v3.26.3
Commercial Mortgage Loans, Held for Investment
 9 Months Ended
Sep. 30, 2026
Receivables [Abstract]  
Commercial Mortgage Loans, Held for Investment
Note 4 - Commercial Mortgage Loans, Held for Investment
Commercial Mortgage Loans, Held for Investment
The following table presents a summary of the Company's commercial mortgage loans, held for investment, carrying values by class (dollars in thousands):
September 30, 2026December 31, 2025
Senior loans$3,987,687 $4,376,873 
Mezzanine loans51,835 44,563 
Total gross carrying value of loans4,039,522 4,421,436 
General allowance for credit losses35,648 34,196 
Specific allowance for credit losses36,284 4,106 
Less: Allowance for credit losses71,932 38,302 
Total commercial mortgage loans, held for investment, net$3,967,590 $4,383,134 
For the nine months ended September 30, 2026 and year ended December 31, 2025, the activity in the Company's commercial mortgage loans, held for investment carrying values, was as follows (dollars in thousands):
Nine Months Ended September 30, 2026Year Ended
December 31, 2025
Amortized cost, beginning of period$4,421,436 $4,986,750 
Acquisitions and originations1,029,502 1,156,575 
Principal repayments(1,182,725)(1,420,373)
Dispositions— (35,116)
Principal charge-off(22,851)(32,860)
Deferred fees and other items(1)
(4,063)(10,304)
Amortization/accretion of fees and other items(1)
7,243 9,557 
Transfer to real estate owned(2)
(206,666)(197,396)
Transfer to held for sale— (33,909)
Cost recovery(2,354)(1,488)
Amortized cost, end of period$4,039,522 $4,421,436 
Allowance for credit losses, beginning of period$(38,302)$(78,083)
General (provision)/benefit for credit losses(1,452)12,669 
Specific (provision)/benefit for credit losses(55,029)(5,748)
Charge offs from specific allowance for credit losses22,851 32,860 
Allowance for credit losses, end of period$(71,932)$(38,302)
Total commercial mortgage loans, held for investment, net $3,967,590 $4,383,134 
________________________
(1) Other items primarily consist of purchase discounts or premiums and deferred origination expenses.
(2) For additional details on properties obtained through foreclosure or deed-in-lieu of foreclosure, see Note 8 - Real Estate Owned.
As of September 30, 2026 and December 31, 2025, the Company's total commercial mortgage loan, held for investment, portfolio was comprised of 175 and 169 loans, respectively.
Loan Portfolio by Collateral Type and Geographic Region
The following tables present the composition by loan collateral type and region of the Company's commercial mortgage loans, held for investment portfolio (dollars in thousands):
September 30, 2026December 31, 2025
Loan Collateral Type Par Value Percentage Par ValuePercentage
Multifamily$3,354,417 82.8 %$3,434,672 77.5 %
Hospitality361,375 8.9 %515,144 11.6 %
Industrial181,495 4.5 %309,522 7.0 %
Office35,867 0.9 %58,259 1.3 %
Retail— — %1,986 — %
Other118,782 2.9 %115,928 2.6 %
Total $4,051,936 100.0 %$4,435,511 100.0 %
September 30, 2026December 31, 2025
Loan RegionPar Value Percentage Par Value Percentage
Southeast$1,754,872 43.3 %$1,832,831 41.4 %
Southwest1,120,991 27.6 %1,431,471 32.3 %
Mideast364,039 9.0 %348,750 7.9 %
Far West158,184 3.9 %239,874 5.4 %
New England137,211 3.4 %125,982 2.8 %
Great Lakes105,315 2.6 %108,095 2.4 %
Rocky Mountain113,030 2.8 %76,180 1.7 %
Various(1)
298,294 7.4 %272,328 6.1 %
Total$4,051,936 100.0 %$4,435,511 100.0 %
________________________
(1) Represents loans secured by a portfolio of properties located in various parts of the United States.
Allowance for Credit Losses
The following table presents the quarterly changes in the Company's allowance for credit losses for the nine months ended September 30, 2026 (dollars in thousands):
General Allowance for Credit Losses
Specific Allowance for Credit LossesFundedUnfundedTotalTotal Allowance for Credit Losses
December 31, 2025$4,106 $34,196 $296 $34,492 $38,598 
Changes:
Provision/(Benefit)14,846 (1,358)38 (1,320)13,526 
Charge offs(2,617)— — — (2,617)
March 31, 2026$16,335 $32,838 $334 $33,172 $49,507 
Changes:
Provision/(Benefit)1,507 3,777 (109)3,668 5,175 
Write offs— — — — — 
June 30, 2026$17,842 $36,615 $225 $36,840 $54,682 
Changes:
Provision/(Benefit)38,676 (967)(19)(986)37,690 
Charge offs(20,234)— — — (20,234)
September 30, 2026$36,284 $35,648 $206 $35,854 $72,138 
Specific Allowance for Credit Losses
The Company has elected to apply a practical expedient for collateral dependent assets in which the allowance for credit losses is calculated as the difference between the estimated fair value of the underlying collateral, less estimated cost to sell, and the amortized cost basis of the loan. As such, these loans receivable are measured at fair value on a nonrecurring basis using significant unobservable inputs and are classified as Level III assets in the fair value hierarchy. The fair value of the underlying collateral is determined using the market approach, the income approach, or a combination thereof. The significant unobservable input used for the income approach is the exit capitalization rate assumptions, which ranged from 6.00% to 9.25%. The significant unobservable input used for the market approach is the estimated fair value less cost to sell based on a negotiated price from an anticipated buyer.
In December 2021, the Company originated a first mortgage loan with a commitment of $23.0 million secured by a multifamily property in Pennsylvania. The loan was identified by management as non-performing and placed on non-accrual status, with an amortized cost of $21.7 million as of December 31, 2025. The Company recorded a specific allowance for credit losses of $2.0 million on this loan as of December 31, 2025, and an additional specific allowance for credit losses of $0.6 million in the first quarter of 2026. The loan was paid off in March 2026 at a discount, and the Company charged off the specific allowance for credit losses at the time of the payoff.
In November 2021, the Company originated a first mortgage loan with a commitment of $39.0 million secured by a multifamily property in Arizona. The loan was identified by management as non-performing and placed on cost recovery status,
with an amortized cost of $36.6 million, as of September 30, 2026. The Company recorded a specific allowance for credit losses of $10.0 million on this loan as of September 30, 2026.
In June 2022, the Company originated a first mortgage loan with a commitment of $46.0 million secured by a multifamily property in North Carolina. The loan was identified by management as non-performing and placed on cost recovery status, with
an amortized cost of $44.0 million, as of September 30, 2026. The Company recorded a specific allowance for credit losses of
$11.5 million on this loan as of September 30, 2026.
In December 2021, the Company originated a first mortgage loan with a commitment of $82.9 million secured by two multifamily properties in North Carolina. The loan was identified by management as non-performing and placed on cost recovery status, with an amortized cost of $79.8 million, as of June 30, 2026. The Company recorded a specific allowance for credit losses of $13.2 million on this loan as of June 30, 2026. In September 2026, the Company foreclosed on these properties, recording a $2.7 million benefit to the specific allowance and charging-off the balance of the specific allowance for credit losses at the time of the foreclosure.
In October 2022, the Company originated a first mortgage loan with a commitment of $34.3 million secured by a multifamily property in Texas. The loan was identified by management as non-performing and placed on cost recovery status, with an amortized cost of $29.8 million, as of September 30, 2026. The Company recorded a specific allowance for credit losses of $2.7 million on this loan as of September 30, 2026.
In March 2021, the Company originated a first mortgage loan with a commitment of $78.6 million secured by a multifamily property in Texas. The loan was identified by management as non-performing and placed on non-accrual status, with an amortized cost of $72.0 million, as of June 30, 2026. In August 2026, the Company foreclosed on this property, recording a $5.5 million provision to the specific allowance and charging-off the balance of the specific allowance for credit losses at the time of the foreclosure.
In June 2025, the Company originated a first mortgage loan with a commitment of $19.3 million secured by a multifamily property in Texas. The loan was identified by management as non-performing and placed on non-accrual status, with an amortized cost of $18.6 million, as of June 30, 2026. In July 2026, the Company foreclosed on this property, recording a $4.2 million provision to the specific allowance and charging-off the balance of the specific allowance for credit losses at the time of the foreclosure.
In September 2021, the Company originated a first mortgage loan with a commitment of $11.3 million secured by a multifamily property in Georgia. The loan was identified by management as non-performing and placed on non-accrual status, with an amortized cost of $8.9 million, as of September 30, 2026. The Company recorded a specific allowance for credit losses of $0.9 million on this loan as of September 30, 2026.
In March 2022, the Company originated a first mortgage loan with a commitment of $35.7 million secured by a multifamily property in Arizona. The loan was identified by management as non-performing and placed on cost recovery status, with an amortized cost of $34.7 million, as of September 30, 2026. The Company recorded a specific allowance for credit losses of $7.6 million on this loan as of September 30, 2026.
In May 2022, the Company originated a first mortgage loan with a commitment of $20.4 million secured by a multifamily property in Texas. The loan was identified by management as non-performing and placed on cost recovery status, with an amortized cost of $16.6 million, as of September 30, 2026. The Company recorded a specific allowance for credit losses of $3.6 million on this loan as of September 30, 2026.
General Allowance for Credit Losses
The Company recorded a total decrease and increase, respectively, in its general allowance for credit losses during the three and nine months ended September 30, 2026 of $1.0 million and $1.4 million, respectively. The primary respective drivers for the change in reserve balance for both periods is attributable to worsening economic scenario projections used in our CECL model compared to the preceding period for the nine month period, with minor improvements quarter over quarter for the three month period. Changes in the provision for credit losses for the Company’s financial instruments are recorded in (Provision)/benefit for credit losses in the consolidated statements of operations with a corresponding offset to the financial instrument’s amortized cost recorded in the consolidated balance sheet, or as a component of Accounts payable and accrued expenses for unfunded loan commitments.
Past Due Status
The following table presents a summary of the loan's amortized cost basis as of September 30, 2026 (dollars in thousands):
CurrentLess than 90 days past due
90 or more days past due(1)
Total
As of September 30, 2026$3,804,278 $81,189 $154,055 $4,039,522 
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(1) Comprised of five mortgage loans, all of which were collateralized by multifamily properties and are designated as non-performing.
Non-performing Status
The following table presents the amortized cost basis of our non-performing loans as of September 30, 2026 and December 31, 2025 (dollars in thousands):
September 30, 2026December 31, 2025
Non-performing loan amortized cost at beginning of year, January 1$213,980 $133,230 
Addition of non-performing loan amortized cost308,231 346,323 
Less: Removal of non-performing loan amortized cost340,533 265,573 
Non-performing loan amortized cost end of period(1)
$181,678 $213,980 
________________________
(1) As of each of September 30, 2026 and December 31, 2025, the Company had seven loans designated as non-performing. As of September 30, 2026, five non-performing loans were placed on cost recovery status, all of which were collateralized by multifamily properties, with a combined specific allowance for credit losses of $35.4 million. The other two were collateralized by multifamily properties and placed on non-accrual status, one of which had a specific allowance for credit losses of $0.9 million. As of December 31, 2025, four non-performing loans were placed on cost recovery status, one of which was collateralized by an office property and the other three by multifamily properties with a combined specific allowance for credit losses of $4.1 million. The other three were collateralized by multifamily properties and placed on non-accrual status with no specific allowance for credit losses.
Loan Credit Characteristics, Quality and Vintage
As part of the Company's process for monitoring the credit quality of its commercial mortgage loans, excluding those held for sale, measured at fair value, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its loans. The loans are scored on a scale of 1 to 5 as follows:
Investment Rating
Summary Description
1
Very Low Risk - Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable.
2
Low Risk - Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.
3
Average Risk - Performing investments requiring closer monitoring. Trends and risk factors show some deterioration.
4
High Risk/Delinquent/Defaulted/Potential For Loss - Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative.
5
Impaired/Defaulted/Loss Likely - Underperforming investment with expected loss of interest and some principal.
All commercial mortgage loans, excluding loans classified as Commercial mortgage loans, held for sale, measured at fair value within the consolidated balance sheets, are assigned an initial risk rating of 2. As of September 30, 2026 and December 31, 2025, the weighted average risk rating of loans was 2.4 and 2.4, respectively.
The following tables present the par value and amortized cost of our commercial mortgage loans, held for investment as of September 30, 2026 and December 31, 2025, by the Company’s internal risk rating and year of origination (dollars in thousands):
September 30, 2026
Amortized Cost by Year of Origination
Risk RatingNumber of LoansTotal Par Value20262025202420232022PriorTotal Amortized Cost% of Portfolio
1—$— $— $— $— $— $— $— $— — %
21402,966,596 714,624 1,032,100 764,457 215,954 132,053 98,737 2,957,925 73.2 %
322751,693 — 75,482 330,658 97,185 214,246 33,856 751,427 18.6 %
46140,601 — 23,077 51,880 — — 65,721 140,678 3.5 %
57193,046 — — — — 125,086 64,406 189,492 4.7 %
Total175$4,051,936 $714,624 $1,130,659 $1,146,995 $313,139 $471,385 $262,720 $4,039,522 100.0 %
Allowance for credit losses(71,932)
Total carrying value, net$3,967,590 
December 31, 2025
Amortized Cost by Year of Origination
Risk RatingNumber of LoansTotal Par Value20252024202320222021PriorTotal Amortized Cost% of Portfolio
1—$— $— $— $— $— $— $— $— — %
21373,213,933982,678 1,175,376 322,490 387,548 313,728 20,559 3,202,37972.4 %
322848,719— 305,158 129,792 220,090 178,500 14,756 848,29619.2 %
46246,682— — — 138,889 107,790 — 246,6795.6 %
54126,177 — — — 44,483 58,504 21,095 124,082 2.8 %
Total169$4,435,511 $982,678 $1,480,534 $452,282 $791,010 $658,522 $56,410 $4,421,436 100.0 %
Allowance for credit losses(38,302)
Total carrying value, net$4,383,134