized loss of $10.1 million included within the consolidated statements of operations.

The loss is attributable to 20 CMBS securities sold during the year ended December 31, 2020 in response to the dislocations in the capital markets due to COVID-19.

There had been no sales of CMBS securities during the year ended December 31, 2019.

Unrealized Gain/Loss on Real Estate Securities Available for Sale

For the year ended December 31, 2020 our real estate securities, available for sale, measured at fair value had an unrecognized unrealized loss of $7.3 million included within the consolidated statements of comprehensive income.

The deterioration in fair value of real estate securities for the year ended December 31, 2020 can be attributed to the significant market volatility and credit uncertainties related to the outbreak of COVID-19 followed by some recovery in CMBS markets in the second half of 2020.

Expenses from operations

Expenses from operations for the years ended December 31, 2019 and December 31, 2018 were made up of the following (dollars in thousands):

Expenses from operations for the years ended December 31, 2020 and 2019 were made up of the following (dollars in thousands):

Year Ended December 31,

Asset management and subordinated performance fee $ 15,178 $ 16,226

Acquisition expenses 696 900

Administrative services expenses 13,120 16,363

Acquisition fees and acquisition expenses

Professional fees 10,964 11,631

Other expenses

Real estate owned operating expense

Real estate owned operating expenses 3,653 2,802

Depreciation and amortization 2,233 507

Other expenses 3,312 3,771

Total expenses from operations $ 49,156 $ 52,200

The increase in our expenses from operations was primarily related to asset management and subordinated performance fees, administrative services expenses and professional fees.

The increase in asset management and subordinated performance fee was primarily driven by the larger stockholders’ equity and preferred stock for the year ended December 31, 2019 , compared to the year ended December 31, 2018 .

In addition to a higher equity base, we accrued approximately $2.0 million of subordinated performance fee during the year ended December 31, 2019 compared to $0.0 million during the year ended December 31, 2018 .

The increase in administrative services expenses and professional fees was primarily driven by the increase in outstanding equity during 2019 and a larger portfolio.

In addition, the increase in real estate owned operating expense was driven by the two new real estate owned assets on our balance sheet for the year ended December 31, 2019 , compared to none for the year ended December 31, 2018 .

The decrease in our expenses from operations was primarily related to lower administrative services expenses.

The decrease in administrative services expenses was due to fewer conduit activities during the twelve months ended December 31, 2020, compared to the twelve months ended December 31, 2019.

The decrease in asset management and subordinated performance fee was primarily driven by the lower stockholders’ equity and preferred stock for the year ended December 31, 2020, compared to the year ended December 31, 2019.

The increase in depreciation and amortization expense was due to $2.2 million of expenses incurred on a total of two real estate owned assets during the twelve months ended December 31, 2020, compared to $0.5 million incurred on two real estate owned assets during the twelve months ended December 31, 2019.

Comparison of the Year Ended December 31, 2019 to the Year Ended December 31, 2018

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Real estate securities 153,484 6,149 4.0 % 15,166 717 4.7 %

Total $ 2,768,472 $ 195,299 7.1 % $ 1,999,028 $ 152,288 7.6 %

Interest-bearing Liabilities:

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Collateralized loan obligations 1,641,740 67,927 4.1 % 1,124,424 50,679 4.5 %

Derivative instruments, at fair value

Derivative instruments — 334 N/A — 284 N/A

Total $ 2,065,831 $ 90,419 4.4 % $ 1,441,113 $ 70,000 4.9 %

Net interest income/spread $ 104,880 2.7 % $ 82,288 2.7 %

Average leverage % (4)

74.6 % 72.1 %

Weighted average levered yield (5)

14.9 % 14.7 %

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(1) Based on amortized cost for real estate debt and real estate securities and principal amount for repurchase agreements.

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Interest income

Interest income for the years ended December 31, 2018 and 2017 totaled $152.3 million and $89.6 million, respectively.

As of December 31, 2018, our portfolio consisted of 100 commercial mortgage loans, 7 commercial mortgage loans, held-for-sale, measured at fair value and two investments in CMBS.

The main drivers in the increase in interest income were the increase in the 1 Month LIBOR, the benchmark for our loans and an increase of $748.2 million in the average carrying value of our interest-earning assets.

The increase in interest income was due to the formation of the TRS in September 2017.

Interest income for the years ended December 31, 2019 and December 31, 2018 totaled $195.3 million and $152.3 million, respectively.

As of December 31, 2019, our portfolio consisted of 122 commercial mortgage loans, 7 commercial mortgage loans, held-for-sale, measured at fair value and 21 investments in CMBS.

The main driver in the increase in interest income was an increase of $769.4 million in the average carrying value of our interest-earning assets.

Interest expense

Interest expense for the year ended December 31, 2019 increased to $90.4 million compared to interest expense for the year ended December 31, 2018 of $70.0 million.

The increase in interest expense was due to an increase in the 1 Month LIBOR, the benchmark index for our financing lines and an increase of $664.2 million in the average carrying value of our interest-bearing liabilities, of which approximately $718.2 million is an increase due to two CLOs issued in 2018.

The increase in interest expense was also due to the formation of the TRS in September 2017.

The increase in interest expense was due to an increase of $624.7 million in the average carrying value of our interest-bearing liabilities.

Realized Gain/Loss on Commercial Mortgage Loans Held-for-Sale

Realized loss on commercial mortgage loans held-for-sale for the year ended December 31, 2018 was $9.0 thousand on sale of 5 commercial mortgage loans held-for-sale for proceeds of $20.6 million compared to $120.0 thousand realized gain for the year ended December 31, 2017 on sale of 15 commercial mortgage loans held-for-sale for total proceeds of $121.7 million.

Realized gain on commercial mortgage loans held-for-sale, measured at fair value at the TRS for the year ended December 31, 2019 was $37.8 million compared to $11.3 million for the year ended December 31, 2018.

The $6.8 million increase in realized gain was due to total proceeds of $567.4 million from the sale of fixed-rate commercial real estate loans into the CMBS securitization market during the year ended December 31, 2018 versus limited transaction of total proceeds of $20.6 million for the year ended December 31, 2017 due to the formation of the TRS in September 2017.

Expenses from operations

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Asset management and subordinated performance fee $ 16,226 $ 10,299

Acquisition expenses 900 452

Administrative services expenses 16,363 13,446

Acquisition fees and acquisition expenses

Professional fees 11,631 8,318

Real estate owned operating expenses 2,802 —

Depreciation and amortization 507 —

Other expenses 3,771 4,887

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The increase in our expenses from operations was primarily related to asset management and subordinated performance fees, administrative services expenses and professional fees.

During the years ended December 31, 2018 and 2017, we incurred asset management and subordinated performance fees of $10.3 million and $9.3 million, respectively.

The entire $10.3 million in the asset management and subordinated performance fee line is composed of asset management fees, as there was no subordinated performance fee for 2018 due to applicable conditions not having been satisfied.

The increase in asset management fees was due to additional equity raised during the year ended December 31, 2018.

For the year ended December 31, 2018, we incurred approximately $13.4 million of administrative service expenses related to general and administrative expense reimbursement, of which the full amount was attributable to our Advisor;

compared to $6.8 million of administrative services expense for the year ended December 31, 2017, an increase of approximately $6.6 million.

Additionally, during the year ended December 31, 2018 and December 31, 2017, we incurred $8.3 million and $5.4 million of professional fees, respectively, an increase of approximately $2.9 million.

The increases in administrative services expenses and professional fee are due to increases in overall Company growth, origination activities and the addition of the Conduit business.

As of December 31, 2019 and 2018 , our portfolio consisted of 122 and 100 commercial mortgage loans, excluding commercial mortgage loans accounted for under the fair value option, respectively.

The commercial mortgage loans held for investment as of December 31, 2019 and December 31, 2018 had a total carrying value, net of allowance for loan losses, of $2,762.0 million and $2,206.8 million , respectively.

As of December 31, 2019 and 2018 the Company's total commercial mortgage loans, held for sale, measured at fair value comprised of 7 loans with total fair value of $112.6 million and 7 loans with total fair value of $76.9 million , respectively.

As of December 31, 2019 , the Company had 21 CMBS investments with total fair value of $386.3 million .

We had $ 26.4 million CMBS investments as of December 31, 2018 .

For our commercial mortgage loans, excluding commercial mortgage loans accounted for under the fair value option, we currently estimate loss rates based on historical realized losses experienced in the industry and take into account current collateral and economic conditions affecting the probability or severity of losses when establishing the allowance for loan losses.

The allowance for loan loss as of December 31, 2019 and 2018 is $0.9 million and $4.8 million , respectively.

As of December 31, 2019 , the Company had one loan with an unpaid principal balance of $57.1 million that had interest past due for greater than 90 days.

As of December 31, 2018 , the Company had one loan with an unpaid principal balance of $ 14.3 million that had interest past due for greater than 90 days.

The increase in administrative services expenses and professional fees was primarily driven by the increase in outstanding equity during 2019 and a larger portfolio.

In addition, the increase in real estate owned operating expense was driven by the two new real estate owned assets on our balance sheet for the year ended December 31, 2019, compared to none for the year ended December 31, 2018.

As of December 31, 2020 and 2019, our portfolio consisted of 130 and 122 commercial mortgage loans, respectively, excluding commercial mortgage loans accounted for under the fair value option.

The commercial mortgage loans held for investment as of December 31, 2020 and December 31, 2019 had a total carrying value, net of allowance for credit losses, of $2,693.8 million and $2,762.0 million, respectively.

As of December 31, 2020 and 2019 the Company's total commercial mortgage loans, held-for-sale, measured at fair value comprised of three loans with total fair value of $67.6 million and seven loans with total fair value of $112.6 million, respectively.

As of December 31, 2020 and 2019, our real estate securities, available for sale, at fair value comprised of nine CMBS investments with total fair value of $171.1 million and 21 CMBS investments with total fair value of $386.3 million.

As of December 31, 2020 and December 31, 2019, our other real estate investments, measured at fair value, comprised one investment with a total fair value of $2.5 million and $2.6 million, respectively.

As of December 31, 2020 and December 31, 2019, our real estate owned portfolio comprised one investment with a carrying value of $26.5 million and two investments with a carrying value of $35.3 million, respectively.

As of December 31, 2020, we had two loans with unpaid contractual principal balance for a total carrying value of $94.9 million, one with interest past due for greater than 90 days and the other with interest past due greater than 30 days.

We did not take any asset specific reserves for these loans.

As of December 31, 2019, we had one loan with unpaid contractual principal balance and carrying value of $57.1 million that had interest past due for greater than 90 days.

As of December 31, 2020 and 2019, our commercial mortgage loans, excluding commercial mortgage loans accounted for under the fair value option, had a weighted average coupon of 5.5% and 5.6%, and a weighted average remaining life of 1.7 years and 1.8 years, respectively.

As of December 31, 2020 and 2019, our CMBS investments had a weighted average coupon of 2.2% and 3.7%, and a weighted average remaining life of 12.8 years and 15.8 years, respectively.

The following charts summarize our commercial mortgage loans, held for investment, by the collateral type, geographical region and coupon rate type as of December 31, 2019 and 2018 :

The following charts summarize our commercial mortgage loans, held for investment, by coupon rate type, collateral type and geographical region as of December 31, 2020 and 2019:

An investments region classification is defined according to the below map based on the location of investments secured property.

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The following table shows selected data from our commercial mortgage loans, held for investment in our portfolio as of December 31, 2020 (dollars in thousands):

Property Type

Interest Rate (1)

Effective Yield

Loan to Value (2)

Senior Debt 1

1 month LIBOR + 4.50%

Senior Debt 2

1 month LIBOR + 4.65%

Senior Debt 3

1 month LIBOR + 4.00%

Senior Debt 4

1 month LIBOR + 5.00%

Senior Debt 5

1 month LIBOR + 4.45%

Senior Debt 6

1 month LIBOR + 6.00%

Senior Debt 7

1 month LIBOR + 3.35%

Senior Debt 8

1 month LIBOR + 4.15%

Senior Debt 9

1 month LIBOR + 3.75%

Senior Debt 10

1 month LIBOR + 5.00%

Senior Debt 11

1 month LIBOR + 3.50%

Senior Debt 12

1 month LIBOR + 3.62%

Senior Debt 13

1 month LIBOR + 5.19%

Senior Debt 14

1 month LIBOR + 4.50%

Senior Debt 15

1 month LIBOR + 5.25%

Senior Debt 16

1 month LIBOR + 4.41%

Senior Debt 17

1 month LIBOR + 3.60%

Senior Debt 18

1 month LIBOR + 3.30%

Senior Debt 19

1 month LIBOR + 4.65%

Senior Debt 20

1 month LIBOR + 4.00%

Senior Debt 21

1 month LIBOR + 3.70%

Senior Debt 22

1 month LIBOR + 4.25%

Senior Debt 23

1 month LIBOR + 3.70%

Senior Debt 24

1 month LIBOR + 4.95%

Senior Debt 25

1 month LIBOR + 4.00%

Senior Debt 26

1 month LIBOR + 4.40%

Senior Debt 27

1 month LIBOR + 3.00%

Senior Debt 28

1 month LIBOR + 4.05%

Senior Debt 29

1 month LIBOR + 4.05%

Senior Debt 30

1 month LIBOR + 5.05%

Senior Debt 31

1 month LIBOR + 3.50%

Senior Debt 32

1 month LIBOR + 4.05%

Senior Debt 33

1 month LIBOR + 5.05%

Senior Debt 34

1 month LIBOR + 3.15%

Senior Debt 35

1 month LIBOR + 3.75%

Senior Debt 36

1 month LIBOR + 3.75%

Senior Debt 37

1 month LIBOR + 3.95%

Senior Debt 38

1 month LIBOR + 4.00%

Senior Debt 39

1 month LIBOR + 4.50%

Senior Debt 40

1 month LIBOR + 4.87%

Senior Debt 41

1 month LIBOR + 3.50%

Senior Debt 42

1 month LIBOR + 3.30%

Senior Debt 43

1 month LIBOR + 3.75%

Senior Debt 44

1 month LIBOR + 4.23%

Senior Debt 45

1 month LIBOR + 6.00%

Senior Debt 46

1 month LIBOR + 4.00%

Senior Debt 47

1 month LIBOR + 3.10%

Senior Debt 48

1 month LIBOR + 3.40%

Senior Debt 49

Senior Debt 50

1 month LIBOR + 3.50%

Senior Debt 51

1 month LIBOR + 5.50%

Senior Debt 52

1 month LIBOR + 3.74%

Senior Debt 53

1 month LIBOR + 3.15%

Senior Debt 54

1 month LIBOR + 3.40%

Property Type

Interest Rate (1)

Effective Yield

Loan to Value (2)

Senior Debt 55

1 month LIBOR + 3.35%

Senior Debt 56

1 month LIBOR + 3.10%

Senior Debt 57

1 month LIBOR + 4.00%

Senior Debt 58

1 month LIBOR + 3.45%

Senior Debt 59

1 month LIBOR + 3.45%

Senior Debt 60

1 month LIBOR + 6.00%

Senior Debt 61

1 month LIBOR + 4.80%

Senior Debt 62

1 month LIBOR + 4.75%

Senior Debt 63

1 month LIBOR + 3.95%

Senior Debt 64

1 month LIBOR + 2.99%

Senior Debt 65

1 month LIBOR + 3.75%

Senior Debt 66

1 month LIBOR + 3.25%

Senior Debt 67

1 month LIBOR + 5.20%

Senior Debt 68

1 month LIBOR + 3.90%

Senior Debt 69

1 month LIBOR + 4.95%

Senior Debt 70

Manufactured Housing

1 month LIBOR + 3.90%

Senior Debt 71

1 month LIBOR + 5.00%

Senior Debt 72

1 month LIBOR + 3.44%

Senior Debt 73

1 month LIBOR + 3.95%

Senior Debt 74

1 month LIBOR + 4.14%

Senior Debt 75

1 month LIBOR + 4.25%

Senior Debt 76

1 month LIBOR + 3.10%

Senior Debt 77

1 month LIBOR + 3.10%

Senior Debt 78

1 month LIBOR + 4.00%

Senior Debt 79

1 month LIBOR + 3.50%

Senior Debt 80

1 month LIBOR + 5.00%

Senior Debt 81

1 month LIBOR + 4.50%

Senior Debt 82

1 month LIBOR + 3.40%

Senior Debt 83

1 month LIBOR + 3.40%

Senior Debt 84

1 month LIBOR + 3.48%

Senior Debt 85

1 month LIBOR + 3.10%

Senior Debt 86

1 month LIBOR + 3.77%

Senior Debt 87

1 month LIBOR + 3.75%

Senior Debt 88

1 month LIBOR + 4.00%

Senior Debt 89

1 month LIBOR + 4.25%

Senior Debt 90

1 month LIBOR + 4.45%

Senior Debt 91

1 month LIBOR + 3.50%

Senior Debt 92

1 month LIBOR + 4.50%

Senior Debt 93

1 month LIBOR + 2.80%

Senior Debt 94

1 month LIBOR + 4.20%

Senior Debt 95

Manufactured Housing

1 month LIBOR + 3.65%

Senior Debt 96

Manufactured Housing

1 month LIBOR + 3.65%

Senior Debt 97

Senior Debt 98

1 month LIBOR + 2.65%

Senior Debt 99

1 month LIBOR + 3.35%

Senior Debt 100

1 month LIBOR + 3.99%

Senior Debt 101

1 month LIBOR + 2.65%

Senior Debt 102

1 month LIBOR + 2.75%

Senior Debt 103

1 month LIBOR + 3.75%

Senior Debt 104

1 month LIBOR + 3.50%

Senior Debt 105

1 month LIBOR + 4.00%

Senior Debt 106

1 month LIBOR + 3.55%

Senior Debt 107

1 month LIBOR + 2.75%

Senior Debt 108

1 month LIBOR + 3.75%

Senior Debt 109

1 month LIBOR + 3.15%

Senior Debt 110

1 month LIBOR + 5.25%

Senior Debt 111

1 month LIBOR + 2.70%

Property Type

Interest Rate (1)

Effective Yield

Loan to Value (2)

Senior Debt 112

1 month LIBOR + 4.75%

Senior Debt 113

1 month LIBOR + 3.00%

Senior Debt 114

1 month LIBOR + 2.80%

Senior Debt 115

1 month LIBOR + 5.50%

Loan Type Property Type Par Value Interest Rate (1)

Effective Yield Loan to Value (2)

Senior Debt 1 Industrial $33,655 1 month LIBOR + 4.00% 4.20% 65.0%

Senior Debt 2 Mixed Use 12,839 1 month LIBOR + 5.00% 5.75% 73.3%

Senior Debt 3 Office 14,034 1 month LIBOR + 4.45% 5.45% 64.2%

Senior Debt 4 Office 8,391 1 month LIBOR + 6.00% 7.00% 74.0%

Senior Debt 5 Multifamily 37,812 1 month LIBOR + 3.35% 5.60% 76.0%

Senior Debt 6 Office 26,811 1 month LIBOR + 4.15% 5.40% 69.5%

Senior Debt 7 Hospitality 10,400 1 month LIBOR + 6.25% 6.50% 61.6%

Senior Debt 8 Hospitality 5,894 1 month LIBOR + 3.50% 4.50% 77.0%

Senior Debt 9 Hospitality 57,075 1 month LIBOR + 5.19% 6.19% 51.8%

Senior Debt 10 Multifamily 77,945 1 month LIBOR + 4.50% 5.50% 22.4%

Senior Debt 11 Hospitality 10,250 1 month LIBOR + 5.25% 6.25% 60.7%

Senior Debt 12 Hospitality 23,000 1 month LIBOR + 6.00% 6.50% 48.1%

Senior Debt 13 Office 23,726 1 month LIBOR + 5.15% 6.60% 56.4%

Senior Debt 14 Multifamily 41,826 1 month LIBOR + 3.70% 4.50% 63.7%

Senior Debt 15 Hospitality 28,272 1 month LIBOR + 4.00% 5.25% 68.0%

Senior Debt 16 Hospitality 22,700 1 month LIBOR + 4.40% 5.00% 72.7%

Senior Debt 17 Multifamily 35,886 1 month LIBOR + 3.00% 4.50% 83.6%

Senior Debt 18 Self Storage 3,851 1 month LIBOR + 4.05% 5.00% 45.5%

Senior Debt 19 Self Storage 6,496 1 month LIBOR + 4.05% 5.05% 55.8%

Senior Debt 20 Self Storage 7,606 1 month LIBOR + 4.05% 5.05% 57.6%

Senior Debt 21 Self Storage 2,400 1 month LIBOR + 4.05% 5.00% 37.6%

Senior Debt 22 Self Storage 6,310 1 month LIBOR + 5.05% 5.19% 59.1%

Senior Debt 23 Hospitality 22,355 1 month LIBOR + 3.50% 4.80% 68.8%

Senior Debt 24 Mixed Use 59,451 1 month LIBOR + 4.87% 5.27% 49.0%

Senior Debt 25 Office 21,100 1 month LIBOR + 3.75% 5.80% 70.0%

Senior Debt 26 Self Storage 6,299 1 month LIBOR + 6.00% 7.75% 58.9%

Senior Debt 27 Office 16,342 1 month LIBOR + 3.40% 5.30% 67.5%

Senior Debt 28 Retail 29,500 6.25% 6.25% 68.5%

Senior Debt 29 Self Storage 11,966 1 month LIBOR + 5.50% 7.25% 68.1%

Senior Debt 30 Multifamily 16,172 1 month LIBOR + 3.15% 4.95% 80.3%

Senior Debt 31 Multifamily 22,417 1 month LIBOR + 3.40% 4.95% 80.5%

Senior Debt 32 Multifamily 29,868 1 month LIBOR + 3.35% 5.25% 73.0%

Senior Debt 33 Land 16,400 1 month LIBOR + 6.00% 8.25% 45.7%

Senior Debt 34 Hospitality 8,523 1 month LIBOR + 4.80% 6.75% 62.5%

Senior Debt 35 Industrial 14,160 1 month LIBOR + 3.95% 5.95% 66.4%

Senior Debt 36 Multifamily 48,500 1 month LIBOR + 3.75% 6.15% 69.5%

Senior Debt 37 Multifamily 23,295 1 month LIBOR + 5.70% 7.50% 70.7%

Senior Debt 38 Office 7,200 1 month LIBOR + 3.90% 5.95% 67.6%

Senior Debt 39 Manufactured Housing 8,893 1 month LIBOR + 4.40% 6.50% 60.3%

Senior Debt 40 Hospitality 14,000 1 month LIBOR + 4.47% 6.72% 44.8%

Senior Debt 41 Retail 14,250 1 month LIBOR + 3.95% 6.45% 61.2%

Senior Debt 42 Hospitality 21,000 1 month LIBOR + 4.14% 6.64% 56.0%

Senior Debt 43 Multifamily 24,711 1 month LIBOR + 3.10% 5.40% 73.1%

Senior Debt 44 Multifamily 37,643 1 month LIBOR + 3.10% 5.40% 73.4%

Senior Debt 45 Office 42,631 1 month LIBOR + 3.50% 5.75% 71.0%

Senior Debt 46 Retail 8,500 1 month LIBOR + 7.50% 7.64% 51.6%

Loan Type Property Type Par Value Interest Rate (1)

Effective Yield Loan to Value (2)

Senior Debt 47 Hospitality 10,580 1 month LIBOR + 4.50% 6.75% 68.7%

Senior Debt 48 Multifamily 18,100 1 month LIBOR + 3.40% 5.35% 76.4%

Senior Debt 49 Hospitality 19,900 1 month LIBOR + 4.15% 6.50% 61.8%

Senior Debt 50 Multifamily 18,656 1 month LIBOR + 3.10% 5.50% 67.4%

Senior Debt 51 Office 34,400 1 month LIBOR + 3.90% 6.15% 68.2%

Senior Debt 52 Hospitality 20,930 1 month LIBOR + 3.75% 6.10% 62.6%

Senior Debt 53 Hospitality 15,500 1 month LIBOR + 4.00% 6.50% 56.4%

Senior Debt 54 Hospitality 5,250 1 month LIBOR + 4.25% 6.50% 47.7%

Senior Debt 55 Hospitality 12,750 1 month LIBOR + 4.45% 6.85% 62.9%

Senior Debt 56 Hospitality 9,545 1 month LIBOR + 4.50% 6.85% 64.0%

Senior Debt 57 Retail 9,400 1 month LIBOR + 4.20% 6.30% 77.1%

Senior Debt 58 Manufactured Housing 12,200 1 month LIBOR + 3.65% 5.90% 48.4%

Senior Debt 59 Manufactured Housing 24,100 1 month LIBOR + 3.65% 5.90% 53.8%

Senior Debt 60 Multifamily 23,149 1 month LIBOR + 2.65% 4.75% 75.8%

Senior Debt 61 Office 29,750 1 month LIBOR + 3.35% 5.42% 54.3%

Senior Debt 62 Hospitality 34,484 1 month LIBOR + 3.99% 5.74% 31.0%

Senior Debt 63 Multifamily 12,839 1 month LIBOR + 2.65% 4.50% 71.6%

Senior Debt 64 Multifamily 37,021 1 month LIBOR + 2.75% 4.50% 79.3%

Senior Debt 65 Industrial 53,500 1 month LIBOR + 3.75% 5.50% 59.7%

Senior Debt 66 Office 21,825 1 month LIBOR + 3.50% 5.40% 70.9%

Senior Debt 67 Hospitality 7,100 1 month LIBOR + 4.00% 5.75% 70.3%

Senior Debt 68 Industrial 22,230 1 month LIBOR + 3.55% 5.25% 69.7%

Senior Debt 69 Multifamily 21,083 1 month LIBOR + 2.75% 4.25% 71.7%

Senior Debt 70 Multifamily 27,087 1 month LIBOR + 3.15% 4.95% 71.6%

Senior Debt 71 Multifamily 26,130 1 month LIBOR + 2.70% 2.84% 76.0%

Senior Debt 72 Multifamily 7,150 1 month LIBOR + 4.75% 5.80% 75.3%

Senior Debt 73 Multifamily 25,000 1 month LIBOR + 3.00% 4.50% 75.5%

Senior Debt 74 Office 25,500 1 month LIBOR + 4.35% 6.05% 64.9%

Senior Debt 75 Multifamily 14,181 1 month LIBOR + 3.10% 4.50% 63.7%

Senior Debt 76 Office 48,276 1 month LIBOR + 3.70% 5.00% 65.7%

Senior Debt 77 Industrial 25,350 1 month LIBOR + 3.50% 5.20% 58.1%

Senior Debt 78 Multifamily 11,800 1 month LIBOR + 3.15% 4.75% 72.4%

Senior Debt 79 Office 27,598 1 month LIBOR + 2.70% 2.84% 71.4%

Senior Debt 80 Multifamily 75,100 1 month LIBOR + 4.35% 6.00% 64.7%

Senior Debt 81 Manufactured Housing 1,385 5.50% 5.50% 62.8%

Senior Debt 82 Industrial 14,650 1 month LIBOR + 6.00% 6.75% 59.9%

Senior Debt 83 Multifamily 7,149 1 month LIBOR + 4.75% 5.75% 62.6%

Senior Debt 84 Multifamily 6,764 1 month LIBOR + 4.90% 5.65% 53.2%

Senior Debt 85 Multifamily 46,000 1 month LIBOR + 4.75% 5.75% 69.4%

Senior Debt 86 Multifamily 5,550 1 month LIBOR + 6.87% 7.87% 75.0%

Senior Debt 87 Industrial 16,400 1 month LIBOR + 6.25% 7.00% 61.0%

Senior Debt 88 Multifamily 14,505 1 month LIBOR + 4.75% 5.50% 65.3%

Senior Debt 89 Multifamily 23,438 1 month LIBOR + 4.65% 5.40% 52.7%

Senior Debt 90 Multifamily 4,300 1 month LIBOR + 5.50% 6.50% 87.4%

Senior Debt 91 Manufactured Housing 7,680 1 month LIBOR + 4.50% 5.00% 66.7%

Senior Debt 92 Mixed Use 30,465 1 month LIBOR + 5.15% 6.15% 67.0%

Senior Debt 93 Multifamily 3,140 1 month LIBOR + 6.25% 6.75% 73.5%

Senior Debt 94 Industrial 24,657 1 month LIBOR + 4.60% 5.10% 20.7%

Loan Type Property Type Par Value Interest Rate (1)

Effective Yield Loan to Value (2)

Senior Debt 95 (3)

Mezzanine Loan 1

Mezzanine Loan 2

Mezzanine Loan 3

1 month LIBOR + 8.01%

Mezzanine Loan 4

Mezzanine Loan 5

Mezzanine Loan 6

Multifamily — 1 month LIBOR + 5.25% 5.39% —%

Senior Debt 96 Hospitality 27,000 1 month LIBOR + 6.50% 6.85% 62.7%

Senior Debt 97 Multifamily 2,465 1 month LIBOR + 5.75% 6.50% 66.6%

Senior Debt 98 Multifamily 50,000 1 month LIBOR + 6.69% 7.44% 80.0%

Senior Debt 99 Self Storage 29,895 1 month LIBOR + 5.00% 5.25% 58.8%

Senior Debt 100 Multifamily 11,622 1 month LIBOR + 4.75% 5.25% 70.0%

Senior Debt 101 Manufactured Housing 3,400 1 month LIBOR + 5.00% 5.25% 58.6%

Senior Debt 102 Multifamily 27,550 1 month LIBOR + 5.75% 6.00% 69.8%

Senior Debt 103 Multifamily 76,000 1 month LIBOR + 4.10% 4.35% 67.9%

Senior Debt 104 Multifamily 58,000 1 month LIBOR + 5.25% 5.39% 74.7%

Senior Debt 105 Manufactured Housing 5,020 1 month LIBOR + 5.25% 5.39% 65.9%

Senior Debt 106 Office 19,003 1 month LIBOR + 4.50% 5.25% 47.9%

Senior Debt 107 Office 69,675 5.15% 5.15% 52.5%

Senior Debt 108 Office 30,900 1 month LIBOR + 5.20% 5.45% 66.0%

Senior Debt 109 Multifamily 10,945 1 month LIBOR + 7.04% 7.29% 63.3%

Senior Debt 110 Self Storage 11,600 1 month LIBOR + 4.76% 5.01% 66.6%

Senior Debt 111 Industrial 24,552 1 month LIBOR + 4.35% 4.60% 69.8%

Senior Debt 112 Manufactured Housing 5,000 1 month LIBOR + 5.90% 6.50% 58.8%

Senior Debt 113 Office 12,750 1 month LIBOR + 5.00% 5.25% 67.8%

Senior Debt 114 Multifamily 40,937 1 month LIBOR + 4.35% 4.60% 73.2%

Senior Debt 115 Multifamily 36,200 1 month LIBOR + 4.45% 4.70% 66.5%

Senior Debt 116 Multifamily 8,250 1 month LIBOR + 5.50% 5.75% 73.7%

Senior Debt 117 Retail 11,963 1 month LIBOR + 4.87% 5.12% 75.0%

Senior Debt 118 Manufactured Housing 3,585 1 month LIBOR + 5.40% 5.90% 76.3%

Senior Debt 119 Multifamily 5,730 1 month LIBOR + 5.00% 5.25% 73.5%

Senior Debt 120 Multifamily 18,800 1 month LIBOR + 4.00% 4.14% 79.7%

Senior Debt 121 Industrial 14,250 1 month LIBOR + 4.50% 4.75% 66.3%

Senior Debt 122 Office 11,550 1 month LIBOR + 5.50% 5.75% 68.8%

Senior Debt 123 Multifamily 21,000 1 month LIBOR + 4.60% 4.75% 66.7%

Senior Debt 124 Office 26,000 1 month LIBOR + 5.00% 5.25% 63.9%

Senior Debt 125 Hospitality 17,401 5.75% 5.75% 52.9%

Mezzanine Loan 1 Multifamily 3,480 9.50% 9.50% 84.3%

Mezzanine Loan 2 Retail 3,500 10.00% 10.00% 59.7%

Mezzanine Loan 3 Multifamily 6,500 1 month LIBOR + 10.25% 11.00% 90.4%

Mezzanine Loan 4 Retail 1,438 1 month LIBOR + 10.75% 11.00% 84.0%

Mezzanine Loan 5 Multifamily 1,000 11.00% 11.00% 68.9%

$2,722,863 5.50% 64.0%

________________________

(1) Our floating rate loan agreements contain the contractual obligation for the borrower to maintain an interest rate cap to protect against rising interest rates.

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(2) Loan to value percentage is from metrics at origination.

(3) The total commitment of this loan is $40.5 million, however none was funded as of December 31, 2020.

The following table shows selected data from our commercial mortgage loans, held-for-sale, measured at fair value as of December 31, 2020 (dollars in thousands):

Property Type

Interest Rate

Effective Yield

Loan to Value (1)

TRS Senior Debt 1

TRS Senior Debt 2

TRS Senior Debt 3

TRS Senior Debt 4

TRS Senior Debt 5

TRS Senior Debt 6

TRS Senior Debt 7

Loan Type Property Type Par Value Interest Rate Effective Yield Loan to Value (1)

TRS Senior Debt 1 Industrial $58,500 3.33% 3.33% 58.0%

TRS Senior Debt 2 Industrial 9,050 4.30% 4.30% 58.4%

TRS Mezzanine Loan 3 Multifamily 100 1 month LIBOR + 14.00% 15.00% 76.4%

$67,650 3.48% 58.1%

________________________

(1) Loan to value percentage is from metrics at origination.

The following table shows selected data from our real estate securities, available for sale, measured at fair value as of December 31, 2020 (dollars in thousands):

Type Par Value Interest Rate Effective Yield

CMBS 1 $13,250 1 month LIBOR + 2.95% 3.1%

CMBS 2 10,800 1 month LIBOR + 2.10% 2.2%

CMBS 3 40,000 1 month LIBOR + 2.35% 2.5%

CMBS 4 8,000 1 month LIBOR + 1.85% 2.0%

CMBS 5 24,000 1 month LIBOR + 2.00% 2.1%

CMBS 6 12,000 1 month LIBOR + 2.15% 2.3%

CMBS 7 20,000 1 month LIBOR + 1.33% 1.5%

CMBS 8 25,000 1 month LIBOR + 1.63% 1.8%

CMBS 9 25,665 1 month LIBOR + 2.15% 2.3%

$178,715 2.2%

The following table shows selected data from our other real estate investments, measured at fair value as of December 31, 2020 (dollars in thousands):

Type Property Type Par Value Preferred Return

Preferred Equity 1 Retail $2,500 12.5%

The following table shows selected data from our real estate owned assets in our portfolio as of December 31, 2020 (dollars in thousands):

Type Property Type Carrying Value

Real Estate Owned 1 Office $26,510

Liquidity and Capital Resources

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However, our board of directors may change this target without shareholder approval.

In addition, in 2019 the Company raised $140.2 million of common and preferred equity through private placements to institutional and individual investors, and we expect to continue to raise capital in private placements in 2020.

In addition, in 2020 the Company raised $10.9 million through sales of common and preferred equity to institutional and individual investors.

The Company anticipates that our debt and equity financing sources and our anticipated cash generated from operations will be adequate to fund our anticipated uses of capital.

In addition to our current mix of financing sources, the Company may also access additional forms of financings, including credit facilities, securitizations, public and private, secured and unsecured debt issuances by us or our subsidiaries, or through capital recycling initiatives whereby we sell certain assets in our portfolio and reinvest the proceeds in assets with more attractive risk-adjusted returns.

Refer to “COVID-19 Pandemic” above for information on the impact of the COVID-19 pandemic on our liquidity.

Collateralized Loan Obligations

On April 15, 2019, the Company called all of the outstanding notes issued by BSPRT 2017-FL1 Issuer, Ltd., a wholly

owned indirect subsidiary of the Company.

On January 15, 2020, the Company called all of the outstanding notes issued by BSPRT 2017-FL2 Issuer, Ltd., a wholly owned indirect subsidiary of the Company.

The outstanding principal of the notes on the date of the call was $21.0 million.

Company recognized all the remaining unamortized deferred financing costs of $4.5 million recorded within the Interest

expense line of the consolidated statements of operations, which was a non-cash charge.

As of December 31, 2019 and December 31, 2018 the notes issued by BSPRT 2017-FL2 Issuer, a wholly owned indirect subsidiary of the Company, are collateralized by interests in a pool of 5 and 12 mortgage assets having a total principal balance of $100.8 million and $244.6 million , respectively (the “2017-FL2 Mortgage Assets”).

The sale of the 2017-FL2 Mortgage Assets to BSPRT 2017-FL2 Issuer is governed by a Mortgage Asset Purchase Agreement dated as of November 29, 2017, between the Company and BSPRT 2017-FL2 Issuer.

The Company recognized all the remaining unamortized deferred financing costs of $4.5 million recorded within the Interest expense line of the consolidated statements of operations, which was a non-cash charge.

As of December 31, 2020 and December 31, 2019 the notes issued by BSPRT 2018-FL3 Issuer, Ltd.

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The sale of the 2018-FL4 Mortgage Assets to BSPRT 2018-FL4 Issuer, Ltd.

is governed by a Mortgage Asset Purchase Agreement dated as of October 12, 2018, between the Company and BSPRT 2018-FL4, Ltd.

On May 30, 2019, BSPRT 2019-FL5 Issuer, Ltd.

and BSPRT 2019-FL5 Co-Issuer, LLC, wholly owned indirect subsidiaries of the Company, collateralized by interests in a pool of 49 mortgage assets having a principal balance of $810.0 million (the "2019-FL5 Mortgage Assets") entered into an indenture with the OP, as advancing agent, U.S.

Bank National Association as note administrator and U.S.

Bank National Association as trustee, which governs the issuance of approximately $ 714.8 million principal balance secured floating rate notes (the “2019 FL5 Notes”), of which $ 639.9 million were purchased by third party investors and $ 74.9 million purchased by a wholly owned subsidiary of the OP.

In addition, concurrently with the issuance of the 2019 FL5 Notes, BSPRT 2019-FL5 Issuer, Ltd.

also issued 95,177 Preferred Shares, par value of $0.001 per share and with an aggregate liquidation preference and notional amount equal to $1,000 per share, which were not offered as part of closing the indenture.

federal income tax purposes, the Issuer and Co-Issuer are disregarded entities.

As of December 31, 2019 , the notes issued by BSPRT 2019-FL5 Issuer, Ltd.

and BSPRT 2019-FL5 Co-Issuer, LLC, are collateralized by interests in a pool of 48 mortgage assets having a principal balance of $ 809.4 million.

is governed by a Mortgage Asset Purchase Agreement dated as of October 12, 2018, between the Company and BSPRT 2018-FL4 Issuer, Ltd.

As of December 31, 2020 and December 31, 2019, the notes issued by BSPRT 2019-FL5 Issuer, Ltd.

and BSPRT 2019-FL5 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 54 and 48 mortgage assets having a principal balance of $799.8 million and $809.4 million respectively (the "2019-FL5 Mortgage Assets").

The sale of the 2019-FL5 Mortgage Assets to BSPRT 2019-FL5 Issuer, Ltd.

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Repurchase Agreements, Commercial Mortgage Loans

As of December 31, 2019 , the Company has entered into various repurchase facilities with JPMorgan Chase Bank, National Association (the "JPM Repo Facility"), U.S Bank National Association (the "USB Repo Facility"), Barclays Bank PLC (the "Barclays Revolver Facility" and the "Barclays Repo Facility"), Wells Fargo Bank, National Association (the "WF Repo Facility"), and Credit Suisse AG (the "CS Repo Facility" and together with JPM Repo Facility, USB Repo Facility, WF Repo Facility, Barclays Revolver Facility, and Barclays Repo Facility, the "Repo Facilities").

As of December 31, 2020, the Company has repurchase facilities with JPMorgan Chase Bank, National Association (the "JPM Repo Facility"), U.S Bank National Association (the "USB Repo Facility"), Barclays Bank PLC (the "Barclays Revolver Facility" and the "Barclays Repo Facility"), Wells Fargo Bank, National Association (the "WF Repo Facility"), and Credit Suisse AG (the "CS Repo Facility" and together with JPM Repo Facility, USB Repo Facility, WF Repo Facility, Barclays Revolver Facility, and Barclays Repo Facility, the "Repo Facilities").

The Repo Facilities are financing sources through which the Company may pledge one or more mortgage loans to the financing entity in exchange for funds typically at an advance rate of between 65% to 80% of the principal amount of the mortgage loan being pledged.

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As of December 31, 2020

Repurchase Facility

Committed Financing

Amount Outstanding

Interest Expense (1)

Ending Weighted Average Interest Rate

Initial Term Maturity

Repurchase Facility Committed Financing Amount Outstanding Interest Expense (1)

Ending Weighted Average Interest Rate Initial Term Maturity

JPM Repo Facility (2)

$ 300,000 $ 113,884 $ 5,020 2.54 % 10/6/2022

USB Repo Facility (3)

100,000 5,775 599 2.40 % 6/15/2021

CS Repo Facility (4)

200,000 106,971 3,539 2.84 % 8/19/2021

WF Repo Facility (5)

175,000 27,150 1,041 2.50 % 11/21/2021

Barclays Revolver Facility (6)

100,000 — 387 N/A 9/20/2021

Barclays Repo Facility (7)

300,000 22,560 1,046 2.51 % 3/15/2022

Total $ 1,175,000 $ 276,340 $ 11,632

__________________________

(1) For the year ended December 31, 2020.

Includes amortization of deferred financing costs.

(2) On September 3, 2019, the committed financing amount was downsized from $520 million to $300 million and the maturity date was amended to January 30, 2021.

(3) Includes two one -year extensions at the option of an indirect wholly-owned subsidiary of the Company, which may be exercised upon the satisfaction of certain conditions.

(4) On March 26, 2019, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to March 27, 2020.

(5) Includes three one -year extensions at the Company’s option, which may be exercised upon the satisfaction of certain conditions.

(6) On September 13, 2019, the Company exercised the extension option, and extended the term maturity to September 20, 2021.

There is one more one -year extension option available at the Company's discretion.

(2) On October 6, 2020 the maturity date was amended to October 6, 2022.

(3) On June 9, 2020, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to June 15, 2021.

(4) On August 28, 2020, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to August 19, 2021.

Additionally, in 2020 the committed financing amount was downsized from $300 million to $200 million.

(5) On November 17, 2020, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to November 21, 2021.

There are two more one-year extension options available at the Company's discretion.

(6) There is one one-year extension option available at the Company's discretion.

(7) Includes two one-year extensions at the Company's option.

As of December 31, 2019

Repurchase Facility

Committed Financing

Amount Outstanding

Interest Expense (1)

Ending Weighted Average Interest Rate

Initial Term Maturity

Repurchase Facility Committed Financing Amount Outstanding Interest Expense (1)

Ending Weighted Average Interest Rate Initial Term Maturity

JPM Repo Facility (2)

GS Repo Facility (3)

$ 300,000 $ 107,526 $ 6,862 4.51 % 1/30/2021

USB Repo Facility (3)

100,000 — 622 N/A 6/15/2020

CS Repo Facility (4)

300,000 87,375 5,563 4.84 % 3/27/2020

WF Repo Facility (5)

175,000 24,942 1,333 3.65 % 11/21/2020

Barclays Revolver Facility (6)

100,000 — 976 N/A 9/20/2021

Barclays Facility (7)

300,000 32,700 1,260 3.80 % 3/15/2022

Total $ 1,275,000 $ 252,543 $ 16,616

_______________________

(1) For the year ended December 31, 2019.

Includes amortization of deferred financing costs.

(2) On January 30, 2018 the committed financing amount was upsized from $ 300 million to $ 520 million and the maturity date was amended to January 30, 2020 .

Includes a one -year extension at the Company's option.

(3) Matured on December 27, 2018.

Committed balance was $250 million prior to maturity.

(2) On September 3, 2019, the committed financing amount was downsized from $520 million to $300 million and the maturity date was amended to January 30, 2021.

(3) Includes two one-year extensions at the option of an indirect wholly-owned subsidiary of the Company, which may be exercised upon the satisfaction of certain conditions.

(5) On July 19, 2018, the committed financing amount was upsized from $ 250 million to $ 300 million .

On June 20, 2018, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to June 19, 2019.

(4) On March 26, 2019, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to March 27, 2020.

(5) Includes three one-year extensions at the Company’s option, which may be exercised upon the satisfaction of certain conditions.

(7) On July 30, 2018, the committed financing amount was upsized from $ 75 million to $ 100 million .

Includes a one -year extension at the Company's option.

(6) On September 13, 2019, the Company exercised the extension option, and extended the term maturity to September 20, 2021.

There is one more one-year extension option available at the Company's discretion.

(7) Includes two one-year extensions at the Company's option.

Other financing and loan participation - Commercial Mortgage Loans

On December 11, 2018, the Company transferred $10.0 million of its interest in a term loan to City National Bank ("City National Financing") via a participation agreement.

As of December 31, 2019 , the City National Financing accrued interest at an annual rate of 4.6% The Company incurred $0.2 million of interest expense on the City National Financing for the year ended December 31, 2019 .

On April 10, 2019, the Company terminated the participation agreement with City National Bank and paid off the $ 10.0 million under the participation agreement.

On March 23, 2020, the Company transferred $15.2 million of its interest in a term loan to Sterling National Bank ("SNB") via a participation agreement.

During 2020, the Company's outstanding loan increased resultant of future fundings, leading to an increase in amount outstanding via the participation agreement.

The Company incurred $0.5 million of interest expense on SNB for the year ended December 31, 2020.

As of December 31, 2020 there was an outstanding balance of $31.4 million.

The loan matures on February 9, 2023.

Mortgage Note Payable

On October 15, 2019, the Company obtained a commercial mortgage loan for $29.2 million related to the real estate owned portfolio.

As of December 31, 2019 the loan accrued interest at an annual rate of 3.85% .

The Company incurred $0.2 million of interest expense for the year ended December 31, 2019 .

As of December 31, 2020 the loan accrued interest at an annual rate of 3.85% and matures on November 6, 2034.

The Company incurred $1.1 million of interest expense for the twelve months ended December 31, 2020.

Additionally, on January 6, 2020, the Company obtained a commercial mortgage loan for $11.0 million related to the real estate owned portfolio (see Note 5 - Real Estate Owned) .

As of December 31, 2020 the loan and related real estate owned assets were no longer held by the Company.

The Company incurred $0.8 million of interest expense for the twelve months ended December 31, 2020.

Unsecured Debt

Pursuant to a lending and security agreement with Security Benefit Life Insurance Company ("SBL"), which was entered into in February 2020 and amended in March and August 2020, the Company may borrow up to $100.0 million at a rate of one-month LIBOR + 4.5%.

The facility has a maturity of February 10, 2023 and is secured by a pledge of equity interests in certain of the Company’s subsidiaries.

The Company incurred $0.2 million of interest expense on the lending agreement with SBL for the twelve months ended December 31, 2020.

As of December 31, 2020, there was no outstanding balance under the lending agreement.

Repurchase Agreements - Real Estate Securities

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The repurchase contracts on each security under an MRA generally mature in 30-90 days and terms are adjusted for current market rates as necessary.

As of December 31, 2019 and December 31, 2018 we were party to six MRAs, of which two were used for each respective periods presented, described below (dollars in thousands):

As of December 31, 2019

Below is a summary of the Company's MRAs as of December 31, 2020 and 2019 (dollars in thousands):

Weighted Average

Amount Outstanding

Accrued Interest

Collateral Pledged (1)

Interest Rate

Days to Maturity

Counterparty Amount Outstanding Accrued Interest Collateral Pledged (1)

Interest Rate Days to Maturity

As of December 31, 2020

JP Morgan Securities LLC $ 33,791 $ 1,668 $ 43,612 1.75 % 31

Wells Fargo Securities, LLC

Wells Fargo Securities, LLC — 1,057 — N/A N/A

Goldman Sachs International 22,440 455 30,794 1.68 % 16

Barclays Capital Inc.

76,809 2,102 97,244 1.71 % 33

Credit Suisse AG — 905 — N/A N/A

Citigroup Global Markets, Inc.

53,788 2,532 71,723 1.70 % 29

Total/Weighted Average $ 186,828 $ 8,719 $ 243,373 1.71 % 33

As of December 31, 2019

Weighted Average

Amount Outstanding

Accrued Interest

Collateral Pledged (1)

Interest Rate

Days to Maturity

JP Morgan Securities LLC $ 83,353 $ 124 $ 93,500 2.53 % 20

Wells Fargo Securities, LLC 178,304 1,199 209,873 2.94 % 11

Barclays Capital Inc.

40,720 221 47,475 2.81 % 23

Citigroup Global Markets, Inc.

91,982 413 103,453 2.69 % 19

Total/Weighted Average $ 394,359 $ 1,957 $ 454,301 2.79 % 16

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As of December 31, 2020

Amount Outstanding

Average Outstanding Balance

Amount Outstanding Average Outstanding Balance

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Repurchase Agreements, Commercial Mortgage Loans $ 234,524 $ 226,224 $ 183,033 $ 276,340 $ 282,282 $ 238,280 $ 197,632 $ 279,187

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As of December 31, 2019

Amount Outstanding

Average Outstanding Balance

Amount Outstanding Average Outstanding Balance

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Repurchase Agreements, Commercial Mortgage Loans $ 370,889 $ 132,870 $ 111,937 $ 252,543 $ 357,850 $ 337,970 $ 132,126 $ 214,812

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As of December 31, 2018

Amount Outstanding

Average Outstanding Balance

Amount Outstanding Average Outstanding Balance

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Repurchase Agreements, Commercial Mortgage Loans $ 501,310 $ 304,975 $ 565,329 $ 149,440 $ 313,509 $ 222,339 $ 456,636 $ 183,689

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origination volume, loan repayments and prepayments, our use of other financing sources such as collateralized loan obligations, our liquidity needs and types of loan assets and underlying collateral that we hold.

In 2019, the maximum average outstanding balance was $612.0 million , at the end of November 30, 2019, of which $266.6 million was related to repurchase agreements on our commercial mortgage loans and $345.4 million for repurchase agreements on our real estate securities.

In 2018 , the maximum average outstanding balance was $560.6 million , at the end of September 30, 2018 , of which $534.8 million was related to repurchase agreements on our commercial mortgage loans and $25.8 million for repurchase agreements on our real estate securities.

In 2017 , the maximum average outstanding balance was $483.4 million , at the end of June 30, 2017 , of which $434.4 million was related to repurchase agreements on our commercial mortgage loans and $49.1 million for repurchase agreements on our real estate securities.

During the twelve months ended December 31, 2020 the maximum average outstanding balance was $721.0 million, of which $268.2 million was related to repurchase agreements on our commercial mortgage loans and $452.8 million for repurchase agreements on our real estate securities.

During the twelve months ended December 31, 2019, the maximum average outstanding balance was $612.0 million, at the end of November 30, 2019, of which $266.6 million was related to repurchase agreements on our commercial mortgage loans and $345.4 million for repurchase agreements on our real estate securities.

During the twelve months ended December 31, 2018, the maximum average outstanding balance was $560.6 million, at the end of September 30, 2018, of which $534.8 million was related to repurchase agreements on our commercial mortgage loans and $25.8 million for repurchase agreements on our real estate securities.

Private Placements

Commencing in February 2018, the Company has been offering common stock and Series A Preferred Stock and commencing in October 2019, the Company has been offering Series C Preferred Stock, in private placements exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act and certain rules and regulations promulgated thereunder.

The following table summarizes the sales of common stock in these offerings (dollars in thousands, except share amounts):

Shares Issued

Balance, December 31, 2018

February 2019

September 2019

November 2019

December 2019

Balance, December 31, 2019

As of December 31, 2019 , the Company had $10.7 million outstanding of binding purchase commitments for common stock.

The following table summarizes the sales of Series A Preferred Stock in these offerings (dollars in thousands, except share amounts):

Shares Issued

Since February 2018, we have been conducting offerings of our common stock, Series A Preferred Stock, and Series C Preferred Stock in offerings exempt from the registration requirements of the Securities Act.

The following table summarizes the issuance of common stock in these offerings (dollars in thousands, except share amounts):

Shares Issued Proceeds

Balance, December 31, 2019 12,136,262 $ 201,225

January 2020 284,983 4,762

February 2020 365,051 6,100

March 2020 — —

April 2020 — —

June 2020 — —

July 2020 — —

August 2020 — —

September 2020 — —

October 2020 — —

November 2020 — —

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Balance, December 31, 2020 12,786,296 $ 212,087

The following table summarizes the sales of Series C Preferred Stock in these offerings (dollars in thousands, except share amounts):

Shares Issued

As of December 31, 2020, we had no outstanding binding purchase commitments for common stock.

The following table summarizes the issuance of Series A Preferred Stock in these offerings (dollars in thousands, except share amounts):

Shares Issued Proceeds

Balance, December 31, 2019 40,496 $ 202,549

January 2020 — —

February 2020 14 70

March 2020 — —

April 2020 — —

June 2020 — —

July 2020 — —

August 2020 — —

September 2020 — —

October 2020 — —

November 2020 — —

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Balance, December 31, 2020 40,510 $ 202,619

As of December 31, 2020, we had no outstanding binding purchase commitments for Series A Preferred Stock.

There were no issuances of Series C Preferred Stock during the year ended December 31, 2020.

As of December 31, 2020, we had no outstanding binding purchase commitments for Series C Preferred Stock.

The following tables present the activity in the Company's Series A Preferred Stock for the periods ended December 31, 2020 and December 31, 2019, respectively (dollars in thousands, except share amounts):

Series A Preferred Stock

Series A Preferred Stock Shares Amount

Beginning Balance, December 31, 2019 40,500 $ 202,144

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Ending Balance, December 31, 2020 40,515 $ 202,292

Series A Preferred Stock Shares Amount

Beginning Balance, December 31, 2018 29,249 $ 145,786

Issuance of Preferred Stock 11,247 56,233

Dividends paid in Preferred Stock 4 24

Offering costs — —

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Ending Balance, December 31, 2019 40,500 $ 202,144

The following table presents the activity in the Company's Series C Preferred Stock for the period ended December 31, 2019 , (dollars in thousands, except share amounts):

Preferred C Stock

The following table presents the activity in the Company's Series C Preferred Stock for the period ended December 31, 2020 and December 31, 2019, (dollars in thousands, except share amounts):

Preferred C Stock Shares Amount

Beginning Balance, December 31, 2019 1,400 $ 6,966

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Ending Balance, December 31, 2020 1,400 $ 6,962

Series C Preferred Stock Shares Amount

Beginning Balance, December 31, 2018 — $ —

Issuance of Preferred Stock 1,400 6,998

Dividends paid in Preferred Stock — —

Offering costs — (33)

Amortization of offering costs — 1

Ending Balance, December 31, 2019 1,400 $ 6,966

Distributions

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federal income taxes.

In 2019, the Company's board of directors authorized and declared ongoing monthly distributions at a rate equivalent to $1.44 per annum, per share.

The Company's distributions are payable by the fifth day following each month end to stockholders of record at the close of business each day during the prior month.

Distributions on our common stock are payable when authorized and declared by our board of directors.

Distribution payments are dependent on the availability of funds.

The Company's board of directors may reduce the amount of distributions paid or suspend distribution payments at any time, and therefore, distributions payments are not assured.

Our board of directors may reduce the amount of distributions paid or suspend distribution payments at any time, and therefore, distributions payments are not assured.

Dividends payable on each share of Series A and Series C Preferred Stock are generally equal to the quarterly dividend that would have been paid had such share of Preferred Stock been converted to a share of common stock, except to the extent common stock dividends have been reduced below certain specified levels.

To the extent dividends on Preferred Shares are not authorized and declared by our board of directors and paid by the Company monthly, the dividend amounts will accrue.

In April 2020, the Company’s board of directors unanimously approved a transition in the timing of the dividend payments to holders of the Company’s common stock from a monthly payment with daily accruals to a quarterly accrual and payment basis.

Similarly, the Company began paying accrued and unpaid dividends on Preferred Stock on a quarterly basis.

In November 2020, the Company’s board of directors declared the following fourth quarter 2020 dividends:

(i) a quarterly cash dividend of $0.275 per common share (equivalent to $1.10 per annum) which was paid in January 2021 to holders of record on December 31, 2020, and (ii) a quarterly cash dividend per share of Preferred Stock equivalent to the amount of distributions that would have been paid upon a conversion of such share of Preferred Stock into common stock, which was paid in January 2021 to holders of record on December 31, 2020.

The below table shows the distributions paid on shares outstanding of common stock, as well as the amount of shares of common stock issued upon reinvestment of distributions by stockholders under our DRIP during the years ended December 31, 2020 and 2019 (dollars in thousands):

Year Ended December 31, 2020

Amount Paid in Cash

Amount Issued under DRIP

Payment Date Amount Paid in Cash Amount Issued under DRIP

January 2, 2020 $ 4,154 $ 1,211

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April 1, 2020 5,413 —

May 1, 2020 — —

June 1, 2020 — —

July 1, 2020 9,463 2,679

August 1, 2020 — —

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December 23, 2020 (1)

Total $ 36,798 $ 8,883

_____________________

(1) Payment relates to second quarter dividend distributions which were recalculated as a result of the transition from a monthly payment with daily accruals to a quarterly payment and accrual basis.

Year Ended December 31, 2019

Amount Paid in Cash

Amount Issued under DRIP

Payment Date Amount Paid in Cash Amount Issued under DRIP

January 4, 2019 $ 3,576 $ 1,171

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April 1, 2019 3,749 1,167

May 1, 2019 3,678 1,143

June 3, 2019 3,870 1,182

July 1, 2019 3,796 1,141

August 2, 2019 4,033 1,181

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December 2, 2019 3,976 1,181

Total $ 45,763 $ 13,901

The following table shows the sources for the payment of distributions to common stockholders for the periods presented (dollars in thousands):

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Source of Distribution Coverage:

Net Income (Loss)

Available cash on hand

Net Income $ 36,798 80.6 % $ 45,763 76.7 %

Common stock issued under DRIP 8,883 19.4 % 13,901 23.3 %

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Net cash provided by operating activities for the year ended December 31, 2020 was $115.3 million.

Cash inflows were primarily driven by net income of $54.7 million and net proceeds of $44.7 million related to originations of and proceeds from sales of commercial mortgage loans, measured at fair value.

Net cash provided by investing activities for the year ended December 31, 2020 was $240.7 million.

Cash inflows were primarily driven by proceeds from principal repayments of $1,228.2 million received on commercial mortgage loans, held for investment, proceeds received from the sale/repayment of real estate securities of $346.2 million, $77.2 million of proceeds received from the sale of commercial mortgage loans, held-for-sale and $22.5 million of proceeds received from sale of real estate owned assets.

Inflows were partially offset by the origination and acquisition of $1,281.2 million of commercial mortgage loans and the purchase of real estate securities of $148.6 million.

Net cash used in financing activities for the year ended December 31, 2020 was $373.0 million.

Cash outflows were primarily driven by repayments on CLOs of $182.7 million, net payment on CMBS repurchase agreements of $207.5 million, $49.8 million in cash distributions to stockholders and $10.3 million of stock repurchases.

Outflows were offset by $31.4 million of proceeds received from borrowing on other financing and loan participation for commercial mortgage loans, $11.7 million from borrowing on mortgage note payable and net proceeds of $23.8 million received from repurchase agreements on commercial mortgage loans.

Cash Flows for the Year Ended December 31, 2019

Net cash provided by operating activities for the year ended December 31, 2019 was $45.4 million.

Cash inflows were primarily driven by an increase in net income to $83.9 million, offset by net cash outflows of $45.5 million related to originations of and proceeds from sales of commercial mortgage loans, measured at fair value.

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Inflows were partially offset by the payment of $60.6 million in cash distributions to stockholders, $13.8 million of stock repurchases and repayments on CLOs of $343.2 million.

Cash Flows for the Year Ended December 31, 2018

Net cash provided by operating activities for the year ended December 31, 2018 was $7.1 million .

Cash inflows were primarily driven by an increase in net income to $52.8 million , offset by net cash outflows of $24.0 million related to originations of and proceeds from sales of commercial mortgage loans, measured at fair value.

Net cash used in investing activities for the year ended December 31, 2018 was $ 855.8 million .

Cash outflows were primarily driven by the origination and acquisition of $1,598.8 million of commercial mortgage loans.

Outflows were offset by proceeds from principal repayments of $753.9 million received on commercial mortgage loans, held for investment and proceeds from sale of commercial mortgage loans, held for sale of $16.9 million .

Net cash provided by financing activities for the year ended December 31, 2018 was $ 961.4 million .

Cash inflows were primarily driven by proceeds of $1,161.0 million from issuance of two CLOs, BSPRT 2017-FL1 and BSPRT 2017-FL2.

This was partially offset by cash outflows of $83.8 million from net repayments on the Repo Facilities, $5.5 million from net payment on our CMBS MRAs, the payment of $37.0 million in cash distributions to stockholders, $20.5 million of stock repurchases and repayments on CLOs of $143.1 million

Election as a REIT

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Unfunded loan commitments (1)

Maturities of lease liabilities for operating lease

$ 59,692 $ 161,300 $ 7,700 $ — $ 228,692

Repurchase agreements - commercial mortgage loans 139,896 136,444 — — 276,340

Repurchase agreements - real estate securities 186,828 — — — 186,828

— — — 1,639,227 1,639,227

Mortgage Note Payable — — — 29,167 29,167

Total $ 386,416 $ 297,744 $ 7,700 $ 1,668,394 $ 2,360,254

________________________

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The Committee engaged independent legal counsel to assist the Committee in negotiating the amended Advisory Agreement.

The Advisor will continue to provide the daily management for the Company and the Operating Partnership, including an investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the board of directors.

The Advisor shall continue to be entitled to an asset management fee equal to one and one-half percent (1.5%) of Equity (as defined in the amended Advisory Agreement).

The Advisor shall continue to be entitled to an annual subordinated performance fee equal to fifteen percent (15%) of the Total Return (as defined in the amended Advisory Agreement) over a six percent (6%) per annum hurdle, subject to certain limitations.

The Advisor shall not be entitled to acquisition or disposition fees.

The Company or the Operating Partnership shall continue to pay directly or reimburse the Advisor for all the expenses paid or actually incurred by the Advisor in connection with the services it provides to the Company and the Operating Partnership pursuant to the amended Advisory Agreement, subject to certain limitations.

The initial term of the amended Advisory Agreement is three-years and shall be automatically renewed for additional one-year periods, unless either party elects not to renew.

Pursuant to the amended Advisory Agreement, the Advisor provides the daily management for the Company and the Operating Partnership, including an investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the board of directors.

The initial term of the amended Advisory Agreement was three-years and was automatically renewed for an additional one-year period on January 19, 2021 and will continue to automatically renew for additional one-year periods unless either party elects not to renew.

The Company may terminate the amended Advisory Agreement for a Cause Event (as defined in the amended Advisory Agreement) without payment of a termination fee.

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In such case, the Company shall be obligated to pay a termination fee.

Pursuant to the amended Advisory Agreement, the Advisor and/or its affiliates are required to acquire equity securities of the Company equal to a purchase price of not less than $10 million, subject to certain conditions.

During the term of the amended Advisory Agreement, the Advisor shall not, directly or indirectly, manage or advise another REIT that is engaged in the business of the Company in any geographical region in which the Company has a significant investment, or provide any services related to fixed-rate conduit lending to any other person, subject to certain conditions.

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provided that in no event will the annual subordinated performance fee payable to the Advisor exceed 10.0% of the aggregate total return for such year.

Until September 2017, the Company paid the Advisor an acquisition fee of 1.0% of the principal amount funded by us to originate or acquire commercial mortgage loans and 1.0% of the anticipated net equity funded by the Company to acquire real estate securities.

• The Company reimburses the Advisor for insourced expenses incurred by the Advisor on the Company's behalf related to selecting, evaluating, originating and acquiring investments in an amount up to 0.5% of the principal amount funded by the Company to originate or acquire commercial mortgage loans and up to 0.5% of the anticipated net equity funded by the Company to acquire real estate securities investments.

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Refer to Note 9 - Stock Transactions for a description of the Company’s private placements.

Officers of the Company and other employees of the Advisor and its affiliates (“Manager Investors”), as well as members of the Company's board of directors, have acquired common stock and Series A Preferred Stock in these private placements on substantially the same terms applying to purchases by third party accredited investors unaffiliated with the Company or the Advisor.

The Manager Investors acquired an aggregate of $2.4 million of common stock in these private placements during the year ended December 31, 2019.

During the year ended December 31, 2019, each independent member of the Company's board of directors acquired 5,984 shares of common stock in these private placements for an aggregate purchase price of $0.4 million .

Officers of the Company and other employees of the Advisor and its affiliates (“Manager Investors”), as well as members of the Company's board of directors, have acquired common stock and Series A and Series C Convertible Preferred Stock in these private placements on substantially the same terms applying to purchases by third party accredited investors unaffiliated with the Company or the Advisor.

The Manager Investors have agreed with the Advisor not to sell or otherwise transfer the securities purchased in the private placement without the consent of the Advisor, prior to 180 days after a listing of the Company’s common stock on a national securities exchange.

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Loan Acquisitions

On February 22, 2018, the Company purchased commercial mortgage loans from an entity that is an affiliate of the Advisor, for an aggregate purchase price of $27.8 million .

The purchase of the commercial mortgage loans and the $27.8 million purchase price were approved by the Company’s board of directors.

These loans are expected to be sold into a securitization vehicle through the Company's TRS segment.

On February 22, 2018, the Company purchased commercial mortgage loans from an entity that is an affiliate of the Company's Advisor, for an aggregate purchase price of $27.8 million.

The purchase of the commercial mortgage loans and the $27.8 million purchase price were approved by the independent directors of the Company’s board of directors.

On April 18, 2018, the Company sold $23.3 million of these commercial mortgage loans into a CMBS securitization.

The remaining $4.5 million, carrying value of $3.9 million , of these commercial mortgage loans are recorded in commercial mortgage loans, held-for-investment on the consolidated balance sheet as of December 31, 2019 .

The table below shows the costs incurred due to arrangements with our Advisor and its affiliates during the years ended December 31, 2019, 2018 and 2017 and the associated payable as of December 31, 2019 and 2018 (dollars in thousands):

The remaining $4.5 million of these commercial mortgage loans, recorded as held for investment, were fully paid down during the year ended December 31, 2020.

Lending Agreement with Stockholder

The facility has a maturity of February 10, 2023 and is secured by a pledge of equity interests in certain of the Company’s subsidiaries.

SBL also holds 14,950 of the Company’s outstanding shares of Series A Preferred Stock.

The Company incurred $0.2 million interest expense on the lending agreement with SBL for the year ended December 31, 2020.

As of December 31, 2020 there was no outstanding balance under the lending agreement.

The table below shows the costs incurred due to arrangements with our Advisor and its affiliates during the years ended December 31, 2020, 2019 and 2018 and the associated amounts payable as of December 31, 2020 and 2019 (dollars in thousands).

See Note 11 - Related Party Transactions and Arrangements for further detail.

Year Ended December 31,

Payable as of December 31,

Acquisition fees and expenses (1)

Year Ended December 31, Payable as of December 31,

2020 2019 2018 2020 2019

Acquisition expenses (1)

696 900 452 — 225

Administrative services expenses 13,120 16,363 13,446 2,940 1,238

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703 1,610 1,259 1,812 —

(1) Total acquisition fees and expenses paid during the years ended December 31, 2019 , 2018 and 2017 were $ 8.4 million , $ 8.1 million and $ 10.2 million respectively, of which $ 7.5 million , $ 7.6 million and $ 6.0 million were capitalized within the commercial mortgage loans, held for investment line of the consolidated balance sheets for years ended December 31, 2019 , 2018 and 2017 .

(2) These are primarily related to reimbursable costs incurred for the increase in loan origination activities.

These amounts are included in Other expenses in the Company's consolidated statements of operations.

The payables as of December 31, 2019 and 2018 in the table above are included in Due to affiliates on our consolidated balance sheets.

Total related party fees and reimbursements $ 29,697 $ 35,099 $ 25,456 $ 9,525 $ 4,789

______________________

(1) Total acquisition fees and expenses paid during the years ended December 31, 2020, 2019 and 2018 were $7.1 million, $8.4 million and $8.1 million respectively, of which $6.4 million, $7.5 million and $7.6 million were capitalized within the commercial mortgage loans, held for investment line of the consolidated balance sheets for the years ended December 31, 2020, 2019 and 2018.

(2) These are related to reimbursable costs incurred for the increase in loan origination activities and are included in Other expenses in the Company's consolidated statements of operations.

(3) The related party payable includes $1.8 million of payments made by the Advisor to third party vendors on behalf of the Company.

The amounts payable as of December 31, 2020 and 2019 in the table above are included in Due to affiliates on the Company's consolidated balance sheets.

Off Balance Sheet Arrangements

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We believe our presentations of FFO and MFFO assist investors in analyzing and comparing our operating and financial performance between reporting periods.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (the "White Paper").

The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of depreciable property, property and asset impairment write-downs, depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.

Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO.

Our business plan is to operate as a mortgage REIT with our portfolio consisting of commercial mortgage loan investments and investments in real estate securities.

We will typically have no FFO adjustments to our net income or loss computed in accordance with GAAP as a result of operating as a mortgage REIT.

Although we have the ability to acquire real property, we have not acquired any at this time and as such have not had any FFO adjustments to our net income or loss computed in accordance with GAAP.

In addition, we believe MFFO is a useful financial metric for shareholders as historically, over time, MFFO has been a strong indicator of our distributions per share and is a metric we consider in declaring our distributions.

As a REIT, we generally must distribute annually at least 90% of our net taxable income, and distributions are one of the principal reasons shareholders invest in our common stock.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in F ebruary 2004 (the "White Paper").

The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of certain real estate assets, gains or losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, depreciation and amortization related to real estate and after adjustments for unconsolidated partnerships and joint ventures on the same basis.

Our business plan is to operate as a mortgage REIT with our portfolio consisting of com mercial mortgage loan investments, investments in real estate securities and real estate owned assets.

We define MFFO, a non-GAAP measure, consistent with the IPA's Guideline 2010 - 01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs:

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unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis.

resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized.

While we will be responsible for managing interest rate, hedge and foreign exchange risk, we expect to retain an outside consultant to review all our hedging agreements.

The accretion of discounts and amortization of premiums and other loan expenses on debt investments, gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized.

Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude such gains and losses in calculating MFFO, as such gains and losses are not reflective of our core operations.

Our MFFO calculation excludes impairments of real estate related investments, including loans.

We assess the credit quality of our investments and adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary.

For loans classified as held-for-investment, we establish and maintain a general allowance for loan losses inherent in our portfolio at the reporting date and, where appropriate, a specific allowance for loan losses for loans we have determined to be impaired at the reporting date.

We assess the credit quality of our investments and adequacy of credit loss reserves on a quarterly basis, or more frequently as necessary.

For loans classified as held for investment, we establish and maintain a general allowance for credit losses inherent in our portfolio at the reporting date and, where appropriate, a specific allowance for credit losses for loans we have determined to be impaired at the reporting date.

An individual loan is considered impaired when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan.

Real estate related securities are evaluated for other-than-temporary impairment when the fair value of a security falls below its net amortized cost.

Real estate securities which have experienced a decline in fair value below their amortized cost basis (i.e., impairment) are evaluated each reporting period to determine whether the decline in fair value is due to credit-related factors.

Credit-related impairment is recognized as an allowance on the consolidated balance sheets with a corresponding adjustment on the consolidated statements of operations.

Significant judgment is required in this analysis.

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This requires significant judgment and because it is based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized may differ materially from the carrying value as of the balance sheet date.

If upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of the loan, a specific allowance for loan losses is recorded.

If upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of the loan, a specific allowance for credit losses is recorded.

In the case of real estate securities, all or a portion of a deemed impairment may be recorded.

Due to our limited life, any allowance for loan losses or impairment of real estate securities recorded may be difficult to recover.

Due to our limited life, any allowance for credit losses or impairment of real estate securities recorded may be difficult to recover.

The table below reflects the items deducted or added to net income or loss in our calculation of FFO and MFFO for the years ended December 31, 2020, December 31, 2019 and December 31, 2018 (dollars in thousands):

Year Ended December 31,

2020 2019 2018

Funds From Operations:

Net income $ 54,746 $ 83,924 $ 52,825

Impairment losses on real estate owned assets 398 — —

Depreciation and amortization 2,233 — —

Funds from operations $ 57,377 $ 83,924 $ 52,825

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Unrealized (gain)/loss on financial instruments 1,102 (2,081) 1,611

Loan loss (recovery)/provision

Provision/(benefit) for credit losses 13,296 3,007 3,370

Modified funds from operations (1)

$ 66,472 $ 79,606 $ 53,686

(1) Modified funds from operations for the year ended December 31, 2019 includes a non-cash charge of $4.5 million related to the call of BSPRT 2017 - FL1 CLO on April 15, 2019.

____________________________

(1) Modified funds from operations for the year ended December 31, 2020 includes a non-cash charge of $4.5 million related to the call of BSPRT 2017 - FL2 CLO on January 15, 2020.

Excluding the non-cash charge modified funds from operations would be $71.0 million for the year ended December 31, 2020.

Modified funds from operations for year ended December 31, 2019 includes a non-cash charge of $4.5 million related to the call of BSPRT 2017 - FL1 CLO on April 15, 2019.

Excluding this non-cash charge, modified funds from operations would have been $84.1 million.

Modified funds from operations for year ended December 31, 2018 includes a non-cash charge of $6.4 million related to the call of RFT 2015-FL1 CLO on February 15, 2018.

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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 7. Management’s Discussion and Analysis