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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________ 
FORM 10-Q
__________________________________ 
(Mark One)
☒
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2023
OR
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                     to                    
Commission File Number: 001-34452
__________________________________ 
Apollo Commercial Real Estate Finance, Inc.
(Exact name of registrant as specified in its charter)
__________________________________ 
Maryland 27-0467113
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer
Identification No.)
Apollo Commercial Real Estate Finance, Inc.
c/o Apollo Global Management, Inc.
9 West 57th Street, 42nd Floor,
New York, New York 10019
(Address of principal executive offices) (Zip Code)
(212) 515–3200
(Registrant’s telephone number, including area code)
__________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.01 par valueARINew York Stock Exchange


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒  Accelerated filer ☐
Non-accelerated filer ☐  Smaller reporting company ☐
 Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐    No  ☒
As of October 27, 2023, there were 141,358,605 shares, $0.01 par value per share, of the registrant’s common stock issued and outstanding.




Table of Contents
 

See notes to unaudited condensed consolidated financial statements.
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands—except share data)
September 30, 2023December 31, 2022
Assets:
Cash and cash equivalents$307,845 $222,030 
Commercial mortgage loans, net(1)(3)
7,561,254 8,121,109 
Subordinate loans and other lending assets, net(2)(3)
412,777 560,881 
Real estate owned, held for investment, net (net of $9,363 accumulated depreciation in 2023)
495,299 302,688 
Other assets206,578 70,607 
Assets related to real estate owned, held for sale79,188 162,397 
Derivative assets, net94,037 128,640 
Total Assets$9,156,978 $9,568,352 
Liabilities and Stockholders' Equity
Liabilities:
Secured debt arrangements, net$5,135,855 $5,296,825 
Senior secured term loans, net760,381 763,813 
Senior secured notes, net495,437 494,844 
Convertible senior notes, net176,018 229,361 
Accounts payable, accrued expenses and other liabilities(4)
202,901 227,360 
Debt related to real estate owned, held for investment, net161,245 160,294 
Participations sold— 25,130 
Payable to related party9,515 9,728 
Liabilities related to real estate owned, held for sale3,844 6,493 
Total Liabilities6,945,196 7,213,848 
Commitments and Contingencies (see Note 18)
Stockholders’ Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, Series B-1, 6,770,393 shares issued and outstanding ($169,260 liquidation preference) in 2023 and 2022 (see Note 17)
68 68 
Common stock, $0.01 par value, 450,000,000 shares authorized, 141,353,133 and 140,595,995 shares issued and outstanding in 2023 and 2022, respectively
1,414 1,406 
Additional paid-in-capital2,723,170 2,716,907 
Accumulated deficit(512,870)(363,877)
Total Stockholders’ Equity2,211,782 2,354,504 
Total Liabilities and Stockholders’ Equity$9,156,978 $9,568,352 
———————
(1) Includes $7,203,350 and $7,482,658 pledged as collateral under secured debt arrangements in 2023 and 2022, respectively.
(2) Includes $213,139 and $191,608 pledged as collateral under secured debt arrangements in 2023 and 2022, respectively.
(3) Net of $220,305 and $159,724 CECL Allowance in 2023 and 2022, respectively, comprised of $193,000 and $133,500 Specific CECL Allowance and $27,305 and $26,224 General CECL Allowance, respectively.
(4) Includes $3,972 and $4,347 of General CECL Allowance related to unfunded commitments on commercial mortgage loans, subordinate loans and other lending assets, net in 2023 and 2022, respectively.

See notes to unaudited condensed consolidated financial statements.
4
Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations (Unaudited)
(in thousands—except share and per share data)
 
Three months ended September 30,Nine months ended September 30,
 2023202220232022
Net interest income:
Interest income from commercial mortgage loans$180,441 $120,821 $520,712 $304,631 
Interest income from subordinate loans and other lending assets 1,599 13,354 16,416 43,719 
Interest expense(121,817)(72,302)(342,963)(173,949)
Net interest income$60,223 $61,873 $194,165 $174,401 
Revenue from real estate owned operations20,934 14,428 66,273 42,098 
Total net revenue$81,157 $76,301 $260,438 $216,499 
Operating expenses:
General and administrative expenses (includes equity-based compensation of $4,356 and $13,091 in 2023 and $4,518 and $13,734 in 2022, respectively)
$(7,664)$(7,184)$(22,150)$(21,501)
Management fees to related party(9,518)(9,719)(28,425)(28,705)
Operating expenses related to real estate owned(18,950)(13,308)(52,917)(36,094)
Depreciation and amortization on real estate owned(1,020)— (7,208)(704)
Total operating expenses$(37,152)$(30,211)$(110,700)$(87,004)
Other income, net$1,465 $285 $4,537 $353 
Net realized gain (loss) on investments— 43,577 (86,604)43,577 
Realized gain on extinguishment of debt30 — 495 — 
Decrease (increase) in current expected credit loss allowance, net
5,833 55,564 (60,205)37,897 
Foreign currency translation loss(44,165)(92,782)(3,974)(210,138)
Gain (loss) on foreign currency forward contracts (includes unrealized gains (losses) of $28,244 and $(27,709) in 2023 and $108,428 and $221,623 in 2022, respectively)
39,490 129,252 8,239 257,227 
Gain (loss) on interest rate hedging instruments (includes unrealized gains (losses) of $(70) and $(9,211) in 2023 and $1,044 and $10,808 in 2022, respectively)
(70)1,044 (122)10,808 
Net income before taxes$46,588 $183,030 $12,104 $269,219 
Income tax provision(517)— (517)— 
Net income$46,071 $183,030 $11,587 $269,219 
Preferred dividends(3,068)(3,068)(9,204)(9,204)
Net income available to common stockholders$43,003 $179,962 $2,383 $260,015 
Net income per share of common stock:
Basic$0.30 $1.27 $— $— $1.83 
Diluted$0.30 $1.13 $— $1.66 
Basic weighted-average shares of common stock outstanding141,350,428 140,594,987 141,255,730 140,513,957 
Diluted weighted-average shares of common stock outstanding141,350,428 164,350,132 141,255,730 169,252,602 
Dividend declared per share of common stock$0.35 $0.35 $1.05 $1.05 
    



See notes to unaudited condensed consolidated financial statements.
5
Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)
(in thousands—except share and per share data)
 Preferred StockCommon StockAdditional
Paid-In-Capital		Accumulated
Deficit		Total
SharesParSharesPar
Balance at January 1, 20236,770,393 $68 140,595,995 $1,406 $2,716,907 $(363,877)$2,354,504 
Capital increase (decrease) related to Equity Incentive Plan — — 670,044 7 (2,352)— (2,345)
Net income— — — — — 48,916 48,916 
Dividends declared on preferred stock - $0.45 per share
— — — — — (3,068)(3,068)
Dividends declared on common stock - $0.35 per share
— — — — — (50,446)(50,446)
Balance at March 31, 20236,770,393 $68 141,266,039 $1,413 $2,714,555 $(368,475)$2,347,561 
Capital increase related to Equity Incentive Plan— — 77,138 — 4,365 — 4,365 
Net loss— — — — — (83,400)(83,400)
Dividends declared on preferred stock - $0.45 per share
— — — — — (3,068)(3,068)
Dividends declared on common stock - $0.35 per share
— — — — — (50,467)(50,467)
Balance at June 30, 20236,770,393 $68 141,343,177 $1,413 $2,718,920 $(505,410)$2,214,991 
Capital increase related to Equity Incentive Plan— — 9,956 1 4,250 — 4,251 
Net income— — — — — 46,071 46,071 
Dividends declared on preferred stock - $0.45 per share
— — — — — (3,068)(3,068)
Dividends declared on common stock - $0.35 per share
— — — — — (50,463)(50,463)
Balance at September 30, 20236,770,393 $68 141,353,133 $1,414 $2,723,170 $(512,870)$2,211,782 


Preferred StockCommon StockAdditional
Paid-In-Capital		Accumulated
Deficit		Total
SharesParSharesPar
Balance at January 1, 20226,770,393 $68 139,894,060 $1,399 $2,721,042 $(427,883)$2,294,626 
Adoption of ASU 2020-06(1)
— — — — (15,408)11,992 (3,416)
Capital increase (decrease) related to Equity Incentive Plan— — 647,349 6 (2,280)— (2,274)
Net income— — — — — 15,238 15,238 
Dividends declared on preferred stock - $0.45 per share
— — — — — (3,068)(3,068)
Dividends declared on common stock - $0.35 per share
— — — — — (50,088)(50,088)
Balance at March 31, 20226,770,393 $68 140,541,409 $1,405 $2,703,354 $(453,809)$2,251,018 
Capital increase related to Equity Incentive Plan— — 49,434 1 4,518 — 4,519 
Net income— — — — — 70,951 70,951 
Dividends declared on preferred stock - $0.45 per share
— — — — — (3,068)(3,068)
Dividends declared on common stock - $0.35 per share
— — — — — (50,108)(50,108)
Balance at June 30, 20226,770,393 $68 140,590,843 $1,406 $2,707,872 $(436,034)$2,273,312 
Capital increase related to Equity Incentive Plan— — 5,152 — 4,518 — 4,518 
Net income— — — — — 183,030 183,030 
Dividends declared on preferred stock - $0.45 per share
— — — — — (3,068)(3,068)
Dividends declared on common stock - $0.35 per share
— — — — — (50,107)(50,107)
Balance at September 30, 20226,770,393 $68 140,595,995 $1,406 $2,712,390 $(306,179)$2,407,685 

(1) Refer to "Note 10 - Convertible Senior Notes, Net" for detail.
See notes to unaudited condensed consolidated financial statements.
6

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)
(in thousands)
 For the nine months ended September 30,
 20232022
Cash flows provided by operating activities:
     Net income$11,587 $269,219 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
     Amortization of discount/premium and payment-in-kind interest(24,928)(39,828)
     Amortization of deferred financing costs11,609 8,582 
     Equity-based compensation13,091 13,734 
Increase in current expected credit loss allowance, net60,205 (37,897)
Foreign currency loss21,027 199,587 
Unrealized loss on foreign currency contracts27,709 (221,623)
Unrealized loss (gain) on interest rate hedging instruments9,211 (10,808)
Depreciation and amortization on real estate owned7,208 704 
Realized gain on extinguishment of debt(495)— 
     Net realized loss (gain) on investment86,604 (43,577)
     Changes in operating assets and liabilities:
          Proceeds received from payment-in-kind interest15,407 83,731 
          Other assets(2,092)(24,149)
Payment for interest rate cap(2,317)— 
          Accounts payable, accrued expenses and other liabilities9,404 27,454 
          Payable to related party(213)(11)
Net cash provided by operating activities$243,017 $225,118 
Cash flows used in investing activities:
    New funding of commercial mortgage loans(181,017)(2,753,609)
    Add-on funding of commercial mortgage loans(264,769)(407,063)
    Increase (decrease) in collateral related to derivative contracts, net(39,360)255,110 
    Add-on funding of subordinate loans and other lending assets(77,027)(85,964)
    Capital expenditures on real estate assets(47,187)(21,160)
    Proceeds received from the repayment and sale of commercial mortgage loans749,716 1,316,431 
    Proceeds received from the repayment of subordinate loans and other lending assets75,170 129,760 
    Origination and exit fees received on commercial mortgage loans, and subordinate loans and other lending assets, net9,191 42,779 
    Cash received from hotel title assumption569 — 
Net cash provided by (used in) investing activities$225,286 $(1,523,716)
Cash flows provided by financing activities:
     Proceeds from secured debt arrangements356,333 2,770,405 
     Repayments of secured debt arrangements(508,245)(1,118,630)
     Repayments of senior secured term loan principal(6,000)(6,000)
     Repayments and repurchases of convertible notes(53,442)(345,000)
     Proceeds related to financing on real estate owned — 164,835 
     Payment of deferred financing costs(7,189)(15,333)
     Payment of withholding tax on RSU delivery(6,820)(6,972)
     Dividends on common stock(151,556)(150,467)
     Dividends on preferred stock(9,204)(9,204)
Net cash provided by (used in) financing activities$(386,123)$1,283,634 

See notes to unaudited condensed consolidated financial statements.
7

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Continued)
(in thousands)

 For the nine months ended September 30,
 20232022
Net increase (decrease) in cash and cash equivalents, including cash classified within assets related to real estate owned, held for sale$82,180 $(14,964)
Decrease (increase) in cash classified within assets related to real estate owned, held for sale3,376 (5,858)
Net increase (decrease) in cash and cash equivalents$85,556 $(20,822)
Cash and cash equivalents, beginning of period222,030 343,106 
Effects of foreign currency translation on cash and cash equivalents259 (3,020)
Cash and cash equivalents, end of period$307,845 $319,264 
Supplemental disclosure of cash flow information:
    Interest paid$316,819 $151,348 
    Income tax paid795 — 
Supplemental disclosure of non-cash financing activities:
    Dividend declared, not yet paid$53,531 $53,175 
    Change in participation sold(25,130)(4,368)
    Change in loan proceeds held by servicer129,670 5,871 
Assumption of real estate75,000 270,035 
Assumption of other assets related to real estate owned2,827 — 
Assumption of accounts payable, accrued expenses and other liabilities related to real estate owned(3,396)— 
Transfer of assets to assets related to real estate owned, held for sale79,021 (156,201)
Transfer of assets related to real estate owned, held for sale to assets related to real estate owned held for investment, net151,676 — 
Transfer of assets related to real estate owned, held for sale to other assets4,357 — 
Transfer of liabilities to liabilities related to real estate owned, held for sale1,438 6,116 
Transfer of liabilities related to real estate owned, held for sale to accounts payable, accrued expenses and other liabilities7,163 — 
See notes to unaudited condensed consolidated financial statements.
8
Apollo Commercial Real Estate Finance, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 – Organization
Apollo Commercial Real Estate Finance, Inc. (together with its consolidated subsidiaries, is referred to throughout this report as the "Company," "ARI," "we," "us" and "our") is a corporation that has elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes and primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, and other commercial real estate related debt investments. These asset classes are referred to as our target assets.
We were formed in Maryland on June 29, 2009, commenced operations on September 29, 2009 and are externally managed and advised by ACREFI Management, LLC (the "Manager"), an indirect subsidiary of Apollo Global Management, Inc. (together with its subsidiaries, "Apollo").
We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2009. To maintain our tax qualification as a REIT, we are required to distribute at least 90% of our taxable income, excluding net capital gains, to stockholders and meet certain other asset, income, and ownership tests.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements include our accounts and those of our consolidated subsidiaries. All intercompany amounts have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our most significant estimates include current expected credit loss ("CECL") allowances. Actual results may differ from estimates.
These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022 ("Annual Report"), as filed with the Securities and Exchange Commission (the "SEC"). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows have been included. Our results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year or any other future period.
We currently operate in one reporting segment.
Risks and Uncertainties
Although more normalized activities have resumed and there has been improved global economic activity due to global and domestic vaccination efforts, there are still various uncertainties around the impact coronavirus ("COVID-19") and its variants had and will continue to have on our business and the economy as a whole, including longer-term macroeconomic effects on supply chains, inflation and labor shortages. For example, in response to recent inflationary pressure, the U.S. Federal Reserve and other global central banks have raised interest rates in 2022 and 2023. We believe the estimates used in preparing our financial statements and related footnotes are reasonable and supportable based on the best information available to us as of September 30, 2023.
Recent Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04 "Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"). ASU 2020-04 provides optional expedients and exceptions for applying GAAP to debt instruments, derivatives, and other contracts that reference London Interbank Offered Rate ("LIBOR") or other reference rates expected to be discontinued as a result of reference rate reform. In December 2022, the FASB issued ASU 2022-06 "Reference Rate Reform (Topic 848): Deferral of Sunset Date of Topic 848 ("ASU 2022-06") which deferred the sunset date to December 31, 2024. As prescribed by the optional expedients within ASU 2020-04, we have accounted for applicable modified contracts that incorporate alternative benchmarks as if they are not substantially different. We will continue to apply such expedients or exceptions related to modifications for certain of our commercial mortgage loans and debt agreements as a result of reference rate reform. The application of ASU 2020-04 has not had a material impact, nor is it expected to have a material impact, on our consolidated financial statements.
9
Note 3 – Fair Value Disclosure
GAAP establishes a hierarchy of valuation techniques based on the observability of the inputs utilized in measuring financial instruments at fair value. Market-based or observable inputs are the preferred source of values, followed by valuation models using management's assumptions in the absence of market-based or observable inputs. The three levels of the hierarchy as noted in Accounting Standards Codification ("ASC") 820, "Fair Value Measurements and Disclosures" are described below:
Level I — Quoted prices in active markets for identical assets or liabilities.
Level II — Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.
Level III — Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used.
While we anticipate that our valuation methods are appropriate and consistent with valuation methods used by other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. We use inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced.
The fair values of foreign exchange ("Fx") forwards are determined by comparing the contracted forward exchange rate to the current market exchange rate. The current market exchange rates are determined by using market spot rates, forward rates and interest rate curves for the underlying countries. Our Fx forwards are classified as Level II in the fair value hierarchy.
The fair value of our interest rate cap is determined by using the market standard methodology of discounting the future expected cash receipts that occur when variable interest rates rise above the strike rate of the interest rate cap. The variable interest rates used in the calculation of projected receipts on the interest rate cap are based on a third-party expert's expectation of future interest rates derived from observable market interest rate curves and volatility. Our interest rate caps are classified as Level II in the fair value hierarchy and manage our exposure to variable cash flows on certain of our borrowings. As of December 31, 2022, we held one interest rate cap related to our term loan. As of September 30, 2023, we held one interest rate cap related to our construction financing which was purchased on September 26, 2023. Refer to Note 5 – Real Estate Owned and Note 11 – Derivatives for further detail.
The following table summarizes the levels in the fair value hierarchy into which our assets and liabilities with recurring fair value measurements were categorized as of September 30, 2023 and December 31, 2022 ($ in thousands): 
 Fair Value as of September 30, 2023Fair Value as of December 31, 2022
 Level ILevel IILevel IIITotalLevel ILevel IILevel IIITotal
Recurring fair value measurements:
Foreign currency forward, net$— $91,790 $— $91,790 $— $119,499 $— $119,499 
Interest rate cap asset— 2,247 — 2,247 — 9,141 — 9,141 
Total financial instruments$— $94,037 $— $94,037 $— $128,640 $— $128,640 
Non-recurring Fair Value Measurements
We are required to record real estate owned, a nonfinancial asset, at fair value on a non-recurring basis in accordance with ASC 820. Under ASC 820, we may utilize the income, market or cost approach (or combination thereof) to determine the fair value of real estate owned. We deem the inputs used in these approaches to be significant unobservable inputs. Therefore, we classify the fair value of real estate owned within Level III of the fair value hierarchy.

On March 31, 2023, we acquired legal title of a hotel property in Atlanta, GA ("Atlanta Hotel") through a deed-in-lieu of foreclosure. At the time of acquisition, we determined the fair value of the net real estate assets to be $75.0 million, using a combination of market and income approach. We utilized a discount rate and capitalization rate of 10.5% and 9.5%, respectively. During the three months ended June 30, 2023, the Atlanta Hotel's assets and liabilities were reclassified to held for sale and the fair value of the net real estate assets, less costs to sell, was in excess of our cost basis. We carry the Atlanta Hotel's assets and liabilities at the lower of our cost basis and the fair value less costs to sell on our condensed consolidated balance sheet. No impairments had been recorded as of September 30, 2023.

On August 3, 2022, we acquired legal title of a multifamily development property located in downtown Brooklyn, NY
10
("Brooklyn Development") through a deed-in-lieu of foreclosure. We determined the fair value of the real estate assumed to be $270.1 million, based on the market value of the land at the time of acquisition. No impairments had been recorded as of September 30, 2023 or December 31, 2022.
On May 24, 2021, we acquired legal title to a full-service luxury hotel in Washington D.C. ("D.C. Hotel") through a deed-in-lieu of foreclosure. We assumed the D.C. Hotel's assets and liabilities, including a $110.0 million mortgage loan. We repaid the mortgage loan at par and hold the property unlevered. At the time of acquisition, we determined the fair value of the real estate assets to be $154.3 million. No impairments had been recorded as of September 30, 2023 or December 31, 2022.
Refer to "Note 5 – Real Estate Owned" for additional discussions.
Note 4 – Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net
Our loan portfolio was comprised of the following at September 30, 2023 and December 31, 2022 ($ in thousands):
Loan TypeSeptember 30, 2023December 31, 2022
Commercial mortgage loans, net(1)
$7,561,254 $8,121,109 
Subordinate loans and other lending assets, net412,777 560,881 
Carrying value, net$7,974,031 $8,681,990 
  ———————
(1)Includes $102.6 million and $138.3 million in 2023 and 2022, respectively, of contiguous financing structured as subordinate loans.

Our loan portfolio consisted of 99% and 98% floating rate loans, based on amortized cost, as of September 30, 2023 and December 31, 2022, respectively.
Activity relating to our loan portfolio for the nine months ended September 30, 2023 was as follows ($ in thousands):
Principal
Balance
Deferred Fees/Other Items (1)
Specific CECL AllowanceCarrying Value, Net
December 31, 2022$8,892,767 $(51,053)$(133,500)$8,708,214 
New funding of loans181,017 — — 181,017 
Add-on loan fundings(2)
341,796 — — 341,796 
Loan repayments and sales(1,020,590)— — (1,020,590)
Gain (loss) on foreign currency translation(4,999)83 — (4,916)
Increase in Specific CECL Allowance, net— — (59,500)(59,500)
Net realized loss on investment(87,367)763 — (86,604)
Transfer to real estate owned(75,000)— — (75,000)
Deferred fees and other items— (9,191)— (9,191)
Payment-in-kind interest and amortization of fees— 26,110 — 26,110 
September 30, 2023$8,227,624 $(33,288)$(193,000)$8,001,336 
General CECL Allowance(3)
(27,305)
Carrying value, net$7,974,031 
———————
(1)Other items primarily consist of purchase discounts or premiums, cost recovery interest, exit fees, deferred origination expenses, and the activity of unconsolidated joint ventures.
(2)Represents fundings committed prior to 2023.
(3)$4.0 million of the General CECL Allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheet.

The following table details overall statistics for our loan portfolio at the dates indicated ($ in thousands):
11
September 30, 2023December 31, 2022
Number of loans 49 61 
Principal balance$8,227,624 $8,892,767 
Carrying value, net$7,974,031 $8,681,990 
Unfunded loan commitments(1)
$693,125 $1,041,654 
Weighted-average cash coupon(2)
8.3 %7.2 %
Weighted-average remaining fully-extended term(3)
2.4 years2.8 years
Weighted-average expected term(4)
1.8 years1.7 years
———————
(1)Unfunded loan commitments are funded to finance construction costs, tenant improvements, leasing commissions, or carrying costs. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.
(2)For floating rate loans, based on applicable benchmark rates as of the specified dates. For loans placed on non-accrual the interest rate used in calculating weighted-average cash coupon is 0%.
(3)Assumes all extension options are exercised.
(4)Expected term represents our estimated timing of repayments as of the specified dates. Excludes risk-rated 5 loans.

Property Type
The table below details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):
September 30, 2023December 31, 2022
Property TypeCarrying
Value
% of
Portfolio(1)
Carrying
Value
% of
Portfolio(1)
Hotel$1,903,246 23.8 %$2,117,079 24.3 %
Office1,494,101 18.7 1,671,006 19.2 
Retail1,375,338 17.2 1,364,752 15.7 
Residential1,245,131 15.5 1,537,541 17.7 
Mixed Use637,492 8.0 559,809 6.4 
Healthcare520,208 6.5 575,144 6.6 
Industrial282,758 3.5 296,860 3.4 
Other(2)
543,062 6.8 586,023 6.7 
Total$8,001,336 100.0 %$8,708,214 100.0 %
General CECL Allowance(3)
(27,305)(26,224)
Carrying value, net$7,974,031 $8,681,990 
———————
(1)Percentage of portfolio calculations are made prior to consideration of General CECL Allowance.
(2)Other property types include parking garages (2.7%), caravan parks (2.5%) and urban predevelopment (1.6%) in 2023, and parking garages (3.1%), caravan parks (2.3%) and urban predevelopment (1.3%) in 2022.
(3)$4.0 million and $4.3 million of the General CECL Allowance for 2023 and 2022, respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheets.


Geography
The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):
September 30, 2023December 31, 2022
Geographic LocationCarrying
Value
% of
Portfolio(1)
Carrying
Value
% of
Portfolio(1)
United Kingdom$2,482,587 31.0 %$2,470,532 28.4 %
New York City1,723,669 21.5 2,049,493 23.5 
Other Europe(2)
1,396,418 17.5 1,542,462 17.7 
12
West577,416 7.2 584,247 6.7 
Southeast533,852 6.7 642,542 7.4 
Midwest533,692 6.7 592,756 6.8 
Other(3)
753,702 9.4 826,182 9.5 
Total$8,001,336 100.0 %$8,708,214 100.0 %
General CECL Allowance(4)
(27,305)(26,224)
Carrying value, net$7,974,031 $8,681,990 
———————
(1)Percentage of portfolio calculations are made prior to consideration of General CECL Allowance.
(2)Other Europe includes Germany (5.2%), Italy (4.7%), Spain (4.2%), Sweden (2.9%) and Ireland (0.5%) in 2023 and Italy (5.4%), Germany (4.9%), Spain (3.8%), Sweden (2.8%) and Ireland (0.7%) in 2022.
(3)Other includes Northeast (5.5%), Southwest (1.8%), Mid-Atlantic (1.2%) and Other (0.9%) in 2023 and Northeast (5.5%), Southwest (2.3%), Mid-Atlantic (1.4%) and Other (0.3%) in 2022.
(4)$4.0 million and $4.3 million of the General CECL Allowance for 2023 and 2022, respectively, is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheets.

Risk Rating
We assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan to value ("LTV") ratio, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. We apply these various factors on a case-by-case basis depending on the facts and circumstances for each loan, and the different factors may be given different weightings in different situations. This review is performed quarterly. Based on a 5-point scale, our loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:
    1.    Very low risk
    2.    Low risk
    3. Moderate/average risk
    4. High risk/potential for loss: a loan that has a risk of realizing a principal loss
    5. Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss, or an impairment has been recorded

The following tables present the carrying value of our loan portfolio by year of origination and internal risk rating and gross write-offs by year of origination as of September 30, 2023 and December 31, 2022, respectively ($ in thousands):

September 30, 2023
Amortized Cost by Year Originated
Risk RatingNumber of LoansTotal% of Portfolio20232022202120202019Prior
1—$— — %$— $— $— $— $— $— 
23192,291 2.4 %— — — — 126,658 65,633 
3427,452,050 93.1 %169,707 2,610,749 2,271,332 372,957 1,414,255 613,051 
4288,312 1.1 %— — — — — 88,312 
52268,683 3.4 %— — — 169,881 — 98,802 
Total49$8,001,336 100.0 %$169,707 $2,610,749 $2,271,332 $542,838 $1,540,913 $865,798 
General CECL Allowance(1)
(27,305)
Total carrying value, net$7,974,031 
Weighted Average Risk Rating3.1
Gross write-offs$81,890 $— $— $— $— $— $81,890 


13

December 31, 2022
Amortized Cost by Year Originated
Risk RatingNumber of LoansTotal% of Portfolio20222021202020192017Prior
1—$