What changed in this filing

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Item 4. Controls and Procedures

2021-11-02 compared with 2021-08-03 · 17 added, 30 removed, 74 unchanged (39% of the section changed)

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Based upon that evaluation, our President and our Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2021 that

have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Warning Concerning Forward-Looking Statements

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Forward-looking statements in this Quarterly Report on Form 10-Q relate to various aspects of our business, including:

• The likelihood that we will complete the Merger;

• Our expectation that our shareholders will benefit from the Merger;

• The risks associated with the ability to consummate the Merger and the other Transactions;

• The risk that the anticipated benefits from the Merger may not be realized or may take longer to realize than

expected, including as a result of the failure to obtain the required approvals of our and TRMT’s shareholders;

• Unexpected costs or unexpected liabilities that may arise from the Merger or the other Transactions, whether or not

• The occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement or the failure to satisfy the closing conditions;

• The duration and severity of the COVID-19 pandemic and its impact on us and our borrowers and their ability and willingness to fund their debt service obligations to us;

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• The credit qualities of our borrowers;

• Rising inflationary pressures and the effects of inflation on our results of operations and financial conditions;

• The ability and willingness of our borrowers to repay our investments in a timely manner or at all;

• Our projected leverage;

• The cost and availability of additional advancements under our Master Repurchase Facility, or other debt financing under additional repurchase or bank facilities we may obtain from time to time, and our ability to obtain such additional debt financing;

• The cost and availability of additional advancements under our Master Repurchase Facilities, or other debt financing under additional repurchase or bank facilities we may obtain from time to time, and our ability to obtain such additional debt financing;

• Our qualification for taxation as a REIT;

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• Compliance with, and changes to, federal, state or local laws or regulations, accounting rules, tax laws or similar matters,

• Limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify for taxation as a REIT for U.S.

• Limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our qualification for taxation as a REIT for U.S.

federal income tax purposes,

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• We have a limited operating history originating and investing in first mortgage loans secured by middle market and transitional CRE and we may not be able to operate our business successfully or generate sufficient revenue to make or sustain distributions to our shareholders,

• To make additional investments and continue to grow our business, we will need to obtain additional cost-effective capital.

• To make additional investments and continue to grow our business after we invest our existing available capital, we will need to obtain additional cost-effective capital.

We cannot be sure that we will be successful in obtaining any such additional capital.

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• Our distributions and distribution rate are set from time to time by our Board of Trustees.

The timing, amount and form of future distributions will be determined at the discretion of our Board of Trustees and will depend upon various factors that our Board of Trustees deems relevant, including our historical and projected income, our Distributable Earnings, the then-current and expected needs and availability of cash to pay our obligations and fund our investments, distributions which may be required to be paid by us to qualify for taxation as a REIT, limitations on distributions contained in our financing arrangements and other factors deemed relevant by our Board of Trustees

in its discretion.

The timing, amount and form of future distributions will be determined at the discretion of our Board of Trustees and will depend upon various factors that our Board of Trustees deems relevant, including our historical and projected income, our Distributable Earnings, the then-current and expected needs and availability of cash to pay our obligations and fund our investments, distributions which may be required to be paid by us to maintain our qualification for taxation as a REIT, limitations on distributions contained in our financing arrangements and other factors deemed relevant by our Board of Trustees in its discretion.

Accordingly, our future distribution rates may be increased or decreased and we can provide no assurances as to the rate at which future distributions will be paid.

• Competition may limit our ability to identify and make desirable investments,

• Competition may limit our ability to identify and make desirable investments with any additional capital we may obtain or with any proceeds we may receive from repayments of our investments,

• Our belief that there will be strong demand for alternative sources of CRE debt capital as the U.S.

economy continues to improve and return to a more stable state may not be correct,

economy continues to improve and returns to a more stable state may not be correct,

• The value of our loans depends upon our borrowers’ ability to generate cash flows from operating the underlying collateral for our loans.

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However, these mechanisms may not adequately cover the debt service amount and will likely not be able to fully fund the debt service obligations owed to us if the tenants’ businesses fail or they default on their debt service obligations owed to us,

• The impact of the COVID-19 pandemic is affecting all parts of the economy including our borrowers who are experiencing the negative impact of current economic conditions.

As a result, we may not have sufficient capital to meet commitments from actions that UBS takes if our borrowers default or the value of our collateral declines below required levels,

• The impact of the COVID-19 pandemic affected all parts of the economy and continues to particularly affect certain aspects of the economy, including certain of our borrowers.

As a result, we may not have sufficient capital to meet commitments from actions that UBS or Citibank, with respect to our Master Repurchase Facilities, take if our borrowers default or the value of our collateral declines below required levels,

• Prepayment of our loans may adversely affect the value of our loan portfolio and our ability to make or sustain distributions to our shareholders,

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• We may incur significant debt, and our governing documents contain no limit on the amount of debt we may incur,

• Continued availability of additional advancements under our Master Repurchase Facility is subject to us identifying suitable loans to invest in and our satisfying certain financial covenants and other conditions, as applicable, that we may be unable to satisfy,

• Financing for floating rate mortgages and other related assets that we may seek to sell pursuant to our Master Repurchase Facility is subject to approval by the lender under our Master Repurchase Facility, whose approval we may not obtain,

• Actual costs under our Master Repurchase Facility will be higher than LIBOR plus a premium because of fees and expenses associated with our debt,

• Although, to date, neither UBS or Citibank has instituted cash sweeps on our accounts and we have not received a margin call under our Master Repurchase Agreement, each bank may do so in the future in accordance with such agreements,

• Continued availability of additional advancements under our Master Repurchase Facilities is subject to us identifying suitable loans to invest in and our satisfying certain financial covenants and other conditions, as applicable, that we may be unable to satisfy,

• Financing for floating rate mortgages and other related assets that we may seek to sell pursuant to our Master Repurchase Facilities is subject to approval by the lender under our Master Repurchase Facilities, whose approval we may not obtain,

• Actual costs under our Master Repurchase Facilities will be higher than LIBOR plus a premium because of fees and expenses associated with our debt,

• Any phase out of LIBOR may have an impact on our investments and our debt financing arrangements,

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However, the advantages we believe we may realize from these relationships may not materialize,

• Our intention to remain exempt from registration under the 1940 Act imposes limits on our operations, and we may fail to remain exempt from registration under the 1940 Act,

• Our failure to qualify for taxation as a REIT could have significant adverse consequences,

• Although we have entered into the Merger Agreement and we expect the Merger to close during the third quarter of 2021, the closing of the Merger is subject to the satisfaction or waiver of conditions, including the receipt of requisite approvals by our and TRMT’s shareholders.

We cannot be sure that any or all of these conditions will be

satisfied or waived.

Accordingly, the Merger may not close when expected or at all, or the terms of the Merger and the other Transactions may change, and

• This Quarterly Report on Form 10-Q states that the Merger, the Merger Share Issuance and the other Transactions and the terms thereof were evaluated, negotiated and recommended to each of our and TRMT’s board of trustees by special committees of our and TRMT’s board of trustees, respectively, each consisting solely of our and TRMT’s disinterested, independent trustees, respectively, and were separately unanimously approved and adopted by our and TRMT’s independent trustees and by our and TRMT’s board of trustees, and that UBS Securities LLC and Citigroup Global Markets Inc.

acted as a financial advisor to each of the special committees of our and TRMT’s board of trustees, respectively.

Despite this process, we have been subject to, and could be subject to additional claims challenging the Merger and the other Transactions or our entry into the Merger Agreement and related agreements because of the multiple relationships among us, TRMT, TRA, RMR LLC, RMR Inc.

and their related persons and entities or other reasons, and defending even meritless claims could be expensive and distracting to management.

Currently unexpected results could occur due to many different circumstances, some of which are beyond our control, such as acts of terrorism, the COVID-19 pandemic, natural disasters or changes in capital markets or the economy generally.

• Our intention to remain exempt from registration under the 1940 Act imposes limits on our operations, and we may fail to remain exempt from registration under the 1940 Act, and

• Our failure to remain qualified for taxation as a REIT could have significant adverse consequences.

Currently unexpected results could occur due to many different circumstances, some of which are beyond our control, such as acts of terrorism, the COVID-19 pandemic, natural disasters, global climate change or changes in capital markets or the economy generally.

The information contained elsewhere in this Quarterly Report on Form 10-Q, in our “Summary of Principal Risk Factors” included in our Current Report on Form 8-K filed on March 24, 2021 or in our other filings with the SEC identifies other important factors that could cause our actual results to differ materially from those stated in or implied by our forward looking statements.

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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-Q

Item 4. Controls and Procedures