Published: 2022-04-25 00:00:00 ET

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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.

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 losses. Actual results could differ from those 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, 2021 ("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 months ended March 31, 2022 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

During the first quarter of 2020, there was a global outbreak of a novel coronavirus ("COVID-19"), which was declared by the World Health Organization as a pandemic. The ongoing COVID-19 pandemic in many countries continues to adversely impact global economic activity and has contributed to significant volatility in financial markets. In response to COVID-19, the United States and numerous other countries and organizations have implemented a variety of actions to mobilize efforts to mitigate the ongoing and expected impact. Although more normalized activities have resumed and there has been improvement due to global and domestic vaccination efforts, we are not in a position to estimate the ultimate impact COVID-19 and its variants will have on our business and the economy as a whole. Due to various uncertainties, including the ultimate geographic spread of the virus, the rise of new variants that may occur, the severity of such new variants, the duration of the pandemic, and actions that may be taken by governmental authorities, further business risks could arise. 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 March 31, 2022. The uncertainty surrounding COVID-19 and its variants may materially impact the accuracy of the estimates and assumptions used in the financial statements and related footnotes and, as a result, actual results may vary significantly from estimates.

Recent Accounting Pronouncements

In March 2020, the 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. This guidance is optional

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and may be elected through December 31, 2022 using a prospective application on all eligible contract modifications. We have loan agreements, debt agreements, and an interest rate cap that incorporate LIBOR as a referenced interest rate. It is difficult to predict what effect, if any, the phase-out of LIBOR and the use of alternative benchmarks may have on our business or on the overall financial markets. During the fourth quarter of 2021, we adopted optional expedients per ASU 2020-04 for certain of our commercial mortgage loans and debt agreements denominated in British Pound Sterling ("GBP") and Euro ("EUR") with contracts that reference GBP LIBOR and EUR LIBOR, respectively. 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 evaluate the possible adoption of any such expedients or exceptions for certain of our commercial mortgage loans and debt agreements denominated in US dollars.

In March 2022, the FASB issued ASU 2022-02 "Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures" ("ASU 2022-02"). The intention of ASU 2022-02 is to simplify the guidance surrounding loan modifications and restructurings and to eliminate the accounting guidance related to TDR. The new guidance deviates from TDR guidance as disclosures are now based on whether a modification or restructuring with a borrower experiencing financial difficulty results in principal forgiveness, an interest rate reduction, a significant payment delay or term extension as opposed to simply a concession. The new guidance requires disclosure by class of financing receivables, of the types of modifications, the financial effects of those modifications and the performance of those modified receivables in the last twelve months. As it relates to ASC 326-20 we are now allowed to use any acceptable method to determine credit losses as a result of modification or restructuring with a borrower experiencing financial difficulty. ASU 2022-02 also requires disclosure of gross write-offs recorded in the current period, on a year-to-date basis, by year of origination in the vintage disclosures. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022. Entities are able to early adopt these amendments and have the ability to early adopt the TDR enhancements separately from the vintage disclosures. We have not yet adopted this ASU and will continue to evaluate the effects of adoption.

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 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 would occur if 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 volatilities. Our interest rate cap is classified as Level II in the fair value hierarchy.

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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 March 31, 2022 and December 31, 2021 ($ in thousands): 

			Fair Value as of March 31, 2022																								Fair Value as of December 31, 2021
			Level I						Level II						Level III						Total						Level I						Level II						Level III						Total
Recurring fair value measurements:
Foreign currency forward, net			$	—					$	33,482					$	—					$	33,482					$	—					$	15,340					$	—					$	15,340
Interest rate cap asset			—						7,769						—						7,769						—						1,448						—						1,448
Total financial instruments			$	—					$	41,251					$	—					$	41,251					$	—					$	16,788					$	—					$	16,788

Our loan portfolio was comprised of the following at March 31, 2022 and December 31, 2021 ($ in thousands):

Loan Type						March 31, 2022						December 31, 2021
Commercial mortgage loans, net(1)						$	7,586,554					$	7,012,312
Subordinate loans and other lending assets, net						763,488						844,948
Carrying value, net						$	8,350,042					$	7,857,260

  ———————

(1)Includes $85.5 million and $97.8 million in 2022 and 2021, respectively, of contiguous financing structured as subordinate loans.

Our loan portfolio consisted of 98% floating rate loans, based on amortized cost, as of each of March 31, 2022 and December 31, 2021.

Activity relating to our loan portfolio for the three months ended March 31, 2022 was as follows ($ in thousands):

						Principal Balance						Deferred Fees/Other Items (1)						Specific CECL Allowance						Carrying Value, Net(2)
December 31, 2021						$	8,072,377					$	(36,529)					$	(145,000)					$	7,890,848
New funding of loans						1,196,111						—						—						1,196,111
Add-on loan fundings(3)						145,888						—						—						145,888
Loan repayments and sales						(725,508)						—						—						(725,508)
Gain (loss) on foreign currency translation						(101,297)						1,036						—						(100,261)
Specific CECL Allowance						—						—						(30,000)						(30,000)
Deferred fees and other items						—						(20,461)						—						(20,461)
PIK interest and amortization of fees						7,083						7,719						—						14,802
March 31, 2022						$	8,594,654					$	(48,235)					$	(175,000)					$	8,371,419
General CECL Allowance(4)																								(21,377)
Carrying value, net																								$	8,350,042

———————

(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)December 31, 2021 carrying value excludes General CECL Allowance.

(3)Represents fundings committed prior to 2022.

(4)$3.9 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):

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						March 31, 2022						December 31, 2021
Number of loans						67						67
Principal balance						$	8,594,654					$	8,072,377
Carrying value, net						$	8,350,042					$	7,857,260
Unfunded loan commitments(1)						$	1,800,235					$	1,357,122
Weighted-average cash coupon(2)						4.5		%				4.5		%
Weighted-average remaining fully-extended term(3)						3.0 years						2.9 years
Weighted-average expected term(4)						2.0 years						2.3 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 or cost recovery 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):

						March 31, 2022												December 31, 2021
Property Type						Carrying Value						% of Portfolio(1)						Carrying Value						% of Portfolio(1)
Office						$	1,980,780					23.7		%				$	1,700,779					21.6		%
Hotel						1,949,106						23.3						1,875,439						23.8
Residential-for-sale						896,714						10.7						956,617						12.1
Healthcare						637,570						7.6						316,321						4.0
Retail Center						508,117						6.1						414,740						5.3
Residential-for-rent						470,861						5.6						477,569						6.1
Mixed Use						417,967						5.0						269,839						3.4
Industrial						364,953						4.4						377,068						4.8
Urban Retail						358,221						4.3						711,592						9.0
Other(2)						787,130						9.3						790,884						9.9
Total						$	8,371,419					100.0		%				$	7,890,848					100.0		%
General CECL Allowance(3)						(21,377)												(33,588)
Carrying value, net						$	8,350,042											$	7,857,260

(1)Percentage of portfolio calculations are made prior to consideration of General CECL Allowance.

(2)Other property types include parking garages (3.1%), caravan parks (2.6%), multifamily development (2.1%) and urban predevelopment (1.5%) in 2022, and parking garages (3.3%), caravan parks (2.8%), multifamily development (2.2%), and urban predevelopment (1.6%) in 2021.

(3)$3.9 million and $3.1 million of the General CECL Allowance for 2022 and 2021, 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 sheet.

Geography

The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):

						March 31, 2022												December 31, 2021
Geographic Location						Carrying Value						% of Portfolio(1)						Carrying Value						% of Portfolio(1)
New York City						$	2,295,383					27.4		%				$	2,000,661					25.4		%
United Kingdom						1,989,250						23.8						2,297,286						29.1

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Other Europe(2)						1,494,435						17.9						1,295,870						16.4
Southeast						769,205						9.2						708,920						9.0
Midwest						681,237						8.1						689,274						8.7
West						341,569						4.1						356,097						4.5
Other(3)						800,340						9.5						542,740						6.9
Total						$	8,371,419					100.0		%				$	7,890,848					100.0		%
General CECL Allowance(4)						(21,377)												(33,588)
Carrying value, net						$	8,350,042											$	7,857,260

(1)Percentage of portfolio calculations are made prior to consideration of General CECL Allowance.

(2)Other Europe includes Germany (5.6%), Italy (4.3%), Spain (3.9%), Sweden (3.3%), and Ireland (0.8%) in 2022 and Germany (6.1%), Sweden (3.6%), Spain (3.3%), Italy (2.6%), and Ireland (0.8%) in 2021.

(3)Other includes Northeast (5.9%), Southwest (1.9%), Mid-Atlantic (1.4%) and Other (0.3%) in 2022 and Southwest (3.5%), Northeast (1.5%), Mid-Atlantic (1.6%), and Other (0.3%) in 2021.

(4)$3.9 million and $3.1 million of the General CECL Allowance for 2022 and 2021, 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 sheet.

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. 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 allocate the carrying value of our loan portfolio based on our internal risk ratings and date of origination at the dates indicated ($ in thousands):

March 31, 2022
																											Year Originated
Risk Rating						Number of Loans						Total						% of Portfolio									2022						2021						2020						2019						2018						Prior
1						—						$	—					—		%							$	—					$	—					$	—					$	—					$	—					$	—
2						1						32,000						0.4		%							—						—						—						—						—						32,000
3						61						7,774,143						92.8		%							994,971						2,636,290						669,291						1,822,835						796,136						854,620
4						1						106,313						1.3		%							—						—						—						—						—						106,313
5						4						458,963						5.5		%							—						—						—						—						—						458,963
Total						67						$	8,371,419					100.0		%							$	994,971					$	2,636,290					$	669,291					$	1,822,835					$	796,136					$	1,451,896
General CECL Allowance(1)												(21,377)
Total carrying value, net												$	8,350,042
Weighted Average Risk Rating																		3.1

December 31, 2021

Year Originated

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Risk Rating						Number of Loans						Total						% of Portfolio									2021						2020						2019						2018						2017						Prior
1						—						$	—					—		%													$	—					$	—					$	—					$	—					$	—
2						1						32,000						0.4		%							—						—						—						—						—						32,000
3						62						7,372,081						93.5		%							2,622,248						644,404						2,307,948						828,270						389,264						579,947
4						1						81,980						1.0		%							—						—						—						—						81,980						—
5						3						404,787						5.1		%							—						—						—						—						177,483						227,304
Total						67						$	7,890,848					100.0		%							$	2,622,248					$	644,404					$	2,307,948					$	828,270					$	648,727					$	839,251
General CECL Allowance(1)												(33,588)
Total carrying value, net												$	7,857,260
Weighted Average Risk Rating																		3.1

———————

(1)$3.9 million and $3.1 million of the General CECL Allowance for 2022 and 2021, respectively, is excluded from the tables above 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

CECL

In accordance with ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments", which we refer to as the "CECL Standard", we record allowances for loans and held-to-maturity debt securities that are deducted from the carrying amount of the assets to present the net carrying value of the amounts expected to be collected on the assets. We record loan specific allowances as a practical expedient under the CECL Standard ("Specific CECL Allowance"), which we apply to assets that are collateral dependent and where the borrower or sponsor is experiencing financial difficulty. For the remainder of the portfolio, we record a general allowance ("General CECL Allowance", and together with the Specific CECL Allowance, "CECL Allowances"), in accordance with the CECL Standard on a collective basis by assets with similar risk characteristics. We have elected to use the weighted average remaining maturity ("WARM") method in determining a General CECL Allowance for a majority of our portfolio. In the future, we may use other acceptable methods, such as a probability-of-default/loss-given-default method.

Specific CECL Allowance

For collateral dependent loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we have elected to apply a practical expedient in accordance with the CECL Standard in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a Specific CECL Allowance. The Specific CECL Allowance is determined as the difference between the fair value of the underlying collateral and the carrying value of the loan (prior to the Specific CECL Allowance). When the repayment or satisfaction of a loan is dependent on a sale, rather than operations, of the collateral, the fair value is adjusted for the estimated cost to sell the collateral. The fair value of the underlying collateral is determined by using method(s) such as discounted cash flow, the market approach, or direct capitalization approach. The key unobservable inputs used to determine the fair value of the underlying collateral may vary depending on the information available to us and market conditions as of the valuation date.

We regularly evaluate the extent and impact of any credit migration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan by loan basis. The Specific CECL Allowance is evaluated on a quarterly basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the liquidation value of the underlying collateral. We also evaluate the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the properties. In addition, we consider the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. Such impairment analysis is completed and reviewed by asset management and finance personnel who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants.

We evaluate modifications to our loan portfolio to determine if the modifications constitute a TDR and/or substantial modification, under ASC Topic 310 "Receivables".

The following table summarizes the loans with Specific CECL Allowances that have been recorded on our portfolio as of March 31, 2022 ($ in thousands):

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Type			Property type			Location			Amortized cost prior to Specific CECL Allowance			Specific CECL Allowance(1)			Amortized cost			Interest recognition status/ as of date
Mortgage
			Urban Predevelopment(2)(3)			Miami, FL			$190,610			$68,000			$122,610			Cost Recovery/ 3/1/2020
			Multifamily Development(2)			Brooklyn, NY			189,775			10,000			179,775			Cost Recovery/ 3/1/2020
			Retail Center(4)(5)			Cincinnati, OH			171,598			67,000			104,598			Cost Recovery/ 10/1/2019
Mortgage total:									$551,983			$145,000			$406,983
Mezzanine
			Residential-for-Sale(6)			Manhattan, NY			$81,980			$30,000			$51,980			Non-accrual/ 7/1/2021
Mezzanine total:									$81,980			$30,000			$51,980
Total:									$633,963			$175,000			$458,963

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(1)During the three months ended March 31, 2022, we recorded $30.0 million of Specific CECL Allowance.

(2)The fair value of this collateral was determined by assuming rent per square foot ranging from $48 to $215 and a capitalization rate ranging from 5.0% to 5.5%.

(3)In October 2020, we entered a joint venture with CCOF Design Venture, LLC, which owns the underlying properties that secure our $187.9 million first mortgage loan. The entity in which we own an interest, and which owns the underlying properties, was deemed to be a Variable Interest Entity ("VIE") and we determined that we are not the primary beneficiary of that VIE as we do not have the power to direct the entity's activities. The related profit and loss from the joint venture was immaterial for the three months ended March 31, 2022 and 2021.

(4)The fair value of retail collateral was determined by applying a capitalization rate of 8.0%.

(5)In September 2018, we entered a joint venture with Turner Consulting II, LLC ("Turner Consulting"), through an entity which owns the underlying property that secures our loan. Turner Consulting contributed 10% of the venture’s equity and we contributed 90%. The entity was deemed to be a VIE and we determined that we are not the primary beneficiary of that VIE as we do not have the power to direct the entity's activities. During the three months ended March 31, 2022 and 2021, $0.2 million and $0.3 million, respectively, of interest paid was applied towards reducing the carrying value of the loan. The related profit and loss from the joint venture was immaterial for the three months ended March 31, 2022 and 2021.

(6)The fair value of the residential-for-sale collateral was determined by making certain projections and assumptions with respect to future performance and a discount rate of 10%.

We own three mezzanine loans which had an aggregate amortized cost at March 31, 2022 of $474.9 million (inclusive of $138.6 million of payment- in-kind ("PIK") interest) and are secured by the same residential-for-sale property currently under construction in Manhattan, NY. These loans include (i) a $242.6 million senior mezzanine loan ("Senior Mezzanine Loan"), (ii) a $180.3 million junior mezzanine loan ("Junior Mezzanine A Loan"), and (iii) a $52.0 million (net of $30.0 million Specific CECL Allowance) junior mezzanine loan ("Junior Mezzanine B Loan" together with the Junior Mezzanine A Loan collectively referred to as "Junior Mezzanine Loan").

During the third quarter of 2021, a vehicle (the "Seller") managed by an affiliate of the Manager transferred its Junior Mezzanine B Loan position to the Company and in connection with this transfer, one of the property’s subordinate capital providers paid the Seller a price representing the Seller’s original principal balance on the Junior Mezzanine B Loan position with the Seller agreeing to forego its accrued interest on the Junior Mezzanine B Loan based on a change in the estimated sales velocity of the collateral.

In conjunction with this transaction, the Company and the subordinate capital provider have agreed to a waterfall sharing arrangement pursuant to which, rather than the Company receiving interest it otherwise would have been entitled to after July 1, 2021 on the Junior Mezzanine Loan, proceeds received from the sale or refinance of the underlying collateral, after repayment to priority lenders under the waterfall, will be shared between the Company and the subordinate capital provider at an agreed upon allocation. As such, we opted to cease accruing interest on the Junior Mezzanine Loan as of July 1, 2021 and will resume doing so when we deem appropriate. As of March 31, 2022, sales velocity on the underlying property lagged behind the borrower's business plan and management's expectations. Based on this information as of March 31, 2022, we deemed the borrower to be experiencing financial difficulty and accordingly changed the risk rating to a 5 and recorded $30.0 million of Specific CECL Allowance on the Junior Mezzanine B Loan. An extension to May 1, 2022 was executed with the borrower.

General CECL Allowance

In determining the General CECL Allowance using the WARM method, an annual historical loss rate, adjusted for macroeconomic estimates, is applied to the amortized cost of an asset, or pool of assets, over each subsequent period for the assets' remaining expected life. We considered various factors including (i) historical loss experience in the commercial real estate lending market, (ii) timing of expected repayments and satisfactions, (iii) expected future funding, (iv) capital subordinate to us when we are the senior lender, (v) capital senior to us when we are the subordinate lender, and (vi) our current and future view of the macroeconomic environment for a reasonable and supportable forecast period. The CECL Standard requires the use

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of significant judgment to arrive at an estimated credit loss. There is significant uncertainty related to future macroeconomic conditions as the result of COVID-19.

We derived an annual historical loss rate based on a commercial mortgage backed securities ("CMBS") database with historical losses from 1998 through the first quarter of 2022 provided by a third party, Trepp LLC. We applied various filters to arrive at a CMBS dataset most analogous to our current portfolio from which to determine an appropriate historical loss rate. The annual historical loss rate was further adjusted to reflect our expectations of the macroeconomic environment for a reasonable and supportable forecast period which we have determined to be one year. In assessing the macroeconomic environment, we consider macroeconomic factors, including unemployment rate, commercial real estate prices, and market liquidity. We compared the historical data for each metric to historical commercial real estate losses in order to determine the correlation of the data. We used projections, obtained from third-party service providers, of each factor to approximate the impact the macroeconomic outlook may have on our loss rate.

The General CECL Allowance on subordinate loans is calculated by incorporating both the loan balance of the position(s) of the structurally senior third-party lender(s) and the balance of our subordinate loan(s). The subordinate loans, by virtue of being the first loss position, are required to absorb losses prior to the senior position(s) being impacted, resulting in a higher percentage allowance attributable to the subordinate loan. The General CECL Allowance on unfunded loan commitments is time-weighted based on our expected commitment to fund such obligations. The General CECL Allowance on unfunded commitments is recorded as a liability on our condensed consolidated balance sheet within accounts payable, accrued expenses and other liabilities.

Although our secured debt obligations and senior secured term loan financing have a minimum tangible net worth maintenance covenant, the General CECL Allowance has no impact on these covenants as we are permitted to add back the General CECL Allowance for the computation of tangible net worth as defined in the respective agreements.

The following schedule sets forth our General CECL Allowance as of March 31, 2022 and December 31, 2021 ($ in thousands):

						March 31, 2022						December 31, 2021
Commercial mortgage loans, net						$	16,663					$	22,554
Subordinate loans and other lending assets, net						4,714						11,034
Unfunded commitments(1)						3,928						3,106
Total General CECL Allowance						$	25,305					$	36,694

 ———————

(1)The General CECL Allowance on unfunded commitments is recorded as a liability on our condensed consolidated balance sheet within accounts payable, accrued expenses and other liabilities.

We have made an accounting policy election to exclude accrued interest receivable, ($44.4 million and $41.2 million, as of March 31, 2022 and December 31, 2021, respectively) included in Other Assets on our condensed consolidated balance sheet, from the amortized cost basis of the related commercial mortgage loans and subordinate loans and other lending assets in determining the General CECL Allowance, as any uncollectible accrued interest receivable is written off in a timely manner. We discontinue accruing interest on loans if we deem the interest to be uncollectible with any previously accrued uncollected interest on the loan charged to interest income in the same period. Under certain circumstances, we may apply the cost recovery method under which interest collected on a loan reduces the loan's amortized cost. The amortized cost basis for loans on cost recovery was $407.0 million and $404.8 million as of March 31, 2022 and December 31, 2021, respectively. For the three months ended March 31, 2022 and 2021, we received $0.2 million and $0.3 million, respectively, in interest that reduced amortized cost under the cost recovery method.

In November 2020, the borrower under a £309.2 million commercial mortgage loan ($422.7 million assuming conversion into U.S. Dollars ("USD")), of which we own £247.5 million ($338.4 million assuming conversion into USD), secured by an urban retail property located in London, United Kingdom, entered into administration triggering an event of default. In accordance with the loan agreement, we are entitled to collect default interest in addition to the contractual interest we had been earning. During the first quarter of 2022, our commercial mortgage loan was fully satisfied and all accrued contractual and default interest was collected.

As of March 31, 2022 and December 31, 2021, the amortized cost basis for loans with accrued interest past due 90 or more days was $407.0 million and $757.6 million, respectively.

The following schedule illustrates the quarterly changes in CECL Allowances for the three months ended March 31, 2022 and 2021, respectively ($ in thousands):

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						Specific CECL Allowance						General CECL Allowance												Total CECL Allowance						CECL Allowance as % of Amortized Cost
												Funded			Unfunded			Total												General			Total
December 31, 2021						$145,000						$33,588			$3,106			$36,694						$181,694						0.49%			2.26%
Changes:
			Q1 Allowance (Reversals)			30,000						(12,211)			822			(11,389)						18,611
March 31, 2022						$175,000						$21,377			$3,928			$25,305						$200,305						0.32%			2.34%

						Specific CECL Allowance						General CECL Allowance												Total CECL Allowance						CECL Allowance as % of Amortized Cost
												Funded			Unfunded			Total												General			Total
December 31, 2020						$	175,000					$	38,102		$	3,365		$	41,467					$	216,467					0.67		%	3.23		%
Changes:
			Q1 Allowance (Reversals)			—						(1,667)			429			(1,238)						(1,238)
March 31, 2021						$	175,000					$	36,435		$	3,794		$	40,229					$	215,229					0.62		%	3.06		%

The General CECL Allowance decreased by $11.4 million during the three months ended March 31, 2022. The decrease is primarily related to changes to expected loan repayment dates as well as portfolio seasoning and improved macroeconomic outlook. The decrease was partially offset by new loan originations.

Other Loan and Lending Assets Activity

We recognized PIK interest of $1.2 million and $16.8 million for the three months ended March 31, 2022 and 2021 respectively.

We recognized $2.1 million in pre-payment penalties and accelerated fees for the three months ended March 31, 2022 and none for the three months ended March 31, 2021.

As of March 31, 2022 and December 31, 2021 our portfolio included other lending assets, which are subordinate risk retention interests in securitization vehicles. The underlying mortgages related to our subordinate risk retention interests are secured by a portfolio of properties located throughout the United States. Our maximum exposure to loss from the subordinate risk retention interests is limited to the book value of such interests. The book value as of March 31, 2022 was $51.1 million, consisting of one interest with a weighted average maturity of 2.2 years and $64.6 million as of December 31, 2021 consisting of two interests with weighted average maturity of 5.8 years. We are not obligated to provide, and do not intend to provide financial support to these subordinate risk retention interests. These interests are accounted for as held-to-maturity and recorded at carrying value on our condensed consolidated balance sheet.

In 2017, we originated a subordinate loan junior to a $33.0 million third-party mortgage, secured by a hotel in Anaheim, CA. In December 2020, due to non-performance, we assumed legal title through the execution of a deed-in-lieu of foreclosure. We intended to sell the hotel and, as such, as of the date of the title assumption, we recorded the hotel property on our condensed consolidated balance sheet at its fair market value less costs to sell, net of a realized loss of $2.4 million, that was previously recorded as Specific CECL Allowance.

As of March 31, 2021 there was an increase in our expected costs to sell the property, and therefore, we recorded a $0.6 million loss during the three months ended March 31, 2021, as realized losses and impairments on real estate owned in our condensed consolidated statement of operations. During the second quarter of 2021 the property was sold at our cost basis and no additional gain or loss was recorded. The $33.0 million first mortgage was repaid upon the sale of the property.

In 2017, we originated a $20.0 million junior mezzanine loan which was subordinate to: (i) a $110.0 million mortgage loan, and (ii) a $24.5 million senior mezzanine loan, secured by a full-service luxury hotel in Washington, D.C. During the first quarter of 2020, we recorded a $10.0 million Specific CECL Allowance and placed our junior mezzanine loan on non-accrual status.

On May 24, 2021, we purchased the $24.5 million senior mezzanine loan at par and acquired legal title to the hotel

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through a deed-in-lieu of foreclosure. We assumed the hotel’s assets and liabilities (including the $110.0 million mortgage loan) and recorded an additional $10.0 million charge reflecting the difference between the fair value of the hotel’s net assets and the carrying amount of the loan. This $10.0 million loss on title assumption plus the previously recorded Specific CECL Allowance of $10.0 million resulted in a $20.0 million realized loss on investments included in our condensed consolidated statement of operations during the second quarter of 2021.

On May 24, 2021, in accordance with ASC 805, "Business Combinations," we allocated the fair value of the hotel’s acquired assets and assumed debt. On June 29, 2021, we repaid the $110.0 million mortgage loan against the property. As of March 1, 2022, the hotel assets and liabilities met the criteria to be classified as held for sale under ASC Topic 360, "Property, Plant, and Equipment." As of March 1, 2022, we ceased recording depreciation on the building and furniture, fixtures, and equipment on the condensed consolidated statement of operations.

Below are the hotel's assets and liabilities as of March 31, 2022 on our condensed consolidated balance sheet ($ in thousands):

			March 31, 2022
Assets:
Cash			$	3,841
Land			58,742
Buildings			86,973
Furniture, fixtures, and equipment			8,766
Accumulated depreciation			(3,349)
Other assets			2,111
Total Assets			$	157,084
Liabilities:
Accounts payable, accrued expenses and other liabilities			5,712
Total Liabilities			$	5,712
Net Real Estate Assets			$	151,372

For the three months ended March 31, 2022 and 2021, we recorded the operating revenue, expenses and fixed asset depreciation and amortization in our condensed consolidated income statement as shown below ($ in thousands):

			Three months ended March 31,
			2022			2021
Operations related to real estate owned:
Revenue from operations			$	9,040		$	—
Operating expenses			(9,652)			—
Depreciation and amortization			(704)			—
Net loss from real estate owned			$	(1,316)		$	—

The following table details the components of our other assets at the dates indicated ($ in thousands):

			March 31, 2022						December 31, 2021
Interest receivable			$	44,370					$	41,219
Loan proceeds held by servicer			8,276						3,179
Other(1)			246						3,355
Total			$	52,892					$	47,753

———————

(1)Includes $3.1 million of other assets from real estate owned at December 31, 2021. Refer to "Note 5 – Assets and Liabilities Related to Real Estate Owned, Held for Sale" for additional information.

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At March 31, 2022 and December 31, 2021, our borrowings included the following secured debt arrangements, maturities and weighted-average interest rates ($ in thousands):

			March 31, 2022																		December 31, 2021
			Maximum Amount of Borrowings(1)						Borrowings Outstanding(1)						Maturity (2)						Maximum Amount of Borrowings(1)						Borrowings Outstanding(1)						Maturity (2)
JPMorgan - USD			$	1,415,051					$	1,269,796					September 2026						$	1,344,283					$	1,329,923					September 2026
JPMorgan - GBP			84,949						84,320						September 2026						87,497						86,849						September 2026
JPMorgan - EUR			—						—						N/A						68,220						68,220						September 2026
DB - USD			700,000						421,461						March 2023						700,000						259,073						March 2023
Goldman - USD			300,000						159,618						November 2025(3)						300,000						168,231						November 2025(3)
CS Facility - USD			486,319						470,651						June 2026(4)(5)						161,609						148,720						February 2025(4)(5)
HSBC Facility - EUR			163,285						158,592						July 2022						167,756						162,937						July 2022
Barclays - USD			200,000						32,693						June 2022						200,000						32,693						March 2024
Santander - EUR			59,762						52,222						August 2024						—						—						N/A
Total Secured Credit Facilities			3,409,366						2,649,353												3,029,365						2,256,646
Barclays Private Securitization - GBP, EUR, SEK			1,932,666						1,932,666						February 2026(5)						1,902,684						1,902,684						August 2024(5)
Total Secured Debt Arrangements			5,342,032						4,582,019												4,932,049						4,159,330
Less: deferred financing costs			N/A						(10,705)												N/A						(9,062)
Total Secured Debt Arrangements, net(6)(7)(8)			$	5,342,032					$	4,571,314											$	4,932,049					$	4,150,268

———————

(1)As of March 31, 2022, GBP, EUR, and Swedish Krona ("SEK") borrowings were converted to USD at a rate of 1.31, 1.11, and 0.11, respectively. As of December 31, 2021, GBP, EUR and SEK borrowings were converted to USD at a rate of 1.35, 1.14 and 0.11 respectively.

(2)Maturity date assumes extensions at our option are exercised with consent of financing providers, where applicable.

(3)Assumes facility enters the amortization period described below.

(4)Assumes financings are extended in line with the underlying loans.

(5)Represents weighted average maturity across various financings with the counterparty. See below for additional details.

(6)Weighted-average borrowing costs as of March 31, 2022 and December 31, 2021 were applicable benchmark rates and credit spread adjustments, plus spreads of USD: +2.08% / GBP: +1.82% / EUR: +1.49% / SEK: +1.50% and USD: +2.00% / GBP: +1.86% / EUR: +1.42%/ SEK : +1.50%, respectively.

(7)Weighted average advance rates based on cost as of March 31, 2022 and December 31, 2021 were 70.5% (66.5% (USD) / 75.6% (GBP) / 72.9% (EUR) / 80.7% (SEK)) and 69.8% (67.1% (USD) / 72.7% (GBP) / 68.9% (EUR)/ 80.7% (SEK)), respectively.

(8)As of March 31, 2022 and December 31, 2021, approximately 52% and 50% of the outstanding balance under these secured borrowings were recourse to us.

Each of our existing secured credit facilities include "credit based and other mark-to-market" features. "Credit mark-to-market" provisions in repurchase facilities are designed to keep the lenders' credit exposure generally constant as a percentage of the underlying collateral value of the assets pledged as security to them. If the credit of the underlying collateral value decreases, the amount of leverage available to us will be reduced as our assets are marked-to-market, which would reduce our liquidity. Generally, the lender under the applicable secured debt arrangement calls for and/or sets the valuation and any revaluation of the collateral assets in its sole, good faith discretion. If it is determined (subject to certain conditions) that the market value of the underlying collateral has decreased by more than a defined minimum amount, the lender may require us to provide additional collateral or may make margin calls, which may require us to repay all or a portion of the funds advanced. We closely monitor our liquidity and intend to maintain sufficient liquidity on our condensed consolidated balance sheet in order to meet any margin calls in the event of any significant decreases in asset values. As of March 31, 2022 and December 31, 2021, the weighted average haircut under our secured debt arrangements was approximately 29.5% and 30.2%, respectively. In addition, our existing secured debt arrangements are not entirely term-matched financings and may mature before our commercial real estate debt investments that represent underlying collateral to those financings. We are in frequent dialogue with the lenders under our secured debt arrangements regarding our management of their collateral assets and as we negotiate renewals and extensions of these liabilities, we may experience lower advance rates and higher pricing under the renewed or extended agreements.

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JPMorgan Facility

In November 2019, through wholly-owned subsidiaries, we entered into a Sixth Amended and Restated Master Repurchase Agreement with JPMorgan Chase Bank, National Association (the "JPMorgan Facility"). During the third quarter of 2021, we amended the JPMorgan Facility to allow for $1.5 billion of maximum borrowings and maturity in September 2024, plus two one-year extensions available at our option, which are subject to certain conditions. The JPMorgan Facility enables us to elect to receive advances in USD, GBP, or EUR. Margin calls may occur any time at specified aggregate margin deficit thresholds.

As of March 31, 2022, we had $1.4 billion, including £64.2 million ($84.3 million assuming conversion into USD) of borrowings outstanding under the JPMorgan Facility secured by certain of our commercial mortgage loans.

DB Facility

In January 2022, through an indirect wholly-owned subsidiary, we entered into a Fourth Amended and Restated Master Repurchase Agreement with Deutsche Bank AG, Cayman Islands Branch, London Branch (the "DB Facility"). The DB Facility allows for $700.0 million in maximum borrowings ($421.5 million drawn at March 31, 2022) for the sale and repurchase of eligible first mortgage loans secured by commercial or residential-for-rent properties, located in the United States, United Kingdom and the European Union, and enables us to elect to receive advances in USD, GBP, or EUR. In March 2022, we exercised our second extension option and extended maturity to March 2023. Margin calls may occur any time at specified aggregate margin deficit thresholds.

As of March 31, 2022, we had $421.5 million of borrowings outstanding under the DB Facility secured by certain of our commercial mortgage loans.

Goldman Facility

In November 2017, through an indirect wholly-owned subsidiary, we entered into a master repurchase and securities contract agreement with Goldman Sachs Bank USA (the "Goldman Facility"). During the fourth quarter of 2021, we amended the Goldman Facility to reduce the maximum borrowings from $500.0 million to $300.0 million and extended maturity to November 2023. In addition, the Goldman Facility contains a two-year amortization period subsequent to the November 2023 maturity, which allows for the refinancing or pay down of assets under the facility. Margin calls may occur any time at specified margin deficit thresholds.

As of March 31, 2022, we had $159.6 million of borrowings outstanding under the Goldman Facility secured by certain of our commercial mortgage loans.

CS Facility

In July 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS Facility"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility — USD has an "evergreen" feature such that the facility continues unless terminated at any time by Credit Suisse with six months' notice. Margin calls may occur any time at specified aggregate margin deficit thresholds.

As of March 31, 2022, we had $470.7 million of borrowings outstanding under the CS Facility secured by certain of our commercial mortgage loans.

HSBC Facility

In July 2019, through an indirect wholly-owned subsidiary, we entered into a secured credit facility with HSBC Bank plc, which provides for a single asset financing (the "HSBC Facility"). The HSBC Facility was extended during the first quarter 2021 and matures in July 2022. Margin calls may occur any time at specified aggregate margin deficit thresholds.

As of March 31, 2022, we had €143.3 million ($158.6 million assuming conversion into USD) of borrowings outstanding under the HSBC Facility secured by one commercial mortgage loan.

Barclays Facility

In March 2020, through an indirect wholly-owned subsidiary, we entered into a secured credit facility pursuant to a Master Repurchase Agreement with Barclays Bank plc (the "Barclays Facility"). The Barclays Facility allows for $200.0 million of maximum borrowings and matures in June 2022 with extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds.

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As of March 31, 2022, we had $32.7 million of borrowings outstanding under the Barclays Facility secured by one commercial mortgage loan.

Santander Facility

In March 2022, through an indirect wholly-owned subsidiary, we entered into a secured credit facility with Santander Bank, which provides for a single asset financing (the "Santander Facility"). The Santander Facility allows for €54.0 million ($59.8 million assuming conversion to USD) of maximum borrowings and initially matures in August 2024. Margin calls may occur any time at specified aggregate margin deficit thresholds.

As of March 31, 2022, we had €47.2 million ($52.2 million assuming conversion into USD) of borrowings outstanding under the Santander Facility secured by one commercial mortgage loan.

Barclays Private Securitization

In June 2020, through a newly formed entity, we entered into a private securitization with Barclays Bank plc, of which Barclays Bank plc retained $782.0 million of senior notes (the "Barclays Private Securitization"). The Barclays Private Securitization finances the loans that were previously financed under a Global Master Repurchase Agreement with Barclays Bank plc (the "Barclays Facility - GBP/EUR"). During 2021, we pledged five additional commercial mortgage loans and additional collateral with a total outstanding principal balance as of December 31, 2021 of €237.6 million, £572.7 million, and kr2.6 billion (totaling $1.3 billion assuming conversion into USD). During the first quarter of 2022, we pledged three additional commercial mortgage loans with outstanding principal balances of £134.8 million ($177.1 million assuming conversion into USD) and €157.4 million ($174.2 million assuming conversion into USD), and pledged additional collateral of a financed loan of £78.8 million ($103.5 million assuming conversion into USD) for a total of $454.8 million.

The Barclays Private Securitization eliminates daily margining provisions and grants us significant discretion to modify certain terms of the underlying collateral including waiving certain loan-level covenant breaches and deferring or waiving of debt service payments for up to 18 months. The securitization includes LTV based covenants with significant headroom to previous levels included in the Barclays Facility - GBP/EUR. These deleveraging requirements are based on significant declines in the value of the collateral as determined by an annual third-party (engaged by us) appraisal process tied to the provisions of the underlying loan agreements. We believe this provides us with both cushion and predictability to avoid sudden unexpected outcomes and material repayment requirements. In addition to the pledge of the additional collateral in June 2020 noted above, we paid down the previous financing by €16.5 million (totaling $18.5 million in USD) and agreed to increase the financing spreads by 0.25%.

The table below provides the borrowings outstanding (on an as converted basis) and weighted-average fully-extended maturities by currency for the assets financed under the Barclays Private Securitization as of March 31, 2022 ($ in thousands):

			Borrowings outstanding						Fully-Extended Maturity(1)
Total/Weighted-Average GBP			$	1,215,814					April 2026
Total/Weighted-Average EUR			496,625						July 2025(2)
Total/Weighted-Average SEK			220,227						May 2026
Total/Weighted-Average Securitization			$	1,932,666					February 2026

The table below provides the borrowings outstanding (on an as converted basis) and weighted-average fully-extended maturities by currency for the assets financed under the Barclays Private Securitization as of December 31, 2021 ($ in thousands):

			Borrowings outstanding						Fully-Extended Maturity(1)
Total/Weighted-Average GBP			$	1,299,321					June 2025
Total/Weighted-Average EUR			373,904						November 2022(2)
Total/Weighted-Average SEK			229,458						November 2022
Total/Weighted-Average Securitization			$	1,902,683					August 2024

———————

(1)Assumes underlying loans extend to fully extended maturity and extensions at our option are exercised.

(2)The EUR portion of the Barclays Private Securitization has an "evergreen" feature such that the facility continues for one year and can be terminated by either party on certain dates with, depending on the date of notice, a minimum of nine to twelve months' notice.

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The table below provides the assets and liabilities of the Barclays Private Securitization VIE included in our condensed consolidated balance sheet ($ in thousands):

			March 31, 2022						December 31, 2021
Assets:
Cash			$	873					$	3,456
Commercial mortgage loans, net(1)			2,536,735						2,559,266
Other Assets			19,352						20,765
Total Assets			$	2,556,960					$	2,583,487
Liabilities:
Secured debt arrangements, net (net of deferred financing costs of $2.5 million and $2.0 million in 2022 and 2021, respectively)			$	1,930,163					$	1,900,640
Accounts payable, accrued expenses and other liabilities(2)			4,374						2,671
Total Liabilities			$	1,934,537					$	1,903,311

———————

(1)Net of the General CECL Allowance of $7.0 million and $11.8 million as of March 31, 2022 and December 31, 2021, respectively.

(2)Includes General CECL Allowance related to unfunded commitments on commercial mortgage loans, net of $1.8 million and $0.4 million as of March 31, 2022 and December 31, 2021, respectively.

The table below provides the net income of the Barclays Private Securitization VIE included in our condensed consolidated statement of operations ($ in thousands):

			Three months ended March 31,
			2022						2021
Net Interest Income:
Interest income from commercial mortgage loans			$	28,714					$	16,093
Interest expense			(9,588)						(4,590)
Net interest income			$	19,126					$	11,503
Reversal of (provision for) loan losses and impairments			3,341						(3,628)
Foreign currency loss			(19,629)						(913)
Net Income			$	2,838					$	6,962

As of March 31, 2022, we had £925.4 million, €448.7 million, and kr2.1 billion ($1.9 billion assuming conversion into USD) of borrowings outstanding under the Barclays Private Securitization secured by certain of our commercial mortgage loans.

At March 31, 2022, our borrowings had the following remaining maturities ($ in thousands):

			Less than 1 year						1 to 3 years						3 to 5 years						More than 5 years						Total
JPMorgan Facility			$	127,524					$	770,775					$	455,817					$	—					$	1,354,116
DB Facility			10,630						410,831						—						—						421,461
Goldman Facility			84,898						35,886						38,834						—						159,618
CS Facility			—						148,720						321,931						—						470,651
HSBC Facility			158,592						—						—						—						158,592
Barclays Facility			32,693						—						—						—						32,693
Santander Facility			—						52,222						—						—						52,222
Barclays Private Securitization			—						567,640						1,365,026						—						1,932,666
Total			$	414,337					$	1,986,074					$	2,181,608					$	—					$	4,582,019

The table above reflects the fully extended maturity date of the facility and assumes facilities with an "evergreen" feature continue to extend through the fully-extended maturity of the underlying asset and assumes underlying loans are extended with consent of financing providers.

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The table below summarizes the outstanding balances at March 31, 2022, as well as the maximum and average month-end balances for the three months ended March 31, 2022 for our borrowings under secured debt arrangements ($ in thousands).

			As of March 31, 2022												For the three months ended March 31, 2022
			Balance						Amortized Cost of Collateral						Maximum Month-End Balance						Average Month-End Balance
JPMorgan Facility			$	1,354,116					$	2,105,790					$	1,467,343					$	1,392,462
DB Facility			421,461						625,530						421,461						354,967
Goldman Facility			159,618						257,227						164,607						161,743
CS Facility			470,651						645,392						470,651						274,050
HSBC Facility			158,592						206,168						161,003						160,124
Barclays Facility			32,693						50,149						32,693						32,693
Santander Facility			52,222						67,545						52,222						52,222
Barclays Private Securitization			1,932,666						2,543,761						1,963,837						1,878,007
Total			$	4,582,019					$	6,501,562

The table below summarizes the outstanding balances at December 31, 2021, as well as the maximum and average month-end balances for the year ended December 31, 2021 for our borrowings under secured debt arrangements ($ in thousands).

			As of December 31, 2021												For the year ended December 31, 2021
			Balance						Amortized Cost of Collateral						Maximum Month-End Balance						Average Month-End Balance
JPMorgan Facility			$	1,484,992					$	2,259,376					$	1,484,992					$	1,219,072
DB Facility			259,073						389,238						520,217						407,428
Goldman Facility			168,231						261,848						331,154						228,312
CS Facility			148,720						214,124						369,182						224,351
HSBC Facility			162,937						211,813						174,717						165,958
Barclays Facility			32,693						50,241						35,193						33,526
Barclays Private Securitization			1,902,684						2,571,067						1,902,684						1,396,411
Total			$	4,159,330					$	5,957,707

We were in compliance with the covenants under each of our secured debt arrangements at March 31, 2022 and December 31, 2021.

In May 2019, we entered into a $500.0 million senior secured term loan (the "2026 Term Loan"), which matures in May 2026 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities. The 2026 Term Loan bears interest at LIBOR plus 2.75% and was issued at a price of 99.5%.

In March 2021, we entered into an additional $300.0 million senior secured term loan, with substantially the same terms as the 2026 Term Loan, (the "2028 Term Loan" and, together with the 2026 Term Loan, the "Term Loans"), which matures in March 2028 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities. The 2028 Term Loan bears interest at LIBOR (with a floor of 0.50%) plus 3.50% and was issued at a price of 99.0%.

The Term Loans are amortizing with repayments of 0.25% per quarter of the total committed principal. During the three months ended March 31, 2022 and 2021, we repaid $1.3 million of principal respectively related to the 2026 Term Loan. During the three months ended March 31, 2022, we repaid $0.7 million of principal related to the 2028 Term Loan.

The following table summarizes the terms of our Term Loans as of March 31, 2022 ($ in thousands):

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			Principal Amount			Unamortized Issuance Discount(1)			Deferred Financing Costs(1)			Carrying Value			Spread			Maturity Date
2026 Term Loan			$	486,250		$	(1,458)		$	(7,469)		$	477,323		2.75		%	5/15/2026
2028 Term Loan			297,000			(2,536)			(4,490)			289,974			3.50		%	3/11/2028
Total			$	783,250		$	(3,994)		$	(11,959)		$	767,297

———————

(1)     Unamortized issuance discount and deferred financing costs will be amortized to interest expense over remaining life of respective term loans.

The following table summarizes the terms of our Term Loans as of December 31, 2021 ($ in thousands):

			Principal Amount			Unamortized Issuance Discount(1)			Deferred Financing Costs(1)			Carrying Value			Spread			Maturity Date
2026 Term Loan			$	487,500		$	(1,548)		$	(7,933)		$	478,019		2.75		%	5/15/2026
2028 Term Loan			297,750			(2,643)			(4,801)			290,306			3.50		%	3/11/2028
Total			$	785,250		$	(4,191)		$	(12,734)		$	768,325

———————

(1)     Unamortized issuance discount and deferred financing costs will be amortized to interest expense over remaining life of respective term loans.

Covenants

During the fourth quarter of 2021, we modified the financial covenants of the Term Loans which included the following: (i) increased our maximum ratio of total recourse debt to tangible net worth from 3:1 to 4:1; (ii) increased our maximum ratio of total unencumbered assets to total pari-passu indebtedness from 1.25:1 to 2.50:1; and (iii) amended the definition of unencumbered asset to include the carrying value of the residual equity in the entities where we hold assets financed under repurchase obligations. In conjunction with the modifications, we incurred $5.2 million in fees, $3.9 million of which were consent fees paid to borrowers recorded as deferred financing costs and $1.3 million of arrangement fees paid to the Term Loan arranger recorded as general and administrative expenses.

We were in compliance with the covenants under the Term Loans at March 31, 2022 and December 31, 2021.

Interest Rate Cap

During the second quarter of 2020, we entered into a three-year interest rate cap to cap LIBOR at 0.75%. This effectively limits the maximum all-in coupon on our 2026 Term Loan to 3.50%. In connection with the interest rate cap, we incurred upfront fees of $1.1 million for the year ended December 31, 2020, which we recorded as a deferred financing cost on our consolidated balance sheet. The deferred financing cost is being amortized over the duration of the interest rate cap with respective amortization recognized as part of interest expense in our condensed consolidated statement of operations.

In June 2021, we issued $500.0 million of 4.625% Senior Secured Notes due 2029 (the "2029 Notes"), for which we received net proceeds of $495.0 million, after offering expenses. The 2029 Notes will mature on June 15, 2029, unless earlier repurchased or redeemed. The 2029 Notes are secured by a first-priority lien, and rank pari passu in right of payment with all of our existing and future first lien obligations, including indebtedness under the Term Loans. The 2029 Notes were issued at par and contain covenants relating to liens, indebtedness, and investments in non-wholly owned entities. As of March 31, 2022, the 2029 Notes had a carrying value of $494.2 million net of deferred financing costs of $5.8 million.

Covenants

The 2029 Notes include certain covenants including a requirement that we maintain a ratio of total unencumbered assets to total pari-passu indebtedness of at least 1.20:1. As of March 31, 2022 and December 31, 2021, we were in compliance with all covenants.

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In two separate offerings during 2017, we issued an aggregate principal amount of $345.0 million of 4.75% Convertible Senior Notes due 2022 (the "2022 Notes"), for which we received $337.5 million, after deducting the underwriting discount and offering expenses. At March 31, 2022, the 2022 Notes had a carrying value of $344.9 million and an unamortized discount of $0.1 million.

During the fourth quarter of 2018, we issued $230.0 million of 5.375% Convertible Senior Notes due 2023 (the "2023 Notes" and, together with the 2022 Notes, the "Convertible Notes"), for which we received $223.7 million after deducting the underwriting discount and offering expenses. At March 31, 2022, the 2023 Notes had a carrying value of $228.8 million and an unamortized discount of $1.2 million.

The following table summarizes the terms of the Convertible Notes as of March 31, 2022 ($ in thousands):

			Principal Amount			Coupon Rate			Effective Rate			Conversion Rate (2)			Maturity Date			Remaining Period of Amortization
2022 Notes			$	345,000		4.75		%	4.86		%	50.2260			8/23/2022			0.40
2023 Notes			230,000			5.38		%	5.85		%	48.7187			10/15/2023			1.54
Total			$	575,000

The following table summarizes the terms of the Convertible Notes as of December 31, 2021 ($ in thousands):

			Principal Amount			Coupon Rate			Effective Rate (1)			Conversion Rate (2)			Maturity Date			Remaining Period of Amortization
2022 Notes			$	345,000		4.75		%	5.60		%	50.2260			8/23/2022			0.64
2023 Notes			230,000			5.38		%	6.16		%	48.7187			10/15/2023			1.79
Total			$	575,000

———————

(1)Effective rate includes the effect of the adjustment for the conversion option (See footnote (2) below), the value of which reduced the initial liability and was recorded in additional paid-in-capital. The effective rate as of March 31, 2022 reflects adoption of ASU 2020-06.

(2)We have the option to settle any conversions in cash, shares of common stock or a combination thereof. The conversion rate represents the number of shares of common stock issuable per one thousand principal amount of the Convertible Notes converted, and includes adjustments relating to cash dividend payments made by us to stockholders that have been deferred and carried-forward in accordance with, and are not yet required to be made pursuant to, the terms of the applicable supplemental indenture.

We may not redeem the Convertible Notes prior to maturity except in limited circumstances. The closing price of our common stock on March 31, 2022 of $13.93 was less than the per share conversion price of the Convertible Notes.

On January 1, 2022 we adopted ASU 2020-06 "Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity" ("ASU 2020-06"), which no longer require the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. Prior to the adoption of ASU 2020-06, we attributed $15.4 million of the proceeds to the equity component of the Convertible Notes ($11.0 million to the 2022 Notes and $4.4 million to the 2023 Notes), which represented the excess proceeds received over the fair value of the liability component of the Convertible Notes at the date of issuance. The equity component of the Convertible Notes had been reflected within additional paid-in capital on our condensed consolidated balance sheet until January 1, 2022 when we adopted ASU 2020-06 through the modified retrospective approach. Upon adoption, we (i) reclassified $12.0 million of previously recorded amortization related to the equity component of the Convertible Notes from retained earnings to additional paid-in-capital and (ii) reclassified the remaining unamortized balance of $3.4 million to additional paid-in-capital, which increased the cost basis of convertible notes and decreased additional paid-in-capital on the condensed consolidated balance sheet.

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We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than USD.

We have entered into a series of forward contracts to sell an amount of foreign currency (GBP, EUR and SEK) for an agreed upon amount of USD at various dates through February 2027. These forward contracts were executed to economically fix the USD amounts of foreign denominated cash flows expected to be received by us related to foreign denominated loan investments.

The following table summarizes our non-designated Fx forwards and our interest rate cap as of March 31, 2022:

March 31, 2022

Type of Derivatives

Number of Contracts

Aggregate Notional Amount (in thousands)

Notional Currency

Maturity

Weighted-Average Years to Maturity

Fx contracts - GBP

100

852,464

GBP

April 2022 - February 2027

2.31

Fx contracts - EUR

104

622,979

EUR

April 2022 - November 2025

2.55

Fx contracts - SEK

20

768,363

SEK

May 2022 - May 2026

3.53

Interest rate cap

1

500,000

USD

June 2023

1.21

The following table summarizes our non-designated Fx forwards and our interest rate cap as of December 31, 2021:

December 31, 2021

Type of Derivatives

Number of Contracts

Aggregate Notional Amount (in thousands)

Notional Currency

Maturity

Weighted-Average Years to Maturity

Fx contracts - GBP

125

738,178

GBP

January 2022 - February 2026

2.14

Fx contracts - EUR

90

508,541

EUR

January 2022 - November 2025

1.88

Fx contracts - SEK

20

765,138

SEK

February 2022 - May 2026

3.74

Interest rate cap

1

500,000

USD

June 2023

1.45

We have not designated any of our derivative instruments as hedges as defined in ASC 815, "Derivatives and Hedging" and, therefore, changes in the fair value of our derivative instruments are recorded directly in earnings. The following table summarizes the amounts recognized on our condensed consolidated statements of operations related to our derivatives for the three months ended March 31, 2022 and 2021 ($ in thousands):

									Amount of gain (loss) recognized in income
									Three months ended March 31,
			Location of Gain (Loss) Recognized in Income						2022						2021
Forward currency contracts			Unrealized gain on derivative instruments						$	18,142					$	10,502
Forward currency contracts			Realized gain (loss) on derivative instruments						4,620						(702)
Total									$	22,762					$	9,800

In June 2020, we entered into an interest rate cap for approximately $1.1 million. We use our interest rate cap to manage exposure to variable cash flows on our borrowings under our senior secured term loan by effectively limiting LIBOR from exceeding 0.75%. This effectively limits the maximum all-in coupon on our senior secured term loan to 3.50%. The unrealized gain or loss related to the interest rate cap is recorded net under unrealized gain on interest rate hedging instruments in our condensed consolidated statement of operations. The following table summarizes the amount recognized on our condensed consolidated statements of operations related to our interest rate cap for the three months ended March 31, 2022 and 2021 ($ in thousands):

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									Amount of gain recognized in income
									Three months ended March 31,
			Location of Gain Recognized in Income						2022						2021
Interest rate cap(1)			Unrealized gain on interest rate hedging instruments						$	6,321					$	357
Total									$	6,321					$	357

———————

(1)With a notional amount of $500.0 million at March 31, 2022 and 2021.

The following tables summarize the gross asset and liability amounts related to our derivatives at March 31, 2022 and December 31, 2021 ($ in thousands):

			March 31, 2022																		December 31, 2021
			Gross Amount of Recognized Assets						Gross Amounts Offset in our Condensed Consolidated Balance Sheet						Net Amounts of Assets Presented in our Condensed Consolidated Balance Sheet						Gross Amount of Recognized Assets						Gross Amounts Offset in our Condensed  Consolidated Balance Sheet						Net Amounts of Liabilities Presented in our Condensed Consolidated Balance Sheet
Forward currency contracts			$	40,449					$	(6,967)					$	33,482					$	28,781					$	(13,441)					$	15,340
Interest rate cap			7,769						—						7,769						1,448						—						1,448
Total derivative assets (liabilities)			$	48,218					$	(6,967)					$	41,251					$	30,229					$	(13,441)					$	16,788

Participations sold represents the subordinate interests in loans we originated and subsequently partially sold. We account for participations sold as secured borrowings on our condensed consolidated balance sheet with both assets and non-recourse liabilities because the participations do not qualify as a sale under ASC 860, "Transfers and Servicing." The income earned on the participations sold is recorded as interest income and an identical amount is recorded as interest expense in our condensed consolidated statements of operations.

In October 2020, we sold a $25.0 million interest, at par, in a mezzanine loan collateralized by a ground-up condominium development in New York City that we originated in December 2017. The participation interest sold accrued payment-in-kind interest, was accounted for as a secured borrowing on our condensed consolidated balance sheet, and was subordinate to our remaining mezzanine loan. The mezzanine loan was repaid at par in June 2021, and therefore, we de-recognized the related participating interest of $27.7 million, which included $2.7 million in payment-in-kind interest.

In December 2020, we sold a £6.7 million ($8.9 million assuming conversion into USD) interest, at par, in a first mortgage loan collateralized by an office building located in London, United Kingdom that was originated by us in December 2017. In connection with this sale, we transferred our remaining unfunded commitment of £19.1 million ($25.3 million assuming conversion into USD). The participation interest sold is subordinate to our remaining £70.5 million ($92.7 million assuming conversion into USD) first mortgage loan and is accounted for as a secured borrowing on our condensed consolidated balance sheet.

During the three months ended March 31, 2022, the participation sold on commercial mortgage loans balance decreased by $0.8 million due to unrealized loss on foreign currency translation.

The table below details participations sold included in our condensed consolidated balance sheet ($ in thousands):

			March 31, 2022						December 31, 2021
Participation sold on Commercial mortgage loans			$	26,276					$	27,064
Total participations sold			$	26,276					$	27,064

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thousands):

			March 31, 2022						December 31, 2021
Accrued dividends payable			$	52,645					$	52,833
Collateral held under derivative agreements			37,790						21,420
Accrued interest payable			22,264						16,166
Accounts payable and other liabilities(1)			1,506						9,084
General CECL Allowance on unfunded commitments(2)			3,928						3,106
Total			$	118,133					$	102,609

  ———————

(1)Includes $7.2 million of accounts payable and other liabilities on the balance sheet of the real estate owned at December 31, 2021.

(2)Refer to "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" for additional disclosure related to the General CECL Allowance on unfunded commitments for the three months ended March 31, 2022 and December 31, 2021, respectively.

Management Agreement

In connection with our initial public offering in September 2009, we entered into a management agreement (the "Management Agreement") with the Manager, which describes the services to be provided by the Manager and its compensation for those services. The Manager is responsible for managing our day-to-day operations, subject to the direction and oversight of our board of directors.

Pursuant to the terms of the Management Agreement, the Manager is paid a base management fee equal to 1.5% per annum of our stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears.

The term of the Management Agreement was automatically renewed for a successive one-year term on September 29, 2021, and will automatically renew on each anniversary thereafter. The Management Agreement may be terminated upon expiration of the one-year extension term only upon the affirmative vote of at least two-thirds of our independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to ARI or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair fees by accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of our independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual base management fee during the 24-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. Following a meeting by our independent directors in February 2022, which included a discussion of the Manager’s performance and the level of the management fees thereunder, we determined not to seek termination of the Management Agreement.

We incurred approximately $9.4 million in base management fees under the Management Agreement for the three months ended March 31, 2022 and 2021.

In addition to the base management fee, we are also responsible for reimbursing the Manager for certain expenses paid by the Manager on our behalf or for certain services provided by the Manager to us. For the three months ended March 31, 2022 and 2021, we paid expenses totaling $0.9 million and $0.6 million, respectively, related to reimbursements for certain expenses paid by the Manager on our behalf under the Management Agreement. Expenses incurred by the Manager and reimbursed by us are reflected in the respective condensed consolidated statement of operations expense category or our condensed consolidated balance sheet based on the nature of the item.

Included in payable to related party on our condensed consolidated balance sheet at March 31, 2022 and December 31, 2021 is approximately $9.4 million and $9.8 million, respectively, for base management fees incurred but not yet paid under the Management Agreement.

Loans receivable

In June 2015, we originated a $20.0 million mezzanine loan secured by pledges of equity interests in the property

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recorded as real estate owned - held for sale on our condensed consolidated balance sheet at March 31, 2022. The mezzanine loan was subordinate to (i) a $110.0 million mortgage loan, originated by a third party, and (ii) a $24.5 million senior mezzanine loan, originated by an affiliate of the Manager. On May 24, 2021, we purchased the $24.5 million senior mezzanine loan at par from the affiliate and acquired legal title to the hotel through a deed-in-lieu of foreclosure. Refer to "Note 5 – Assets and Liabilities Related to Real Estate Owned, Held for Sale" for additional information.

As described in Note 4 above, we own three mezzanine loans, including Junior Mezzanine B Loan, that are secured by the same residential-for-sale property currently under construction in Manhattan, NY. During the third quarter of 2021, the Seller transferred its Junior Mezzanine B Loan position to the Company and in connection with this transfer, one of the property’s subordinate capital providers paid the Seller a price representing the Seller’s original principal balance on the Junior Mezzanine B Loan position with the Seller agreeing to forego its accrued interest on the Junior Mezzanine B Loan.

Term Loan

In March 2021, Apollo Global Funding, LLC, an affiliate of the Manager, served as one of the eight arrangers for the issuance of our 2028 Term Loan and received $0.2 million of arrangement fees. In addition, funds managed by an affiliate of the Manager invested in $30.0 million of the 2028 Term Loan.

Senior Secured Notes

In June 2021, Apollo Global Securities, LLC, an affiliate of the Manager, served as one of the eight initial purchasers in the issuance of our 2029 Notes and received $0.4 million of initial purchasers' discounts and commissions.

On September 23, 2009, our board of directors approved the Apollo Commercial Real Estate Finance, Inc. 2009 Equity Incentive Plan ("2009 LTIP") and on April 16, 2019, our board of directors approved the Amended and Restated Apollo Commercial Real Estate Finance, Inc. 2019 Equity Incentive Plan ("2019 LTIP," and together with the 2009 LTIP, the "LTIPs"), which amended and restated the 2009 LTIP. Following the approval of the 2019 LTIP by our stockholders at our 2019 annual meeting of stockholders on June 12, 2019, no additional awards have been or will be granted under the 2009 LTIP and all outstanding awards granted under the 2009 LTIP remain in effect in accordance with the terms in the 2009 LTIP.

The 2019 LTIP provides for grants of restricted common stock, restricted stock units ("RSUs") and other equity-based awards up to an aggregate of 7,000,000 shares of our common stock. The LTIPs are administered by the compensation committee of our board of directors (the "Compensation Committee") and all grants under the LTIPs must be approved by the Compensation Committee.

We recognized stock-based compensation expense of $4.7 million and $4.4 million during the three months ended March 31, 2022 and 2021 respectively, related to restricted stock and RSU vesting.

The following table summarizes the grants, vesting and forfeitures of restricted common stock and RSUs during the three months ended March 31, 2022:

			Type						Restricted Stock						RSUs						Grant Date Fair Value ($ in millions)
Outstanding at December 31, 2021									45,185						2,597,941
			Granted						—						—						N/A
			Vested						—						(18,195)						N/A
			Forfeiture						—						(12,524)						N/A
Outstanding at March 31, 2022									45,185						2,567,222

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Below is a summary of restricted stock and RSU vesting dates as of March 31, 2022: 

Vesting Year						Restricted Stock						RSU						Total Awards
2022						38,517						1,242,262						1,280,779
2023						3,334						883,785						887,119
2024						3,334						441,175						444,509
Total						45,185						2,567,222						2,612,407

At March 31, 2022, we had unrecognized compensation expense of approximately $0.1 million and $29.7 million related to the vesting of restricted stock awards and RSUs, respectively, noted in the table above.

RSU Deliveries

Our authorized capital stock consists of 450,000,000 shares of common stock, $0.01 par value per share and 50,000,000 shares of preferred stock, $0.01 par value per share. As of March 31, 2022, 140,541,409 shares of common stock were issued and outstanding, and 6,770,393 shares of 7.25% Series B-1 Preferred Stock were issued and outstanding.

On July 15, 2021, we exchanged all 6,770,393 shares outstanding of our 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share ("Series B Preferred Stock"), with a liquidation preference of $25.00 per share, for 6,770,393 shares of 7.25% Series B-1 Preferred Stock, par value $0.01 per share ("Series B-1 Preferred Stock"), with a liquidation preference of $25.00 per share, pursuant to an exchange agreement with the two existing holders of the Series B Preferred Stock.

Dividends. The following table details our dividend activity:

			Three months ended March 31,
Dividends declared per share of:			2022						2021
Common Stock			$0.35						$0.35
Series B Preferred Stock			N/A						0.50
Series B-1 Preferred Stock			0.45						N/A

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appealed, the parties fully briefed the appeal, and then Plaintiffs dropped the appeal, and the case remains dismissed.

Plaintiffs have now amended the complaint in a separate action, 111 West 57th Investment LLC v. 111W57 Mezz Investor LLC (No. 655031/2017) also in New York Supreme Court (the "April 2021 Action") to name Apollo Global Management, Inc., the Subsidiary, the Company, and certain funds managed by Apollo as defendants. The April 2021 Action concerns overlapping claims and the same condominium development project that the Apollo Action concerned. We believe the claims in this action are without merit, including as barred by the dismissal of the Apollo Action. The defendants filed a motion to dismiss, which currently is pending. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.

Loan Commitments. As described in "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net" at March 31, 2022, we had $1.8 billion of unfunded commitments related to our commercial mortgage and subordinate loans. The timings and amounts of fundings are uncertain as these commitments relate to loans for construction costs, capital expenditures, leasing costs, interest and carry costs, among others. As such, the timings and amounts of future fundings depend on the progress and performance of the underlying assets of our loans. Certain of our lenders are contractually obligated to fund their ratable portion of these loan commitments over time, while other lenders have some degree of discretion over future loan funding obligations. The total unfunded commitment is expected to be funded over the remaining 3.9 years weighted average tenor of these loans.

COVID-19. The COVID-19 global pandemic has brought forth uncertainty and disruption to the global economy. The magnitude and duration of the COVID-19 pandemic and its impact on our borrowers and their tenants, cash flows and future results of operations could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 pandemic, the success of actions taken to contain or treat the pandemic, and reactions by consumers, companies, governmental entities and capital markets. The prolonged duration and impact of the COVID-19 pandemic, including the continued impact and uncertainty resulting from COVID-19 variants, could materially disrupt our business operations and impact our financial performance.

As of March 31, 2022, we have not recorded any contingencies on our condensed consolidated balance sheet related to COVID-19. To the extent COVID-19 continues to cause dislocations in the global economy, our financial condition, results of operations, and cash flows may continue to be adversely impacted. Refer to "Note 2 - Summary of Significant Accounting Policies" for further discussion regarding COVID-19.

The following table presents the carrying value and estimated fair value of our financial instruments not carried at fair value on our condensed consolidated balance sheet at March 31, 2022 and December 31, 2021 ($ in thousands):

			March 31, 2022												December 31, 2021
			Carrying Value						Estimated Fair Value						Carrying Value						Estimated Fair Value
Cash and cash equivalents			$	215,749					$	215,749					$	343,106					$	343,106
Commercial mortgage loans, net			7,586,554						7,477,241						7,012,312						6,945,038
Subordinate loans and other lending assets, net(1)			763,488						660,105						844,948						725,906
Secured debt arrangements, net			(4,571,314)						(4,571,314)						(4,150,268)						(4,150,268)
Senior secured term loans, net			(767,297)						(781,197)						(768,325)						(782,995)
Senior secured notes, net			(494,247)						(455,080)						(494,051)						(489,175)
2022 Notes			(344,858)						(345,711)						(343,117)						(347,552)
2023 Notes			(228,810)						(230,460)						(226,862)						(231,150)
Participations sold			(26,276)						(26,056)						(27,064)						(27,064)

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(1)Includes subordinate risk retention interests in securitization vehicles with an estimated fair value that approximates their carrying value.

To determine estimated fair values of the financial instruments listed above, market rates of interest, which include credit assumptions, are used to discount contractual cash flows. The estimated fair values are not necessarily indicative of the amount we could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. Estimates of fair value for cash and cash equivalents, convertible senior notes, net, secured debt arrangements net and senior secured term loan, net are measured using

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ASC 260, "Earnings per share" requires the use of the two-class method of computing earnings per share for all periods presented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for dividends declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for dividends declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.

The remaining earnings are allocated to common stockholders and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. Each total is then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding shares of common stock and all potential shares of common stock assumed issued if they are dilutive. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of these potential shares of common stock.

The table below presents the computation of basic and diluted net income per share of common stock for the three months ended March 31, 2022 and 2021 ($ in thousands except per share data): 

			For the three months ended March 31,
			2022						2021
Basic Earnings
Net income			$	15,238					$	58,335
Less: Preferred dividends			(3,068)						(3,385)
Net income available to common stockholders			$	12,170					$	54,950
Less: Dividends on participating securities			(899)						(847)
Basic Earnings			$	11,271					$	54,103
Diluted Earnings
Basic Earnings			$	11,271					$	54,103
Add: Dividends on participating securities			—						847
Add: Interest expense on Convertible Notes			—						8,245
Diluted Earnings			$	11,271					$	63,195
Number of Shares:
Basic weighted-average shares of common stock outstanding			140,353,386						139,805,863
Diluted weighted-average shares of common stock outstanding			140,353,386						170,792,684
Earnings Per Share Attributable to Common Stockholders
Basic			$	0.08					$	0.39
Diluted			$	0.08					$	0.37

The dilutive effect to earnings per share is determined using the "if-converted" method whereby interest expense on the outstanding Convertible Notes is added back to the diluted earnings per share numerator and all of the potentially dilutive shares are included in the diluted earnings per share denominator. For the three months ended March 31, 2022, 28,533,271 weighted-average potentially issuable shares with respect to the Convertible Notes were excluded from the calculation of diluted net income per share because the effect was anti-dilutive. For the three months ended March 31, 2021 28,533,271 weighted-average potentially issuable shares with respect to the Convertible Notes were included in the dilutive earnings per share denominator. Refer to "Note 10 - Convertible Senior Notes, Net" for further discussion.

For the three months ended March 31, 2022, 2,571,417 weighted-average unvested RSUs were excluded from the calculation of diluted net income per share because the effect was anti-dilutive. For the three months ended March 31, 2021,

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Subsequent to the quarter ended March 31, 2022, the following events took place:

Investment activity: We originated a £407.0 million ($530.3 million assuming conversion into USD) floating-rate commercial mortgage loan secured by two retail properties in the United Kingdom, of which £377.0 million ($491.2 million assuming conversion into USD) was funded at close. In addition, we funded approximately $45.0 million for previously closed loans.

Loan Repayments: We received approximately $28.0 million from loan repayments.

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