What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-29 compared with 2024-04-29 · 133 added, 74 removed, 269 unchanged (43% of the section changed)

32 unchanged sentences

Market Conditions .

During 2023, the CRE industry continued to experience extreme volatility.

In response to inflationary pressures, the Federal Open Market Committee of the U.S.

Federal Reserve, or the FOMC, increased the federal funds rate by 525 basis points over a 16-month period beginning in March 2022.

The pace of the interest rate increases in 2022 and 2023 coupled with macroeconomic and geopolitical uncertainty negatively impacted CRE acquisition and financing transaction activity.

By the end of the year, CRE investors seemed cautiously optimistic that inflation had peaked, that the U.S.

economy was likely headed for a “soft-landing” and that the FOMC would be poised to reduce the federal funds rate by 125 to 150 basis points as a result of five or six rate cuts in 2024.

Despite this cautious optimism heading into 2024, overall CRE investment and transaction volume continued to decline over the first quarter of 2024 as investors chose to delay sale or refinancing decisions with the anticipation of lower interest rates in the future.

Since that time, the narrative on declining interest rates has shifted.

economy continues to be strong and recent employment reports, coupled with stronger than expected inflationary measures, suggest that the FOMC will likely consider fewer rate cuts in 2024 than originally anticipated, if any.

As such, it is becoming apparent that CRE investors will likely have to adapt to a “higher for longer” interest rate environment.

This could negatively impact property values and put further strain on borrowers seeking to refinance debt that was originated in a much lower interest rate environment.

With lower prospects for near term interest rate reductions, property fundamentals and durability of cash flows will be in greater focus and will have a greater impact on refinancing activity going forward.

Those CRE owners that are more reliant on rate reductions to qualify for a refinance are more likely to be forced to sell properties, while borrowers with well performing, lower leveraged cash flowing assets will have greater optionality with regards to financing options.

Despite strong U.S.

economic growth, certain segments of the CRE industry are beginning to encounter erosion in operating fundamentals.

Despite strong employment figures, the U.S.

office market continues to suffer from the post pandemic shift in work habits and weak demand for office space in general.

Retail assets, particularly needs based and grocery anchored retail, continue to benefit from a strong consumer and employment market.

The apartment and industrial sectors remain the most coveted property types amongst lenders and investors, but have recently started to experience challenges due to excess supply.

The lack of affordable housing in the United States and the rent versus buy dynamic favor the apartment sector.

New industrial development has slowed considerably but continues to benefit from strong demand.

Although new development absorption may take longer than originally expected, both sectors are expected to eventually reach equilibrium and rents will begin to increase again.

Despite current market conditions and headwinds facing the CRE industry, we believe the CRE lending market remains well positioned to handle these challenges given that there is ample liquidity available to borrowers with well performing properties.

National banks have curtailed lending activity somewhat, but regional and local banks are continuing to evaluate transactions for borrowers with healthy balance sheets.

The CMBS market has started to see increased activity given recent spread tightening, while the larger, more established CRE collateralized loan obligation lenders are increasing new originations for eventual securitization.

Heading in to 2024, CRE investors seemed cautiously optimistic that inflation had peaked, that the U.S.

economy was likely headed for a “soft-landing” and that the Federal Open Market Committee of the U.S.

Federal Reserve, or the FOMC, would be poised to reduce the federal funds rate by 125 to 150 basis points as a result of five or six rate cuts in 2024.

With the anticipation of lower interest rates in the future, investors chose to delay sale or refinancing decisions and overall CRE investment and transaction volume remained tepid well into the second quarter of 2024.

However, despite recent economic data indicating slowing U.S.

economic growth, including lower retail sales, consumer spending and a slight increase in the unemployment rate, the FOMC has made it clear that inflation remains elevated and that it intends to keep the federal funds rate steady at 5.25% to 5.50% until it is confident that inflation is on pace to reach its longer-term objective of 2%.

With no clear sight on the timing or magnitude of a future interest rate cut, CRE investors continue to adjust to a “higher for longer” interest rate environment.

CRE owners that were counting on interest rate reductions but are not well capitalized to invest additional capital to deleverage and qualify for a refinance, are more likely to be forced to sell properties to repay debt, likely at distressed prices.

Recent increases in CMBS and CRE collateralized loan obligation delinquency rates signal that the prolonged period of elevated interest rates is starting to impact these borrowers and their ability to refinance lower cost debt at current interest rates.

For borrowers capable of investing additional equity into their properties, or for borrowers with well performing, cash flowing assets, there appear to be numerous financing options at their disposal.

CMBS activity increased through the first half of 2024.

Strong demand from bond buyers has allowed borrowers to take advantage of tightening credit spreads for 10-year and 5-year loans, the latter of which has become more popular for both bond investors and borrowers.

Life insurance companies continue to expand their product offerings to borrowers, offering both low leverage, fixed rate term debt as well as floating rate transitional loans, which were once reserved for banks and alternative lenders, like us.

This has resulted in greater optionality for borrowers and increased competition amongst lenders to finance quality properties in today’s environment.

The banking sector continues to be impacted by legacy CRE exposure and increased capital charges imposed by regulators but have become more active by evaluating new loans for strategic, long-term clients.

Agency lenders Fannie-Mae and Freddie-Mac are active but are also facing increased competition from CMBS/conduit providers, life-insurance companies and alternative lenders, like us.

Oversupply issues in certain multifamily markets have put downward pressure on rents, making it more difficult to qualify for agency financing.

Given that multifamily properties are generally coveted by most lenders, competition amongst lenders to provide financing on this sector has continued to increase.

Certain segments of the CRE industry are beginning to experience a deterioration in operating fundamentals.

office market continues to suffer from the post pandemic shift in work habits and weak demand for office space.

Retail assets, particularly needs based and grocery anchored retail, have benefited from a strong consumer and employment market, but recent reports of declining retail sales and weakening consumer demand may eventually have an impact on performance.

The industrial sector remains a preferred asset class among lenders and investors, however oversupply in certain markets and more measured corporate demand have impacted the pace of rent growth.

The lack of affordable housing in the United States and the rent versus own dynamic continue to favor the apartment sector.

Oversupply in certain markets however, has caused a slowdown, and in some markets, a decline in rent growth.

For most markets, it is expected that the imbalance between supply and demand will be short lived and once these markets reach equilibrium, rents will increase again.

Despite the current market conditions and headwinds facing the CRE industry, we believe the CRE lending market remains well positioned to handle these challenges given that there is ample liquidity available to borrowers with well performing properties.

Changes in Interest Rates.

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therefore, changes to income from investments, net, may not move proportionately with the increase or decrease in benchmark rates.

As of March 31, 2024, SOFR was 5.33%, which exceeds the floors established by all of our loans, and as a result none of our loan investments currently had active interest rate floors.

As of June 30, 2024, SOFR was 5.34%, which exceeds the floors established by all of our loans, and as a result none of our loan investments currently had active interest rate floors.

Size of Portfolio .

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We believe that Distributable Earnings and Distributable Earnings per common share provide meaningful information to consider in addition to net income, net income per common share and cash flows from operating activities determined in accordance with GAAP.

These measures help us to evaluate our performance excluding the effects of certain transactions, the variability of any management incentive fees that may be paid or payable and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations.

These measures help us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations.

In addition, Distributable Earnings, excluding incentive fees, is used in determining the amount of base management and management incentive fees payable by us to Tremont under our management agreement.

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The table below calculates our book value per common share:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Shareholders' equity $ 271,089 $ 271,248

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The purchase discount of $36,443 was allocated to each acquired loan and is being accreted into income over the remaining term of the respective loan.

As of March 31, 2024 and December 31, 2023, the unaccreted purchase discount was $1,202 and $2,347, respectively.

As of June 30, 2024 and December 31, 2023, the unaccreted purchase discount was $420 and $2,347, respectively.

(2) Excludes the impact of our allowance for credit losses.

As of March 31, 2024 and December 31, 2023, our allowance for credit losses for our loan portfolio and unfunded loan commitments was $6,525 and $5,828, respectively.

As of June 30, 2024 and December 31, 2023, our allowance for credit losses for our loan portfolio and unfunded loan commitments was $7,840 and $5,828, respectively.

Our Loan Portfolio

The table below details overall statistics for our loan portfolio as of March 31, 2024 and December 31, 2023:

As of March 31, 2024 As of December 31, 2023

The table below details overall statistics for our loan portfolio as of June 30, 2024 and December 31, 2023:

As of June 30, 2024 As of December 31, 2023

Number of loans 22 24

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Loan Portfolio Details

The table below details our loan portfolio as of March 31, 2024:

The table below details our loan portfolio as of June 30, 2024:

# Location Property Type Origination Date Committed Principal Amount Principal

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15 Fontana, CA Industrial 11/18/2022 24,355 22,000 S + 3.75% S + 4.29% 11/18/2026 72 % 3

16 Los Angeles, CA Industrial 06/28/2024 23,800 21,450 S + 3.40% S + 3.85% 06/28/2029 58 % 3

17 Downers Grove, IL Office 12/09/2021 23,530 23,530 S + 4.25% S + 4.57% 12/09/2026 72 % 3

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19 Portland, OR Multifamily 07/09/2021 19,688 19,688 S + 3.57% S + 3.94% 07/09/2026 75 % 3

19 Scottsdale, AZ Hotel 09/27/2023 17,250 17,250 S + 4.25% S + 4.65% 09/27/2028 57 % 2

20 Newport News, VA Multifamily 04/25/2024 17,757 14,629 S + 3.15% S + 3.88% 04/25/2029 71 % 3

21 Sandy Springs, GA Retail 09/23/2021 16,488 15,287 S + 3.75% S + 4.09% 09/23/2026 72 % 3

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(3) LTV represents the initial loan amount divided by the underwritten in-place value of the underlying collateral at closing.

As of March 31, 2024, we had $628,891 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 21 first mortgage loans.

As of March 31, 2024, we had three loans representing approximately 15% of the amortized cost of our loan portfolio with a loan risk rating of “4” or “higher risk”.

As of June 30, 2024, we had $652,198 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 22 first mortgage loans.

As of June 30, 2024, we had five loans representing approximately 24% of the amortized cost of our loan portfolio with a loan risk rating of “4” or “higher risk”.

All of the loans in our portfolio are structured with risk mitigation mechanisms, such as cash flow sweeps or interest reserves, to help protect us against investment losses.

In addition, we actively engage with our borrowers regarding their execution of the business plans for the underlying collateral, among other things.

As of March 31, 2024 and April 25, 2024, all of our borrowers had paid their debt service obligations owed and due to us.

We did not have any outstanding past due loans or nonaccrual loans as of March 31, 2024.

As of June 30, 2024 and July 25, 2024, all of our borrowers had paid their debt service obligations owed and due to us.

We did not have any outstanding past due loans or nonaccrual loans as of June 30, 2024.

However, our borrowers' businesses, operations and liquidity may be materially adversely impacted by current inflationary pressures, rising or sustained high interest rates, supply chain issues or a prolonged economic slowdown or recession could amplify those negative impacts.

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Financing Activities

The table below is an overview of our Secured Financing Facilities as of March 31, 2024:

The table below is an overview of our Secured Financing Facilities as of June 30, 2024:

Facility Maturity Date Principal Balance Unused Capacity Maximum Facility Size Collateral Principal Balance

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Total $ 418,989 $ 276,011 $ 695,000 $ 588,760

The table below details our Secured Financing Facilities activities during the three months ended March 31, 2024:

The table below details our Secured Financing Facilities activities during the three months ended June 30, 2024:

Carrying Value

Balance at March 31, 2024 $ 421,171

Borrowings 10,197

Repayments (13,800)

Deferred fees (3)

Amortization of deferred fees 374

Balance at June 30, 2024 $ 417,939

The table below details our Secured Financing Facilities activities during the six months ended June 30, 2024:

Carrying Value

Balance at December 31, 2023 $ 454,422

Borrowings 10,197

Repayments (47,024)

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Amortization of deferred fees 699

Balance at March 31, 2024 $ 421,171

As of March 31, 2024, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 7.50% per annum, excluding associated fees and expenses.

As of March 31, 2024 and April 25, 2024, we had a $422,592 aggregate outstanding principal balance under our Secured Financing Facilities.

As of March 31, 2024, we were in compliance with all covenants and other terms under our Secured Financing Facilities.

Balance at June 30, 2024 $ 417,939

As of June 30, 2024, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 7.48% per annum, excluding associated fees and expenses.

As of June 30, 2024 and July 25, 2024, we had a $418,989 and $397,747, respectively, aggregate outstanding principal balance under our Secured Financing Facilities.

As of June 30, 2024, we were in compliance with all covenants and other terms under our Secured Financing Facilities.

For further information regarding our Secured Financing Facilities, see Note 5 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS (amounts in thousands, except per share data)

Three Months Ended March 31, 2024 Compared to Three Months Ended December 31, 2023:

Three Months Ended June 30, 2024 Compared to Three Months Ended March 31, 2024:

Three Months Ended

March 31, 2024 December 31, 2023 Change % Change

June 30, 2024 March 31, 2024 Change % Change

INCOME FROM INVESTMENTS:

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Income before income taxes 4,242 5,236 (994) (19.0 %)

Income tax (expense) benefit

(3) 103 (106) (102.9 %)

Income tax expense (13) (3) (10) 333.3 %

Net income $ 4,229 $ 5,233 $ (1,004) (19.2 %)

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Interest and related income .

The decrease in interest and related income was primarily the result of lower outstanding principal balances under our loan investment portfolio during the three months ended March 31, 2024.

The weighted average aggregate principal balance of our loan investments was approximately $613,000 for the three months ended March 31, 2024 as compared to approximately $646,000 for the three months ended December 31, 2023.

The increase in interest and related income was primarily the result of a prepayment premium received during the three months ended June 30, 2024, partially offset by a lower average outstanding principal balance for our loan investment portfolio.

The weighted average aggregate principal balance of our loan investments was approximately $601,000 for the three months ended June 30, 2024 as compared to approximately $613,000 for the three months ended March 31, 2024.

Purchase discount accretion.

The increase in purchase discount accretion was primarily due to accelerated accretion of a loan prepayment during the three months ended March 31, 2024.

The decrease in purchase discount accretion was primarily due to accelerated accretion related to a loan prepayment during the three months ended March 31, 2024 and lower amounts outstanding on loans acquired in the Merger during the three months ended June 30, 2024 as compared to the three months ended March 31, 2024.

Interest and related expenses.

The decrease in interest and related expenses was primarily the result of lower outstanding principal balances under our Secured Financing Facilities during the three months ended March 31, 2024.

The weighted average principal balance was approximately $439,000 for the three months ended March 31, 2024 as compared to approximately $448,000 for the three months ended December 31, 2023.

The decrease in interest and related expenses was primarily the result of lower outstanding principal balances under our Secured Financing Facilities during the three months ended June 30, 2024.

The weighted average principal balance was approximately $422,000 for the three months ended June 30, 2024 as compared to approximately $439,000 for the three months ended March 31, 2024.

Revenue from real estate owned.

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We recognize management incentive fees payable to Tremont in accordance with our management agreement.

The decrease in management incentive fees was due to lower "core earnings," as defined in our management agreement, for the three months ended March 31, 2024 as compared to the three months ended December 31, 2023.

The increase in management incentive fees was due to higher "core earnings," as defined in our management agreement, for the three months ended June 30, 2024 as compared to the three months ended March 31, 2024.

General and administrative expenses .

The increase in general and administrative expenses was primarily due to increases in share based compensation, partially offset by decreases in professional fees during the three months ended March 31, 2024 as compared to the three months ended December 31, 2023.

The increase in general and administrative expenses was primarily due to an increase in share based compensation resulting from shares awarded to our Trustees during the three months ended June 30, 2024 as compared to the three months ended March 31, 2024.

Reimbursement of shared services expenses.

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The provision for credit losses represents the increase in the allowance for credit losses on our loan portfolio and unfunded commitments.

The increase in the allowance for credit losses during the three months ended March 31, 2024 was primarily attributable to declining values for CRE and unfavorable CRE pricing forecasts used in our CECL model.

The increase in the allowance for credit losses during the three months ended June 30, 2024 was primarily attributable to declining values for CRE and unfavorable CRE pricing forecasts used in our CECL model and increased provisions for certain of our office loans.

Expenses from real estate owned.

Expenses from real estate owned represent expenses from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023.

The increase in expenses from real estate owned was primarily due to increases in depreciation and utility expense.

Income tax (expense) benefit.

Income tax (expense) benefit represents income taxes paid or payable by us or refunded or refundable to us in certain jurisdictions where we are subject to state income taxes.

The decrease in expenses from real estate owned was primarily due to a decrease in depreciation expense.

Income tax expense.

Income tax expense represents income taxes paid or payable by us in certain jurisdictions where we are subject to state income taxes.

The decrease in net income was due to the changes noted above.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023:

Six Months Ended June 30,

2024 2023 Change % Change

INCOME FROM INVESTMENTS:

Interest and related income $ 32,726 $ 31,677 $ 1,049 3.3 %

Purchase discount accretion 1,927 2,232 (305) (13.7 %)

interest and related expenses (17,058) (15,621) (1,437) 9.2 %

Income from loan investments, net 17,595 18,288 (693) (3.8 %)

Revenue from real estate owned 1,147 149 998 669.8 %

Total revenue 18,742 18,437 305 1.7 %

OTHER EXPENSES:

Base management fees 2,162 2,146 16 0.7 %

Incentive fees 420 192 228 118.8 %

General and administrative expenses 2,044 2,077 (33) (1.6 %)

Reimbursement of shared services expenses 1,382 1,271 111 8.7 %

Provision for credit losses 2,012 39 1,973 n/m

Expenses from real estate owned 1,244 218 1,026 470.6 %

Total other expenses 9,264 5,943 3,321 55.9 %

Income before income taxes 9,478 12,494 (3,016) (24.1 %)

Income tax expense (16) (47) 31 (66.0 %)

Net income $ 9,462 $ 12,447 $ (2,985) (24.0 %)

Weighted average common shares outstanding - basic and diluted 14,683 14,594 89 0.6 %

Net income per common share - basic and diluted $ 0.64 $ 0.85 $ (0.21) (24.7 %)

Interest and related income .

The increase in interest and related income was primarily the result of higher benchmark interest rates during the six months ended June 30, 2024, partially offset by lower outstanding principal balances under our loan investment portfolio.

The weighted average benchmark interest rate was 5.38% as of June 30, 2024 as compared to 5.21% as of June 30, 2023.

The weighted average principal balance was approximately $607,000 for the six months ended June 30, 2024 as compared to approximately $641,000 for the six months ended June 30, 2023.

Purchase discount accretion.

The decrease in purchase discount accretion was primarily the result of lower amounts outstanding on loans acquired in the Merger during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Interest and related expenses.

The increase in interest and related expenses was primarily the result of higher benchmark interest rates, partially offset by lower outstanding principal balances under our Secured Financing Facilities during the six months ended June 30, 2024.

The weighted average benchmark interest rate was 5.32% as of June 30, 2024 as compared to 5.15% as of June 30, 2023.

The weighted average principal balance was approximately $431,000 for the six months ended June 30, 2024 as compared to approximately $440,000 for the six months ended June 30, 2023.

Revenue from real estate owned.

Revenue from real estate owned represents revenue from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023.

Incentive fees.

We recognize management incentive fees payable to Tremont in accordance with our management agreement.

The increase in management incentive fees was due to higher "core earnings," as defined in our management agreement, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

General and administrative expenses .

The decrease in general and administrative expenses was primarily due to decreases in professional fees, partially offset by an increase in share based compensation during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Reimbursement of shared services expenses.

Reimbursement of shared services expenses represents reimbursement of the costs for the services that Tremont arranges on our behalf from RMR.

The increase in reimbursement of shared services expenses was primarily the result of higher usage of shared services from RMR.

Provision for credit losses.

The provision for credit losses represents the increase in the allowance for credit losses on our loan portfolio and unfunded commitments.

The increase in the allowance for credit losses during the six months ended June 30, 2024 was primarily attributable to declining values for CRE and unfavorable CRE pricing forecasts used in our CECL model and increased provisions for certain of our office loans.

Expenses from real estate owned.

Income tax expense.

Income tax expense represents income taxes paid or payable by us in certain jurisdictions where we are subject to state income taxes.

The decrease in net income was due to the changes noted above.

Reconciliation of Net Income to Distributable Earnings

The table below demonstrates how we calculate Distributable Earnings and Distributable Earnings per common share, which are non-GAAP measures, and provides a reconciliation of these non-GAAP measures to net income:

Three Months Ended

March 31, 2024 December 31, 2023

Three Months Ended Six Months Ended

June 30, 2024 March 31, 2024 June 30, 2024 June 30, 2023

Net income $ 4,229 $ 5,233 $ 9,462 $ 12,447

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Provision for credit losses

1,315 697 2,012 39

Depreciation and amortization of real estate owned 305 357 662 —

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The table below is a summary of our sources and uses of cash flows for the periods presented:

Three Months Ended March 31,

Six Months Ended June 30,

Cash and cash equivalents at beginning of period $ 87,855 $ 71,067

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The decrease in cash provided by operating activities for the 2024 period compared to the 2023 period was primarily the result of a lower average loan investment balance in the 2024 period, partially offset by higher benchmark interest rates.

The decrease in cash provided by investing activities is primarily due to decreased loan repayments in the 2024 period.

The decrease in cash used in financing activities is primarily due to decreased repayments on our Secured Financing Facilities during the 2024 period.

The decrease in cash provided by investing activities was primarily due to decreased loan repayments in the 2024 period.

The decrease in cash used in financing activities was primarily due to lower proceeds from our Secured Financing Facilities in the 2024 period.

Distributions

During the three months ended March 31, 2024, we declared and paid regular quarterly distributions to our common shareholders totaling $5,184, or $0.35 per common share, using cash on hand.

On April 11, 2024, we declared a regular quarterly distribution of $0.35 per common share, or $5,182, to shareholders of record on April 22, 2024.

We expect to pay this distribution to our common shareholders on or about May 16, 2024 using cash on hand.

During the six months ended June 30, 2024, we declared and paid regular quarterly distributions to our common shareholders totaling $10,366, or $0.35 per common share, using cash on hand.

On July 11, 2024, we declared a regular quarterly distribution of $0.35 per common share, or $5,190, to shareholders of record on July 22, 2024.

We expect to pay this distribution to our common shareholders on or about August 15, 2024 using cash on hand.

For further information regarding distributions, see Note 7 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Contractual Obligations and Commitments

Our contractual obligations and commitments as of March 31, 2024 were as follows:

Our contractual obligations and commitments as of June 30, 2024 were as follows:

Payment Due by Period

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(2) The allocation of outstanding advancements under our Secured Financing Facilities is based on the earlier of the current maturity date of each loan investment with respect to which the individual borrowing relates or the maturity date of the respective Secured Financing Facilities.

(3) Projected interest payments are attributable only to our debt service obligations at existing rates as of March 31, 2024 and are not intended to estimate future interest costs which may result from debt prepayments, additional borrowings, new debt issuances or changes in interest rates.

(3) Projected interest payments are attributable only to our debt service obligations at existing rates as of June 30, 2024 and are not intended to estimate future interest costs which may result from debt prepayments, additional borrowings, new debt issuances or changes in interest rates.

(4) Lease related costs include capital expenditures used to improve tenants' spaces pursuant to lease agreements or leasing related costs, such as brokerage commissions, related to the Yardley, PA property.

Debt Covenants

Our principal debt obligations as of March 31, 2024 were the outstanding balances under our Secured Financing Facilities.

Our principal debt obligations as of June 30, 2024 were the outstanding balances under our Secured Financing Facilities.

The agreements governing our Master Repurchase Facilities, or our Master Repurchase Agreements, provide for acceleration of the date of repurchase of any then purchased assets and the liquidation of the purchased assets by UBS, Citibank or Wells Fargo, as applicable, upon the occurrence and continuation of certain events of default, including a change of control of us, which includes Tremont ceasing to act as our sole manager or to be a wholly owned subsidiary of RMR.

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Our BMO Loan Program Agreement provides for acceleration of all payment obligations due under the BMO Facility Loan Agreements upon the occurrence and continuation of certain events of default, including a change of control of us, which includes Tremont ceasing to act as our sole manager or to be a wholly owned subsidiary of RMR.

As of March 31, 2024, we had a $334,825 aggregate outstanding principal balance under our Master Repurchase Facilities.

As of June 30, 2024, we had a $331,222 aggregate outstanding principal balance under our Master Repurchase Facilities.

Our Master Repurchase Agreements are structured with risk mitigation mechanisms, including a cash flow sweep, which would allow UBS, Citibank and Wells Fargo, as applicable, to control interest payments from our borrowers under our loans that are financed under our respective Master Repurchase Facilities, and the ability to accelerate dates of repurchase and institute margin calls, which may require us to pay down balances associated with one or more of our loans that are financed under our Master Repurchase Facilities.

As of March 31, 2024, we had a $87,767 aggregate outstanding principal balance under the BMO Facility.

As of March 31, 2024, we were in compliance with all covenants and other terms under our Secured Financing Facilities.

As of June 30, 2024, we had a $87,767 aggregate outstanding principal balance under the BMO Facility.

As of June 30, 2024, we were in compliance with all covenants and other terms under our Secured Financing Facilities.

Related Person Transactions

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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 2. Management’s Discussion and Analysis